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 811-04847
ECLIPSE FUNDS
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
Marguerite E.H. Morrison, Esq.
169 Lackawanna Avenue
Parsippany, NJ 07054
(Name and address of agent for service)
Registrant's telephone number, including area code: (973) 394-4437
Date of fiscal year end: October 31
Date of reporting period: 11/1/04-4/30/05
ITEM 1. REPORTS TO STOCKHOLDERS.
MAINSTAY(R) FUNDS
Semiannual Report
Unaudited
April 30, 2005
(MAINSTAY INVESTMENTS LOGO)
EQUITY FUNDS
MainStay All Cap Growth Fund
MainStay All Cap Value Fund
MainStay Mid Cap Opportunity Fund
MainStay S&P 500 Index Fund
MainStay Small Cap Opportunity Fund
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Short Term Bond Fund
BLENDED FUNDS
MainStay Asset Manager Fund
MainStay Balanced Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
TABLE OF CONTENTS
<Table>
Message from the President 3
- --------------------------------------------------------------------------------
EQUITY FUNDS
MainStay All Cap Growth Fund 4
- --------------------------------------------------------------------------------
MainStay All Cap Value Fund 18
- --------------------------------------------------------------------------------
MainStay Mid Cap Opportunity Fund 32
- --------------------------------------------------------------------------------
MainStay S&P 500 Index Fund 47
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MainStay Small Cap Opportunity Fund 66
- --------------------------------------------------------------------------------
INCOME FUNDS
MainStay Cash Reserves Fund 83
- --------------------------------------------------------------------------------
MainStay Floating Rate Fund 96
- --------------------------------------------------------------------------------
MainStay Indexed Bond Fund 118
- --------------------------------------------------------------------------------
MainStay Intermediate Term Bond Fund 142
- --------------------------------------------------------------------------------
MainStay Short Term Bond Fund 163
BLENDED FUNDS
MainStay Asset Manager Fund 176
- --------------------------------------------------------------------------------
MainStay Balanced Fund 211
- --------------------------------------------------------------------------------
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund 235
- --------------------------------------------------------------------------------
MainStay Growth Allocation Fund 246
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MainStay Moderate Allocation Fund 257
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MainStay Moderate Growth Allocation Fund 268
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Notes to Financial Statements 279
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Board Members and Officers 295
- --------------------------------------------------------------------------------
Board Consideration and Approval of Management and Subadvisory Agreements 298
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures 306
- --------------------------------------------------------------------------------
Shareholder Reports and Quarterly Portfolio Disclosure 306
</Table>
www.mainstayfunds.com 1
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2
MESSAGE FROM
THE PRESIDENT
During the six months ended April 30, 2005, the U.S. stock market advanced,
though its progress was uneven. The market generally climbed from November
through the end of 2004, hesitated in January 2005, climbed again until early
March, and then slipped back for much of the remainder of the reporting period.
The Federal Open Market Committee raised the targeted federal funds rate at all
four of its meetings during the reporting period, with a 25 basis point increase
on each occasion. That brought the targeted federal funds rate from 1.75% at the
beginning of the reporting period to 2.75% at the end of April. Although
short-term interest rates rose, yields on longer-term bonds declined.
In late March, the Federal Open Market Committee reported that pressures on
inflation had picked up in recent months and that pricing power had become more
evident. In early April, crude-oil prices briefly topped $58 per barrel. Later
that month, data on real gross domestic product suggested that the pace of
economic growth had slowed somewhat in the first quarter of 2005.
At MainStay, we recognize your concern about market volatility and we're pleased
to offer Funds appropriate for a wide variety of investment needs. At the end of
March 2005, MainStay introduced four new Asset Allocation Funds to broaden the
array of choices we provide investors. Each Asset Allocation Fund invests in
several other MainStay Funds and is subject to specific allocation targets and
constraints outlined in the prospectus.
Each MainStay Fund seeks to achieve its investment objective through consistent
application of an established investment approach that is consistently applied
over time. Although economic, industry, and geopolitical variables are
constantly in flux, we use careful research and consistent investment
disciplines as we seek to provide competitive performance for our shareholders
over full market cycles.
The reports that follow provide more detailed information about the specific
market forces and portfolio management decisions that affected your MainStay
Fund investments during the six months ended April 30, 2005.
Sincerely,
/s/ CHRISTOPHER O. BLUNT
Christopher O. Blunt
President
www.mainstayfunds.com 3
MAINSTAY ALL CAP GROWTH FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------
With sales charges -2.25% -3.98% -11.12% 6.39%
Excluding sales charges 3.44 1.61 -10.11 6.99
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH
GROWTH FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------- -------------------
4/30/95 9450 10000 10000 10000
13121 13021 13255 13324
14530 16294 16179 15743
20616 22985 22990 22373
25921 28001 29087 27659
31651 30837 37109 35364
23970 26837 25141 24134
19274 23448 20087 19480
15362 20328 17204 16557
18284 24979 20928 20353
4/30/05 18578 26562 21012 20415
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------
With sales charges -1.98% -4.25% -11.15% 6.05%
Excluding sales charges 3.02 0.75 -10.84 6.05
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH
GROWTH FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------- -------------------
4/30/95 10000 10000 10000 10000
13779 13021 13255 13324
15118 16294 16179 15743
21221 22985 22990 22373
26415 28001 29087 27659
31923 30837 37109 35364
23914 26837 25141 24134
19082 23448 20087 19480
15102 20328 17204 16557
17854 24979 20928 20353
4/30/05 17989 26562 21012 20415
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------
With sales charges 1.96% -0.30% -10.84% 6.05%
Excluding sales charges 2.96 0.70 -10.84 6.05
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH
GROWTH FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------- -------------------
4/30/95 10000 10000 10000 10000
13779 13021 13255 13324
15118 16294 16179 15743
21221 22985 22990 22373
26415 28001 29087 27659
31923 30837 37109 35364
23914 26837 25141 24134
19082 23448 20087 19480
15102 20328 17204 16557
17864 24979 20928 20353
4/30/05 17989 26562 21012 20415
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time. From inception (1/2/91) through 12/31/03,
performance for Class A, B, and C shares (each first offered 1/2/04) includes
the historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class A, B, and C shares.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
4 MainStay All Cap Growth Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
3.65% 2.08% -9.89% 7.22%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH
GROWTH FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------- -------------------
4/30/95 10000 10000 10000 10000
13919 13021 13255 13324
15450 16294 16179 15743
21956 22985 22990 22373
27645 28001 29087 27659
33791 30837 37109 35364
25575 26837 25141 24134
20616 23448 20087 19480
16476 20328 17204 16557
19663 24979 20928 20353
4/30/05 20073 26562 21012 20415
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------------------
S&P 500(R) Index(1) 3.28% 6.34% -2.94% 10.26%
Russell 1000(R) Growth Index(2) 1.14 0.40 -10.75 7.71
Russell 3000(R) Growth Index(3) 0.87 0.30 -10.41 7.40
Average Lipper large-cap growth
fund(4) 0.93 1.10 -9.49 7.12
</Table>
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
2. The Russell 1000(R) Growth Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with higher price-to-book
ratios and higher forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
3. The Russell 3000(R) Growth Index is an unmanaged index that measures the
performance of those Russell 3000(R) Index companies with higher
price-to-book ratios and higher forecasted growth values. The Russell 3000(R)
Index measures the performance of the 3,000 largest U.S. companies based on
total market capitalization. Results assume reinvestment of all dividends and
capital gains. The Russell 3000(R) Growth Index is considered to be the
Fund's broad-based securities-market index for comparison purposes. An
investment cannot be made directly into an index.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 5
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ALL CAP GROWTH FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,034.60 $ 7.37 $1,017.70 $ 7.30
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,030.55 $11.13 $1,013.95 $11.04
- --------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,029.95 $11.12 $1,013.95 $11.04
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,036.65 $ 4.70 $1,020.35 $ 4.66
- --------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.46% for Class A, 2.21% for Class B and Class C, and 0.93% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
6 MainStay All Cap Growth Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 99.1%
Short-Term Investments (collateral from securities lending is 6.6%) 7.4%
Liabilities in Excess of Cash and Other Assets (6.5)%
</Table>
See Portfolio of Investments on page 10 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. UnitedHealth Group, Inc.
2. WellPoint, Inc.
3. PacifiCare Health Systems, Inc.
4. Praxair, Inc.
5. Danaher Corp.
6. Peabody Energy Corp.
7. Illinois Tool Works, Inc.
8. FedEx Corp.
9. United Technologies Corp.
10. Caremark Rx, Inc.
</Table>
www.mainstayfunds.com 7
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Rudolph C. Carryl and Edmund C. Spelman
of MacKay Shields LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests in securities that have growth characteristics and
that span the entire range of market capitalizations as described by the Russell
3000(R) Growth Index.(1) The Fund normally invests at least 80% of its assets in
equity securities. In implementing this strategy, the Fund normally invests in
securities of companies with investment characteristics such as: participation
in expanding product or service markets, increasing unit sales volume, growth in
revenues and earnings per share superior to that of the average of common stocks
comprising indices such as the S&P 500(R) Index,(2) and increasing return on
investment. The Fund maintains a flexible approach and may invest in various
types of companies and securities. We look for companies and securities
that we feel are ready for a rise in price or may experience acceleration in
growth of earnings, possibly as a result of changes in management, products,
consumer demand, or the economy. We may sell a security if we no longer believe
it will contribute to meeting the Fund's investment objective.
WHAT KEY FACTORS INFLUENCED THE EQUITY MARKET DURING THE REPORTING PERIOD?
The equity market was volatile during the six months ended April 30, 2005. The
reporting period began with the reelection of George W. Bush and a strong market
rally through the end of 2004. In the first few months of 2005, however,
continued interest-rate hikes by the Federal Reserve, rising inflationary
concerns, and record oil and gas prices caused the stock market to decline.
WHAT DECISIONS HAD THE BIGGEST INFLUENCE ON THE FUND'S PERFORMANCE?
Excluding all sales charges, the Fund outperformed its benchmark, the Russell
3000(R) Growth Index, during the reporting period. This resulted largely from
strength in the Fund's holdings in the energy, financials, health care, and
materials sectors. Performance was strong among companies in oil services,
health care services, coal, and diversified financial services.
WHICH INDIVIDUAL SECURITIES HAD THE GREATEST POSITIVE IMPACT ON PERFORMANCE
DURING THE REPORTING PERIOD?
The top-five contributors to the Fund's overall performance were WellPoint
(+56%),(3) PacifiCare Health Systems (+68%), United Healthcare (+31%), Peabody
Energy (+38%), and CareMark Rx (+34%). WellPoint, PacifiCare Health Systems, and
United Healthcare are all HMOs. WellPoint delivered strong earnings growth after
it merged with Anthem Health. Each of these HMOs benefited from solid enrollment
and medical-cost containment, which led to positive earnings revisions and
strong stock-price performance. Peabody Energy, a coal production company,
benefited from rising coal prices that resulted from strong demand. Caremark Rx,
a prescription-drug benefit management company, saw its shares rise on greater
generic-drug substitution, strong specialty distribution growth, and increasing
mail-order growth. The company delivered solid earnings-per-share growth and has
consistently guided analysts' expectations higher.
WHICH STOCKS DETRACTED FROM PERFORMANCE?
Symantec (-34%), an antivirus-software provider, saw its shares fall sharply
when the company announced the acquisition of Veritas Software, a
storage-software company. Investors believed the acquisition would slow
Symantec's growth rate. Internet-auction service company eBay (-33%) felt the
effects of a deep recession in Germany and other European countries, as well as
decelerating growth in U.S. transactions. This caused eBay to lower its earnings
guidance, and the stock declined sharply. Harman International (-36%), a
manufacturer of audio and video products serving the consumer and professional
markets, declined because of increased competition and a slowdown in worldwide
auto sales. The automotive industry is the key market for Harman's audio
products. Shares of motorcycle manufacturer Harley-Davidson (-18%) fell as the
company cut its motorcycle production because of increased inventory at its
dealerships. The company's stock weakened when forward-earnings estimates were
lowered. Boston Scientific (-16%), a manufacturer of medical instruments, is
experiencing tremendous growth because of its leading drug-coated stent. This
Mid-capitalization companies are generally less established and their stocks may
be more volatile and less liquid than the securities of larger companies. Stocks
of small companies may be subject to greater price volatility, significantly
lower trading volumes, and greater spreads between bid and ask prices than
stocks of larger companies. Small companies may be more vulnerable to adverse
business or market developments than mid- or large-capitalization companies.
1. See footnote on page 5 for more information on the Russell 3000(R) Growth
Index.
2. See footnote on page 5 for more information on the S&P 500(R) Index.
3. Percentages reflect total returns of Fund holdings in the securities
mentioned, including purchases and sales, for the six months ended April 30,
2005, or for the portion of the reporting period such securities were held in
the Fund, if shorter.
8 MainStay All Cap Growth Fund
growth, however, is expected to slow dramatically, and investors are uncertain
about the company's sustainable growth rate going forward.
WERE THERE ANY SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD?
The Fund purchased D.R. Horton (+18%), one of the largest homebuilders in the
United States. The company is benefiting from low interest rates and the
"ownership society" mentality of U.S. citizens. In addition, D.R. Horton's order
rates and backlogs are at an all-time high. The Fund added St. Joe (+34%), a
real estate operator, whose vast land holdings allow it to build popular
large-scale, mixed-use communities on prime property. We added medical-care
provider Aetna (+26%) to the Fund. The company has restructured its operations
and is delivering strong earnings growth while containing medical costs. Shares
of biotech company Genentech (+53%) were purchased for the Fund and have seen
dramatic share price appreciation, largely because of the company's strong drug
pipeline and its blockbuster cancer drug, Avastin, which continued to show
positive results in treating several types of cancer.
WHAT WERE SOME EXAMPLES OF SECURITIES THAT YOU SOLD DURING THE REPORTING PERIOD?
Puerto Rican financial services company Doral Financial (+7%) was sold after the
company disclosed that rising interest rates had forced it to lower its
assumptions for loan securitizations. Experience has taught us the propriety of
selling after such disclosure, and we sold the Fund's position before it
subsequently dropped more than 65%. We sold the Fund's position in Avaya (-13%),
a supplier of telecommunications equipment, after competition and reduced
customer spending caused sales to slow. The sale proved beneficial, since the
company's stock later fell 40% from our average sale price. Electronic Arts
(+29%) was sold as competition intensified in the entertainment software
industry. XBox, Playstation, and GameCube are planning to introduce new game
players for the 2006 season, and Electronic Arts has seen its growth slow
dramatically. The Fund's position in data processing and electronic commerce
solution provider First Data (+1%) was reduced, then eliminated, after the
company reported a decline in its core payment-services business.
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
The Fund's exposure to the consumer discretionary sector rose from 26.9% of net
assets at the beginning of the reporting period to 29.9% at the end, with no
impact on performance. The Fund's weighting in the energy sector rose from 7.6%
to 10.7% over the period, which benefited results. An increase from 18.2% to
21.1% in the health care sector also enhanced results. The Fund's exposure to
the industrials sector fell from 17% of net assets at the beginning of the
reporting period to 14.5% at the end of April, which had a positive impact
because the industrials sector underperformed the market as a whole. We also
decreased the Fund's weighting in information technology, moving from a 17.7%
weighting to 12.5%. The shift had a positive impact on performance.
WHAT IS YOUR OUTLOOK FOR THE MARKETS AND THE FUND?
We continue to focus on companies that can deliver above-average sales and
earnings growth on a consistent basis. We believe that over the long term, these
companies offer the best opportunities for outperforming the market. At the same
time, however, we are mindful of valuation and will not overpay for a stock if
it does not offer the potential for double-digit returns.
Although we are primarily bottom-up managers, selecting stocks on their
individual merits, we continue to monitor the economy, geopolitical events, and
other factors that may affect stock prices. As we look ahead, we continue to
favor consumer, industrial, energy, and health care service companies because
they appear to offer attractive risk-reward profiles.
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.
www.mainstayfunds.com 9
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (99.1%)+
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.3%)
L-3 Communications
Holdings, Inc. 49,500 $ 3,513,015
V United Technologies Corp. 49,900 5,075,828
------------
8,588,843
------------
AIR FREIGHT & LOGISTICS (1.9%)
V FedEx Corp. 59,800 5,080,010
------------
AUTOMOBILES (1.8%)
Harley-Davidson, Inc. 78,900 3,709,878
Winnebago Industries, Inc. (d) 34,200 996,588
------------
4,706,466
------------
BIOTECHNOLOGY (3.2%)
Amgen, Inc. (a) 43,000 2,503,030
Genentech, Inc. (a) 41,800 2,965,292
Gilead Sciences, Inc. (a) 79,600 2,953,160
------------
8,421,482
------------
CAPITAL MARKETS (1.7%)
Legg Mason, Inc. 24,200 1,714,812
Morgan Stanley 50,400 2,652,048
------------
4,366,860
------------
CHEMICALS (2.1%)
V Praxair, Inc. (d) 120,400 5,638,332
------------
COMMERCIAL SERVICES & SUPPLIES (0.8%)
Cendant Corp. 100,300 1,996,973
------------
COMMUNICATIONS EQUIPMENT (0.8%)
QUALCOMM, Inc. 61,200 2,135,268
------------
COMPUTERS & PERIPHERALS (2.9%)
Apple Computer, Inc. (a) 78,400 2,827,104
Dell, Inc. (a) 106,200 3,698,946
Research In Motion Ltd. (a) 19,200 1,236,672
------------
7,762,722
------------
CONSTRUCTION MATERIALS (1.0%)
Eagle Materials, Inc. 33,742 2,539,086
------------
CONSUMER FINANCE (2.7%)
American Express Co. 41,000 2,160,700
Capital One Financial Corp. 69,600 4,933,944
------------
7,094,644
------------
DISTRIBUTORS (0.5%)
WESCO International, Inc. (a) 58,600 1,416,948
------------
</Table>
<Table>
<Caption>
SHARES VALUE
DIVERSIFIED FINANCIAL SERVICES (1.0%)
Citigroup, Inc. 57,993 $ 2,723,351
------------
ELECTRICAL EQUIPMENT (1.1%)
Roper Industries, Inc. 42,900 2,903,043
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (2.0%)
Amphenol Corp. Class A (a) 101,100 3,987,384
Garmin Ltd. (a)(d) 33,200 1,311,400
------------
5,298,784
------------
ENERGY EQUIPMENT & SERVICES (5.7%)
Baker Hughes, Inc. 75,400 3,326,648
BJ Services Co. 62,000 3,022,500
ENSCO International, Inc. 71,100 2,317,860
Transocean, Inc. (a) 61,300 2,842,481
Weatherford International Ltd. (a) 69,200 3,608,780
------------
15,118,269
------------
FOOD & STAPLES RETAILING (0.6%)
Walgreen Co. 37,400 1,610,444
------------
HEALTH CARE EQUIPMENT & SUPPLIES (4.2%)
Boston Scientific Corp. (a) 122,100 3,611,718
Cooper Cos., Inc. (The) 42,600 2,877,630
Fisher Scientific
International, Inc. (a) 78,600 4,667,268
------------
11,156,616
------------
HEALTH CARE PROVIDERS & SERVICES (12.5%)
Aetna, Inc. 32,800 2,406,536
V Caremark Rx, Inc. 126,700 5,074,335
V PacifiCare Health
Systems, Inc. (a) 95,000 5,677,200
V UnitedHealth Group, Inc. 99,452 9,399,209
WellChoice, Inc. (a) 66,200 3,720,440
V WellPoint, Inc. (a) 51,500 6,579,125
------------
32,856,845
------------
HOTELS, RESTAURANTS & LEISURE (0.2%)
Carnival Corp. 13,300 650,104
------------
HOUSEHOLD DURABLES (12.0%)
Centex Corp. 82,500 4,761,900
D.R. Horton, Inc. 160,000 4,880,000
Harman International
Industries, Inc. 22,900 1,799,482
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
10 MainStay All Cap Growth Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (CONTINUED)
Hovnanian Enterprises, Inc. Class A (a)(d) 84,600 $ 4,295,142
Lennar Corp. 89,600 4,611,712
Mohawk Industries, Inc. (a) 42,800 3,330,268
Toro Co. (The) (d) 79,400 3,280,808
WCI Communities, Inc. (a)(d) 169,000 4,737,070
------------
31,696,382
------------
INTERNET & CATALOG RETAIL (0.6%)
eBay, Inc. (a) 50,600 1,605,538
------------
INTERNET SOFTWARE & SERVICES (0.7%)
VeriSign, Inc. 66,600 1,762,236
------------
LEISURE EQUIPMENT & PRODUCTS (1.1%)
Brunswick Corp. 70,600 2,965,200
------------
MACHINERY (5.6%)
V Danaher Corp. 109,800 5,559,174
Eaton Corp. 27,300 1,601,145
V Illinois Tool Works, Inc. 61,600 5,163,312
Terex Corp. (a) 63,300 2,366,154
------------
14,689,785
------------
MEDIA (1.6%)
McGraw-Hill Cos., Inc. (The) 18,300 1,593,564
Omnicom Group, Inc. 32,400 2,685,960
------------
4,279,524
------------
METALS & MINING (3.7%)
Arch Coal, Inc. (d) 98,700 4,376,358
V Peabody Energy Corp. 122,000 5,339,940
------------
9,716,298
------------
MULTILINE RETAIL (3.0%)
Kohl's Corp. (a) 99,500 4,736,200
Target Corp. 67,300 3,123,393
------------
7,859,593
------------
OIL & GAS (1.2%)
Newfield Exploration Co. (a) 45,000 3,196,350
------------
PHARMACEUTICALS (1.0%)
Teva Pharmaceutical
Industries Ltd. ADR (b) 83,900 2,621,036
------------
REAL ESTATE (1.1%)
St. Joe Co. (The) 40,000 2,783,600
------------
</Table>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.2%)
Analog Devices, Inc. 66,200 $ 2,258,082
Intel Corp. 85,200 2,003,904
Maxim Integrated Products, Inc. 36,200 1,353,880
Texas Instruments, Inc. 109,300 2,728,128
------------
8,343,994
------------
SOFTWARE (3.3%)
Autodesk, Inc. 52,300 1,664,709
FactSet Research Systems, Inc. 98,550 2,735,748
Microsoft Corp. 16,900 427,570
Symantec Corp. (a) 203,800 3,827,364
------------
8,655,391
------------
SPECIALTY RETAIL (7.9%)
Advanced Auto Parts, Inc. (a) 46,200 2,464,770
Bed Bath & Beyond, Inc. (a) 102,000 3,795,420
Best Buy Co., Inc. 59,100 2,975,094
Chico's FAS, Inc. (a) 153,000 3,921,390
Lowe's Cos., Inc. 89,300 4,653,423
TJX Cos., Inc. (The) 134,600 3,048,690
------------
20,858,787
------------
TEXTILES, APPAREL & LUXURY GOODS (2.1%)
Coach, Inc. (a) 153,400 4,111,120
NIKE, Inc. Class B 18,900 1,451,709
------------
5,562,829
------------
THRIFTS & MORTGAGE FINANCE (1.0%)
IndyMac Bancorp, Inc. 65,400 2,516,592
------------
Total Common Stocks
(Cost $214,223,593) 261,178,225
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (7.4%)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (0.8%)
American General Finance Corp.
2.86%, due 5/4/05 $ 1,290,000 1,289,692
UBS Finance (Delaware) LLC
2.93%, due 5/2/05 790,000 789,936
------------
Total Commercial Paper
(Cost $2,079,628) 2,079,628
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 11
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
x
INVESTMENT COMPANY (0.0%) (c)
AIM Institutional Funds Group (e) 214,437 $ 214,437
------------
Total Investment Company
(Cost $214,437) 214,437
------------
PRINCIPAL
AMOUNT
x
MASTER NOTE (4.2%)
Bank of America LLC
3.08%, due 5/2/05 (e) $11,000,000 11,000,000
------------
Total Master Note
(Cost $11,000,000) 11,000,000
------------
REPURCHASE AGREEMENTS (2.4%)
Credit Suisse First Boston LLC 3.05%, dated
4/30/05
due 5/2/05
Proceeds at Maturity $1,500,254 (e)
(Collateralized by Various Bonds with a
Principal Amount of $1,574,970 and a Market
Value of $1,503,041) 1,500,000 1,500,000
Dresdner Kleinwort Wasserstein Securities LLC
3.07%, dated 4/30/05
due 5/2/05
Proceeds at Maturity $1,750,298 (e)
(Collateralized by Various Bonds with a
Principal Amount of $1,841,849 and a Market
Value of $1,836,466) 1,750,000 1,750,000
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
Merrill Lynch Pierce Fenner & Smith, Inc.
3.08%, dated 4/30/05
due 5/2/05
Proceeds at Maturity $3,000,513 (e)
(Collateralized by Various Bonds with a
Principal Amount of $3,039,746 and a Market
Value of $3,148,431) $ 3,000,000 $ 3,000,000
------------
Total Repurchase Agreements
(Cost $6,250,000) 6,250,000
------------
Total Short-Term Investments
(Cost $19,544,065) 19,544,065
------------
Total Investments
(Cost $233,767,658) (f) 106.5% 280,722,290(g)
Liabilities in Excess of
Cash and Other Assets (6.5) (17,292,976)
----------- ------------
Net Assets 100.0% $263,429,314
=========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) ADR-American Depositary Receipt.
(c) Less than one tenth of a percent.
(d) Represents securities out on loan or a portion which is out on loan.
(e) Represents a security or a portion thereof, purchased with cash collateral
received for securities on loan.
(f) The cost for federal income tax purposes is $234,457,570.
(g) At April 30, 2005 net unrealized appreciation was $46,264,720, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $54,581,025 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $8,316,305.
</Table>
12 MainStay All 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $233,767,658) including
$17,458,400 market value of securities
loaned $280,722,290
Cash 2,169
Receivables:
Fund shares sold 463,311
Dividends and interest 47,039
Other assets 43,053
------------
Total assets 281,277,862
------------
LIABILITIES:
Securities lending collateral 17,464,438
Payables:
Manager 169,949
Fund shares redeemed 85,077
Transfer agent 53,658
Professional 28,066
NYLIFE Distributors 7,561
Custodian 3,737
Directors 2,693
Accrued expenses 33,369
------------
Total liabilities 17,848,548
------------
Net assets $263,429,314
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 680
Class B 277
Class C 44
Class I 12,481
Additional paid-in capital 265,791,490
Accumulated net investment loss (356,997)
Accumulated net realized loss on investments (48,973,293)
Net unrealized appreciation on investments 46,954,632
------------
Net assets $263,429,314
============
CLASS A
Net assets applicable to outstanding shares $ 12,891,441
============
Shares of capital stock outstanding 680,423
============
Net asset value per share outstanding $ 18.95
Maximum sales charge (5.50% of offering) price 1.10
------------
Maximum offering price per share outstanding $ 20.05
============
CLASS B
Net assets applicable to outstanding shares $ 5,192,976
============
Shares of capital stock outstanding 276,820
============
Net asset value and offering price per share
outstanding $ 18.76
============
CLASS C
Net assets applicable to outstanding shares $ 830,478
============
Shares of capital stock outstanding 44,267
============
Net asset value and offering price per share
outstanding $ 18.76
============
CLASS I
Net assets applicable to outstanding shares $244,514,419
============
Shares of capital stock outstanding 12,481,373
============
Net asset value and offering price per share
outstanding $ 19.59
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 13
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 943,337
Income from securities loaned -- net 20,451
Interest 19,817
-----------
Total income 983,605
-----------
EXPENSES:
Manager 1,176,639
Professional 45,218
Transfer agent -- Classes A, B and C 28,804
Transfer agent -- Class I 49,871
Registration 24,712
Distribution -- Class B 16,862
Distribution -- Class C 2,611
Custodian 16,194
Service -- Class A 15,686
Service -- Class B 5,583
Service -- Class C 870
Service -- Class I 118
Directors 12,578
Shareholder communication 10,730
Miscellaneous 21,825
-----------
Total expenses before reimbursement 1,428,301
Expense reimbursement from Manager (87,699)
-----------
Net expenses 1,340,602
-----------
Net investment loss (356,997)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 4,551,543
Net change in unrealized appreciation on
investments 6,275,880
-----------
Net realized and unrealized gain on investments 10,827,423
-----------
Net increase in net assets resulting from
operations $10,470,426
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $3,430.
14 MainStay All 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 CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
DECREASE IN NET ASSETS:
Operations:
Net investment loss $ (356,997) $ (792,555)
Net realized gain (loss) on
investments 4,551,543 (8,874,030)
Net change in unrealized
appreciation on investments 6,275,880 16,270,396
----------------------------
Net increase in net assets
resulting from operations 10,470,426 6,603,811
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 2,734,657 14,849,376
Class B 2,210,368 3,689,513
Class C 381,997 581,639
Class I 10,856,459 33,439,885
Service Class -- 375,349
----------------------------
16,183,481 52,935,762
Cost of shares redeemed:
Class A (2,966,553) (1,698,238)
Class B (511,592) (159,295)
Class C (86,216) (37,859)
Class I (30,328,549) (128,896,797)
Service Class -- (11,412,859)
----------------------------
(33,892,910) (142,205,048)
----------------------------
Decrease in net assets derived
from capital share
transactions (17,709,429) (89,269,286)
----------------------------
Net decrease in net assets (7,239,003) (82,665,475)
NET ASSETS:
Beginning of period 270,668,317 353,333,792
----------------------------
End of period $263,429,314 $ 270,668,317
============================
Accumulated net investment loss at
end of period $ (356,997) $ --
============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- ---------------------------
JANUARY 2, JANUARY 2, JANUARY 2,
SIX MONTHS 2004* SIX MONTHS 2004* SIX MONTHS 2004*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005*** 2004 2005*** 2004 2005*** 2004
Net asset value at beginning
of period $ 18.32 $ 18.99 $ 18.21 $18.99 $ 18.22 $18.99
------- ------- ------- ------ ------- ------
Net investment loss (a) (0.07) (0.10) (0.15) (0.22) (0.15) (0.23)
Net realized and unrealized
gain (loss) on investments 0.70 (0.57) 0.70 (0.56) 0.69 (0.54)
------- ------- ------- ------ ------- ------
Total from investment
operations 0.63 (0.67) 0.55 (0.78) 0.54 (0.77)
------- ------- ------- ------ ------- ------
Less dividends:
From net realized gain on
investments -- -- -- -- -- --
------- ------- ------- ------ ------- ------
Net asset value at end of
period $ 18.95 $ 18.32 $ 18.76 $18.21 $ 18.76 $18.22
======= ======= ======= ====== ======= ======
Total investment return (b) 3.44%(c) (3.53%)(c) 3.02%(c) (4.11%)(c) 2.96%(c) (4.05%)(c)
Supplemental Data:
Net investment loss (0.55%)+ (0.61%)+ (1.30%)+ (1.36%)+ (1.30%)+ (1.36%)+
Net expenses 1.46% + 1.31% + 2.21% + 2.06% + 2.21% + 2.06% +
Expenses (before
reimbursement) 1.52% + 1.37% + 2.27% + 2.12% + 2.27% + 2.12% +
Portfolio turnover rate 21% 44% 21% 44% 21% 44%
Net assets at end of period
(in 000's) $12,891 $12,716 $ 5,193 $3,453 $ 830 $ 532
</Table>
<Table>
<Caption>
SERVICE CLASS++
-------------------------------------------------------------------
NOVEMBER 1,
2003
THROUGH
JANUARY 9, YEAR ENDED OCTOBER 31,
2004 2003 2002 2001 2000
Net asset value at beginning
of period $18.16 $ 15.63 $ 19.49 $ 36.88 $ 35.99
------ ------- ------- ------- -------
Net investment income (loss)
(a) (0.01) (0.05) (0.09) (0.14) (0.29)
Net realized and unrealized
gain (loss) on investments 0.97 2.58 (3.77) (12.55) 4.59
------ ------- ------- ------- -------
Total from investment
operations 0.96 2.53 (3.86) (12.69) 4.30
------ ------- ------- ------- -------
Less dividends:
From net realized gain on
investments -- -- -- (4.70) (3.41)
------ ------- ------- ------- -------
Net asset value at end of
period $19.12 $ 18.16 $ 15.63 $ 19.49 $ 36.88
====== ======= ======= ======= =======
Total investment return (b) 5.29%(c) 16.19% (19.81%) (38.49%) 11.93%
Ratios (to average net
assets)/Supplemental Data:
Net investment income
(loss) (0.26%)+ (0.29%) (0.47%) (0.57%) (0.77%)
Net expenses 1.18% + 1.18% 1.18% 1.18% 1.18%
Expenses (before
reimbursement) 1.26% + 1.27% 1.27% 1.23% 1.18%
Portfolio turnover rate 44% 35% 63% 35% 48%
Net assets at end of period
(in 000's) $ 0 $10,573 $10,301 $14,732 $24,732
</Table>
<Table>
* Commencement of Operations.
** The Fund changed its fiscal year end from December 31 to October 31.
*** Unaudited.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges. Class I and Service Class are not
subject to sales charges.
(c) Total return is not annualized.
</Table>
16 MainStay All 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
<Table>
<Caption>
CLASS I
- --------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005*** 2004 2003 2002 2001 2000
$ 18.90 $ 18.66 $ 16.02 $ 19.92 $ 37.50 $ 36.45
-------- -------- -------- -------- -------- ----------
(0.02) (0.04) (0.01) (0.04) (0.09) (0.20)
0.71 0.28 2.65 (3.86) (12.79) 4.66
-------- -------- -------- -------- -------- ----------
0.69 0.24 2.64 (3.90) (12.88) 4.46
-------- -------- -------- -------- -------- ----------
-- -- -- -- (4.70) (3.41)
-------- -------- -------- -------- -------- ----------
$ 19.59 $ 18.90 $ 18.66 $ 16.02 $ 19.92 $ 37.50
======== ======== ======== ======== ======== ==========
3.65%(c) 1.29% 16.48% (19.58%) (38.34%) 12.24%
(0.05%)+ (0.23%) (0.04%) (0.22%) (0.32%) (0.52%)
0.93% + 0.93% 0.93% 0.93% 0.93% 0.93%
0.99% + 0.99% 1.02% 1.02% 0.98% 0.93%
21% 44% 35% 63% 35% 48%
$244,514 $253,968 $342,761 $320,059 $436,898 $1,197,216
</Table>
<Table>
<Caption>
SERVICE CLASS++
--------------------------------
JANUARY 1,
1999
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999** 1998
$ 33.13 $ 25.24
------- -------
(0.21) (0.16)
3.41 10.26
------- -------
3.20 10.10
------- -------
(0.34) (2.21)
------- -------
$ 35.99 $ 33.13
======= =======
9.74%(c) 40.18%
(0.74%)+ (0.56%)
1.18% + 1.19%
1.18% + 1.19%
27% 29%
$25,987 $15,814
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 17
MAINSTAY ALL CAP VALUE FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges -1.99% 0.44% 2.72% 6.93%
Excluding sales charges 3.72 6.29 3.89 7.54
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE
VALUE FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------ ------------------
4/30/95 9450 10000 10000 10000
11803 13021 12989 12953
13770 16294 15920 15767
18104 22985 22636 22413
16999 28001 25824 24957
16145 30837 24823 24128
18545 26837 26418 25953
18039 23448 25386 25390
14528 20328 22083 21976
18385 24979 27882 27995
4/30/05 19541 26562 31765 31790
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges -1.71% 0.52% 2.80% 6.78%
Excluding sales charges 3.29 5.52 3.15 6.78
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE
VALUE FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------ ------------------
4/30/95 10000 10000 10000 10000
12399 13021 12989 12953
14360 16294 15920 15767
18765 22985 22636 22413
17515 28001 25824 24957
16496 30837 24823 24128
18827 26837 26418 25953
18185 23448 25386 25390
14527 20328 22083 21976
18260 24979 27882 27995
4/30/05 19267 26562 31765 31790
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 2.29% 4.52% 3.15% 6.78%
Excluding sales charges 3.29 5.52 3.15 6.78
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE
VALUE FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------ ------------------
4/30/95 10000 10000 10000 10000
12399 13021 12989 12953
14360 16294 15920 15767
18765 22985 22636 22413
17515 28001 25824 24957
16496 30837 24823 24128
18827 26837 26418 25953
18185 23448 25386 25390
14527 20328 22083 21976
18260 24979 27882 27995
4/30/05 19267 26562 31765 31790
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time. From inception (1/2/91) through 12/31/03,
performance for Class A, B, and C shares (each first offered 1/2/04) includes
the historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class A, B, and C shares.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
18 MainStay All Cap Value Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
4.04% 6.87% 4.21% 7.82%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE
VALUE FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------ ------------------
4/30/95 10000 10000 10000 10000
12518 13021 12989 12953
14637 16294 15920 15767
19290 22985 22636 22413
18157 28001 25824 24957
17281 30837 24823 24128
19906 26837 26418 25953
19399 23448 25386 25390
15656 20328 22083 21976
19871 24979 27882 27995
4/30/05 21236 26562 31765 31790
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
S&P 500(R) Index(1) 3.28% 6.34% -2.94% 10.26%
Russell 1000(R) Value Index(2) 6.72 13.92 5.06 12.25
Russell 3000(R) Value Index(3) 6.28 13.56 5.67 12.26
Average Lipper multi-cap value fund(4) 5.18 9.77 4.80 10.20
</Table>
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
2. The Russell 1000(R) Value Index is an unmanaged index that measures the
performance of those Russell 1000(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
3. The Russell 3000(R) Value Index is an unmanaged index that measures the
performance of those Russell 3000(R) Index companies with lower price-to-book
ratios and lower forecasted growth values. The Russell 3000(R) Index measures
the performance of the 3,000 largest U.S. companies based on total market
capitalization. Results assume reinvestment of all dividends and capital
gains. The Russell 3000(R) Value Index is considered to be the Fund's
broad-based securities-market index for comparison purposes. You cannot
invest directly in an index.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 19
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ALL CAP VALUE FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,037.35 $ 7.12 $1,017.95 $ 7.05
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,033.20 $10.89 $1,014.20 $10.79
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,033.20 $10.89 $1,014.20 $10.79
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,040.55 $ 4.60 $1,020.45 $ 4.56
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.41% for Class A, 2.16% for Class B and Class C, and 0.91% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
20 MainStay All Cap Value Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 97.4%
Convertible Preferred Stock 1.6%
Short-Term Investments (collateral from securities lending is 0.0%*) 1.1%
Liabilities in Excess of Cash and Other Assets (0.1)%
</Table>
* Less than one tenth of a percent.
See Portfolio of Investments on page 24 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Pfizer, Inc.
2. Transocean, Inc.
3. Citigroup, Inc.
4. Computer Sciences Corp.
5. Sprint Corp.
6. JPMorgan Chase & Co.
7. Gap, Inc. (The)
8. Bank of America Corp.
9. Rowan Cos., Inc.
10. Cadbury Schweppes PLC
</Table>
www.mainstayfunds.com 21
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Richard A. Rosen and Mark T. Spellman
of MacKay Shields LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests in securities that have value characteristics and that
span the entire range of market capitalizations reflected in the Russell 3000(R)
Value Index.(1) The Fund normally invests at least 80% of its assets in equity
securities. In implementing this strategy, the Fund principally invests in
common stocks that we believe are selling below their value when purchased, that
typically pay dividends, and that are listed on a national securities exchange
or are traded in the over-the-counter market. When assessing whether a stock is
undervalued, we compare the stock's market price to the company's cash flow and
interest-coverage ratios, the company's book value, the estimated value of the
company's assets, and the company's growth rates and future earnings potential.
There may be non-dividend- paying stocks in the portfolio if they meet the
"undervalued" criteria. We may sell securities that we believe no longer
contribute to the Fund's ability to meet its investment objective.
WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL
30, 2005?
Stocks moved somewhat higher during the six-month period, although performance
varied widely across capitalization levels and investment styles. Mid-cap and
large-cap value stocks led the equity market, outpacing growth stocks of all
capitalization levels by a significant margin. Specific industries were subject
to volatile undercurrents during the reporting period. Energy stocks dominated
the market as crude-oil prices topped $58 per barrel before backing off their
record levels by the end of April. A pick-up in merger-and-acquisition activity
in the energy sector also helped drive share prices higher. Information
technology stocks were generally weaker, as incremental data showed slowing
trends in revenue and order growth and mediocre progress in earnings growth.
Meanwhile, the Federal Open Market Committee continued to raise the targeted
federal funds rate, and the Federal Reserve intensified its rhetoric about
inflation concerns.
WHAT WERE SOME OF THE FUND'S STRONG PERFORMERS DURING THE REPORTING PERIOD?
High crude-oil prices benefited the shares of several of the Fund's energy
sector holdings, particularly offshore drillers Transocean Energy (+32%)(2) and
Pride International (+21%). A number of names in the health care sector also
performed well. Positive surprises from hospital operators HCA (+53%) and
Universal Health Services (+37%) drove their share prices up, as each reported
better-than-expected first-quarter 2005 trends and results.
Soft-drink and confectionery company Cadbury Schweppes (+23%) rose during the
reporting period. Cadbury Schweppes posted steadily improving results, driven by
positive trends in the company's brands and by successful integration of recent
acquisitions.
HOW DID THE FUND'S INFORMATION TECHNOLOGY STOCKS FARE DURING THE SIX MONTHS
ENDED APRIL 30, 2005?
Several names in the information technology sector detracted from the Fund's
performance. Shares of mainframe-software maker BMC Software (-14%) slid on
disappointing earnings results. The Fund continued to hold this stock, however,
since we found its longer-term prospects compelling despite softer-than-
anticipated short-term trends. IBM (-15%) suffered from sluggish revenue and
weak new-business-signing trends early in 2005. IBM subsequently announced a
major restructuring plan to cut costs in the affected areas, and we were
encouraged by the company's quick and decisive action.
WERE THERE OTHER STOCKS THAT DETRACTED FROM THE FUND'S RESULTS?
Small-cap industrial concern Insituform Technologies (-25%) saw its share price
drop after reporting weaker-than-expected results. Since we believed that the
market had overreacted, the Fund continued to hold the shares.
Graphite-electrode manufacturer GrafTech International (-59%) also suffered from
weaker-than-expected results. After meeting with senior management to review the
company's recent results and strategy for the future, however, we
Mid-capitalization companies are generally less established and their stocks may
be more volatile and less liquid than the securities of larger companies. Stocks
of small companies may be subject to greater price volatility, significantly
lower trading volumes, and greater spreads between bid and ask prices than
stocks of larger companies. Small companies may be more vulnerable to adverse
business or market developments than mid- or large-capitalization companies.
1. See footnote on page 19 for more information on the Russell 3000(R) Value
Index.
2. Performance percentages reflect the price performance of the securities
mentioned for the six months ended April 30, 2005, or for the portion of the
reporting period shares were held in the Fund, if shorter. Performance
percentages do not reflect the impact of dividends received, if any.
Purchases and sales within the Fund's portfolio may cause the performance of
Fund holdings to differ from that of the securities themselves.
22 MainStay All Cap Value Fund
added to the Fund's position in the stock. Mortgage and specialty insurer PMI
Group (-9%) also detracted from Fund performance for the period. We continued to
hold the PMI shares on the belief that macroeconomic trends, improving credit
quality, and increased market share in municipal-bond insurance may help the
stock in the months ahead.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
At the end of April 2005, the Fund had overweighted positions relative to the
Russell 3000(R) Value Index in consumer staples, energy, health care,
information technology, and telecommunication services. As of the same date, the
Fund was underweighted relative to the Index in utilities, consumer
discretionary, financials, materials, and industrials.
WHAT DO YOU ANTICIPATE GOING FORWARD?
We believe that higher interest rates and slower gross-domestic-product growth
may be important factors in the equity market over the near term.
Larger-capitalization names still seem to be offering more value than
smaller-capitalization names, and this is reflected in many of the Fund's
holdings in the health care and consumer staples sectors.
We also expect high energy prices to continue to affect the overall stock market
as manufacturers struggle to contain energy costs or pass them along to their
consumers. Many of the Fund's energy holdings have approached our price targets,
and we have recently been selling shares. The Fund continues to overweight the
energy sector relative to the Russell 3000(R) Value Index but to a lesser degree
than at the start of the reporting period.
After a strong multiyear run in economic-recovery plays in the industrials and
materials sectors, we have pared back or sold many of the Fund's positions. We
intend to keep the Fund under-weighted in these two sectors for the near term.
Information technology stocks have disappointed to date in 2005, but we continue
to find reasonable value in this sector and intend to remain over-weighted. We
have yet to find much value in the utilities sector, in larger banks, or in real
estate investment trusts (REITs), and we intend to keep the Fund underweighted
in these areas.
We remain confident in our disciplined classic value strategy and will continue
to seek opportunities among undervalued stocks with improving fundamental
characteristics.
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.
www.mainstayfunds.com 23
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (97.4%)+
- ----------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.8%)
Northrop Grumman Corp. 45,800 $ 2,511,672
Raytheon Co. 33,700 1,267,457
-------------
3,779,129
-------------
AUTO COMPONENTS (1.2%)
TRW Automotive Holdings Corp. (a) 89,100 1,586,871
-------------
BEVERAGES (0.7%)
Molson Coors Brewing Co. Class B 15,000 926,250
-------------
BUILDING PRODUCTS (0.8%)
American Standard Cos., Inc. (a) 23,400 1,046,214
-------------
CAPITAL MARKETS (4.1%)
Goldman Sachs Group, Inc. (The) 15,700 1,676,603
Merrill Lynch & Co., Inc. 37,700 2,033,161
State Street Corp. 40,400 1,867,692
-------------
5,577,456
-------------
CHEMICALS (0.7%)
Cambrex Corp. 49,500 940,500
-------------
COMMERCIAL BANKS (6.9%)
V Bank of America Corp. 67,854 3,056,144
PNC Financial Services
Group, Inc. (The) 25,200 1,341,396
U.S. Bancorp 80,400 2,243,160
Wachovia Corp. 27,000 1,381,860
Wells Fargo & Co. 22,600 1,354,644
-------------
9,377,204
-------------
COMMERCIAL SERVICES & SUPPLIES (0.4%)
Learning Tree International, Inc. (a) 37,700 481,052
-------------
COMMUNICATIONS EQUIPMENT (4.5%)
Lucent Technologies, Inc. 403,000 979,290
Motorola, Inc. 143,500 2,201,290
Nokia Corp. ADR (c) 183,700 2,935,526
-------------
6,116,106
-------------
COMPUTERS & PERIPHERALS (2.9%)
Hewlett-Packard Co. 71,700 1,467,699
International Business Machines Corp. 33,600 2,566,368
-------------
4,034,067
-------------
CONSTRUCTION & ENGINEERING (0.6%)
Insituform Technologies, Inc. Class A (a) 53,600 799,176
-------------
</Table>
<Table>
<Caption>
SHARES VALUE
CONTAINERS & PACKAGING (0.9%)
Owens-Illinois, Inc. (a) 50,400 $ 1,235,808
-------------
DIVERSIFIED FINANCIAL SERVICES (5.1%)
V Citigroup, Inc. 82,533 3,875,749
V JPMorgan Chase & Co. 88,456 3,139,303
-------------
7,015,052
-------------
DIVERSIFIED TELECOMMUNICATIONS (7.5%)
ALLTEL Corp. 18,400 1,048,064
BellSouth Corp. 51,900 1,374,831
Iowa Telecommunication Services, Inc. 54,400 1,039,040
SBC Communications, Inc. 61,700 1,468,460
V Sprint Corp. 153,200 3,410,232
Verizon Communications, Inc. 55,700 1,994,060
-------------
10,334,687
-------------
ELECTRIC UTILITIES (0.7%)
FirstEnergy Corp. 23,800 1,035,776
-------------
ENERGY EQUIPMENT & SERVICES (8.7%)
ENSCO International, Inc. 72,300 2,356,980
Pride International, Inc. (a) 103,200 2,301,360
V Rowan Cos., Inc. (a) 114,700 3,042,991
V Transocean, Inc. (a) 89,000 4,126,930
-------------
11,828,261
-------------
FOOD & STAPLES RETAILING (2.6%)
CVS Corp. 35,700 1,841,406
Kroger Co. (The) (a) 111,500 1,758,355
-------------
3,599,761
-------------
FOOD PRODUCTS (5.3%)
V Cadbury Schweppes PLC ADR (c) 72,900 2,963,385
General Mills, Inc. 59,800 2,954,120
Kraft Foods, Inc. Class A 40,100 1,299,641
-------------
7,217,146
-------------
HEALTH CARE PROVIDERS & SERVICES (3.4%)
HCA, Inc. 36,100 2,015,824
Universal Health Services, Inc. Class B 46,600 2,644,084
-------------
4,659,908
-------------
HOUSEHOLD PRODUCTS (1.9%)
Kimberly-Clark Corp. 42,400 2,647,880
-------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
24 MainStay All Cap Value Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------------
INSURANCE (8.1%)
AFLAC, Inc. 46,700 $ 1,898,355
Allstate Corp. (The) 38,600 2,167,776
Hartford Financial Services
Group, Inc. (The) 33,700 2,438,869
Prudential Financial, Inc. 38,300 2,188,845
St. Paul Travelers Cos., Inc. (The) 64,734 2,317,477
-------------
11,011,322
-------------
IT SERVICES (2.5%)
V Computer Sciences Corp. (a) 79,700 3,465,356
-------------
LEISURE EQUIPMENT & PRODUCTS (0.9%)
Mattel, Inc. 65,000 1,173,250
-------------
MACHINERY (1.3%)
Kadant, Inc. (a) 34,700 596,840
Navistar International Corp. (a) 39,700 1,172,341
-------------
1,769,181
-------------
MEDIA (0.9%)
Time Warner, Inc. (a) 73,300 1,232,173
-------------
METALS & MINING (2.4%)
Alcoa, Inc. 77,772 2,256,944
GrafTech International Ltd. (a) 253,600 966,216
-------------
3,223,160
-------------
MULTI-UTILITIES & UNREGULATED POWER (1.1%)
Duke Energy Corp. 51,700 1,509,123
-------------
OIL & GAS (3.0%)
ChevronTexaco Corp. 23,642 1,229,384
ConocoPhillips 15,600 1,635,660
Kerr-McGee Corp. 15,500 1,202,800
-------------
4,067,844
-------------
PAPER & FOREST PRODUCTS (1.6%)
Abitibi-Consolidated, Inc. 305,300 1,294,472
Bowater, Inc. 28,700 932,463
-------------
2,226,935
-------------
PHARMACEUTICALS (6.3%)
Bristol-Myers Squibb Co. 85,500 2,223,000
V Pfizer, Inc. 208,000 5,651,360
Pharmaceuticals Holders Trust (e) 9,500 711,550
-------------
8,585,910
-------------
</Table>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.3%)
Texas Instruments, Inc. 72,600 $ 1,812,096
-------------
SOFTWARE (1.3%)
BMC Software, Inc. (a) 112,500 1,822,500
-------------
SPECIALTY RETAIL (2.8%)
Christopher & Banks Corp. 50,300 785,686
V Gap, Inc. (The) 144,400 3,082,940
-------------
3,868,626
-------------
THRIFTS & MORTGAGE FINANCE (2.2%)
PMI Group, Inc. (The) 65,100 2,288,916
Washington Mutual, Inc. 17,100 706,572
-------------
2,995,488
-------------
Total Common Stocks (Cost $118,456,991) 133,001,268
-------------
CONVERTIBLE PREFERRED STOCK (1.6%)
- ----------------------------------------------------------------------------
PHARMACEUTICALS (1.6%)
Goldman Sachs Group, Inc. (The)
2.875%, Series BSKT (d) 20,000 2,149,820
-------------
Total Convertible Preferred Stock (Cost
$2,007,159) 2,149,820
-------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (1.1%)
- -----------------------------------------------------------------------------
COMMERCIAL PAPER (1.1%)
American General Finance Corp. 2.86%, due 5/4/05 $825,000 824,804
UBS Finance (Delaware) LLC 2.93%, due 5/2/05 720,000 719,942
-------------
Total Commercial Paper (Cost $1,544,746) 1,544,746
-------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 25
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ----------------------------------------------------------------------------
INVESTMENT COMPANY (0.0%) (b)
AIM Institutional Funds Group (f) 6,215 $ 6,215
-------------
Total Investment Company (Cost $6,215) 6,215
-------------
Total Short-Term Investments (Cost $1,550,961) 1,550,961
-------------
Total Investments (Cost $122,015,111) (g) 100.1% 136,702,049(h)
Liabilities in Excess of
Cash and Other Assets (0.1) (110,490)
-------- -------------
Net Assets 100.0% $ 136,591,559
======== =============
</Table>
<Table>
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) ADR -- American Depositary Receipt.
(d) Synthetic Convertible -- an equity-linked security
issued by an entity other than the issuer of the
underlying equity instrument.
(e) Exchange Traded Fund -- represents a basket of
securities that are traded on an exchange.
(f) Represents a security purchased with cash collateral
received for a loaned security pending settlement.
(g) The cost for federal income tax purposes is
$122,976,832.
(h) At April 30, 2005 net unrealized appreciation was
$13,725,217, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $17,982,682 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $4,257,465.
</Table>
26 MainStay All Cap Value 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $122,015,111) $136,702,049
Deposit with broker for securities loaned 73
Receivables:
Investment securities sold 188,865
Fund shares sold 155,110
Dividends and interest 238,914
Other assets 35,224
------------
Total assets 137,320,235
------------
LIABILITIES:
Securities lending collateral (a) 6,288
Payables:
Investment securities purchased 408,074
Fund shares redeemed 130,471
Manager 76,133
Transfer agent 53,815
NYLIFE Distributors 8,442
Custodian 2,804
Directors 1,812
Accrued expenses 40,837
------------
Total liabilities 728,676
------------
Net assets $136,591,559
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 858
Class B 516
Class C 96
Class I 9,205
Additional paid-in capital 134,036,490
Accumulated undistributed net investment
income 649,134
Accumulated net realized loss on investments
and option transactions (12,791,678)
Net unrealized appreciation on investments 14,686,938
------------
Net assets $136,591,559
============
CLASS A
Net assets applicable to outstanding shares $ 10,944,519
============
Shares of capital stock outstanding 858,006
============
Net asset value per share outstanding $ 12.76
Maximum sales charge (5.50% of offering price) 0.74
------------
Maximum offering price per share outstanding $ 13.50
============
CLASS B
Net assets applicable to outstanding shares $ 6,546,200
============
Shares of capital stock outstanding 516,132
============
Net asset value and offering price per
share outstanding $ 12.68
============
CLASS C
Net assets applicable to outstanding shares $ 1,211,669
============
Shares of capital stock outstanding 95,537
============
Net asset value and offering price per
share outstanding $ 12.68
============
CLASS I
Net assets applicable to outstanding shares $117,889,171
============
Shares of capital stock outstanding 9,205,165
============
Net asset value and offering price per
share outstanding $ 12.81
============
</Table>
(a) Collateral on unsettled sale of securities loaned.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 27
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 1,329,455
Interest 53,376
Income from securities loaned -- net 8,149
-----------
Total Income 1,390,980
-----------
EXPENSES:
Manager 588,585
Transfer agent -- Classes A, B and C 28,113
Transfer agent -- Class I 54,281
Professional 28,081
Registration 24,461
Distribution -- Class B 19,863
Distribution -- Class C 4,096
Service -- Class A 12,887
Service -- Class B 6,621
Service -- Class C 1,365
Custodian 12,117
Directors 6,903
Shareholder communication 6,734
Miscellaneous 14,398
-----------
Total expenses before reimbursement 808,505
Expense reimbursement from Manager (112,442)
-----------
Net expenses 696,063
-----------
Net investment income 694,917
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
WRITTEN OPTION TRANSACTIONS:
Net realized gain from:
Security transactions 6,915,796
Written option transactions 12,525
-----------
Net realized gain on investments and written
option transactions 6,928,321
-----------
Net change in unrealized appreciation on
investments (2,417,139)
-----------
Net realized and unrealized gain on investments
and written option transactions 4,511,182
-----------
Net increase in net assets resulting from
operations $ 5,206,099
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $7,733.
28 MainStay All Cap Value Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 694,917 $ 1,545,931
Net realized gain on
investments and written
option transactions 6,928,321 14,464,552
Net change in unrealized
appreciation on investments
and written option
transactions (2,417,139) 1,615,665
---------------------------
Net increase in net assets
resulting from operations 5,206,099 17,626,148
---------------------------
Dividends to shareholders:
From net investment income:
Class A (78,877) --
Class B (21,342) --
Class C (4,738) --
Class I (1,285,863) (2,046,476)
Service Class -- (65,067)
---------------------------
Total dividends to
shareholders (1,390,820) (2,111,543)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 2,701,611 10,262,130
Class B 3,034,768 3,852,520
Class C 464,845 1,014,648
Class I 8,647,422 23,435,990
Service Class -- 429,948
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares
issued to shareholders in
investments of dividends:
Class A $ 75,411 $ --
Class B 19,658 --
Class C 4,117 --
Class I 1,285,603 2,043,233
Service Class -- 52,463
---------------------------
16,233,435 41,090,932
Cost of shares redeemed:
Class A (1,273,261) (1,210,034)
Class B (327,484) (104,583)
Class C (156,958) (139,405)
Class I (13,715,346) (85,783,397)
Service Class -- (6,291,284)
---------------------------
(15,473,049) (93,528,703)
---------------------------
Increase (decrease) in net
assets derived from
capital share
transactions 760,386 (52,437,771)
---------------------------
Net increase (decrease) in
net assets 4,575,665 (36,923,166)
NET ASSETS:
Beginning of period 132,015,894 168,939,060
---------------------------
End of period $136,591,559 $132,015,894
===========================
Accumulated undistributed net
investment income at end of
period $ 649,134 $ 1,345,037
===========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 29
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
---------------------------- --------------------------- -------------
JANUARY 2, JANUARY 2,
SIX MONTHS 2004* SIX MONTHS 2004* SIX MONTHS
ENDED THROUGH ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
2005*** 2004 2005*** 2004 2005***
Net asset value at beginning of period $ 12.40 $12.08 $12.33 $12.08 $12.33
------- ------ ------ ------ ------
Net investment income (loss) 0.04(c) 0.06(c) (0.01)(c) (0.01)(c) (0.01)(c)
Net realized and unrealized gain (loss) on
investments 0.42 0.26 0.42 0.26 0.42
------- ------ ------ ------ ------
Total from investment operations 0.46 0.32 0.41 0.25 0.41
------- ------ ------ ------ ------
Less dividends and distributions:
From net investment income (0.10) -- (0.06) -- (0.06)
From net realized gain on investments -- -- -- -- --
------- ------ ------ ------ ------
Total dividends and distributions (0.10) -- (0.06) -- (0.06)
------- ------ ------ ------ ------
Net asset value at end of period $ 12.76 $12.40 $12.68 $12.33 $12.68
======= ====== ====== ====== ======
Total investment return (a) 3.72%(b) 2.65%(b) 3.29%(b) 2.07%(b) 3.29%(b)
Ratio (to average net assets)/Supplemental
Data:
Net investment gain (loss) 0.60%+ 0.65%+ (0.15%)+ (0.10%)+ (0.15%)+
Net expenses 1.41%+ 1.33%+ 2.16%+ 2.08% + 2.16%+
Expenses (before reimbursement) 1.57%+ 1.45%+ 2.32%+ 2.20% + 2.32%+
Portfolio turnover rate 22% 48% 22% 48% 22%
Net assets at end of period (in 000's) $10,945 $9,206 $6,546 $3,776 $1,212
<Caption>
CLASS C
-----------
JANUARY 2,
2004*
THROUGH
OCTOBER 31,
2004
Net asset value at beginning of period $12.08
------
Net investment income (loss) (0.01)(c)
Net realized and unrealized gain (loss) on
investments 0.26
------
Total from investment operations 0.25
------
Less dividends and distributions:
From net investment income --
From net realized gain on investments --
------
Total dividends and distributions --
------
Net asset value at end of period $12.33
======
Total investment return (a) 2.07%(b)
Ratio (to average net assets)/Supplemental
Data:
Net investment gain (loss) (0.10%)+
Net expenses 2.08% +
Expenses (before reimbursement) 2.20% +
Portfolio turnover rate 48%
Net assets at end of period (in 000's) $ 884
</Table>
<Table>
<Caption>
SERVICE CLASS++
-----------------------------------------------------------
NOVEMBER 1,
2003
THROUGH
JANUARY 9, YEAR ENDED OCTOBER 31,
2004 2003 2002 2001 2000
Net asset value at beginning of period $11.24 $ 9.36 $12.52 $13.97 $12.66
------ ------ ------ ------ ------
Net investment income 0.02(c) 0.11(c) 0.10(c) 0.14(c) 0.10
Net realized and unrealized gain (loss) on
investments 1.07 1.85 (1.85) (1.16) 1.28
------ ------ ------ ------ ------
Total from investment operations 1.09 1.96 (1.75) (1.02) 1.38
------ ------ ------ ------ ------
Less dividends and distributions:
From net investment income (0.13) (0.08) (0.28) (0.12) (0.07)
From net realized gain on investments -- -- (1.13) (0.31) --
------ ------ ------ ------ ------
Total dividends and distributions (0.13) (0.08) (1.41) (0.43) (0.07)
------ ------ ------ ------ ------
Net asset value at end of period $12.20 $11.24 $ 9.36 $12.52 $13.97
====== ====== ====== ====== ======
Total investment return (a) 9.77%(b) 21.14% (16.64%) (7.54%) 11.00%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.91% 1.12% 0.87% 1.03% 0.87%
Net expenses 1.14% 1.19% 1.19% 1.19% 1.19%
Expenses (before reimbursement) 1.31% 1.36% 1.37% 1.25% 1.19%
Portfolio turnover rate 7% 64% 65% 94% 96%
Net assets at end of period (in 000's) $ 0 $5,388 $4,296 $5,219 $5,776
</Table>
<Table>
* Commencement of Operations.
** The Fund changed its fiscal year end from December 31 to October 31.
*** Unaudited.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Total return is calculated exclusive of sales charges. Class I and Service Class are not
subject to sales charges.
(b) Total return is not annualized.
(c) Per share data based on average shares outstanding during the period.
(d) Less than one cent per share.
</Table>
30 MainStay All Cap Value 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
<Table>
<Caption>
CLASS I
- ----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005*** 2004 2003 2002 2001 2000
$ 12.44 $ 11.26 $ 9.38 $ 12.55 $ 14.00 $ 12.69
-------- -------- -------- -------- -------- --------
0.08(c) 0.11(c) 0.14(c) 0.13(c) 0.16(c) 0.15
0.43 1.23 1.85 (1.86) (1.15) 1.27
-------- -------- -------- -------- -------- --------
0.51 1.34 1.99 (1.73) (0.99) 1.42
-------- -------- -------- -------- -------- --------
(0.14) (0.16) (0.11) (0.31) (0.15) (0.11)
-- -- -- (1.13) (0.31) --
-------- -------- -------- -------- -------- --------
(0.14) (0.16) (0.11) (1.44) (0.46) (0.11)
-------- -------- -------- -------- -------- --------
$ 12.81 $ 12.44 $ 11.26 $ 9.38 $ 12.55 $ 14.00
======== ======== ======== ======== ======== ========
4.04%(b) 11.97% 21.43% (16.46%) (7.29%) 11.31%
1.10%+ 1.04% 1.37% 1.12% 1.28% 1.12%
0.91%+ 0.94% 0.94% 0.94% 0.94% 0.94%
1.07%+ 1.06% 1.11% 1.12% 1.00% 0.94%
22% 48% 64% 65% 94% 96%
$117,889 $118,150 $163,551 $137,069 $140,919 $742,924
</Table>
<Table>
<Caption>
SERVICE CLASS++
--------------------------------
JANUARY 1,
1999 YEAR
THROUGH ENDED
OCTOBER 31, DECEMBER 31,
1999** 1998
$11.76 $16.35
------ ------
0.06 0.14
0.84 (1.57)
------ ------
0.90 (1.43)
------ ------
(0.00)(d) (0.14)
-- (3.02)
------ ------
(0.00)(d) (3.16)
------ ------
$12.66 $11.76
====== ======
(7.65%)(b) (8.30%)
0.59% + 0.79%
1.21% + 1.23%
1.21% + 1.23%
49% 76%
$7,418 $9,740
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 31
MAINSTAY MID CAP OPPORTUNITY FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 0.49% 6.87% 9.96% 11.92%
Excluding sales charges 6.34 13.09 11.21 12.55
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
4/30/95 9450 10000 10000 10000
11806 12787 13079 13021
13968 15057 14512 16294
20509 21224 20458 22985
20355 21626 21673 28001
18127 20655 25142 30837
20920 24704 25214 26837
23240 26782 25037 23448
20407 23170 21498 20328
27264 31262 29120 24979
4/30/05 30833 37610 33378 26562
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 1.03% 7.29% 10.12% 11.65%
Excluding sales charges 6.03 12.29 10.39 11.65
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
4/30/95 10000 10000 10000 10000
12387 12787 13079 13021
14502 15057 14512 16294
21138 21224 20458 22985
20783 21626 21673 28001
18355 20655 25142 30837
21030 24704 25214 26837
23186 26782 25037 23448
20215 23170 21498 20328
26796 31262 29120 24979
4/30/05 30088 37610 33378 26562
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 4.98% 11.19% 10.41% 11.66%
Excluding sales charges 5.98 12.19 10.41 11.66
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
4/30/95 10000 10000 10000 10000
12400 12787 13079 13021
14520 15057 14512 16294
21169 21224 20458 22985
20804 21626 21673 28001
18368 20655 25142 30837
21049 24704 25214 26837
23209 26782 25037 23448
20256 23170 21498 20328
26863 31262 29120 24979
4/30/05 30137 37610 33378 26562
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time. From inception (12/27/94) through 12/31/03,
performance for Class A and B shares (each first offered 1/2/04) includes the
historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class A and
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
32 MainStay Mid Cap Opportunity Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
6.59% 13.57% 11.52% 12.84%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
4/30/95 10000 10000 10000 10000
12519 12787 13079 13021
14844 15057 14512 16294
21851 21224 20458 22985
21731 21626 21673 28001
19393 20655 25142 30837
22443 24704 25214 26837
24988 26782 25037 23448
22005 23170 21498 20328
29457 31262 29120 24979
4/30/05 33456 37610 33378 26562
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- ----------------------------------------------------------------------------------------
Russell Midcap(R) Value Index(1) 8.81% 20.30% 12.73% 14.16%
Russell Midcap(R) Index(2) 6.81 14.62 5.83 12.81
S&P 500(R) Index(3) 3.28 6.34 -2.94 10.26
Average Lipper mid-cap value fund(4) 5.46 11.37 11.12 11.98
</Table>
B shares. Prior to 1/2/04, the Fund offered Class L shares, which were subject
to a 1% sales charge and a 1% CDSC on redemptions within one year of purchase.
From inception through 12/29/02, performance for Class L shares (first offered
12/30/02) includes the historical performance of Class I shares adjusted to
reflect the applicable sales charge, CDSC, and fees and expenses for Class L
shares. Effective 1/2/04, all outstanding Class L shares of the Fund were
converted to Class C shares, redesignated Class C shares, or both.
1. The Russell Midcap(R) Value Index is an unmanaged index that measures the
performance of those Russell Midcap(R) companies with lower price-to-book
ratios and lower forecasted growth values. The Russell Midcap(R) Index is an
unmanaged index that measures the performance of the 800 smallest companies
in the Russell 1000(R) Index, which, in turn, is an unmanaged index that
measures the performance of the 1,000 largest U.S. companies based on total
market capitalization. Results for all indices assume reinvestment of all
income and capital gains. The Russell Midcap(R) Value Index is considered to
be the Fund's broad-based securities-market index for comparison purposes. An
investment cannot be made directly into an index.
2. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
3. "S&P 500" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500(R) is
an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 33
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY MID CAP OPPORTUNITY FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,063.80 $ 7.27 $1,017.90 $ 7.10
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,060.85 $11.09 $1,014.15 $10.84
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,060.45 $11.09 $1,014.15 $10.84
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,066.20 $ 5.33 $1,019.80 $ 5.21
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.42% for Class A, 2.17% for Class B and Class C, and 1.04% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
34 MainStay Mid Cap Opportunity Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 94.5%
Short-Term Investment 4.8%
Investment Companies 4.3%
Liabilities in Excess of Cash and Other Assets (3.6)%
</Table>
See Portfolio of Investments on page 38 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Equity Office Properties Trust
2. Burlington Northern Santa Fe Corp.
3. Edison International
4. Astoria Financial Corp.
5. Burlington Resources, Inc.
6. Popular, Inc.
7. DPL, Inc.
8. UST, Inc.
9. KeyCorp
10. First BanCorp
</Table>
www.mainstayfunds.com 35
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Kathy A. O'Connor and Jeffrey Sanders
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in common and preferred
stock of companies with market capitalizations that, at the time of investment,
are similar to those of companies in the Russell Midcap(R) Index,(1) the
Standard & Poor's MidCap 400(R) Index,(2) or a universe selected from the
smallest 800 companies of the largest 1,000 companies ranked by market
capitalization. In implementing this strategy, the Fund invests primarily in
stocks of mid-capitalization companies that we determine to have strong or
improving operating characteristics and to be relatively overlooked or
undervalued by the market. The Fund uses a quantitative and statistical model to
analyze the relative quality and value of stocks.
WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL
30, 2005?
During the six months ended April 30, 2005, most broadly watched equity indices
saw positive performance, but certain small-cap core and small-cap growth
indices declined. Mid-capitalization stocks showed the strongest overall
performance, followed by large- and then small-capitalization stocks. The
market's general preference for value equities over growth stocks was clearly
evident among mid-capitalization issues. During the reporting period, the
domestic equity market was influenced by crude-oil price fluctuations,
job-growth concerns, the decline of the U.S. dollar, and continuing instability
in the Middle East.
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All share classes of MainStay Mid Cap Opportunity Fund underperformed the
Russell Midcap(R) Value Index(3) for the period ended April 30, 2005. In the
banks and technology hardware & equipment industry groups, the Fund's holdings
underperformed peer stocks in the Index. The utilities industry group had strong
performance for the six-month reporting period, but the Fund's underweighted
position relative to the Russell Midcap(R) Value Index detracted from the Fund's
relative performance.
The Russell Midcap(R) Value Index is a capitalization-weighted index, which
means that it has larger weightings among securities with larger market
capitalizations. MainStay Mid Cap Opportunity Fund attempts to have equal
weights among the securities in its portfolio.
For the six months ended April 30, 2005, the Russell Midcap(R) Value Index was
approximately 50% weighted in the top 25% of Index companies (from largest
market capitalization to smallest). This significantly contributed to the return
of the Russell Midcap(R) Value Index. On the other hand, MainStay Mid Cap
Opportunity Fund was weighted only 42% in the top 25% of Index companies with
rank determined by market capitalization. This underweighted position and lower
overall exposure to the top 25% of companies relative to the Russell Midcap(R)
Value Index held back the relative performance of the Fund.
It is important to note that the Fund was invested in some, but not all of the
companies in the Russell Midcap(R) Value Index.
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS PROVIDED THE STRONGEST PERFORMANCE
FOR THE FUND DURING THE SIX-MONTH REPORTING PERIOD?
The five strongest-performing industry groups were energy; food, beverage &
tobacco; utilities; health care equipment & services; and retailing. Among the
strongest contributors to the Fund's performance were petroleum refiner Premcor
(+59.9%),(4) entertainment-software company Activision (+35.2%), health benefits
provider Humana (+69.1%), steel manufacturer Nucor (+20.5%), and transportation
and health care services provider Laidlaw International (+31.4%).
Mid-capitalization companies are generally less established and their stocks may
be more volatile and less liquid than the securities of larger companies.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy.
1. See footnote on page 33 for more information on the Russell Midcap(R) Index.
2. The S&P MidCap 400(R) Index is an unmanaged market-value weighted index that
consists of 400 domestic common stocks chosen for market size, liquidity, and
industry-group representation and is generally considered representative of
the market for domestic mid-cap stocks. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. See footnote on page 33 for more information on the Russell Midcap(R) Value
Index.
4. Percentages reflect total returns of Fund holdings in the securities
mentioned, including purchases and sales, for the six months ended April 30,
2005, or for the portion of the reporting period such securities were held in
the Fund, if shorter. Securities are mentioned in the order of their
contribution to Fund performance, which takes total returns and weightings
both into account.
36 MainStay Mid Cap Opportunity Fund
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS DETRACTED FROM THE FUND'S
PERFORMANCE?
The Fund's five weakest-performing industry groups during the six-month
reporting period were banks, technology hardware & equipment, capital goods,
automobiles & components, and telecommunication services. The greatest negative
contribution to the Fund's performance came from R&G Financial (-62.1%), a
Puerto Rico bank holding company. The second-greatest negative contributor was
telecommunications equipment company UTStarcom (-26.5%), followed by Nuveen
Investments (-11.9%), smokeless tobacco and wine & spirits holding company UST
(-12.3%), and steel manufacturer Steel Dynamics (-27.4%).
WERE THERE ANY SIGNIFICANT EQUITY PURCHASES OR SALES DURING THE REPORTING
PERIOD?
The Fund uses its proprietary model to select stocks that have relatively
improving operating characteristics and are relatively undervalued. One of the
stocks the Fund purchased during the reporting period was Toys "R" Us (+27.0%),
a worldwide retailer of toys, apparel, and other children's products. The Fund
purchased the stock in November 2004 and April 2005. We established a position
in Apache (+9.9%), an energy company, in November 2004 and added to the position
throughout the reporting period. The Fund also established a position in
independent oil and gas exploration and production company Anadarko Petroleum
(+8.4%) in November 2004 and added to the position in April 2005. All three of
these companies exhibited improving fundamentals and, according to our
proprietary model, were relatively undervalued at the time of purchase.
The Fund sells stocks that exhibit deteriorating operating results, are
relatively overvalued, or both. In December 2004, the Fund sold its position in
Saks (+17.8%), when the retailer decided to close some of its stores as part of
a reorganization. The Fund sold its entire position in Outback Steakhouse
(+17.4%) in February 2005 when our quantitative model showed that the stock had
become overvalued. Homebuilder Toll Brothers (+17.1%) was sold for a similar
reason in December 2004.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
Weighting changes in the Fund result from a combination of security performance,
industry performance, and the Fund's proprietary security selection process.
During the reporting period, the Fund's weighting in the banks industry group
increased from 12.2% of net assets at the end of October 2004 to 14.9% at the
end of April 2005. Another significant change was in the consumer durables &
apparel industry group, where the Fund's weighting declined from 9.1% at the
beginning of the reporting period to 5.5% on April 30, 2005.
HOW DID THE FUND'S WEIGHTINGS COMPARE WITH THOSE OF THE RUSSELL MIDCAP(R) VALUE
INDEX AT THE END OF THE REPORTING PERIOD?
As of April 30, 2005, the Fund was overweighted relative to the Russell
Midcap(R) Value Index in the banks industry group as well as in food, beverage &
tobacco; household & personal products; and energy. During the reporting period,
the Fund's performance benefited from relatively overweighted positions in
energy; food, beverage & tobacco; and household & personal products.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
As always, the Fund will continue to focus on stocks that our proprietary model
indicates have relatively improving operating characteristics and are relatively
undervalued.
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.
www.mainstayfunds.com 37
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (94.5%)+
- -----------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.1%)
CNF, Inc. 2,700 $ 115,425
------------
AUTO COMPONENTS (0.7%)
Goodyear Tire & Rubber Co. (The) (a) 43,500 516,345
------------
CAPITAL MARKETS (2.0%)
Bear Stearns Cos., Inc. (The) 2,197 207,968
Nuveen Investments Class A 36,900 1,254,231
------------
1,462,199
------------
COMMERCIAL BANKS (8.0%)
V First BanCorp 36,600 1,327,116
V KeyCorp 41,700 1,382,772
V Popular, Inc. 69,300 1,603,602
Regions Financial Corp. 30,900 1,034,841
TCF Financial Corp. 20,100 508,329
------------
5,856,660
------------
COMMERCIAL SERVICES & SUPPLIES (3.5%)
Brink's Co. (The) 17,900 577,454
Copart, Inc. (a) 22,400 485,632
Deluxe Corp. 5,800 231,594
Kelly Services, Inc. Class A 49,600 1,302,496
------------
2,597,176
------------
COMMUNICATIONS EQUIPMENT (0.9%)
UTStarcom, Inc. (a) 67,200 639,072
------------
COMPUTERS & PERIPHERALS (2.0%)
Apple Computer, Inc. (a) 21,300 768,078
Imation Corp. 13,800 481,206
InFocus Corp. (a) 60,300 217,080
------------
1,466,364
------------
CONSUMER FINANCE (1.7%)
AmeriCredit Corp. (a) 23,400 547,560
Student Loan Corp. (The) 1,800 348,750
WFS Financial, Inc. (a) 8,700 391,065
------------
1,287,375
------------
CONTAINERS & PACKAGING (0.2%)
Crown Holdings, Inc. (a) 9,300 139,965
------------
DIVERSIFIED FINANCIAL SERVICES (1.0%)
CIT Group, Inc. 17,400 700,872
------------
</Table>
<Table>
<Caption>
SHARES VALUE
DIVERSIFIED TELECOMMUNICATION SERVICES (1.3%)
CenturyTel, Inc. 31,100 $ 954,459
------------
ELECTRIC UTILITIES (4.8%)
V DPL, Inc. 60,400 1,536,576
V Edison International 51,800 1,880,340
Xcel Energy, Inc. 6,200 106,516
------------
3,523,432
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%)
Tektronix, Inc. 9,100 197,106
------------
FOOD & STAPLES RETAILING (0.5%)
Albertson's, Inc. 19,700 389,863
------------
FOOD PRODUCTS (3.1%)
Hershey Co. (The) 15,900 1,016,010
McCormick & Co., Inc. (b) 6,900 238,671
Pilgrim's Pride Corp. Class B 15,500 559,395
Tyson Foods, Inc. Class A 29,600 499,944
------------
2,314,020
------------
GAS UTILITIES (0.8%)
Southern Union Co. (a) 24,900 596,106
------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.0%)
Bausch & Lomb, Inc. 4,000 300,000
Cytyc Corp. (a) 56,400 1,201,884
------------
1,501,884
------------
HEALTH CARE PROVIDERS & SERVICES (1.9%)
Humana, Inc. (a) 17,500 606,375
Manor Care, Inc. 8,400 280,140
PacifiCare Health Systems, Inc. (a) 8,100 484,056
------------
1,370,571
------------
HOTELS, RESTAURANTS & LEISURE (2.2%)
Choice Hotels International, Inc. 18,000 1,089,360
Darden Restaurants, Inc. 16,900 507,000
------------
1,596,360
------------
HOUSEHOLD DURABLES (3.0%)
Black & Decker Corp. (The) 9,100 761,033
Fortune Brands, Inc. (a) 4,900 414,442
NVR, Inc. (a) 400 287,340
Ryland Group, Inc. (The) 2,700 165,780
Stanley Works (The) 13,800 593,814
------------
2,222,409
------------
HOUSEHOLD PRODUCTS (3.0%)
Clorox Co. (The) 15,700 993,810
Energizer Holdings, Inc. (a) 20,800 1,184,976
------------
2,178,786
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
38 MainStay Mid Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.1%)
Alleghany Corp. (a) 306 $ 82,620
------------
INSURANCE (1.6%)
Conseco, Inc. (a) 13,700 263,588
MBIA, Inc. 4,900 256,662
Torchmark Corp. 12,600 673,218
------------
1,193,468
------------
IT SERVICES (1.6%)
Convergys Corp. (a) 46,900 607,824
Sabre Holdings Corp. Class A 29,100 569,196
------------
1,177,020
------------
LEISURE EQUIPMENT & PRODUCTS (2.3%)
Eastman Kodak Co. 29,200 730,000
Mattel, Inc. 55,100 994,555
------------
1,724,555
------------
MACHINERY (0.9%)
Terex Corp. (a) 17,500 654,150
------------
METALS & MINING (2.3%)
Nucor Corp. 17,400 889,140
Steel Dynamics, Inc. 18,700 508,266
United States Steel Corp. 7,400 316,424
------------
1,713,830
------------
MULTILINE RETAIL (3.3%)
Dillard's, Inc. Class A 56,200 1,307,774
Federated Department Stores, Inc. 3,500 201,250
Sears Holdings Corp. (a) 6,829 923,554
------------
2,432,578
------------
MULTI-UTILITIES & UNREGULATED POWER (2.5%)
Equitable Resources, Inc. 14,200 818,488
Reliant Energy, Inc. (a) 56,100 570,537
Williams Cos., Inc. (The) 24,700 420,394
------------
1,809,419
------------
OIL & GAS (8.2%)
Amerada Hess Corp. 8,500 796,025
Anadarko Petroleum Corp. 4,500 328,680
Apache Corp. 18,500 1,041,365
V Burlington Resources, Inc. 34,600 1,681,906
Overseas Shipholding Group, Inc. 3,200 180,576
Premcor, Inc. 18,300 1,210,545
Sunoco, Inc. 7,700 764,302
Valero Energy Corp. 1,000 68,530
------------
6,071,929
------------
PAPER & FOREST PRODUCTS (0.8%)
Louisiana-Pacific Corp. 22,900 563,340
------------
</Table>
<Table>
<Caption>
SHARES VALUE
PERSONAL PRODUCTS (0.6%)
Estee Lauder Cos., Inc. (The) Class A 11,900 $ 457,079
------------
REAL ESTATE (4.8%)
AMB Property Corp. 6,300 245,637
Apartment Investment & Management Co. Class A 16,800 640,416
Cousins Properties, Inc. 7,800 210,600
V Equity Office Properties Trust 61,100 1,922,817
Impac Mortgage Holdings, Inc. 26,700 489,144
------------
3,508,614
------------
ROAD & RAIL (4.0%)
V Burlington Northern Santa Fe Corp. 39,700 1,915,525
Laidlaw International, Inc. (a) 43,900 982,921
Norfolk Southern Corp. 1,600 50,240
------------
2,948,686
------------
SOFTWARE (1.7%)
Activision, Inc. (a) 30,000 433,800
Autodesk, Inc. 25,700 818,031
------------
1,251,831
------------
SPECIALTY RETAIL (5.0%)
Abercrombie & Fitch Co. Class A 5,200 280,540
AutoNation, Inc. (a) 47,000 858,690
Circuit City Stores, Inc. (a) 59,400 938,520
Sherwin-Williams Co. (The) 24,000 1,069,680
Toys "R" Us, Inc. (a) 15,200 385,320
Zale Corp. (a) 6,000 162,180
------------
3,694,930
------------
TEXTILES, APPAREL & LUXURY GOODS (0.2%)
Reebok International Ltd. 3,600 146,196
------------
THRIFTS & MORTGAGE FINANCE (6.9%)
V Astoria Financial Corp. 65,850 1,745,683
Countrywide Financial Corp. 10,598 383,542
Doral Financial Corp. 5,000 70,250
Fremont General Corp. 19,100 414,279
IndyMac Bancorp, Inc. 7,200 277,056
MGIC Investment Corp. 21,700 1,280,300
New Century Financial Corp. 6,300 286,335
PMI Group, Inc. (The) 5,800 203,928
R&G Financial Corp. Class B 13,500 191,835
Radian Group, Inc. 4,400 195,492
------------
5,048,700
------------
TOBACCO (3.6%)
Reynolds American, Inc. 14,900 1,161,753
V UST, Inc. 32,600 1,493,080
------------
2,654,833
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 39
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------
)x
TRADING COMPANIES & DISTRIBUTORS (1.1%)
Grainger (W.W.), Inc. 14,800 $ 818,292
------------
Total Common Stocks (Cost $66,396,290) 69,578,519
------------
INVESTMENT COMPANIES (4.3%)
- -----------------------------------------------------------------------------
CAPITAL MARKETS (4.3%)
iShares Russell Midcap Index Fund (c) 7,700 587,125
iShares Russell Midcap Value Index Fund (c) 8,000 880,800
iShares S&P MidCap 400/ BARRA Value Index Fund (c) 7,000 859,250
S&P MidCap 400 Index-MidCap SPDR Trust, Series 1
(c) 7,000 811,510
------------
Total Investment Companies
(Cost $3,134,623) 3,138,685
------------
PRINCIPAL
AMOUNT VALUE
)x
SHORT-TERM INVESTMENT (4.8%)
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.8%)
Bank of New York (The)
2.70%, dated 4/29/05
due 5/2/05
Proceeds at Maturity
$3,547,798
(Collateralized by Federal National Mortgage
Association
5.143%, due 3/1/33
with a Principal Amount of
$6,685,000 and a Market Value
of $6,642,574 including
accrued interest) $3,547,000 $ 3,547,000
------------
Total Short-Term Investment (Cost $3,547,000) 3,547,000
------------
Total Investments (Cost $73,077,913) (d) 103.6% 76,264,204(e)
Liabilities in Excess of
Cash and Other Assets (3.6) (2,661,917)
---------- ------------
Net Assets 100.0% $ 73,602,287
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Nonvoting shares.
(c) Exchange Traded Fund -- represents a basket of
securities that are traded on an exchange.
(d) The cost for federal income tax purposes is $73,087,931.
(e) At April 30, 2005 net unrealized appreciation was
$3,176,273, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $6,672,063 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $3,495,790.
</Table>
40 MainStay Mid Cap Opportunity 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $73,077,913) $76,264,204
Cash 159,607
Receivables:
Investment securities sold 1,751,549
Fund shares sold 562,738
Dividends and interest 44,638
Other assets 35,629
-----------
Total assets 78,818,365
-----------
LIABILITIES:
Payables:
Investment securities purchased 5,007,760
Fund shares redeemed 73,531
Manager 39,451
Transfer agent 34,732
NYLIFE Distributors 28,978
Professional 16,068
Custodian 1,131
Accrued expenses 14,427
-----------
Total liabilities 5,216,078
-----------
Net assets $73,602,287
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share) 1
billion shares authorized:
Class A $ 10,271
Class B 7,873
Class C 4,779
Class I 7,609
Additional paid-in capital 69,082,630
Accumulated undistributed net investment loss (20,897)
Accumulated undistributed net realized gain on
investments 1,323,731
Net unrealized appreciation on investments 3,186,291
-----------
Net assets $73,602,287
===========
CLASS A
Net assets applicable to outstanding shares $24,876,178
===========
Shares of capital stock outstanding 1,027,066
===========
Net asset value per share outstanding $ 24.22
Maximum sales charge (5.50% of offering price) 1.41
-----------
Maximum offering price per share outstanding $ 25.63
===========
CLASS B
Net assets applicable to outstanding shares $18,777,254
===========
Shares of capital stock outstanding 787,304
===========
Net asset value and offering price per
share outstanding $ 23.85
===========
CLASS C
Net assets applicable to outstanding shares $11,393,900
===========
Shares of capital stock outstanding 477,940
===========
Net asset value and offering price per
share outstanding $ 23.84
===========
CLASS I
Net assets applicable to outstanding shares $18,554,955
===========
Shares of capital stock outstanding 760,913
===========
Net asset value and offering price per
share outstanding $ 24.39
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 41
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 464,623
Interest 25,064
----------
Total income 489,687
----------
EXPENSES:
Manager 248,191
Transfer agent -- Classes A, B and C 51,552
Transfer agent -- Class I 14,019
Distribution -- Class B 46,044
Distribution -- Class C 31,221
Registration 27,553
Service -- Class A 19,679
Service -- Class B 15,348
Service -- Class C 10,407
Professional 16,784
Custodian 6,443
Shareholder communication 4,099
Portfolio pricing 2,794
Trustees 2,623
Miscellaneous 8,237
----------
Total expenses before reimbursement 504,994
Expense reimbursement from Manager (71,040)
----------
Net expenses 433,954
----------
Net investment income 55,733
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,310,921
Net change in unrealized appreciation on
investments (667,952)
----------
Net realized and unrealized gain on investments 642,969
----------
Net increase in net assets resulting from
operations $ 698,702
==========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $513.
42 MainStay Mid Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income (loss) $ 55,733 $ (19)
Net realized gain on investments 1,310,921 1,340,083
Net change in unrealized
appreciation on investments (667,952) 1,004,716
----------------------------
Net increase in net assets
resulting from operations 698,702 2,344,780
----------------------------
Dividends and distributions to shareholders:
From net investment income:
Class A (21,607) --
Class B (4,534) --
Class C (3,471) --
Class I (47,018) --
Service Class -- --
From net realized gain on
investments:
Class A (336,321) --
Class B (246,314) --
Class C (191,557) (11)
Class I (541,186) (109,405)
Service Class -- (167)
----------------------------
Total dividends and distributions
to shareholders (1,392,008) (109,583)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 19,886,265 6,832,118
Class B 14,089,563 5,871,147
Class C 7,285,424 4,954,042
Class I 4,902,589 8,968,490
Service Class -- 21,108
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Class A $ 259,475 $ --
Class B 246,626 --
Class C 180,288 10
Class I 569,097 109,130
Service Class -- 167
----------------------------
47,419,327 26,756,212
Cost of shares redeemed:
Class A (1,151,494) (408,728)
Class B (874,254) (218,504)
Class C (888,708) (132,476)
Class I (5,978,748) (6,057,924)
Service Class -- (24,327)
----------------------------
(8,893,204) (6,841,959)
----------------------------
Increase in net assets derived
from capital share transactions 38,526,123 19,914,253
----------------------------
Net increase in net assets 37,832,817 22,149,450
NET ASSETS:
Beginning of period 35,769,470 13,620,020
----------------------------
End of period $ 73,602,287 $ 35,769,470
============================
Accumulated undistributed net
investment loss at end of period $ (20,897) $ --
============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 43
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- ------------------------------
JANUARY 2, JANUARY 2,
SIX MONTHS 2004** SIX MONTHS 2004** SIX MONTHS
ENDED THROUGH ENDED THROUGH ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005*** 2004 2005*** 2004 2005*** 2004
Net asset value at beginning
of period $ 23.45 $21.93 $ 23.14 $21.79 $ 23.14 $20.86
------- ------ ------- ------ ------- ------
Net investment income (loss) 0.01(a) (0.01) (0.05)(a) (0.07) (0.05)(a) (0.07)
Net realized and unrealized
gain (loss) on investments 1.51 1.53 1.48 1.42 1.47 2.50
------- ------ ------- ------ ------- ------
Total from investment
operations 1.52 1.52 1.43 1.35 1.42 2.43
------- ------ ------- ------ ------- ------
Less dividends and
distributions:
From net investment income (0.04) -- (0.01) -- (0.01) --
From net realized gain on
investments (0.71) -- (0.71) -- (0.71) (0.15)
------- ------ ------- ------ ------- ------
Total dividends and
distributions (0.75) -- (0.72) -- (0.72) (0.15)
------- ------ ------- ------ ------- ------
Net asset value at end of
period $ 24.22 $23.45 $ 23.85 $23.14 $ 23.84 $23.14
======= ====== ======= ====== ======= ======
Total investment return (b) 6.34%(c) 6.93%(c) 6.03%(c) 6.20%(c) 5.98%(c) 11.71%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) 0.35%+ (0.21%)+ (0.40%)+ (0.96%)+ (0.40%)+ (0.96%)
Net expenses 1.42%+ 1.53% +# 2.17% + 2.28% +# 2.17% + 2.28%#
Expenses (before
reimbursement) 1.68%+ 2.13% +# 2.43% + 2.88% +# 2.43% + 2.88%#
Portfolio turnover rate 35% 43% 35% 43% 35% 43%
Net assets at end of period
(in 000's) $24,876 $6,554 $18,777 $5,756 $11,394 $4,951
<Caption>
CLASS C
------------
DECEMBER 30,
2002**
THROUGH
OCTOBER 31,
2003
Net asset value at beginning
of period $ 15.87
-------
Net investment income (loss) (0.06)(a)
Net realized and unrealized
gain (loss) on investments 5.05
-------
Total from investment
operations 4.99
-------
Less dividends and
distributions:
From net investment income --
From net realized gain on
investments --
-------
Total dividends and
distributions --
-------
Net asset value at end of
period $ 20.86
=======
Total investment return (b) 31.44%(c)
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) (0.53%)+
Net expenses 2.13% +#
Expenses (before
reimbursement) 2.37% +#
Portfolio turnover rate 90%
Net assets at end of period
(in 000's) $ 1
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
+ Annualized.
# Includes transfer agent fees paid indirectly which amounted to 0.02%, 0.09%, 0.13% and
0.15% of average net assets for the years or periods ended October 31, 2004, October 31,
2003, October 31, 2002 and October 31, 2001, respectively, and custodian fees and other
expenses paid indirectly which amounted to 0.02% of average net assets for the year ended
December 31, 2000.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
(d) Restated.
</Table>
44 MainStay Mid Cap Opportunity 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
<Table>
<Caption>
CLASS I
- ------------------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2001
ENDED THROUGH YEAR ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2005*** 2004 2003 2002 2001* 2000 1999
$ 23.57 $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06 $ 17.73
------- ------- ------- ------- ------- ------- -------
0.05(a) 0.05 0.08(a) 0.09 0.06 0.06 0.11
1.54 2.66 4.84 (0.14) (0.69) 0.88 (0.13)
------- ------- ------- ------- ------- ------- -------
1.59 2.71 4.92 (0.05) (0.63) 0.94 (0.02)
------- ------- ------- ------- ------- ------- -------
(0.06) -- (0.07) (0.09) -- (0.06) (0.11)
(0.71) (0.15) -- -- -- (0.01) (1.54)
------- ------- ------- ------- ------- ------- -------
(0.77) (0.15) (0.07) (0.09) -- (0.07) (1.65)
------- ------- ------- ------- ------- ------- -------
$ 24.39 $ 23.57 $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06
======= ======= ======= ======= ======= ======= =======
6.59%(c) 12.97% 30.59% (0.38%) (3.72%)(c) 5.83% 0.04%
0.73%+ 0.26% 0.47% 0.46% 0.41%+ 0.35% 0.51%
1.04%+ 1.06%# 1.13%# 1.17%# 1.19%+#(d) 1.06%# 1.05%
1.30%+ 1.66%# 1.37%# 1.29%# 1.22%+#(d) 1.06%# 1.05%
35% 43% 90% 75% 69% 114% 51%
$18,555 $18,508 $13,617 $51,231 $56,907 $67,401 $83,064
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 45
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
SERVICE CLASS++
-----------------------------------------
NOVEMBER 1, JULY 1,
2003 YEAR 2002*
THROUGH ENDED THROUGH
JANUARY 9, OCTOBER 31, OCTOBER 31,
2004 2003 2002
Net asset value at beginning of period $20.97 $16.16 $17.77
------ ------ ------
Net investment income 0.00(b) 0.05(a) 0.06
Net realized and unrealized gain (loss) on
investments 1.35 4.81 (1.67)
------ ------ ------
Total from investment operations 1.35 4.86 (1.61)
------ ------ ------
Less dividends and distributions:
From net investment income -- (0.05) --
From net realized gain on investments (0.15) -- --
------ ------ ------
Total dividends and distributions (0.15) (0.05) --
------ ------ ------
Net asset value at end of period $22.17 $20.97 $16.16
====== ====== ======
Total investment return (c) 6.47%(d) 30.18% (9.06%)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.22%)+ 0.22% 0.21%+
Net expenses 1.31% +# 1.38%# 1.42%+#
Expenses (before reimbursement) 2.45% +# 1.62%# 1.54%+#
Portfolio turnover rate 9% 90% 75%
Net assets at end of period (in 000's) $ 0 $ 2 $ 0(e)
</Table>
<Table>
* Commencement of Operations.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
# Includes transfer agent fees paid indirectly which amounted
to 0.02%, 0.09% and 0.13% of average net assets for the
years or periods ended January 9, 2004, October 31, 2003 and
October 31, 2002, respectively.
(a) Per share data based on average shares outstanding during
the period.
(b) Less than one cent per share.
(c) Total return is calculated exclusive of sales charges.
Service Class is not subject to sales charges.
(d) Total return is not annualized.
(e) Less than one thousand dollars.
</Table>
46 MainStay Mid Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY S&P 500 INDEX FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -0.15% 2.47% -3.91% 9.44%
Excluding sales charges 2.93 5.64 -3.32 9.77
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX
--------------------------- -------------
4/30/95 9700 10000
12536 13021
15592 16294
21881 22985
26587 28001
29169 30837
25375 26837
22074 23448
19072 20328
23332 24979
4/30/05 24638 26562
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
3.14% 6.04% -3.08% 10.03%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX
--------------------------- -------------
4/30/95 10000 10000
12952 13021
16151 16294
22711 22985
27659 28001
30402 30837
26493 26837
23097 23448
19999 20328
24525 24979
4/30/05 26006 26562
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
S&P 500(R) Index(1) 3.28% 6.34% -2.94% 10.26%
Average Lipper S&P 500 Index objective
fund(2) 3.01 5.75 -3.47 9.83
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 3% and an annual 12b-1
fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have
no annual 12b-1 fee, and are generally available to corporate and institutional
investors with a minimum initial investment of $5 million. Performance figures
reflect certain fee waivers and/or expense limitations, without which total
returns may have been lower. The Manager has contractually agreed to limit the
Fund's total fund operating expenses through December 31, 2005. There is no
guarantee that the contractual waiver will continue after that date. From
inception (1/2/91) through 12/31/03, performance for Class A shares (first
offered 1/2/04) includes the historical performance of Class I shares adjusted
to reflect the applicable sales charge and fees and expenses for Class A shares.
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc., and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund. The
S&P 500(R) is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. The S&P 500(R) Index is
considered to be the Fund's broad-based securities-market index for
comparison purposes. An investment cannot be made directly into an index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
www.mainstayfunds.com 47
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY S&P 500 INDEX FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,029.40 $2.92 $1,022.10 $2.91
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,031.45 $1.66 $1,023.35 $1.66
- ------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.58% for Class A, and 0.33% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 181 (to reflect the
one-half year period).
48 MainStay S&P 500 Index Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 90.9%
Short-Term Investments (collateral from securities lending is 2.1%) 10.9%
Liabilities in Excess of Cash and Other Assets (1.8)%
</Table>
See Portfolio of Investments on page 52 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. General Electric Co.
2. ExxonMobil Corp.
3. Microsoft Corp.
4. Citigroup, Inc.
5. Johnson & Johnson
6. Pfizer, Inc.
7. Bank of America Corp.
8. Wal-Mart Stores, Inc.
9. Intel Corp.
10. Procter & Gamble Co. (The)
</Table>
www.mainstayfunds.com 49
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio manager Francis J. Ok of New York Life
Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its total assets in stocks contained
in the S&P 500(R) Index(1) in the same proportion, to the extent feasible, as
they are represented in the Index. In implementing this strategy, we use
statistical techniques to determine which stocks are to be purchased or sold to
replicate the S&P 500(R) Index to the extent feasible. From time to time,
adjustments may be made in the Fund's portfolio because of changes in the
composition of the Index.
WHAT WERE THE MAJOR FACTORS THAT AFFECTED THE STOCK MARKET DURING THE SIX MONTHS
ENDED APRIL 30, 2005?
For much of the six-month reporting period, U.S. equity-market sentiment was
subdued, as factors such as crude-oil price fluctuations, job-growth concerns,
the declining value of the U.S. dollar versus other major currencies, and
instability in the Middle East continued to affect the U.S. economy. During the
reporting period, the Federal Open Market Committee raised the federal funds
target rate by 25 basis points four times--in November and December 2004 and in
February and March 2005. (A basis point is 1/100th of one percentage point.)
These four rate hikes brought the targeted federal funds rate from 1.75% at the
beginning of the reporting period to 2.75% at the end of April. The Federal
Reserve remains optimistic that the economy is well on its way to recovery after
the 2001 recession. Although it appears that longer-term inflation expectations
remain well contained, the Federal Reserve is now focused on trying to ease
inflation.
Broadly watched equity indices ended the six-month reporting period with mixed
results. Mid-capitalization stocks performed best, followed by large-
capitalization and then small-capitalization stocks. The market clearly favored
value equities over growth stocks for large- and mid-cap issues, although
different data sources suggested different style preferences among small-cap
issues.(2)
WHAT WERE THE BEST-PERFORMING INDUSTRY GROUPS(3) IN THE S&P 500(R) INDEX DURING
THE REPORTING PERIOD?
From a total-return perspective, health care equipment & services (+18.40%)(4)
was the best-performing industry group for the six months ended April 30, 2005.
Other top-performing industry groups included utilities (+16.32%), energy
(+15.88%), food, beverage & tobacco (+12.99%), and household & personal products
(+10.35%).
Some of the industry groups with the highest total returns were among the
strongest contributors to the performance of the Index. Other industry groups,
however, had strong impact on Index performance because of higher weightings,
despite lower total returns. On the basis of impact, which takes weightings and
total returns both into account, the leading industry group was energy
(+15.88%), followed by health care equipment & services (+18.40%), food,
beverage & tobacco (+12.99%), capital goods (+5.85%), and pharmaceuticals &
biotechnology (+6.34%).
WHICH INDUSTRY GROUPS WERE THE WORST PERFORMERS?
On the basis of total returns alone, the worst-performing industry groups in the
Index for the six-month reporting period were automobiles & components
(-23.89%), technology hardware & equipment (-6.86%), retailing (-6.85%),
transportation (-4.91%), and food & staples retailing (-4.64%).
For the six months ended April 30, 2005, technology hardware & equipment
(-6.86%) was the industry group with the greatest negative impact on Index
performance when weightings and total returns were
Index funds generally seek to reflect the performance of an index or an
allocation among indices, unlike other funds, whose objectives may, in some
cases, involve seeking to outperform an index or other benchmark. The Fund may
invest in derivatives, which may increase the volatility of the Fund's net asset
value and may result in a loss to the Fund.
1. See footnote on page 47 for more information on the S&P 500(R) Index.
2. Specifically, for the six months ended April 30, 2005, the Russell 2000(R)
Growth Index underperformed the Russell 2000(R) Value Index, while the S&P
SmallCap 600/Barra Growth Index outperformed the S&P SmallCap 600/Barra Value
Index. Each of these indices is unmanaged, contains different issues, and is
considered to be generally representative of small-cap growth or small-cap
value stocks, as the index name suggests. An investment cannot be made
directly into an index.
3. The Global Industry Classification Standard categorizes companies by sector,
industry group, industry, and subindustry. Results in this section of the
semiannual report reflect industry group and company performance. In the
Portfolio of Investments that follows, companies are listed by industry.
4. Percentages reflect the total-return performance, including reinvestment of
all dividends and capital gains, of the industry groups or the securities
mentioned for the six months ended 4/30/05. Purchases and sales within the
Fund's portfolio may cause the performance of Fund holdings to differ from
that of the industry groups or securities themselves.
50 MainStay S&P 500 Index Fund
both considered. Retailing (-6.85%) was next, followed by automobiles &
components (-23.89%), food & staples retailing (-4.64%), and media (-1.16%).
WHICH INDIVIDUAL STOCKS HAD THE HIGHEST TOTAL RETURNS DURING THE REPORTING
PERIOD?
For the six months ended April 30, 2005, the S&P 500(R) Index company with the
best total return was Humana (+80.94%). Valero Energy (+60.00%) had the
second-best total return, followed by WellPoint (+58.89%), Aetna (+54.52%), and
HCA (+52.89%).
As impressive as these returns may be, the five stocks that made the greatest
positive contribution to the performance of the S&P 500(R) Index all had higher
weightings and lower total returns. On the basis of impact, which takes
weightings and total returns both into account, the strongest positive
contributor to the performance of the Index for the six-month reporting period
was ExxonMobil (+17.07%), followed by Altria Group (+37.24%), Johnson & Johnson
(+18.61%), General Electric (+7.39%), and Citigroup (+7.80%).
WHICH STOCKS WERE THE WEAKEST PERFORMERS DURING THE REPORTING PERIOD?
For the six months ended April 30, 2005, the S&P 500(R) Index stock with the
worst total return was Delphi (-60.17%). Other particularly weak performers
included JDS Uniphase (-53.31%), Sanmina-SCI (-50.00%), Maytag (-43.15%), and
Gateway (-41.71%).
On the basis of impact, which takes weightings and total returns both into
account, Wal-Mart Stores (-12.10%) made the greatest negative contribution to
the performance of the Index for the six-month reporting period. American
International Group (-15.98%) was next, followed by eBay (-35.04%),
International Business Machines (-14.57%), and Fannie Mae (-22.40%).
WERE ANY CHANGES MADE TO THE FUND OR TO THE INDEX DURING THE REPORTING PERIOD?
The Fund seeks to track the performance and weightings of stocks in the S&P
500(R) Index. The Index itself, however, may change from time to time as
companies merge, divest units, add to their market capitalization, or face
financial difficulties. Standard & Poor's may also occasionally adjust the Index
to better reflect the companies that it believes are most representative of the
makeup of the U.S. economy. During the six months ended April 30, 2005, nine
companies were added to the S&P 500(R) Index and nine companies were deleted
from it.
Among the additions were such well-known companies as Archstone-Smith Trust, L-3
Communications Holdings, News Corp., and XTO Energy. Among the deletions were
familiar names such as Deluxe, PeopleSoft, WellPoint Health Networks,
Winn-Dixie, and Worthington Industries. Sears, Roebuck merged with Kmart and was
deleted from the Index but simultaneously reappeared as Sears Holdings. Adolf
Coors merged with Molson and was deleted when Molson Coors Brewing was added to
the Index.
WHAT DO YOU ANTICIPATE GOING FORWARD?
As always, the markets will continue to be buffeted by shifting economic,
monetary, and geopolitical variables. Because we are index investors, however,
we do not attempt to predict how specific forces will affect the stock market.
Instead, we seek to track the performance of the S&P 500(R) Index wherever the
markets may move.
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 made
will come to pass. This material does not constitute investment advice and is
not intended as an endorsement of any specific investment.
www.mainstayfunds.com 51
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (90.9%)+
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.0%)
Boeing Co. (The) 105,531 $ 6,281,205
General Dynamics Corp. 25,394 2,667,640
Goodrich Corp. 15,212 613,044
Honeywell International, Inc. 107,846 3,856,573
L-3 Communications
Holdings, Inc. 14,634 1,038,574
Lockheed Martin Corp. 50,896 3,102,111
Northrop Grumman Corp. 45,689 2,505,585
Raytheon Co. 57,436 2,160,168
Rockwell Collins, Inc. 22,578 1,035,879
United Technologies Corp. 64,960 6,607,731
--------------
29,868,510
--------------
AIR FREIGHT & LOGISTICS (0.9%)
FedEx Corp. 38,205 3,245,515
Ryder System, Inc. 8,133 300,352
United Parcel Service, Inc. Class B 141,908 10,119,459
--------------
13,665,326
--------------
AIRLINES (0.1%)
Delta Air Lines, Inc. (a)(d) 17,773 58,473
Southwest Airlines Co. 93,349 1,389,033
--------------
1,447,506
--------------
AUTO COMPONENTS (0.2%)
Cooper Tire & Rubber Co. 8,888 155,096
Dana Corp. 19,073 217,814
Delphi Corp. 71,086 234,584
Goodyear Tire &
Rubber Co. (The) (a) 22,282 264,487
Johnson Controls, Inc. 24,210 1,328,403
Visteon Corp. 16,389 57,361
--------------
2,257,745
--------------
AUTOMOBILES (0.4%)
Ford Motor Co. 232,111 2,114,531
General Motors Corp. (d) 71,583 1,909,834
Harley-Davidson, Inc. 36,996 1,739,553
--------------
5,763,918
--------------
BEVERAGES (2.2%)
Anheuser-Busch Cos., Inc. (d) 98,489 4,616,179
Brown-Forman Corp. Class B 11,452 635,586
Coca-Cola Co. (The) (c) 287,149 12,473,753
Coca-Cola Enterprises, Inc. 44,686 907,126
Molson Coors Brewing Co. Class B 10,176 628,368
Pepsi Bottling Group, Inc. (The) 25,049 718,155
PepsiCo, Inc. 212,763 11,838,133
--------------
31,817,300
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
BIOTECHNOLOGY (1.1%)
Amgen, Inc. (a) 158,813 $ 9,244,505
Biogen Idec, Inc. (a) 42,271 1,531,901
Chiron Corp. (a) 18,679 637,888
Genzyme Corp. (a) 31,407 1,840,764
Gilead Sciences, Inc. (a) 54,832 2,034,267
MedImmune, Inc. (a) 31,533 799,992
--------------
16,089,317
--------------
BUILDING PRODUCTS (0.2%)
American Standard Cos., Inc. (a) 22,836 1,020,998
Masco Corp. 56,790 1,788,317
--------------
2,809,315
--------------
CAPITAL MARKETS (2.5%)
Bank of New York Co., Inc. (The) 98,709 2,757,929
Bear Stearns Cos., Inc. (The) 14,375 1,360,737
Charles Schwab Corp. (The) 145,510 1,506,028
E*TRADE Financial Corp. (a) 47,024 522,437
Federated Investors, Inc. Class B 12,095 344,103
Franklin Resources, Inc. 25,071 1,721,876
Goldman Sachs Group, Inc. (The) 56,715 6,056,595
Janus Capital Group, Inc. 29,936 388,869
Lehman Brothers Holdings, Inc. 34,955 3,206,073
Mellon Financial Corp. 53,674 1,486,233
Merrill Lynch & Co., Inc. 117,953 6,361,205
Morgan Stanley 141,082 7,423,735
Northern Trust Corp. 25,733 1,158,757
State Street Corp. 42,270 1,954,142
T. Rowe Price Group, Inc. 15,693 865,783
--------------
37,114,502
--------------
CHEMICALS (1.5%)
Air Products & Chemicals, Inc. 28,823 1,692,775
Dow Chemical Co. (The) 120,870 5,551,559
E.I. du Pont de Nemours & Co. 126,356 5,952,630
Eastman Chemical Co. 9,849 531,846
Ecolab, Inc. 28,023 916,632
Engelhard Corp. 15,451 473,264
Great Lakes Chemical Corp. 6,490 201,450
Hercules, Inc. (a) 14,216 188,078
International Flavors & Fragrances, Inc. 11,218 425,162
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
52 MainStay S&P 500 Index Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
Monsanto Co. 33,724 $ 1,976,901
PPG Industries, Inc. 21,950 1,482,723
Praxair, Inc. 40,865 1,913,708
Rohm & Haas Co. 24,629 1,075,302
Sigma-Aldrich Corp. 8,776 512,782
--------------
22,894,812
--------------
COMMERCIAL BANKS (5.4%)
AmSouth Bancorp 44,996 1,184,295
V Bank of America Corp. 513,836 23,143,173
BB&T Corp. 69,552 2,727,134
Comerica, Inc. 21,596 1,236,587
Compass Bancshares, Inc. 15,668 674,037
Fifth Third Bancorp 65,936 2,868,216
First Horizon National Corp. 15,602 647,951
Huntington Bancshares, Inc. 29,437 692,064
KeyCorp 51,478 1,707,011
M&T Bank Corp. 12,469 1,289,918
Marshall & Ilsley Corp. 26,296 1,121,261
National City Corp. 75,327 2,558,105
North Fork Bancorp., Inc. 59,699 1,680,527
PNC Financial Services Group, Inc. (The) 35,827 1,907,071
Regions Financial Corp. 58,938 1,973,834
SunTrust Banks, Inc. 42,971 3,129,578
Synovus Financial Corp. 39,431 1,105,251
U.S. Bancorp 234,905 6,553,849
Wachovia Corp. 200,970 10,285,645
Wells Fargo & Co. 214,947 12,883,923
Zions Bancorp 11,356 795,261
--------------
80,164,691
--------------
COMMERCIAL SERVICES & SUPPLIES (0.9%)
Allied Waste Industries, Inc. (a) 34,380 274,696
Apollo Group, Inc. Class A (a) 21,051 1,518,198
Avery Dennison Corp. 12,867 673,588
Cendant Corp. 133,766 2,663,281
Cintas Corp. 18,967 731,936
Donnelley (R.R.) & Sons Co. 27,329 899,397
Equifax, Inc. 17,095 575,247
H&R Block, Inc. 20,900 1,041,029
Monster Worldwide, Inc. (a) 15,284 351,685
Pitney Bowes, Inc. 29,240 1,307,613
Robert Half International, Inc. 20,361 505,360
Waste Management, Inc. 72,015 2,051,707
--------------
12,593,737
--------------
COMMUNICATIONS EQUIPMENT (2.3%)
ADC Telecommunications, Inc. (a) 102,789 233,331
Andrew Corp. (a) 20,400 250,308
</Table>
<Table>
<Caption>
SHARES VALUE
COMMUNICATIONS EQUIPMENT (CONTINUED)
Avaya, Inc. (a) 60,817 $ 527,892
CIENA Corp. (a) 72,574 166,920
Cisco Systems, Inc. (a) 819,319 14,157,832
Comverse Technology, Inc. (a) 25,035 570,548
Corning, Inc. (a) 178,649 2,456,424
JDS Uniphase Corp. (a) 183,104 270,994
Lucent Technologies, Inc. (a)(d) 561,640 1,364,785
Motorola, Inc. 310,766 4,767,150
QLogic Corp. (a) 11,676 388,110
QUALCOMM, Inc. 208,649 7,279,764
Scientific-Atlanta, Inc. 19,323 590,897
Tellabs, Inc. (a) 58,535 454,232
--------------
33,479,187
--------------
COMPUTERS & PERIPHERALS (3.2%)
Apple Computer, Inc. (a) 103,545 3,733,833
Dell, Inc. (a) 311,673 10,855,570
EMC Corp. (a) 304,934 4,000,734
Gateway, Inc. (a) 37,980 129,512
Hewlett-Packard Co. 367,008 7,512,654
International Business Machines Corp. 206,972 15,808,521
Lexmark International, Inc. Class A (a) 16,037 1,113,770
NCR Corp. (a) 23,637 780,021
Network Appliance, Inc. (a) 46,424 1,236,271
Sun Microsystems, Inc. (a) 428,212 1,554,410
--------------
46,725,296
--------------
CONSTRUCTION & ENGINEERING (0.0%) (b)
Fluor Corp. 10,836 558,704
--------------
CONSTRUCTION MATERIALS (0.0%) (b)
Vulcan Materials Co. 13,083 693,922
--------------
CONSUMER FINANCE (1.1%)
American Express Co. 148,749 7,839,072
Capital One Financial Corp. 31,314 2,219,849
MBNA Corp. 161,958 3,198,671
Providian Financial Corp. (a) 37,147 619,240
SLM Corp. 54,440 2,593,522
--------------
16,470,354
--------------
CONTAINERS & PACKAGING (0.2%)
Ball Corp. 13,957 551,302
Bemis Co., Inc. 13,581 374,292
Pactiv Corp. (a) 18,818 403,458
Sealed Air Corp. (a) 10,587 512,834
Temple-Inland, Inc. 14,512 489,780
--------------
2,331,666
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 53
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts Co. 22,157 $ 950,535
--------------
DIVERSIFIED FINANCIAL SERVICES (3.5%)
CIT Group, Inc. 26,768 1,078,215
V Citigroup, Inc. 662,389 31,105,787
JPMorgan Chase & Co. 450,488 15,987,819
Moody's Corp. 17,391 1,428,497
Principal Financial Group, Inc. 37,922 1,481,993
--------------
51,082,311
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.6%)
ALLTEL Corp. 38,325 2,182,992
AT&T Corp. 101,451 1,940,758
BellSouth Corp. 232,183 6,150,528
CenturyTel, Inc. 17,054 523,387
Citizens Communications Co. 42,492 541,773
Qwest Communications International, Inc. (a)(d) 211,812 724,397
SBC Communications, Inc. (d) 418,737 9,965,941
Sprint Corp. 187,313 4,169,587
Verizon Communications, Inc. 351,083 12,568,771
--------------
38,768,134
--------------
ELECTRIC UTILITIES (2.4%)
Allegheny Energy, Inc. (a) 17,394 425,109
Ameren Corp. 24,777 1,280,971
American Electric Power Co., Inc. 48,574 1,710,776
Carolina Power & Light 31,361 1,316,848
CenterPoint Energy, Inc. 36,657 434,019
Cinergy Corp. 24,254 960,458
CMS Energy Corp. (a) 27,342 353,259
Consolidated Edison, Inc. 30,736 1,330,254
Dominion Resources, Inc. 43,161 3,254,339
DTE Energy Co. 22,009 1,011,313
Edison International 41,337 1,500,533
Entergy Corp. 27,045 1,982,399
Exelon Corp. 84,268 4,171,266
FirstEnergy Corp. 41,857 1,821,617
FPL Group, Inc. 49,606 2,024,917
PG&E Corp. (a) 45,676 1,585,871
Pinnacle West Capital Corp. 11,645 487,925
PPL Corp. 23,957 1,299,907
Public Service Enterprise Group, Inc. 30,183 1,753,632
Southern Co. (The) 94,202 3,103,956
TECO Energy, Inc. 26,191 435,033
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRIC UTILITIES (CONTINUED)
TXU Corp. 30,458 $ 2,612,992
Xcel Energy, Inc. 50,816 873,019
--------------
35,730,413
--------------
ELECTRICAL EQUIPMENT (0.4%)
American Power Conversion Corp. 22,828 553,807
Cooper Industries, Ltd. Class A 11,768 749,151
Emerson Electric Co. 53,194 3,333,667
Rockwell Automation, Inc. 22,139 1,023,486
--------------
5,660,111
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%)
Agilent Technologies, Inc. (a) 54,810 1,137,308
Jabil Circuit, Inc. (a) 23,245 641,562
Molex, Inc. (a) 21,233 539,531
PerkinElmer, Inc. 16,391 303,233
Sanmina-SCI Corp. (a) 66,318 265,935
Solectron Corp. (a) 123,135 406,345
Symbol Technologies, Inc. 30,719 410,713
Tektronix, Inc. 11,368 246,231
Thermo Electron Corp. (a) 20,314 507,444
Waters Corp. (a) 15,334 607,686
--------------
5,065,988
--------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Baker Hughes, Inc. 42,836 1,889,924
BJ Services Co. 20,604 1,004,445
Halliburton Co. 63,985 2,661,136
Nabors Industries, Ltd. (a) 17,899 964,219
National-Oilwell, Inc. 21,267 845,151
Noble Corp. (a) 17,228 876,905
Rowan Cos., Inc. 13,559 359,720
Schlumberger Ltd. 74,782 5,115,837
Transocean, Inc. (a) 40,676 1,886,146
--------------
15,603,483
--------------
FOOD & STAPLES RETAILING (2.6%)
Albertson's, Inc. (d) 46,700 924,193
Costco Wholesale Corp. 59,840 2,428,307
CVS Corp. 50,725 2,616,396
Kroger Co. (The) (a) 92,851 1,464,260
Safeway, Inc. (a) 56,732 1,207,824
SUPERVALU, Inc. 17,164 541,696
Sysco Corp. 80,757 2,794,192
Walgreen Co. (d) 129,437 5,573,557
V Wal-Mart Stores, Inc. 429,402 20,242,011
--------------
37,792,436
--------------
FOOD PRODUCTS (1.1%)
Archer-Daniels-Midland Co. 79,017 1,421,516
Campbell Soup Co. 41,257 1,226,983
ConAgra Foods, Inc. 65,343 1,747,925
</Table>
54 MainStay S&P 500 Index Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
General Mills, Inc. 46,268 $ 2,285,639
H.J. Heinz Co. 44,370 1,635,035
Hershey Foods Corp. 27,709 1,770,605
Kellogg Co. 44,500 2,000,275
McCormick & Co., Inc. 17,168 593,841
Sara Lee Corp. 100,005 2,139,107
Wm. Wrigley Jr. Co. 24,789 1,713,664
--------------
16,534,590
--------------
GAS UTILITIES (0.3%)
KeySpan Corp. 20,340 771,496
Kinder Morgan, Inc. 13,942 1,066,006
Nicor, Inc. 5,599 206,995
NiSource, Inc. 34,429 800,128
Peoples Energy Corp. 4,838 191,585
Sempra Energy 30,214 1,220,041
--------------
4,256,251
--------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.1%)
Applera Corp.-Applied Biosystems Group 24,853 526,884
Bausch & Lomb, Inc. 6,779 508,425
Baxter International, Inc. 78,523 2,913,203
Becton, Dickinson & Co. 32,014 1,873,459
Biomet, Inc. 32,037 1,239,512
Boston Scientific Corp. (a) 96,293 2,848,347
C.R. Bard, Inc. 13,306 946,988
Fisher Scientific International, Inc. (a) 14,834 880,843
Guidant Corp. 40,874 3,027,946
Hospira, Inc. (a) 19,777 663,518
Medtronic, Inc. 153,285 8,078,120
Millipore Corp. (a) 6,324 304,943
St. Jude Medical, Inc. (a) 45,718 1,784,374
Stryker Corp. (d) 47,475 2,304,911
Zimmer Holdings, Inc. (a) 31,313 2,549,504
--------------
30,450,977
--------------
HEALTH CARE PROVIDERS & SERVICES (2.4%)
Aetna, Inc. 37,345 2,740,003
AmerisourceBergen Corp. 13,339 817,414
Cardinal Health, Inc. 55,003 3,056,517
Caremark Rx, Inc. (a) 57,943 2,320,617
CIGNA Corp. 16,663 1,532,663
Express Scripts, Inc. (a) 8,341 747,687
HCA, Inc. 52,141 2,911,553
Health Management Associates, Inc. (a) 30,894 764,009
Humana, Inc. (a) 20,402 706,929
IMS Health, Inc. 29,426 705,636
</Table>
<Table>
<Caption>
SHARES VALUE
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
Laboratory Corp. of America Holdings (a) 17,166 $ 849,717
Manor Care, Inc. 10,923 364,282
McKesson Corp. 37,450 1,385,650
Medco Health Solutions, Inc. (a) 34,891 1,778,394
Quest Diagnostics, Inc. 11,608 1,228,126
Tenet Healthcare Corp. (a) 59,376 710,731
UnitedHealth Group, Inc. 81,265 7,680,355
WellPoint, Inc. (a) 38,637 4,935,877
--------------
35,236,160
--------------
HOTELS, RESTAURANTS & LEISURE (1.3%)
Carnival Corp. 66,762 3,263,327
Darden Restaurants, Inc. 18,737 562,110
Harrah's Entertainment, Inc. 14,415 945,912
Hilton Hotels Corp. 48,809 1,065,510
International Game Technology 43,702 1,175,147
Marriott International, Inc. Class A 25,463 1,597,803
McDonald's Corp. 161,298 4,727,644
Starbucks Corp. (a) 50,678 2,509,575
Starwood Hotels & Resorts Worldwide, Inc. 26,949 1,464,409
Wendy's International, Inc. 14,424 619,222
Yum! Brands, Inc. 36,964 1,735,829
--------------
19,666,488
--------------
HOUSEHOLD DURABLES (0.5%)
Black & Decker Corp. (The) 10,173 850,768
Centex Corp. 16,083 928,311
Fortune Brands, Inc. 18,358 1,552,720
KB HOME 10,600 604,200
Leggett & Platt, Inc. 24,238 653,456
Maytag Corp. (d) 10,104 97,908
Newell Rubbermaid, Inc. 34,880 757,942
Pulte Homes, Inc. 15,052 1,075,465
Snap-on, Inc. 7,362 244,198
Stanley Works (The) 9,569 411,754
Whirlpool Corp. 8,464 525,276
--------------
7,701,998
--------------
HOUSEHOLD PRODUCTS (1.7%)
Clorox Co. (The) 19,446 1,230,932
Colgate-Palmolive Co. 66,582 3,315,118
Kimberly-Clark Corp. 61,010 3,810,074
V Procter & Gamble Co. (The) 319,722 17,312,946
--------------
25,669,070
--------------
INDUSTRIAL CONGLOMERATES (4.4%)
3M Co. 97,923 7,488,172
V General Electric Co. (c) 1,343,516 48,635,279
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 55
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (CONTINUED)
Textron, Inc. 17,104 $ 1,288,786
Tyco International Ltd. 255,160 7,989,060
--------------
65,401,297
--------------
INSURANCE (3.7%)
ACE, Ltd. 36,030 1,547,849
AFLAC, Inc. 63,630 2,586,559
Allstate Corp. (The) 86,091 4,834,871
Ambac Financial Group, Inc. 13,773 920,725
American International Group, Inc. 330,145 16,787,873
Aon Corp. 40,160 837,336
Chubb Corp. (The) 24,263 1,984,228
Cincinnati Financial Corp. 21,154 851,237
Hartford Financial Services Group, Inc. (The) 37,488 2,713,007
Jefferson-Pilot Corp. 17,353 871,294
Lincoln National Corp. 22,103 993,972
Loews Corp. 20,213 1,432,697
Marsh & McLennan Cos., Inc. 67,003 1,878,094
MBIA, Inc. 17,811 932,940
MetLife, Inc. 92,919 3,614,549
Progressive Corp. (The) 25,400 2,318,258
Prudential Financial, Inc. 66,374 3,793,274
SAFECO Corp. 16,071 846,460
St. Paul Travelers Cos., Inc. (The) 84,872 3,038,418
Torchmark Corp. 13,681 730,976
UnumProvident Corp. 37,687 630,127
XL Capital Ltd. Class A 17,605 1,237,631
--------------
55,382,375
--------------
INTERNET & CATALOG RETAIL (0.3%)
eBay, Inc. (a) 153,401 4,867,414
--------------
INTERNET SOFTWARE & SERVICES (0.4%)
Yahoo!, Inc. (a) 165,262 5,703,192
--------------
IT SERVICES (1.0%)
Affiliated Computer Services, Inc. Class A (a) 16,010 763,197
Automatic Data Processing, Inc. 73,914 3,210,824
Computer Sciences Corp. (a) 24,216 1,052,912
Convergys Corp. (a) 18,025 233,604
Electronic Data Systems Corp. 65,625 1,269,844
First Data Corp. 101,680 3,866,890
Fiserv, Inc. (a) 24,542 1,038,127
Paychex, Inc. 45,065 1,378,989
Sabre Holdings Corp. Class A 16,640 325,478
</Table>
<Table>
<Caption>
SHARES VALUE
IT SERVICES (CONTINUED)
SunGard Data Systems, Inc. (a) 36,609 $ 1,222,740
Unisys Corp. (a) 42,727 277,298
--------------
14,639,903
--------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Brunswick Corp. 12,256 514,752
Eastman Kodak Co. 36,305 907,625
Hasbro, Inc. 21,113 399,458
Mattel, Inc. 52,815 953,311
--------------
2,775,146
--------------
MACHINERY (1.3%)
Caterpillar, Inc. 43,434 3,824,364
Cummins, Inc. 5,410 367,881
Danaher Corp. 34,901 1,767,038
Deere & Co. 31,249 1,954,312
Dover Corp. 25,818 938,742
Eaton Corp. 19,392 1,137,342
Illinois Tool Works, Inc. 34,814 2,918,109
Ingersoll-Rand Co. Class A 22,001 1,691,217
ITT Industries, Inc. 11,740 1,062,000
Navistar International Corp. 8,306 245,276
PACCAR, Inc. 22,058 1,497,738
Pall Corp. 15,746 422,465
Parker-Hannifin Corp. 15,254 914,325
--------------
18,740,809
--------------
MEDIA (3.5%)
Clear Channel Communications, Inc. 66,840 2,134,870
Comcast Corp. Class A (a) 280,361 9,002,392
Dow Jones & Co., Inc. 8,933 298,719
Gannett Co., Inc. 31,849 2,452,373
Interpublic Group of Cos., Inc. (The) (a) 53,630 689,682
Knight-Ridder, Inc. 9,542 617,367
McGraw-Hill Cos., Inc. (The) 24,102 2,098,802
Meredith Corp. 5,725 269,075
New York Times Co. (The) Class A 18,460 615,826
News Corp. Ltd. (The) Class A 365,496 5,584,779
Omnicom Group, Inc. 23,668 1,962,077
Time Warner, Inc. (a) 582,546 9,792,598
Tribune Co. 37,787 1,458,578
Univision Communications, Inc. Class A 37,007 972,914
Viacom, Inc. Class B 216,131 7,482,455
Walt Disney Co. (The) (d) 259,473 6,850,087
--------------
52,282,594
--------------
METALS & MINING (0.6%)
Alcoa, Inc. 110,464 3,205,665
Allegheny Technologies, Inc. 11,324 253,658
</Table>
56 MainStay S&P 500 Index Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
METALS & MINING (CONTINUED)
Freeport-McMoRan Copper & Gold, Inc. Class B 22,688 $ 786,366
Newmont Mining Corp. 56,290 2,137,331
Nucor Corp. (d) 20,252 1,034,877
Phelps Dodge Corp. 12,291 1,055,183
United States Steel Corp. 14,487 619,464
--------------
9,092,544
--------------
MULTILINE RETAIL (1.1%)
Big Lots, Inc. (a) 14,330 145,879
Dillard's, Inc. Class A 8,985 209,081
Dollar General Corp. 38,232 778,021
Family Dollar Stores, Inc. 21,240 573,055
Federated Department Stores, Inc. 21,408 1,230,960
J.C. Penney Co., Inc. Holding Co. 34,271 1,624,788
Kohl's Corp. (a) 41,274 1,964,642
May Department Stores Co. 36,973 1,297,013
Nordstrom, Inc. 15,996 813,077
Sears Holdings Corp. 12,177 1,646,818
Target Corp. 113,468 5,266,050
--------------
15,549,384
--------------
MULTI-UTILITIES & UNREGULATED POWER (0.6%)
AES Corp. (The) (a) 82,247 1,322,532
Calpine Corp. (a)(d) 67,761 121,292
Constellation Energy Group, Inc. 22,377 1,176,135
Duke Energy Corp. 118,876 3,469,990
Dynegy, Inc. Class A (a) 41,971 140,603
El Paso Corp. 81,541 814,594
Williams Cos., Inc. (The) 72,231 1,229,372
--------------
8,274,518
--------------
OFFICE ELECTRONICS (0.1%)
Xerox Corp. (a) 121,338 1,607,728
--------------
OIL & GAS (6.4%)
Amerada Hess Corp. 10,797 1,011,139
Anadarko Petroleum Corp. 30,042 2,194,268
Apache Corp. 41,382 2,329,393
Ashland, Inc. 8,428 566,699
Burlington Resources, Inc. 49,058 2,384,709
ChevronTexaco Corp. 266,769 13,871,988
ConocoPhillips 88,177 9,245,358
Devon Energy Corp. 60,806 2,746,607
EOG Resources, Inc. 30,305 1,441,003
V ExxonMobil Corp. 809,392 46,159,626
Kerr-McGee Corp. 20,684 1,605,078
</Table>
<Table>
<Caption>
SHARES VALUE
OIL & GAS (CONTINUED)
Marathon Oil Corp. 43,984 $ 2,048,335
Occidental Petroleum Corp. 50,313 3,471,597
Sunoco, Inc. 8,820 875,473
Unocal Corp. 34,334 1,872,920
Valero Energy Corp. 32,579 2,232,639
XTO Energy, Inc. 44,035 1,328,536
--------------
95,385,368
--------------
PAPER & FOREST PRODUCTS (0.4%)
Georgia-Pacific Corp. 32,940 1,128,854
International Paper Co. 62,192 2,132,564
Louisiana-Pacific Corp. 14,034 345,236
MeadWestvaco Corp. 25,639 755,068
Weyerhaeuser Co. 30,751 2,109,826
--------------
6,471,548
--------------
PERSONAL PRODUCTS (0.6%)
Alberto-Culver Co. 10,751 478,419
Avon Products, Inc. 59,788 2,396,303
Gillette Co. (The) 125,639 6,487,998
--------------
9,362,720
--------------
PHARMACEUTICALS (6.8%)
Abbott Laboratories (d) 197,637 9,715,835
Allergan, Inc. 16,647 1,171,782
Bristol-Myers Squibb Co. 247,651 6,438,926
Forest Laboratories, Inc. (a) 44,501 1,587,797
V Johnson & Johnson 376,942 25,869,529
King Pharmaceuticals, Inc. (a) 30,654 245,232
Lilly (Eli) & Co. 143,604 8,396,526
Merck & Co., Inc. 279,930 9,489,627
Mylan Laboratories, Inc. 34,089 562,469
V Pfizer, Inc. 945,667 25,693,772
Schering-Plough Corp. 186,922 3,901,062
Watson Pharmaceuticals, Inc. (a) 13,859 415,770
Wyeth 169,362 7,611,128
--------------
101,099,455
--------------
REAL ESTATE (0.5%)
Apartment Investment & Management Co. Class A 12,163 463,654
Archstone-Smith Trust 25,303 910,149
Equity Office Properties Trust 51,069 1,607,141
Equity Residential 35,862 1,231,860
Plum Creek Timber Co., Inc. 23,338 806,095
ProLogis 23,281 921,695
Simon Property Group, Inc. 28,067 1,854,387
--------------
7,794,981
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 57
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ROAD & RAIL (0.5%)
Burlington Northern Santa Fe Corp. 47,947 $ 2,313,443
CSX Corp. 27,320 1,096,351
Norfolk Southern Corp. 50,702 1,592,043
Union Pacific Corp. 33,060 2,113,526
--------------
7,115,363
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.8%)
Advanced Micro Devices, Inc. (a) 49,921 710,376
Altera Corp. (a) 47,210 978,663
Analog Devices, Inc. 47,263 1,612,140
Applied Materials, Inc. (a) 211,395 3,143,444
Applied Micro Circuits Corp. (a) 39,091 104,373
Broadcom Corp. Class A (a) 36,870 1,102,782
Freescale Semiconductor, Inc. Class B 50,888 959,748
V Intel Corp. 789,356 18,565,653
KLA-Tencor Corp. (a) 24,896 971,442
Linear Technology Corp. 38,966 1,392,645
LSI Logic Corp. (a) 48,778 261,450
Maxim Integrated Products, Inc. 41,402 1,548,435
Micron Technology, Inc. (a) 77,787 755,312
National Semiconductor Corp. (a) 45,031 859,191
Novellus Systems, Inc. (a) 17,716 415,086
NVIDIA Corp. (a) 21,117 463,308
PMC-Sierra, Inc. (a) 22,749 183,357
Teradyne, Inc. (a) 24,657 271,720
Texas Instruments, Inc. 218,212 5,446,571
Xilinx, Inc. 44,178 1,190,155
--------------
40,935,851
--------------
SOFTWARE (3.5%)
Adobe Systems, Inc. 30,871 1,835,898
Autodesk, Inc. 29,069 925,266
BMC Software, Inc. (a) 28,080 454,896
Citrix Systems, Inc. (a) 21,514 484,065
Computer Associates International, Inc. 67,441 1,814,163
Compuware Corp. (a) 49,132 292,335
Electronic Arts, Inc. (a) 38,996 2,081,997
Intuit, Inc. (a) 23,504 947,211
Mercury Interactive Corp. (a) 10,721 443,099
V Microsoft Corp. (c) 1,282,614 32,450,134
Novell, Inc. (a) 47,990 283,621
Oracle Corp. (a) 569,599 6,584,565
Parametric Technology Corp. (a) 34,271 182,322
Siebel Systems, Inc. (a) 65,265 587,385
</Table>
<Table>
<Caption>
SHARES VALUE
SOFTWARE (CONTINUED)
Symantec Corp. (a) 89,958 $ 1,689,411
VERITAS Software Corp. (a) 53,525 1,102,080
--------------
52,158,448
--------------
SPECIALTY RETAIL (2.0%)
AutoNation, Inc. (a) 28,643 523,308
AutoZone, Inc. (a) 8,589 712,887
Bed Bath & Beyond, Inc. (a) 38,379 1,428,082
Best Buy Co., Inc. 37,804 1,903,053
Circuit City Stores, Inc. 24,232 382,866
Gap, Inc. (The) 100,528 2,146,273
Home Depot, Inc. (The) 278,395 9,846,831
Limited Brands, Inc. 48,400 1,049,796
Lowe's Cos., Inc. 97,919 5,102,559
Office Depot, Inc. (a) 39,654 776,425
OfficeMax, Inc. 11,835 384,401
RadioShack Corp. 20,038 500,349
Sherwin-Williams Co. (The) 15,999 713,075
Staples, Inc. 94,141 1,795,269
Tiffany & Co. 18,459 556,539
TJX Cos., Inc. (The) 61,087 1,383,621
Toys "R" Us, Inc. (a) 27,232 690,331
--------------
29,895,665
--------------
TEXTILES, APPAREL & LUXURY GOODS (0.4%)
Coach, Inc. (a) 48,464 1,298,835
Jones Apparel Group, Inc. 15,551 473,528
Liz Claiborne, Inc. 13,807 489,182
NIKE, Inc. Class B 29,135 2,237,859
Reebok International Ltd. 7,101 288,372
V.F. Corp. 12,657 716,260
--------------
5,504,036
--------------
THRIFTS & MORTGAGE FINANCE (1.6%)
Countrywide Financial Corp. 73,541 2,661,449
Fannie Mae 122,682 6,618,694
Freddie Mac 87,258 5,368,112
Golden West Financial Corp. 35,772 2,229,669
MGIC Investment Corp. 12,290 725,110
Sovereign Bancorp, Inc. 47,469 976,437
Washington Mutual, Inc. 110,643 4,571,769
--------------
23,151,240
--------------
TOBACCO (1.3%)
Altria Group, Inc. 262,204 17,040,638
Reynolds American, Inc. 14,765 1,151,227
UST, Inc. 20,914 957,861
--------------
19,149,726
--------------
TRADING COMPANIES & DISTRIBUTORS (0.0%) (b)
Grainger (W.W.), Inc. 10,584 585,189
--------------
</Table>
58 MainStay S&P 500 Index Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
Nextel Communications, Inc. Class A 142,816 $ 3,997,420
--------------
Total Common Stocks
(Cost $1,236,109,178) 1,343,838,667(f)
--------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (10.9%)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (7.6%)
7-Eleven, Inc.
2.77%, due 5/5/05 (c) $16,900,000 16,894,791
2.78%, due 5/6/05 (c) 14,000,000 13,994,587
AIG Funding, Inc.
2.74%, due 5/3/05 (c) 21,000,000 20,996,773
2.89%, due 5/11/05 (c) 1,600,000 1,598,715
Coca-Cola Co. (The)
2.94%, due 5/10/05 (c) 10,900,000 10,891,988
Cooperative Association of Tractor Dealer
3.02%, due 5/6/05 (c) 3,000,000 2,998,742
Dealers Capital Access Trust
2.82%, due 5/3/05 (c) 8,600,000 8,598,651
UBS Finance (Delaware) LLC
2.98%, due 5/13/05 (c) 20,000,000 19,980,168
USAA Capital Corp.
2.75%, due 5/4/05 (c) 1,800,000 1,799,587
2.91%, due 5/12/05 (c) 9,600,000 9,591,462
Wisconsin Public Service Corp.
2.98%, due 5/10/05 (c) 5,853,000 5,848,639
--------------
Total Commercial Paper
(Cost $113,194,103) 113,194,103
--------------
<Caption>
SHARES
INVESTMENT COMPANY (0.0%) (b)
AIM Institutional Funds Group (e) 629,544 629,544
--------------
Total Investment Company
(Cost $629,544) 629,544
--------------
<Caption>
PRINCIPAL
AMOUNT VALUE
MASTER NOTE (0.6%)
Bank of America LLC
3.08%, due 5/2/05 (e) $ 8,850,000 $ 8,850,000
--------------
Total Master Note
(Cost $8,850,000) 8,850,000
--------------
REPURCHASE AGREEMENTS (1.5%)
Credit Suisse First Boston LLC
3.05%, dated 4/29/05 due 5/2/05
Proceeds at Maturity $5,501,146 (e)
(Collateralized by Various Bonds
with a Principal Amount of
$5,774,880 and a Market Value of
$5,610,146) 5,500,000 5,500,000
Dresdner Kleinwort Wasserstein
3.07%, dated 4/29/05 due 5/2/05
Proceeds at Maturity
$8,302,123 (e)
(Collateralized by Various Bonds
with a Principal Amount of
$8,740,619 and a Market Value of
$8,715,075) 8,300,000 8,300,000
Merrill Lynch Pierce Fenner & Smith, Inc.
3.08%, dated 4/29/05 due 5/2/05
Proceeds at Maturity
$5,501,412 (e)
(Collateralized by Various Bonds
with a Principal Amount of
$5,572,392 and a Market Value of
$5,775,049) 5,500,000 5,500,000
Morgan Stanley & Co., Inc.
3.05%, dated 4/29/05 due 5/2/05
Proceeds at Maturity
$2,300,585 (e)
(Collateralized by Various Bonds
with a Principal Amount of
$2,476,149 and a Market Value of
$2,374,686) 2,300,000 2,300,000
--------------
Total Repurchase Agreements
(Cost $21,600,000) 21,600,000
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 59
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT (1.2%)
United States Treasury Bills
3.00%, due 10/6/05 (c) $ 8,000,000 $ 7,895,435
3.01%, due 10/13/05 (c) 10,000,000 9,863,436
--------------
Total U.S. Government
(Cost $17,756,844) 17,758,871
--------------
Total Short-Term Investments
(Cost $162,030,491) 162,032,518
--------------
Total Investments
(Cost $1,398,139,669) (g) 101.8% 1,505,871,185(h)
Liabilities in Excess of
Cash and Other Assets (1.8) (26,894,901)
----------- --------------
Net Assets 100.0% $1,478,976,284
=========== ==============
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (I)
FUTURES CONTRACTS (-0.4%)
- -----------------------------------------------------------------------------------
Standard & Poor's 500 Index
June 2005 459 $ (6,555,429)
Mini June 2005 1 444
-------------------
Total Futures Contracts
(Settlement Value
$132,995,800) (f) $ (6,554,985)
===================
</Table>
<Table>
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated as collateral for futures contracts.
(d) Represents securities out on loan or a portion which is
out on loan.
(e) Represents a security or a portion thereof, purchased
with cash collateral received for securities on loan.
(f) The combined market value of common stocks and
settlement value of Index futures contracts represents
99.9% of net assets.
(g) The cost for federal income tax purposes is
$1,411,327,862.
(h) At April 30, 2005 net unrealized appreciation was
$94,543,323, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $227,044,465 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $132,501,142.
(i) Represents the difference between the value of the
contracts at the time they were opened and the value at
April 30, 2005.
</Table>
60 MainStay S&P 500 Index 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,398,139,669) including
$29,467,396 market value of securities
loaned $1,505,871,185
Cash 77,258
Receivables:
Fund shares sold 1,942,728
Variation margin on futures contracts 1,767,598
Dividends and interest 1,621,997
Other assets 99,689
--------------
Total assets 1,511,380,455
--------------
LIABILITIES:
Securities lending collateral 31,079,544
Payables:
Fund shares redeemed 619,131
Manager 260,395
Professional 92,592
Transfer agent 78,684
NYLIFE Distributors 59,011
Shareholders communication 35,569
Directors 30,848
Investment securities purchased 29,633
Custodian 18,010
Accrued expenses 100,754
--------------
Total liabilities 32,404,171
--------------
Net assets $1,478,976,284
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 11,116
Class I 44,208
Additional paid-in capital 1,415,025,596
Accumulated undistributed net investment
income 6,733,804
Accumulated net realized loss on investments
and futures contracts (44,014,971)
Net unrealized appreciation on investments
and futures contracts 101,176,531
--------------
Net assets $1,478,976,284
==============
CLASS A
Net assets applicable to outstanding shares $ 295,271,424
==============
Shares of capital stock outstanding 11,115,954
==============
Net asset value per share outstanding $ 26.56
Maximum sales charge (3.00% of offering
price) 0.82
--------------
Maximum offering price per share outstanding $ 27.38
==============
CLASS I
Net assets applicable to outstanding shares $1,183,704,860
==============
Shares of capital stock outstanding 44,208,487
==============
Net asset value and offering price per share
outstanding $ 26.78
==============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 61
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $15,459,599
Interest 1,311,830
Income from securities loaned -- net 22,327
-----------
Total income 16,793,756
-----------
EXPENSES:
Manager 3,455,959
Service -- Class A 364,253
Transfer agent -- Class A 233,297
Transfer agent -- Class I 18,980
Professional 160,732
Custodian 63,513
Directors 60,446
Shareholder communication 53,324
Registration 20,033
Miscellaneous 66,719
-----------
Total expenses before reimbursement 4,497,256
Expense reimbursement from Manager (1,845,583)
-----------
Net expenses 2,651,673
-----------
Net investment income 14,142,083
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Security transactions (9,404,743)
Futures transactions 5,457,241
-----------
Net realized loss on investments (3,947,502)
-----------
Net change in unrealized appreciation on
investments:
Security transactions 34,621,910
Futures transactions (7,270,181)
-----------
Net unrealized gain on investments 27,351,729
-----------
Net realized and unrealized gain on investments 23,404,227
-----------
Net increase in net assets resulting from
operations $37,546,310
===========
</Table>
62 MainStay S&P 500 Index Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 14,142,083 $ 15,150,402
Net realized gain (loss) on
investments and futures
contracts (3,947,502) 2,084,240
Net change in unrealized
appreciation (depreciation) on
investments and futures
contracts 27,351,729 76,378,479
-------------------------------
Net increase in net assets
resulting from operations 37,546,310 93,613,121
-------------------------------
Dividends to shareholders:
From net investment income:
Class A (3,521,725) (9,637,543)
Class I (16,314,897) (2,029,302)
-------------------------------
Total dividends to shareholders (19,836,622) (11,666,845)
-------------------------------
Capital share transactions:
Net proceeds from sale of
shares:
Class A 84,481,371 339,361,707
Class I 300,769,874 331,146,317
Service Class -- 16,110,983
Net asset value of shares issued
to shareholders in reinvestment
of dividends:
Class A 3,418,486 --
Class I 16,313,839 9,634,831
Service Class -- 2,029,023
-------------------------------
404,983,570 698,282,861
Cost of shares redeemed:
Class A (78,000,277) (65,366,049)
Class I (128,565,669) (201,319,436)
Service Class -- (225,114,946)
-------------------------------
(206,565,946) (491,800,431)
-------------------------------
Increase in net assets
derived from capital shares
transactions 198,417,624 206,482,430
-------------------------------
Net increase in net assets 216,127,312 288,428,706
NET ASSETS:
Beginning of period 1,262,848,972 974,420,266
-------------------------------
End of period $1,478,976,284 $1,262,848,972
===============================
Accumulated undistributed net
investment income at the end of
period $ 6,733,804 $ 12,428,343
===============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 63
FINANCIAL HIGHLIGHTS SELECT PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
--------------------------- -------------------------------------------------------
JANUARY 2,
SIX MONTHS 2004* SIX MONTHS
ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, APRIL 30, YEAR ENDED DECEMBER 31,
2005*** 2004 2005*** 2004 2003 2002
Net asset value at beginning
of period $ 26.11 $ 25.46 $ 26.35 $ 24.43 $ 20.57 $ 25.84
-------- -------- ---------- -------- -------- --------
Net investment income 0.68 0.20 0.57 0.33 0.32(a) 0.31
Net realized and unrealized
gain (loss) on investments 0.10 0.45 0.27 1.88 3.85 (3.86)
-------- -------- ---------- -------- -------- --------
Total from investment
operations 0.78 0.65 0.84 2.21 4.17 (3.55)
-------- -------- ---------- -------- -------- --------
Less dividends and
distributions:
From net investment income (0.33) -- (0.41) (0.29) (0.31) (0.32)
From net realized gain on
investments -- -- -- -- -- (1.40)
-------- -------- ---------- -------- -------- --------
Total dividends and
distributions (0.33) -- (0.41) (0.29) (0.31) (1.72)
-------- -------- ---------- -------- -------- --------
Net asset value at end of
period $ 26.56 $ 26.11 $ 26.78 $ 26.35 $ 24.43 $ 20.57
======== ======== ========== ======== ======== ========
Total investment return (b) 2.93%(c) 2.55%(c) 3.14%(c) 9.10% 20.59% (15.23%)
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 1.85%+ 1.09%+ 2.10%+ 1.38% 1.46% 1.31%
Net expenses 0.58%+ 0.59%+ 0.33%+ 0.30% 0.30% 0.30%
Expenses (before
reimbursement) 0.85%+ 0.87%+ 0.60%+ 0.58% 0.61% 0.59%
Portfolio turnover rate 2% 2% 2% 2% 3% 4%
Net assets at end of period
(in 000's) $295,271 $280,346 $1,183,705 $982,503 $777,843 $527,277
<Caption>
CLASS I
------------------------
YEAR ENDED DECEMBER 31,
2001 2000
Net asset value at beginning
of period $ 37.38 $ 36.99
-------- ----------
Net investment income 0.30(a) 0.37
Net realized and unrealized
gain (loss) on investments (9.06) 1.86
-------- ----------
Total from investment
operations (8.76) 2.23
-------- ----------
Less dividends and
distributions:
From net investment income (0.36) (0.38)
From net realized gain on
investments (2.42) (1.46)
-------- ----------
Total dividends and
distributions (2.78) (1.84)
-------- ----------
Net asset value at end of
period $ 25.84 $ 37.38
======== ==========
Total investment return (b) (24.90%) 5.98%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 1.03% 0.95%
Net expenses 0.30% 0.30%
Expenses (before
reimbursement) 0.57% 0.54%
Portfolio turnover rate 5% 11%
Net assets at end of period
(in 000's) $612,937 $1,503,224
</Table>
<Table>
* Commencement of Operations.
** The Fund changed its fiscal year end from December 31 to October 31.
*** Unaudited.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Per share data based on average shares outstanding during the period.
(b) Total Return is calculated exclusive of sales charges. Class I and Service Class are not
subject to sales charges.
(c) Total return is not annualized.
</Table>
64 MainStay S&P 500 Index 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
<Table>
<Caption>
SERVICE CLASS++
-------------------------------------------------------------------------------------------------
NOVEMBER 1,
2003 JANUARY 1,
THROUGH YEAR ENDED THROUGH YEAR ENDED
JANUARY 9, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2002 2001 2000 1999** 1998
$24.23 $ 20.42 $ 25.68 $ 37.16 $ 36.80 $ 33.28 $ 26.99
------ -------- -------- ------- ------- ------- -------
(0.22) 0.26(a) 0.27 0.24(a) 0.27 0.21 0.31
1.92 3.81 (3.84) (9.04) 1.85 3.62 7.31
------ -------- -------- ------- ------- ------- -------
1.70 4.07 (3.57) (8.80) 2.12 3.83 7.62
------ -------- -------- ------- ------- ------- -------
(0.24) (0.26) (0.29) (0.26) (0.30) -- (0.31)
-- -- (1.40) (2.42) (1.46) (0.31) (1.02)
------ -------- -------- ------- ------- ------- -------
(0.24) (0.26) (1.69) (2.68) (1.76) (0.31) (1.33)
------ -------- -------- ------- ------- ------- -------
$25.69 $ 24.23 $ (1.69) $ 25.68 $ 37.16 $ 36.80 $ 33.28
====== ======== ======== ======= ======= ======= =======
7.04%(c) 20.20% (15.41%) (25.10%) 5.72% 11.60%(c) 28.24%
1.33%+ 1.21% 1.06% 0.78% 0.70% 0.81%+ 1.04%
0.55%+ 0.55% 0.55% 0.55% 0.55% 0.55%+ 0.55%
0.85%+ 0.86% 0.84% 0.82% 0.79% 0.80%+ 0.81%
2 3% 4% 5% 11% 7% 8%
$ 0 $196,577 $128,537 $90,127 $64,254 $61,647 $36,442
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 65
MAINSTAY SMALL CAP OPPORTUNITY FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 1.78% 11.44% 12.26% 13.64%
Excluding sales charges 7.70 17.92 13.54 14.28
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALL CAP VALUE
FUND VALUE INDEX CAP 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------- ------------- -------------
4/30/95 9450 10000 10000 10000 10000
11909 12628 13569 13021 12319
13860 14466 14079 16294 13565
21208 20508 20661 22985 19271
18890 17364 17707 28001 15959
19031 18127 21337 30837 17132
19503 22523 23063 26837 20813
23537 27575 26878 23448 24957
20874 22379 21248 20328 20649
30447 31879 29735 24979 30293
4/30/05 35904 35003 32835 26562 33269
<Caption>
RUSSELL 2000
INDEX
------------
4/30/95 10000
13299
13306
18948
17195
20362
19780
21100
16720
23744
4/30/05 24864
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 2.60% 11.93% 12.43% 13.24%
Excluding sales charges 7.20 16.93 12.68 13.24
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALL CAP VALUE
FUND VALUE INDEX CAP 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------- ------------- -------------
4/30/95 10000 10000 10000 10000 10000
12491 12628 13569 13021 12319
14341 14466 14079 16294 13565
21650 20508 20661 22985 19271
19069 17364 17707 28001 15959
19079 18127 21337 30837 17132
19397 22523 23063 26837 20813
23233 27575 26878 23448 24957
20480 22379 21248 20328 20649
29641 31879 29735 24979 30293
4/30/05 34660 35003 32835 26562 33269
<Caption>
RUSSELL 2000
INDEX
------------
4/30/95 10000
13299
13306
18948
17195
20362
19780
21100
16720
23744
4/30/05 24864
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time. From inception (1/12/87) through 12/31/03,
performance for Class A and B shares (each first offered 1/2/04) includes the
historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class A and B shares. Prior to
1/2/04, the Fund offered Class L shares, which were subject to a 1% sales charge
and a 1% CDSC on redemptions within one year of purchase. From inception through
12/29/02, performance for Class L shares (first offered 12/30/02) includes the
historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class L shares. Effective
1/02/04, all outstanding Class L shares of the Fund were converted to Class C
shares, redesignated Class C shares, or both.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
66 MainStay Small Cap Opportunity Fund
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges 6.34% 16.00% 12.70% 13.27%
Excluding sales charges 7.26 17.00 12.70 13.27
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALL CAP VALUE
FUND VALUE INDEX CAP 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------- ------------- -------------
4/30/95 10000 10000 10000 10000 10000
12495 12628 13569 13021 12319
14358 14466 14079 16294 13565
21672 20508 20661 22985 19271
19101 17364 17707 28001 15959
19112 18127 21337 30837 17132
19431 22523 23063 26837 20813
23260 27575 26878 23448 24957
20517 22379 21248 20328 20649
29701 31879 29735 24979 30293
4/30/05 34751 35003 32835 26562 33269
<Caption>
RUSSELL 2000
INDEX
------------
4/30/95 10000
13299
13306
18948
17195
20362
19780
21100
16720
23744
4/30/05 24864
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
7.90% 18.57% 13.86% 14.61%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALL CAP VALUE
FUND VALUE INDEX CAP 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------- ------------- -------------
4/30/95 10000 10000 10000 10000 10000
12636 12628 13569 13021 12319
14758 14466 14079 16294 13565
22648 20508 20661 22985 19271
20224 17364 17707 28001 15959
20437 18127 21337 30837 17132
20998 22523 23063 26837 20813
25386 27575 26878 23448 24957
22579 22379 21248 20328 20649
32979 31879 29735 24979 30293
4/30/05 39104 35003 32835 26562 33269
<Caption>
RUSSELL 2000
INDEX
------------
4/30/95 10000
13299
13306
18948
17195
20362
19780
21100
16720
23744
4/30/05 24864
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
Russell 2000(R) Value Index(1) 1.52% 9.80% 14.07% 13.35%
S&P 500(R) Index(2) 3.28 6.34 -2.94 10.26
Russell 2000(R) Index(3) -0.15 4.71 4.08 9.54
S&P SmallCap 600(R) Index(4) 2.57 10.43 9.00 12.62
Lipper Small-Cap Value Funds
Index(5) 3.58 9.83 14.20 12.77
Average Lipper small-cap value
fund(6) 3.17 9.06 13.81 12.86
</Table>
1. The Russell 2000(R) Value Index is an unmanaged index that measures the
performance of those Russell 2000(R) companies with lower price-to-book
ratios and lower forecasted growth values. Results assume reinvestment of all
income and capital gains. The Russell 2000(R) Value Index is considered to be
the Fund's broad-based securities-market index for comparison purposes. An
investment cannot be made directly into an index.
2. "S&P 500(R)" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Russell 2000(R) Index is an unmanaged index that measures the performance
of the 2,000 smallest companies in the Russell 3000(R) Index, which, in turn,
is an unmanaged index that measures the performance of the 3,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. S&P SmallCap 600(R) Index is an unmanaged market-value weighted index of 600
small-capitalization common stocks. Results assume reinvestment of all income
and capital gains. An investment cannot be made directly into an index.
5. The Lipper Small-Cap Value Funds Index is an unmanaged index that tracks the
performance, after expenses, of the 30 largest small-company value funds.
Results assume reinvestment of all dividend and capital-gain distributions.
An investment cannot be made directly into an index.
6. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 67
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY SMALL CAP OPPORTUNITY FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,077.65 $ 8.19 $1,017.05 $ 7.95
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,072.80 $12.03 $1,013.30 $11.68
- ------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,073.40 $12.03 $1,013.30 $11.68
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,079.45 $ 5.83 $1,019.35 $ 5.66
- ------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.59% for Class A, 2.34% for Class B and Class C, and 1.13% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
68 MainStay Small Cap Opportunity Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 97.9%
Investment Companies 2.5%
Liabilities in Excess of Cash and Other Assets (0.4)%
</Table>
See Portfolio of Investments on page 72 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. AmerUs Group Co.
2. GATX Corp.
3. Laidlaw International, Inc.
4. Shopko Stores, Inc.
5. Overseas Shipholding Group, Inc.
6. Westar Energy, Inc.
7. United Fire & Casualty Co.
8. Nash Finch Co.
9. Genesis HealthCare Corp.
10. PNM Resources, Inc.
</Table>
www.mainstayfunds.com 69
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Kathy A. O'Connor and Jeffrey Sanders
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in common and preferred
stock of companies with market capitalizations that, at the time of investment,
are similar to those of companies in the Russell 2000(R) Index, the S&P SmallCap
600(R) Index, or a universe selected from the smallest 2,000 companies of the
largest 3,000 companies, ranked by market capitalization.(1) In implementing
this strategy, the Fund focuses primarily on small-capitalization stocks that
have strong or improving operating characteristics and have been overlooked by
the market. The Fund uses a quantitative and statistical model to analyze the
relative quality and value of stocks.
WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL
30, 2005?
During the six months ended April 30, 2005, most broadly watched equity indices
saw positive performance, but certain small-cap core and small-cap growth
indices declined. Mid-cap stocks performed relatively better than their large-
and small-cap counterparts. The market clearly favored value equities over
growth stocks for large- and mid-cap issues, although different data sources
suggested different style preferences among small-cap issues.(2) Throughout much
of the reporting period, the domestic equity market was influenced by crude-oil
price fluctuations, job-growth concerns, the decline of the U.S. dollar, and
continuing instability in the Middle East.
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
MainStay Small Cap Opportunity Fund outperformed the Russell 2000(R) Value
Index(3) for the six months ended April 30, 2005. The Fund's relative
performance in the energy, retailing, and insurance industry groups was stronger
than that of peer stocks in the Index. The Fund held overweighted positions
relative to the Index in the energy and insurance industry groups, so the Fund's
outperformance in these industry groups strengthened relative performance.
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS PROVIDED THE STRONGEST PERFORMANCE
FOR THE FUND DURING THE SIX-MONTH REPORTING PERIOD?
The five strongest-performing industry groups were energy, retailing, insurance,
materials, and commercial services & supplies. Among the strongest contributors
to the Fund's performance were steel manufacturer Oregon Steel Mills
(+60.6%),(4) Massachusetts-based automobile-insurance company Safety Insurance
Group (+38.1%), steel service center Olympic Steel (+44.4%), Wisconsin-based
retailer ShopKo Stores (+29.1%), and construction holding company Building
Materials Holding (+31.4%).
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS DETRACTED FROM THE FUND'S
PERFORMANCE?
The Fund's five weakest-performing industry groups during the six-month
reporting period were banks, automobiles & components, technology hardware &
equipment, transportation, and consumer services. The greatest negative
contribution to the Fund's performance came from Visteon (-53.0%), a worldwide
supplier of automotive systems, modules, and components. The second-greatest
negative contributor was cemetery company Steward Enterprises (-22.6%), followed
by insurance and financial services company UICI (-25.5%),
network-infrastructure-equipment company MRV Communications (-45.7%), and metal
distributor Ryerson Tull (-32.4%).
WERE THERE ANY SIGNIFICANT EQUITY PURCHASES OR SALES DURING THE REPORTING
PERIOD?
The Fund uses its proprietary model to select stocks that have relatively
improving operating characteristics and are relatively undervalued. One of the
stocks
Stocks of small-capitalization companies may be subject to greater price
volatility, significantly lower trading volumes, and greater spreads between bid
and ask prices than stocks of larger companies. Small companies may be more
vulnerable to adverse business or market developments than mid- or
large-capitalization companies. Foreign securities may be subject to greater
risks than U.S. investments, including currency fluctuations, less-liquid
trading markets, greater price volatility, political and economic instability,
less publicly available information, and changes in tax or currency laws or
monetary policy.
1. See footnote on page 67 for more information on the Russell 2000(R) Index and
the S&P SmallCap 600(R) Index.
2. Specifically, for the six months ended April 30, 2005, the Russell 2000(R)
Growth Index underperformed the Russell 2000(R) Value Index, while the S&P
SmallCap 600/Barra Growth Index outperformed the S&P SmallCap 600/Barra Value
Index. Each of these indices is unmanaged, contains different issues, and is
considered to be generally representative of small-cap growth or small-cap
value stocks, as the index name suggests. An investment cannot be made
directly into an index.
3. See footnote on page 67 for more information on the Russell 2000(R) Value
Index.
4. Percentages reflect total returns of Fund holdings in the securities
mentioned, including purchases and sales, for the six months ended April 30,
2005, or for the portion of the reporting period such securities were held in
the Fund, if shorter. Securities are mentioned in the order of their
contribution to Fund performance, which takes total returns and weightings
both into account.
70 MainStay Small Cap Opportunity Fund
the Fund purchased during the reporting period was Titanium Metals (+60.0%), a
producer of titanium melted and mill products, whose sales increased 29% in the
first quarter of 2005 compared to the first quarter of 2004. The Fund purchased
the stock in November 2004 and added to it in April 2005. We established a
position in Alliance Imaging (+31.9%), a diagnostic-imaging-services company, in
November 2004 and added to the position in April 2005. The Fund also established
a position in ShopKo Stores (+29.1%) from February through April 2005. The
company, which was one of the Fund's top performers, increased gross margins
through improved promotional planning and markdown management. All three of
these companies exhibited improving fundamentals and, according to our
proprietary model, were relatively undervalued at the time of purchase.
The Fund sells stocks that exhibit deteriorating operating results, are
relatively overvalued, or both. The Fund sold its entire position in Oregon
Steel Mills (+60.6%) in January and February 2005. The Fund sold tubular steel
products company NS Group (+54.4%) in January and February 2005 and eliminated
its position in Olympic Steel (+44.4%) in December 2004 and January 2005.
According to our proprietary quantitative model, all three of these stocks had
become overvalued.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
Weighting changes in the Fund result from a combination of security performance,
industry performance, and the Fund's proprietary security selection process. The
Fund held 3.59% of its net assets in the utilities industry group on October 31,
2004. Over the course of the reporting period, this weighting increased to 8.76%
by April 30, 2005. The Fund's weighting in the energy industry group declined
from 18.56% at the beginning of the reporting period to 12.18% at the end of
April 2005.
HOW DID THE FUND'S WEIGHTINGS COMPARE WITH THOSE OF THE RUSSELL MIDCAP(R) VALUE
INDEX AT THE END OF THE REPORTING PERIOD?
As of April 30, 2005, the Fund was overweighted relative to the Russell 2000(R)
Value Index in the insurance, energy, and transportation industry groups. As
previously mentioned, the Fund benefited from its overweighted positions in the
insurance and energy industry groups. As of the same date, the Fund was
underweighted relative to the Russell 2000(R) Value Index in the utilities,
banks, and real estate industry groups. The underweighted position in banks
helped relative performance, because the industry group as a whole showed weak
results.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
As always, the Fund will continue to focus on stocks that our proprietary model
indicates have relatively improving operating characteristics and are relatively
undervalued.
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.
www.mainstayfunds.com 71
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (97.9%)+
- ----------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.6%)
Park-Ohio Holdings Corp. (a) 156,400 $ 2,211,496
------------
AUTO COMPONENTS (1.2%)
Midas, Inc. (a) 53,400 1,154,508
R&B, Inc. (a) 52,200 652,500
Sauer-Danfoss, Inc. 4,900 96,873
Visteon Corp. 690,500 2,416,750
------------
4,320,631
------------
BUILDING PRODUCTS (0.7%)
NCI Building Systems, Inc. (a) 71,800 2,327,756
------------
CAPITAL MARKETS (0.2%)
Capital Southwest Corp. 9,400 710,593
------------
CHEMICALS (0.3%)
Terra Industries, Inc. (a) 138,100 952,890
------------
COMMERCIAL BANKS (3.6%)
BFC Financial Corp. Class A (a) 5,198 44,859
Columbia Bancorp 5,000 159,500
Provident Bankshares Corp. 214,932 6,293,209
Umpqua Holdings Corp. 283,000 6,288,260
------------
12,785,828
------------
COMMERCIAL SERVICES & SUPPLIES (3.0%)
Ambassadors International, Inc. 27,800 359,176
Century Business Services (a) 19,900 70,844
Cenveo, Inc. (a) 336,800 2,630,408
Consolidated Graphics, Inc. (a) 9,400 431,460
Hudson Highland Group, Inc. (a) 113,300 1,562,407
IAAI Finance Corp. 95,300 2,687,460
PICO Holdings, Inc. (a) 81,423 1,961,480
United Rentals, Inc. (a) 52,800 970,992
------------
10,674,227
------------
COMMUNICATIONS EQUIPMENT (0.6%)
Digi International, Inc. (a) 57,600 613,440
MRV Communications, Inc. (a) 835,900 1,596,569
------------
2,210,009
------------
COMPUTERS & PERIPHERALS (0.0%) (c)
Intergraph Corp. (a) 4,100 121,237
------------
CONSTRUCTION & ENGINEERING (0.2%)
Washington Group International, Inc. (a) 12,000 497,160
------------
</Table>
<Table>
<Caption>
SHARES VALUE
CONSTRUCTION MATERIALS (0.5%)
Texas Industries, Inc. 35,800 $ 1,653,244
------------
CONSUMER FINANCE (1.0%)
Advanta Corp. Class B 66,200 1,625,210
ASTA Funding, Inc. 7,500 156,750
Metris Cos., Inc. (a) 152,400 1,847,088
------------
3,629,048
------------
CONTAINERS & PACKAGING (0.3%)
Caraustar Industries, Inc. (a) 98,800 883,272
------------
DISTRIBUTORS (0.0%) (c)
WESCO International, Inc. (a) 5,000 120,900
------------
DIVERSIFIED FINANCIAL SERVICES (2.3%)
V GATX Corp. 249,200 8,153,824
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.5%)
Commonwealth Telephone Enterprises, Inc. 38,800 1,802,648
------------
ELECTRIC UTILITIES (3.7%)
Allegheny Energy, Inc. (a) 26,500 647,660
CMS Energy Corp. (a) 250,300 3,233,876
El Paso Electric Co. 125,700 2,452,407
V PNM Resources, Inc. 242,800 6,713,420
------------
13,047,363
------------
ELECTRICAL EQUIPMENT (1.8%)
General Cable Corp. (a) 38,800 471,420
Regal-Beloit Corp. 218,100 5,768,745
------------
6,240,165
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%)
Agilysys, Inc. 99,100 1,310,102
------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Lufkin Industries, Inc. 49,200 1,447,464
Maverick Tube Corp. (a) 59,200 1,722,128
SEACOR Holdings, Inc. (a) 11,600 661,316
------------
3,830,908
------------
FOOD & STAPLES RETAILING (3.3%)
Ingles Markets, Inc. Class A 175,500 2,269,215
V Nash Finch Co. 193,300 6,837,021
</Table>
72 MainStay Small Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------------
FOOD & STAPLES RETAILING (CONTINUED)
NeighborCare, Inc. (a) 46,400 $ 1,332,608
Smart & Final, Inc. (a) 98,500 975,150
------------
11,413,994
------------
FOOD PRODUCTS (2.7%)
Ralcorp Holdings, Inc. 147,700 5,851,874
Sanderson Farms, Inc. 20,700 750,168
Seaboard Corp. 2,160 1,846,800
Sensient Technologies Corp. 58,900 1,178,589
------------
9,627,431
------------
GAS UTILITIES (0.0%) (C)
New Jersey Resources Corp. 1,800 78,048
------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.3%)
Dade Behring Holdings, Inc. (a) 17,400 1,073,058
------------
HEALTH CARE PROVIDERS & SERVICES (6.7%)
Alderwoods Group, Inc. (a) 115,900 1,512,495
Alliance Imaging, Inc. 97,200 1,014,768
V Genesis HealthCare Corp. 169,400 6,759,060
Gentiva Health Services, Inc. (a) 156,200 3,058,396
Magellan Health Services, Inc. (a) 153,600 5,231,616
MedCath Corp. (a) 35,400 978,810
Res-Care, Inc. (a) 8,600 122,894
Stewart Enterprises, Inc. Class A (a) 891,100 4,811,940
------------
23,489,979
------------
HOTELS, RESTAURANTS & LEISURE (2.4%)
Jack In The Box, Inc. (a) 50,200 1,835,312
La Quinta Corp. 249,300 2,168,910
Magna Entertainment Corp. 345,700 1,811,468
Marcus Corp. (The) 130,700 2,502,905
------------
8,318,595
------------
HOUSEHOLD DURABLES (2.0%)
Blount International, Inc. (a) 165,400 2,449,574
Brookfield Homes Corp. 12,700 545,211
M.D.C. Holdings, Inc. 14,028 917,151
National Presto Industries, Inc. 78,000 3,042,000
------------
6,953,936
------------
INSURANCE (13.2%)
Allmerica Financial Corp. (a) 56,000 1,879,920
American Physicians Capital, Inc. 4,200 130,326
V AmerUs Group Co. 176,600 8,301,966
Argonaut Group, Inc. (a) 306,200 6,022,954
Commerce Group, Inc. 107,800 6,368,824
Delphi Financial Group, Inc. Class A 22,950 952,884
Donegal Group, Inc. Class B 26,000 458,380
</Table>
<Table>
<Caption>
SHARES VALUE
INSURANCE (CONTINUED)
FBL Financial Group, Inc. 28,100 $ 736,220
Harleysville Group, Inc. 13,500 280,665
Horace Mann Educators Corp. 32,100 525,798
Kansas City Life Insurance Co. 7,800 356,382
LandAmerica Financial Group, Inc. 7,400 367,040
Midland Co. (The) 16,000 502,400
National Western Life Insurance Co. Class A (a) 2,700 446,364
Ohio Casualty Corp. (a) 164,900 3,866,905
PMA Capital Corp. Class A (a) 14,200 100,678
Selective Insurance Group, Inc. 14,900 657,835
Stewart Information Services Corp. 11,400 410,628
UICI 164,500 3,819,690
V United Fire & Casualty Co. 211,000 7,148,680
Vesta Insurance Group, Inc. 113,000 276,850
Zenith National Insurance Corp. 46,100 2,651,211
------------
46,262,600
------------
INTERNET & CATALOG RETAIL (0.6%)
Blair Corp. 47,035 1,545,571
Systemax, Inc. (a) 59,700 433,422
------------
1,978,993
------------
LEISURE EQUIPMENT & PRODUCTS (0.7%)
JAKKS Pacific, Inc. 119,800 2,251,042
Steinway Musical Instruments, Inc. 7,100 214,491
------------
2,465,533
------------
MACHINERY (3.1%)
EnPro Industries, Inc. (a) 216,000 5,432,400
NACCO Industries, Inc. Class A 32,900 3,426,535
Reliance Steel & Aluminum Co. 14,300 539,539
Terex Corp. (a) 39,800 1,487,724
------------
10,886,198
------------
MEDIA (0.3%)
Carmike Cinemas, Inc. 25,600 896,000
------------
METALS & MINING (3.9%)
AK Steel Corp. (a) 275,900 2,000,275
Castle (A.M.) & Co. (a) 117,200 1,400,540
Commercial Metals Co. 38,000 969,380
Metals USA, Inc. (a) 260,800 3,818,112
Ryerson Tull, Inc. 199,600 2,085,820
Steel Dynamics, Inc. 38,100 1,035,558
Steel Technologies, Inc. 48,100 923,039
Titanium Metals Corp. (a) 24,900 837,138
USEC, Inc. 36,500 479,975
------------
13,549,837
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 73
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------------
MULTILINE RETAIL (2.5%)
Dillard's, Inc. Class A 46,000 $ 1,070,420
V Shopko Stores, Inc. (a) 326,800 7,830,128
------------
8,900,548
------------
MULTI-UTILITIES & UNREGULATED POWER (4.8%)
Dynegy, Inc. Class A (a) 1,029,700 3,449,495
Energen Corp. 14,300 885,885
Sierra Pacific Resources (a) 496,900 5,376,458
V Westar Energy, Inc. 316,800 7,254,720
------------
16,966,558
------------
OIL & GAS (10.8%)
Cabot Oil & Gas Corp. 11,600 341,504
Callon Petroleum Co. (a) 203,000 2,758,770
Cimarex Energy Co. 63,600 2,257,800
Denbury Resources, Inc. (a) 57,800 1,834,572
Encore Acquisition Co. 66,800 2,452,896
Frontier Oil Corp. 75,300 3,168,624
Giant Industries, Inc. (a) 37,100 968,681
Harvest Natural Resources, Inc. (a) 17,500 188,825
Houston Exploration Co. (The) (a) 97,400 4,961,556
V Overseas Shipholding Group, Inc. 136,100 7,680,123
Petroleum Development Corp. (a) 20,500 524,800
Plains Exploration & Production Co. (a) 22,086 710,727
Remington Oil & Gas Corp. 25,800 752,586
St. Mary Land & Exploration Co. 113,900 2,471,630
Swift Energy Co. (a) 73,200 1,927,356
Tesoro Corp. (a) 32,500 1,233,050
Vintage Petroleum, Inc. 131,500 3,799,035
------------
38,032,535
------------
PAPER & FOREST PRODUCTS (0.2%)
Louisiana-Pacific Corp. 31,700 779,820
------------
REAL ESTATE (6.9%)
American Home Mortgage Investment Corp. 162,100 5,300,670
California Coastal Communities, Inc. (a) 78,100 2,286,768
Corrections Corp. of America (a) 145,200 5,495,820
CRIIMI MAE, Inc. (a) 87,100 1,825,616
CRT Properties, Inc. 120,500 2,782,345
FelCor Lodging Trust, Inc. (a) 146,000 1,787,040
LaSalle Hotel Properties 112,900 3,429,902
Senior Housing Properties Trust 82,300 1,423,790
------------
24,331,951
------------
</Table>
<Table>
<Caption>
SHARES VALUE
ROAD & RAIL (5.2%)
Florida East Coast Industries, Inc. 132,700 $ 5,653,020
Kansas City Southern (a) 61,000 1,154,120
V Laidlaw International, Inc. 359,900 8,058,161
Overnite Corp. 47,800 1,433,044
RailAmerica, Inc. (a) 136,100 1,404,552
SCS Transportation, Inc. (a) 43,000 657,470
------------
18,360,367
------------
SPECIALTY RETAIL (1.1%)
Burlington Coat Factory Warehouse Corp. 102,800 2,832,140
Rent-Way, Inc. (a) 82,200 641,160
Stage Stores, Inc. (a) 13,800 521,915
------------
3,995,215
------------
TEXTILES, APPAREL & LUXURY GOODS (2.3%)
Haggar Corp. 5,400 104,760
Hartmarx Corp. (a) 192,100 1,657,823
Phillips-Van Heusen Corp. (a) 18,500 478,780
Warnaco Group, Inc. (The) 265,700 5,967,622
------------
8,208,985
------------
THRIFTS & MORTGAGE FINANCE (1.7%)
BankAtlantic Bancorp, Inc. Class A 76,300 1,301,678
BankUnited Financial Corp. (a) 60,500 1,444,740
Berkshire Hills Bancorp, Inc. 5,900 185,260
Commercial Capital Bancorp, Inc. 54,732 864,218
First Financial Service Corp. 8,300 213,725
New Century Financial Corp. 31,800 1,445,310
Sterling Financial Corp. (a) 15,822 517,221
------------
5,972,152
------------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
Huttig Building Products, Inc. (a) 58,000 603,200
------------
WIRELESS TELECOMMUNICATION SERVICES (1.0%)
Dobson Communications Corp. Class A (a) 1,317,800 2,635,600
SBA Communications Corp. (a) 99,700 845,456
------------
3,481,056
------------
Total Common Stocks (Cost $334,780,960) 344,109,890
------------
INVESTMENT COMPANIES (2.5%)
- ----------------------------------------------------------------------------
CAPITAL MARKETS (2.5%)
iShares Russell 2000 Index Fund (b) 21,000 2,420,040
iShares Russell 2000 Value Index Fund (b) 14,000 2,445,100
</Table>
74 MainStay Small Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
INVESTMENT COMPANIES (CONTINUED)
- ----------------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
iShares S&P SmallCap 600/BARRA Value Index Fund
(b) 22,100 $ 2,473,653
iShares S&P SmallCap 600 Index Fund (b) 10,000 1,500,100
------------
8,838,893
------------
Total Investment Companies (Cost $8,307,376) 8,838,893
------------
Total Investments (Cost $343,088,336) (d) 100.4% 352,948,783(e)
Liabilities in Excess of
Cash and Other Assets (0.4) (1,262,283)
------ ------------
Net Assets 100.0% $351,686,500
====== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Exchange Traded Fund -- represents a basket of
securities that are traded on an exchange.
(c) Less than one tenth of a percent.
(d) The cost for federal income tax purpose is $343,339,434.
(e) At April 30, 2005 net unrealized appreciation was
$9,609,349, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $30,441,525 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $20,832,176.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 75
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $343,088,336) $352,948,783
Receivables:
Investment securities sold 7,836,178
Fund shares sold 1,488,830
Dividends and interest 184,295
Other assets 38,476
------------
Total assets 362,496,562
------------
LIABILITIES:
Payables:
Investment securities purchased 4,584,588
Due to custodian 3,120,781
Fund shares redeemed 2,571,315
Manager 299,593
Transfer agent 73,053
NYLIFE Distributors 52,141
Custodian 3,127
Accrued expenses 105,464
------------
Total liabilities 10,810,062
------------
Net assets $351,686,500
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized:
Class A $ 34,355
Class B 19,189
Class C 9,560
Class I 140,694
Additional paid-in capital 305,728,718
Accumulated net investment loss (483,398)
Accumulated undistributed net realized gain on
investments 36,376,935
Net unrealized appreciation on investments 9,860,447
------------
Net assets $351,686,500
============
CLASS A
Net assets applicable to outstanding shares $ 59,125,301
============
Shares of capital stock outstanding 3,435,475
============
Net asset value per share outstanding $ 17.21
Maximum sales charge (5.50% of offering
prices) 1.00
------------
Maximum offering price per share outstanding $ 18.21
============
CLASS B
Net assets applicable to outstanding shares $ 32,450,534
============
Shares of capital stock outstanding 1,918,945
============
Net asset value and offering price per share
outstanding $ 16.91
============
CLASS C
Net assets applicable to outstanding shares $ 16,166,376
============
Shares of capital stock outstanding 956,000
============
Net asset value and offering price per share
outstanding $ 16.91
============
CLASS I
Net assets applicable to outstanding shares $243,944,289
============
Shares of capital stock outstanding 14,069,417
============
Net asset value and offering price per share
outstanding $ 17.34
============
</Table>
76 MainStay Small Cap Opportunity 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 1,531,211
Interest 87,834
------------
Total income 1,619,045
------------
EXPENSES:
Manager 1,569,557
Transfer agent -- Classes A, B and C 97,248
Transfer agent -- Class I 43,321
Distribution -- Class B 94,751
Distribution -- Class C 40,697
Service -- Class A 56,819
Service -- Class B 31,584
Service -- Class C 13,565
Professional 43,389
Registration 31,425
Custodian 26,927
Shareholder communication 20,219
Trustees 12,525
Miscellaneous 20,416
------------
Net expenses 2,102,443
------------
Net investment loss (483,398)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 36,565,660
Net change in unrealized appreciation on
investments (22,042,169)
------------
Net realized and unrealized gain on
investments 14,523,491
------------
Net increase in net assets resulting from
operations $ 14,040,093
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 77
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income (loss) $ (483,398) $ 498,063
Net realized gain on investments 36,565,660 40,242,703
Net change in unrealized
appreciation on investments (22,042,169) (4,766,868)
----------------------------
Net increase in net assets
resulting from operations 14,040,093 35,973,898
----------------------------
Dividends and distributions to shareholders:
From net investment income:
Class I -- (529,938)
Service Class -- (2,449)
From net realized gain on
investments:
Class A (5,109,697) --
Class B (2,976,305) --
Class C (1,216,425) (69)
Class I (31,247,732) (8,783,780)
Service Class -- (58,903)
----------------------------
Total dividends and distributions
to shareholders (40,550,159) (9,375,139)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 42,976,318 26,466,450
Class B 18,716,787 15,449,601
Class C 12,106,056 5,487,844
Class I 75,074,539 120,485,449
Service Class -- 150,100
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Class A $ 3,678,083 $ --
Class B 2,891,454 --
Class C 864,881 69
Class I 29,358,442 8,970,892
Service Class -- 61,284
----------------------------
185,666,560 177,071,689
Cost of shares redeemed:
Class A (7,629,690) (2,619,360)
Class B (1,557,797) (1,096,142)
Class C (1,136,761) (189,760)
Class I (36,665,056) (123,333,409)
Service Class -- (1,347,714)
----------------------------
(46,989,304) (128,586,385)
----------------------------
Increase in net assets derived
from capital share
transactions 138,677,256 48,485,304
----------------------------
Net increase in net assets 112,167,190 75,084,063
NET ASSETS:
Beginning of period 239,519,310 164,435,247
----------------------------
End of period $ 351,686,500 $239,519,310
============================
Accumulated net investment loss at
end of period $ (483,398) $ 0
============================
</Table>
78 MainStay Small Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
This page intentionally left blank
79
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- ------------------------------
JANUARY 2, JANUARY 2,
SIX MONTHS 2004** SIX MONTHS 2004** SIX MONTHS
ENDED THROUGH ENDED THROUGH ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005*** 2004 2005*** 2004 2005*** 2004
Net asset value at beginning
of period $ 18.58 $ 16.78 $ 18.38 $ 16.71 $ 18.37 $16.15
------- ------- ------- ------- ------- ------
Net investment income (loss) (0.02)(e) (0.09)(e) (0.02)(e) (0.19)(e) (0.02)(e) (0.25)(e)
Net realized and unrealized
gain (loss) on investments 1.56 1.89 1.46 1.86 1.47 3.28
------- ------- ------- ------- ------- ------
Total from investment
operations 1.54 1.80 1.44 1.67 1.45 3.03
------- ------- ------- ------- ------- ------
Less dividends and
distributions:
From net investment income -- -- -- -- -- --
From net realized gain on
investments (2.91) -- (2.91) -- (2.91) (0.81)
------- ------- ------- ------- ------- ------
Total dividends and
distributions (2.91) -- (2.91) -- (2.91) (0.81)
------- ------- ------- ------- ------- ------
Net asset value at end of
period $ 17.21 $ 18.58 $ 16.91 $ 18.38 $ 16.91 $18.37
======= ======= ======= ======= ======= ======
Total investment return (b) 7.70%(c) 10.73%(c) 7.20%(c) 9.99%(c) 7.26%(c) 19.29%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) (0.56%)++ (0.36%)++ (1.31%)++ (1.12%)++ (1.31%)++ (1.13%)
Net expenses 1.59% ++ 1.87% ++ 2.34% ++ 2.62% ++# 2.34% ++ 2.62% #
Expenses (before
reimbursement) 1.59% ++ 1.87% ++# 2.34% ++ 2.62% ++# 2.34% ++ 2.62% #
Portfolio turnover rate 58% 132% 58% 132% 58% 132%
Net assets at end of period
(in 000's) $59,125 $24,621 $32,451 $14,905 $16,166 $5,518
<Caption>
CLASS C
------------
DECEMBER 30,
2002**
THROUGH
OCTOBER 31,
2003
Net asset value at beginning
of period $11.46
------
Net investment income (loss) (0.05)(e)
Net realized and unrealized
gain (loss) on investments 4.74
------
Total from investment
operations 4.69
------
Less dividends and
distributions:
From net investment income --
From net realized gain on
investments --
------
Total dividends and
distributions --
------
Net asset value at end of
period $16.15
======
Total investment return (b) 40.92%(c)
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) (0.47%)++
Net expenses 2.27% ++#
Expenses (before
reimbursement) 2.34% ++#
Portfolio turnover rate 132%
Net assets at end of period
(in 000's) $ 2
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
+ Less than 0.01% of average net assets.
++ Annualized.
# Includes transfer agent fees paid directly which amounted to 0.02%, 0.08%, 0.07% and 0.08%
of average net assets for the years or periods ended October 31, 2004, October 31, 2003,
October 31, 2002 and October 31, 2001, respectively, and custodian fees and other expenses
paid indirectly which amounted to 0.02% of average net assets for the year ended December
31, 2000 and less than 0.01% of average net assets for the other years indicated.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
(d) Restated.
(e) Per share data based on average shares outstanding during the period.
</Table>
80 MainStay Small Cap Opportunity 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
<Table>
<Caption>
CLASS I
-------------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2001
ENDED THROUGH YEAR ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2005*** 2004 2003 2002 2001* 2000 1999
$ 18.67 $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76 $ 11.93
-------- -------- -------- -------- -------- -------- --------
(0.04)(e) 0.06(e) 0.07(e) 0.15 0.08 (0.00)(a) 0.01
1.62 3.21 4.74 0.50 0.31 (1.11) 0.35
-------- -------- -------- -------- -------- -------- --------
1.58 3.27 4.81 0.65 0.39 (1.11) 0.36
-------- -------- -------- -------- -------- -------- --------
-- (0.05) (0.13) (0.11) -- -- (0.01)
(2.91) (0.81) -- -- -- -- (0.52)
-------- -------- -------- -------- -------- -------- --------
(2.91) (0.86) (0.13) (0.11) -- -- (0.53)
-------- -------- -------- -------- -------- -------- --------
$ 17.34 $ 18.67 $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76
======== ======== ======== ======== ======== ======== ========
7.90%(c) 20.72% 42.04% 5.84% 3.66%(c) (9.44%) 3.05%
(0.11%)++ 0.32% 0.53% 1.08% 0.70%++ 0.00%+ 0.05%
1.13% ++ 1.18%# 1.27%# 1.26%# 1.23%(d)++# 1.21%# 1.18%#
1.13% ++ 1.18%# 1.34%# 1.27%# 1.23%(d)++# 1.21%# 1.18%#
58% 132% 135% 103% 77% 105% 56%
$243,944 $194,476 $163,362 $111,181 $108,105 $157,630 $251,229
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 81
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
SERVICE CLASS+++
---------------------------------------
NOVEMBER 1, JULY 1,
2003 2002**
THROUGH YEAR ENDED THROUGH
JANUARY 9, OCTOBER 31, OCTOBER 31,
2004 2003 2002
Net asset value at beginning of period $16.24 $11.58 $13.91
------ ------ ------
Net investment income (loss) 0.03(e) (0.04)(d) (0.00)(a)
Net realized and unrealized gain (loss) on
investments 1.74 4.75 (2.33)
------ ------ ------
Total from investment operations 1.77 4.79 (2.33)
------ ------ ------
Less dividends and distributions:
From net investment income (0.03) (0.13) --
From net realized gain on investments (0.81) -- --
------ ------ ------
Total dividends and distributions (0.84) (0.13) --
------ ------ ------
Net asset value at end of period $17.17 $16.24 $11.58
====== ====== ======
Total investment return (b) 11.07%(c) 41.80% (16.75%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 1.02%++ 0.28% 0.83%++
Net expenses 1.44%++# 1.52%# 1.51%++#
Expenses (before reimbursement) 1.44%++# 1.59%# 1.52%++#
Portfolio turnover rate 135% 135% 103%
Net assets at end of period (in 000's) $ 0 $1,071 $ 88
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to
October 31.
** Commencement of Operations.
+ Less than 0.01% of average net assets.
++ Annualized.
+++ Service Class shares ceased operations on January 9, 2004.
# Includes transfer agent fees paid indirectly which amounted
to 0.02%, 0.08% and 0.07% of average net assets for the
years or periods ended January 9, 2004, October 31, 2003 and
October 31, 2002, respectively.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges.
Service Class is not subject to sales charges.
(c) Total return is not annualized.
(d) Per share data based on average shares outstanding during
the period.
</Table>
82 MainStay Small Cap Opportunity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY CASH RESERVES FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
CLASS I SHARES(1)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
0.94% 1.40% 2.39% 3.80%
</Table>
7-DAY CURRENT YIELD: 2.38%
(PERFORMANCE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER INSTITUTIONAL
MAINSTAY CASH RESERVES FUND MONEY MARKET FUND
--------------------------- ----------------------------
4/30/95 10000 10000
10545 10561
11082 11113
11674 11718
12262 12317
12902 12972
13684 13771
14057 14150
14228 14340
14321 14453
4/30/05 14521 14678
</Table>
SWEEP SHARES CLASS SHARES(1)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
0.69% 0.90% 1.88% 3.23%
</Table>
7-DAY CURRENT YIELD: 1.88%
(PERFORMANCE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER INSTITUTIONAL
MAINSTAY CASH RESERVES FUND MONEY MARKET FUND
--------------------------- ----------------------------
4/30/95 10000 10000
10467 10561
10927 11113
11454 11718
11958 12317
12519 12972
13212 13771
13505 14150
13602 14340
13622 14453
4/30/05 13744 14678
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------------------------------
Average Lipper institutional money market fund(2) 0.97% 1.47% 2.44% 3.91%
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price and reinvestment of dividend and capital-gain
distributions. The graphs assume an initial investment of $10,000. Class I
shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fees,
and are generally available to corporate and institutional investors with a
minimum initial investment of $5 million. Sweep Shares Class shares are sold
with no initial sales charge or CDSC, have an annual 12b-1 fee of .25%, and are
available only through financial institutions participating in a sweep account
arrangement. Performance figures reflect certain fee waivers and/or expense
limitations, without which total returns may have been lower. The fee waivers
and/or expense limitations are voluntary and may be discontinued at any time.
From inception (1/2/91) through 12/7/98, performance for the Sweep Shares Class
shares (first offered 12/8/98) includes the performance of Class I shares.
1. As of 4/30/05, MainStay Cash Reserves Fund had an effective 7-day yield of
2.41% and a 7-day current yield of 2.38% for Class I shares and an effective
7-day yield of 1.90% and a 7-day current yield of 1.88% for Sweep Shares
Class shares. These yields reflect certain expense limitations. Had these
expense limitations not been in effect, the effective 7-day yield and the
current 7-day yield would have been 1.98% and 1.96% for Class I shares and
1.54% and 1.53% for Sweep Shares Class shares. These expense limitations are
voluntary and may be terminated or revised at any time. The current yield is
more reflective of the Fund's earnings than the total return.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
The average Lipper institutional money market fund is considered to be the
Fund's broad-based securities-market index for comparison purposes.
www.mainstayfunds.com 83
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY CASH RESERVES FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS I SHARES $1,000.00 $1,009.40 $2.49 $1,022.50 $2.51
- --------------------------------------------------------------------------------------------------------------------------
SWEEP SHARES $1,000.00 $1,006.90 $4.98 $1,020.00 $5.01
- --------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Class I, and 1.00% for Sweep Shares Class) multiplied by the
average account value over the period, divided by 365, multiplied by 181 (to
reflect the one-half year period).
84 MainStay Cash Reserves Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Commercial Paper 60.2%
Certificates of Deposit 15.7%
Corporate Bonds 10.8%
U.S. Government & Federal Agencies 7.3%
Medium-Term Notes 4.7%
Asset-Backed Securities 3.4%
Liabilities in Excess of Cash and Other Assets (2.1)%
</Table>
See Portfolio of Investments on page 88 for specific holdings within these
categories.
www.mainstayfunds.com 85
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Mark C. Boyce and David E. Clement,
CFA, of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund invests in high-quality, short-term securities that are denominated in
U.S. dollars and mature in 13 months or less. The Fund may invest in obligations
of the U.S. government and its agencies or instrumentalities. It may also invest
in CDs, bankers' acceptances, commercial paper, loans, time deposits, repurchase
agreements, and corporate debt securities. The Fund's investments may also
include variable rate notes, floaters, and asset-backed securities.
WHAT MAJOR FACTORS INFLUENCED THE MONEY MARKETS DURING THE SIX MONTHS ENDED
APRIL 30, 2005?
The most significant factor affecting the money markets was Federal Reserve
action to tighten the money supply. During the reporting period, the Federal
Open Market Committee increased the targeted federal funds rate four times--in
November and December 2004 and in February and March 2005--with a 25 basis point
move on each occasion. This brought the targeted federal funds rate to 2.75% at
the end of the six-month reporting period. The financial markets anticipate that
the Federal Open Market Committee will continue to tighten interest rates for
the foreseeable future.
DID YOU ADJUST THE FUND'S DURATION POSITIONING IN RESPONSE TO THE FEDERAL OPEN
MARKET COMMITTEE'S RATE HIKES?
During the six-month reporting period, the Fund's duration was managed in the
range of 45 to 65 days. At the end of the reporting period, the Fund had a
duration of 62 days. This strategy allowed the Fund to react more quickly to
interest rate changes as we sought to benefit from rising interest rates. Going
forward, we believe that this strategy may continue to have a positive impact on
the Fund's performance because it is widely anticipated that interest rates will
continue to rise.
DID THE STEEPENING OF THE MONEY-MARKET YIELD CURVE INFLUENCE THE FUND'S
INVESTMENT DECISIONS?
During the reporting period, the money-market yield curve, as measured by the
difference between the overnight federal funds rate and 12-month LIBOR,(1) was
generally upward sloping, although there was some volatility in the money
markets. In December 2004, the money-market yield curve reached its lowest
level, a 69 basis point difference between the overnight federal funds rate and
12-month LIBOR. During March 2005, the difference reached 118 basis points.
The Fund was able to opportunistically benefit from the steepening money-market
yield curve by purchasing securities with longer maturities that offered higher
yields. For example, we purchased some 3.05% HBOS Treasury Services Yankee CDs
due December 30, 2005, and 2.78% World Omni Auto Receivables due February 12,
2006.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
Commercial paper, which provides a high degree of liquidity, continued to be the
key market sector for the Fund during the reporting period. We also looked for
yield-enhancement opportunities in the short-term corporate-note sector. Among
short corporates, some of the Fund's key investments included notes of Alabama
Power, Bank One, Goldman Sachs Group, and 3M.
We also added incremental yield through investments in the asset-backed and
floating-rate securities sectors, although we gave up some liquidity in the
process. During the reporting period, we purchased asset-backed securities
issued by Capital One Prime Auto, USAA Auto Owner, Nissan Auto Receivables,
World Omni Auto Receivables, and Caterpillar Financial Asset. Among
floating-rate securities, we bought JP Morgan Chase, Nationwide Building
Society, UBS, and TIAA Global Markets for the Fund. We also purchased Yankee
certificates of deposit for the Fund, including issues by BNP Paribas, HBOS
Treasury Services, Toronto Dominion Bank, and Suntrust Bank.
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.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These risks
are likely to be greater in emerging markets than in developed markets. The Fund
may invest in derivatives, which may increase the volatility of the Fund's net
asset value and may result in a loss to the Fund.
1. The London interbank offered rate (LIBOR) is a floating interest rate that is
widely used as a base rate in bank, corporate, and government lending
agreements.
86 MainStay Cash Reserves Fund
DID THE FUND CHANGE ITS ASSET CLASS WEIGHTINGS?
In an effort to add incremental yield to the portfolio, we increased the Fund's
weighting in short-term corporate notes. In so doing, we decreased the Fund's
weighting in commercial paper.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Looking forward, we expect the Federal Open Market Committee to continue to
raise the federal funds target rate throughout 2005. To meet the Fund's
investment objective, our strategy will remain focused on keeping the Fund's
weighted average maturity short and seeking securities that are likely to
benefit from higher short-term interest rates.
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.
www.mainstayfunds.com 87
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (102.1%)+
- ------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (3.4%)
Capital One Prime Auto Receivables
Series 2004-3 Class A1
2.51685%, due 12/15/05 $ 1,994,709 $ 1,994,709
Caterpillar Financial Asset
Series 2005-A Class A1
3.2056%, due 4/25/06 5,000,000 5,000,000
Nissan Auto Receivables Owners Trust
Series 2004-C Class A1
1.93%, due 9/15/05 441,242 441,242
Series 2005-A Class A1
2.6396%, due 1/17/06 3,057,761 3,057,761
USAA Auto Owner Trust
Series 2004-3 Class A1
2.3365%, due 11/15/05 3,596,875 3,596,875
World Omni Auto Receivables
Series 2005-A Class A1
2.78%, due 2/12/06 3,232,301 3,232,301
------------
17,322,888
------------
CERTIFICATES OF DEPOSIT (15.7%)
BNP Paribas NY Branch
3.295%, due 9/26/05 (d) 15,000,000 15,000,000
Dresdner Bank AG
1.97%, due 5/10/05 (c)(d) 10,000,000 10,000,000
HBOS Treasury Services
3.05%, due 12/30/05 (d) 10,000,000 10,001,898
Morgan Stanley
2.95%, due 5/2/05 15,987,000 15,987,000
Suntrust Bank
3.14%, due 8/18/05 10,000,000 10,000,000
Toronto Dominion Bank
3.11%, due 9/8/05 (d) 10,000,000 10,000,000
UBS AG Stamford CT
3.03%, due 7/5/05 (b)(d) 10,000,000 9,999,162
------------
80,988,060
------------
COMMERCIAL PAPER (60.2%)
American Honda Finance Corp.
2.70%, due 5/5/05 8,310,000 8,307,507
Barton Capital Corp.
2.81%, due 5/4/05 9,930,000 9,927,675
Blue Ridge Asset Funding
2.82%, due 5/9/05 9,386,000 9,380,118
Cafco LLC
2.89%, due 5/26/05 15,000,000 14,969,896
CIT Group, Inc.
3.25%, due 9/29/05 10,000,000 9,863,681
</Table>
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
COMMERCIAL PAPER (CONTINUED)
Coca-Cola Enterprises, Inc.
2.92%, due 5/6/05 $10,000,000 $ 9,995,944
Countrywide Home Loans, Inc.
2.17%, due 5/2/05 15,000,000 14,998,829
CRC Funding LLC
2.96%, due 6/15/05 10,000,000 9,963,000
Danske Corp.
3.01%, due 7/7/05 3,190,000 3,172,130
E.I. du Pont de Nemours & Co.
2.92%, due 6/13/05 10,000,000 9,965,122
Florida Power & Light Co.
2.92%, due 5/17/05 10,000,000 9,987,022
Fortune Brands, Inc.
2.75%, due 5/12/05 15,000,000 14,987,396
Goldman Sachs Group, Inc.
2.78%, due 5/11/05 10,000,000 9,992,278
Govco, Inc.
2.93%, due 6/7/05 5,711,000 5,693,802
HBOS Treasury Services
2.87%, due 6/9/05 10,450,000 10,417,509
Hershey Foods Corp.
2.11%, due 5/2/05 4,064,000 4,063,691
Hershey Foods Corp.
2.85%, due 5/16/05 10,000,000 9,988,125
Honeywell International
2.85%, due 5/3/05 11,650,000 11,648,155
IBM Capital, Inc.
3.02%, due 7/13/05 11,585,000 11,514,055
Illinois Tool Works, Inc.
2.80%, due 5/25/05 15,000,000 14,972,000
Lehman Brothers Holdings, Inc.
3.23%, due 10/7/05 5,000,000 4,928,671
Market Street Funding Corp.
2.83%, due 5/13/05 10,000,000 9,990,567
Morgan Stanley Dean Witter
2.80%, due 5/5/05 5,587,000 5,585,262
PACCAR Financial Corp.
2.80%, due 6/2/05 11,295,000 11,266,888
Procter & Gamble Co. (The)
3.03%, due 7/20/05 10,000,000 9,932,667
Sheffield Receivables Corp.
3.19%, due 9/2/05 7,000,000 6,923,085
Shell Finance (UK) PLC
2.85%, due 7/6/05 10,000,000 9,945,367
</Table>
+ Percentages indicated are based on Fund net assets.
88 MainStay Cash Reserves Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
Three Rivers Funding Corp.
2.93%, due 5/16/05 $15,000,000 $ 14,981,687
Variable Funding Capital Co.
2.85%, due 5/24/05 15,000,000 14,972,687
Verizon Network Funding
2.76%, due 5/6/05 5,000,000 4,998,083
Windmill Funding Corp.
2.90%, due 6/8/05 12,214,495
------------
309,547,394
------------
CORPORATE BONDS (10.8%)
3M Co.
5.6743%, due 12/12/05 (a) 2,000,000 2,033,935
Alabama Power Co.
Series H
5.49%, due 11/1/05 4,250,000 4,293,586
Bank One Corp.
6.25%, due 2/1/06 5,972,000 6,097,979
General Electric Co.
3.211%, due 10/24/05 (b) 13,000,000 13,005,910
Goldman Sachs Group, Inc.
7.625%, due 8/17/05 10,000,000 10,144,410
National Rural Utilities Co.
6.00%, due 5/15/06 5,000,000 5,115,550
Nationwide Building Society
3.20%, due 7/22/05 (a)(b) 10,000,000 10,001,071
TIAA Global Markets
3.29%, due 1/13/06 (a)(b) 5,000,000 5,007,129
------------
55,699,570
------------
MEDIUM-TERM NOTES (4.7%)
Lehman Brothers Holdings, Inc.
Series A
2.95%, due 5/16/05 (b) 7,000,000 7,000,000
Pfizer, Inc.
2.69%, due 11/4/05 (b) 17,000,000 17,000,000
------------
24,000,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
U.S. GOVERNMENT & FEDERAL AGENCIES (7.3%)
Federal National Mortgage Association
1.75%, due 5/23/05 $10,000,000 $ 10,000,000
United States Treasury Bills
2.635%, due 5/19/05 13,560,000 13,542,135
2.743%, due 6/16/05 8,955,000 8,923,619
United States Treasury Note
1.625%, due 5/2/05 5,000,000 5,000,000
------------
37,465,754
------------
Total Short-Term Investments
(Amortized Cost $525,023,666) (e) 102.1% 525,023,666
Liabilities in Excess of Cash and Other Assets (2.1) (10,653,420)
----- ------------
Net Assets 100.0% $514,370,246
===== ============
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at April 30, 2005.
(c) Coupon interest bearing security.
(d) Yankee certificate of deposit (CD) -- dollar-denominated CD issued in the
United States by foreign banks and corporations.
(e) The cost stated also represents the aggregate cost for federal income tax
purposes.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 89
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
The table below sets forth the diversification of Cash Reserves Fund investments
by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
AMORTIZED
COST PERCENT+
Agency $ 37,465,754 7.3%
Auto -- Cars/Light Trucks 8,307,507 1.6
Automobile -- Sequential 8,823,884 1.7
Beverages -- Non-Alcoholic 9,995,944 2.0
Chemicals -- Diversified 9,965,122 1.9
Commercial Banks -- Central U.S. 10,000,000 2.0
Commercial Banks -- Eastern U.S. 24,999,162 4.9
Commercial Banks -- Non U.S. 10,000,000 2.0
Computers 11,514,055 2.2
Consumer Products -- Miscellaneous 14,987,396 2.9
Cosmetics & Toiletries 9,932,667 1.9
Diversified Manufacturing 41,660,000 8.1
Electric -- Integrated 14,280,608 2.8
Finance -- Auto Loans 14,765,891 2.9
Finance -- Commercial 14,861,764 2.9
Finance -- Corporate Loans 9,380,118 1.8
Finance -- Investment Banker/Broker 53,637,621 10.4
Finance -- Mortgage Loan/Banker 24,998,900 4.9
Finance -- Other Services 30,779,481 6.0
Finance -- Receivables 83,981,093 16.3
Food -- Confectionary 14,051,816 2.7
Medical -- Drugs 17,000,000 3.3
Money Center Banks 33,591,537 6.5
Oil Companies -- Integrated 9,945,367 1.9
Super-Regional Banks -- U.S. 6,097,979 1.2
------------ ----------
525,023,666 102.1
Liabilities in Excess of
Cash and Other Assets (10,653,420) (2.1)
------------ -------
Net Assets $514,370,246 100.0%
============ =======
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
</Table>
90 MainStay Cash Reserves 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(amortized cost $525,023,666) $525,023,666
Cash 1,410
Receivables:
Interest 1,187,081
Fund shares sold 1,098,584
Other assets 45,698
------------
Total assets 527,356,439
------------
LIABILITIES:
Payables:
Investment securities purchased 7,329,418
Fund shares redeemed 5,251,943
Manager 177,649
NYLIFE Distributors 107,581
Shareholder communication 38,592
Transfer agent 17,674
Custodian 7,343
Directors 3,852
Accrued expenses 52,141
------------
Total liabilities 12,986,193
------------
Net assets $514,370,246
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
8 billion shares authorized:
Class I $ 251,628
Sweep Shares Class 262,744
Additional paid-in capital 513,859,371
Accumulated net realized loss on investments (3,497)
------------
Net assets $514,370,246
============
CLASS I
Net assets applicable to outstanding shares $251,612,712
============
Shares of capital stock outstanding 251,627,689
============
Net asset value and offering price per share
outstanding $ 1.00
============
SWEEP SHARES CLASS
Net assets applicable to outstanding shares $262,757,534
============
Shares of capital stock outstanding 262,743,891
============
Net asset value and offering price per share
outstanding $ 1.00
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 91
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $6,037,038
----------
EXPENSES:
Manager 1,261,076
Distribution -- Sweep Shares Class 328,350
Service -- Sweep Shares Class 328,350
Professional 68,237
Shareholder communication 60,412
Custodian 24,491
Transfer agent 23,742
Directors 21,275
Registration 19,082
Portfolio pricing 2,029
Miscellaneous 27,045
----------
Total expenses before reimbursement 2,164,089
Expense reimbursement from Manager (245,857)
----------
Net expenses 1,918,232
----------
Net investment income 4,118,806
----------
REALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (789)
----------
Net increase in net assets resulting from
operations $4,118,017
==========
</Table>
92 MainStay Cash Reserves Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income $ 4,118,806 $ 2,447,467
Net realized loss on investments (789) (2,708)
-------------------------------
Net increase in net assets
resulting from operations 4,118,017 2,444,759
-------------------------------
Dividends and distributions to shareholders:
From net investment income:
Class I (2,302,897) (1,733,035)
Service Class -- (10,535)
Sweep Shares Class (1,815,909) (703,897)
From net realized gain on
investments:
Class I -- (3,677)
Service Class -- (208)
Sweep Shares Class -- (4,426)
-------------------------------
Total dividends and distributions
to shareholders (4,118,806) (2,455,778)
-------------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class I 330,987,310 506,072,909
Service Class -- 2,796,267
Sweep Shares Class 152,396,401 136,261,850
Net asset value of shares
issued to shareholders
in reinvestment of dividends
and distributions:
Class I 2,302,897 1,742,010
Service Class -- 5,989
Sweep Shares Class 1,815,909 544,302
-------------------------------
487,502,517 647,423,327
Cost of shares redeemed:
Class I (328,219,323) (482,325,843)
Service Class -- (20,300,483)
Sweep Shares Class (152,268,643) (148,842,045)
-------------------------------
(480,487,966) (651,468,371)
-------------------------------
Increase (decrease) in net
assets derived from capital
share transactions 7,014,551 (4,045,044)
-------------------------------
Net increase (decrease) in net
assets 7,013,762 (4,056,063)
NET ASSETS:
Beginning of period 507,356,484 511,412,547
-------------------------------
End of period $ 514,370,246 $ 507,356,484
===============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 93
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005* 2004 2003 2002 2001 2000
Net asset value at beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net investment income 0.01 0.01 0.01 0.02 0.04 0.06
Net realized gain on
investments 0.00(a) 0.00(a) 0.00(a) 0.00(a) -- --
-------- -------- -------- -------- -------- --------
Total from investment
operations 0.01 0.01 0.01 0.02 0.04 0.06
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment income (0.01) (0.01) (0.01) (0.02) (0.04) (0.06)
From net realized gain on
investments (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) -- --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions (0.01) (0.01) (0.01) (0.02) (0.04) (0.06)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total investment return 0.94%(b) 0.77% 0.83% 1.65% 4.67% 5.98%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 2.39%+ 0.77% 0.84% 1.61% 4.50% 5.81%
Net expenses 0.50%+ 0.50% 0.50% 0.50% 0.50% 0.50%
Expenses (before
reimbursement) 0.60%+ 0.60% 0.60% 0.62% 0.61% 0.57%
Net assets at end of period
(in 000's) $251,613 $246,542 $221,058 $329,921 $199,495 $160,942
</Table>
<Table>
<Caption>
SWEEP SHARES CLASS
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005* 2004 2003 2002 2001 2000
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net investment income 0.01 0.00(a) 0.00(a) 0.01 0.04 0.05
Net realized gain on investments 0.00(a) 0.00(a) 0.00(a) 0.00(a) -- --
-------- -------- -------- -------- -------- --------
Total from investment operations 0.01 0.00(a) 0.00(a) 0.01 0.04 0.05
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income (0.01) (0.00)(a) (0.00)(a) (0.01) (0.04) (0.05)
From net realized gain on investments (0.00)(a) (0.00)(a) (0.00)(a) 0.00(a) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.01) (0.00)(a) (0.00)(a) (0.01) (0.04) (0.05)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total investment return 0.69%(b) 0.27% 0.33% 1.14% 4.15% 5.46%
Ratios (to average net assets)/
Supplemental Data:
Net investment income 2.39%+ 0.27% 0.34% 1.11% 4.00% 5.31%
Net expenses 1.00%+ 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses (before reimbursement) 1.10%+ 1.10% 1.10% 1.12% 1.11% 1.07%
Net assets at end of period (in 000's) $262,757 $260,814 $272,856 $291,312 $285,034 $221,935
</Table>
<Table>
* Unaudited.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Less than one cent per share.
(b) Total return is not annualized.
</Table>
94 MainStay Cash Reserves 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
<Table>
<Caption>
SERVICE CLASS++
- ----------------------------------------------------------------------------------------------------------
NOVEMBER 1,
2003 JANUARY 1,
THROUGH THROUGH YEAR ENDED
JANUARY 9, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2004 2003 2002 2001 2000 1999 1998
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------ ------ ------ --------
0.00(a) 0.01 0.01 0.04 0.06 0.04 0.05
0.00(a) 0.00(a) 0.00(a) -- -- -- --
------ ------- ------- ------ ------ ------ --------
0.00(a) 0.01 0.01 0.04 0.06 0.04 0.05
------ ------- ------- ------ ------ ------ --------
(0.00)(a) (0.01) (0.01) (0.04) (0.06) (0.04) 0.05
(0.00)(a) (0.00)(a) (0.00)(a) -- -- -- --
------ ------- ------- ------ ------ ------ --------
(0.00)(a) (0.01) (0.01) (0.04) (0.06) (0.04) 0.05
------ ------- ------- ------ ------ ------ --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.10
====== ======= ======= ====== ====== ====== ========
0.07%(b) 0.58% 1.39% 4.41% 5.72% 3.74%(b) 4.99%
0.38%+ 0.59% 1.36% 4.25% 5.56% 4.43% 4.87%
0.75%+ 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
0.86%+ 0.85% 0.87% 0.86% 0.82% 0.87% 0.88%
$ 0 $17,498 $11,659 $1,685 $1,586 $5,630 $103,765
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 95
MAINSTAY FLOATING RATE FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
A REDEMPTION FEE OF 2% WILL BE APPLIED TO SHARES THAT ARE REDEEMED WITHIN 60
DAYS OF PURCHASE.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE SINCE
TOTAL RETURNS MONTHS YEAR INCEPTION
- --------------------------------------------------
With sales charges -1.35% 0.42% 0.42%
Excluding sales charges 1.71 3.53 3.53
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 9700 10000
4/30/05 10042 10505
</Table>
CLASS B SHARES--MAXIMUM 3% CDSC IF REDEEMED WITHIN THE FIRST FOUR YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE SINCE
TOTAL RETURNS MONTHS YEAR INCEPTION
- ---------------------------------------------------
With sales charges -1.67% -0.24% -0.24%
Excluding sales charges 1.33 2.76 2.76
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
4/30/05 9976 10505
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE SINCE
TOTAL RETURNS MONTHS YEAR INCEPTION
- --------------------------------------------------
With sales charges 0.33% 1.75% 1.75%
Excluding sales charges 1.33 2.75 2.75
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
4/30/05 10175 10505
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 3.0% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 3% if redeemed within the
first four years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
96 MainStay Floating Rate Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE SINCE
TOTAL RETURNS MONTHS YEAR INCEPTION
- --------------------------------------------------
1.83% 3.79% 3.79%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
4/30/05 10379 10505
</Table>
<Table>
<Caption>
SIX ONE SINCE
BENCHMARK PERFORMANCE MONTHS YEAR INCEPTION
Credit Suisse First Boston(TM) Leveraged Loan Index(1) 2.72% 5.05% 5.05%
Average Lipper loan participation fund(2) 1.74 3.44 3.44
</Table>
1. The Credit Suisse First Boston(TM) Leveraged Loan Index is an unmanaged index
that represents tradable, senior-secured, U.S. dollar denominated
non-investment-grade loans. Results assume reinvestment of all income and
capital gains. The Credit Suisse First Boston(TM) Leveraged Loan Index is
considered to be the Fund's broad-based securities-market index for
comparison purposes. An investment cannot be made directly into an index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 97
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY FLOATING RATE FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,017.10 $5.20 $1,019.80 $5.21
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,013.35 $8.94 $1,016.05 $8.95
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,013.35 $8.94 $1,016.05 $8.95
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,018.35 $3.95 $1,021.05 $3.96
- -------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.04% for Class A, 1.79% for Class B and Class C, and 0.79% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
98 MainStay Floating Rate Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Floating Rate Loans 84.9%
Short-Term Investment 10.2%
Foreign Floating Rate Loans 5.6%
Foreign Corporate Bond 0.2%
Liabilities in Excess of Cash and Other Assets (0.9)%
</Table>
See Portfolio of Investments on page 103 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Fidelity National Information Services, Inc.
Term Loan B 4.66%, due 3/9/13
2. Refco Finance Holdings LLC Term Loan B 5.02%,
due 8/5/11
3. PP Acquisition Corp. Term Loan 5.35%, due
11/12/11
4. Intelsat Bermuda Ltd. Term Loan 4.84325%, due
7/28/11
5. Reliant Energy, Inc. Term Loan 5.395%-6.0875%,
due 4/30/10
6. Visant Holding Corp. Term Loan C 5.19%, due
12/21/11
7. Direct TV Term Loan B 4.454%, due 4/13/13
8. Spring Industries, Inc. Term Loan 5.875%, due
12/7/10
9. Solo Cup Co. Term Loan B 5.00%-5.093%, due
2/27/11
10. Maguire Properties, Inc. Term Loan B 6.50%, due
3/15/10
</Table>
www.mainstayfunds.com 99
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Robert Dial and Anthony Malloy of New
York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in a portfolio of
floating-rate loans and other floating-rate debt securities. The Fund may also
purchase fixed-income debt securities and money-market securities or
instruments. When we believe that market or economic conditions are unfavorable
to investors, up to 100% of the Fund's assets may be invested in money-market or
short-term debt securities. The Fund may also invest in these types of
securities or hold cash while we are looking for suitable investment
opportunities or to maintain liquidity.
In implementing this strategy, we seek to identify investment opportunities
based on the financial condition and competitiveness of individual companies. We
also seek to invest in companies that have a high margin of safety and are
leaders in industries with high barriers to entry. We prefer companies with
positive free cash flow, solid asset coverage, and management teams that have
strong track records. In virtually every phase of the investment process, we
attempt to control risk and limit defaults.
WHAT WERE THE MOST SIGNIFICANT FACTORS AND RISKS THAT INFLUENCED THE
FLOATING-RATE LOAN MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2005?
The Federal Open Market Committee met four times during the six months ended
April 30, 2005, and raised its target for the federal funds rate 25 basis points
at each meeting. (A basis point is 1/100th of one percentage point.) These rate
hikes raised the targeted federal funds rate from 1.75% at the end of October
2004 to 2.75% at the end of April 2005. As a result, reference U.S. dollar
London interbank offer rates (LIBOR)(1) rose commensurately. Rising reference
rates prompted strong investor interest in floating-rate loans during the
reporting period. In recent periods, growing demand for these securities has
caused the median new-issue allocation level granted to market participants to
decline substantially. Demand growth has also caused credit spreads(2) to narrow
and prices to remain relatively high in the secondary market (as tracked by the
Credit Suisse First Boston(TM) Leveraged Loan Index).(3) Since LIBOR has risen
more than credit spreads have declined, however, the Fund experienced a rising
yield during the reporting period.
HOW DID YOU POSITION THE FUND'S PORTFOLIO DURING THE REPORTING PERIOD?
The Fund invests in floating-rate loans that have a weighted average effective
duration of less than three months. These securities may have final maturities
of seven to nine years, but their underlying interest-rate contracts are
typically pegged to LIBOR and generally reset every 30, 60, or 90 days. As of
the end of April 2005, the weighted average reset figure for the Fund was 56
days. This means that as short-term interest rates increase, the Fund tends to
adjust within 56 days, raising the yield it pays to investors. An inverse
dynamic would apply when interest rates decline. As of April 30, 2005, the
Fund's portfolio had a weighted average spread of 243.5 basis points above the
weighted average LIBOR reference rate.
WHAT WERE THE MAJOR FACTORS THAT AFFECTED THE FUND'S PERFORMANCE DURING THE
REPORTING PERIOD?
The Fund's comparative benchmark is the Credit Suisse First Boston(TM) Leveraged
Loan Index (the Index). Excluding all sales charges, for the six months ended
April 30, 2005, Class A shares returned 1.71% and Class B and Class C shares
returned 1.33%. Over the same period, Class I shares returned 1.83%.(4) These
returns were lower than the Index return of 2.72% for several reasons. First,
the Fund faces real-world expenses that a hypothetical index does not. Second,
for liquidity purposes, the Fund maintains prudent cash balances as appropriate
for an open-ended Fund with longer-settlement assets. Third, higher Fund net
yields resulted in significant cash inflows, especially during March and April
2005. These inflows temporarily increased the Fund's cash
Floating-rate funds are generally considered to have speculative characteristics
that involve default risk of principal and interest, collateral impairment,
nondiversification, borrower industry concentration, and limited liquidity. The
Fund may invest in foreign securities. U.S. dollar denominated securities of
foreign issuers may be subject to greater risks than U.S. investments, including
currency fluctuations, less-liquid trading markets, greater price volatility,
political and economic instability, less publicly available information, and
changes in tax or currency laws or monetary policy.
1. London interbank offer rates (LIBOR) are floating interest rates that are
widely used as reference rates in bank, corporate, and government lending
agreements.
2. The term "credit spread" refers to the marginal interest rate paid in
addition to a benchmark interest rate linked to a market, index, or
instrument.
3. See footnote on page 97 for more information on the Credit Suisse First
Boston(TM) Leveraged Loan Index.
4. For full information and disclosure about Fund performance see pages 96 and
97.
100 MainStay Floating Rate Fund
position from 11% to 14%. The higher cash position and the lag associated with
the longer-settlement nature of the loans asset class contributed to relative
underperformance. Fourth, amortization of secondary-market purchase premiums
affected relative returns, because the Index tracks assets at primary-issue
prices, which are generally at par or a small discount. Fifth, the conservative
orientation of the Fund affected relative performance. In an effort to minimize
net-asset-value volatility, the Fund holds a significantly underweighted
position relative to the Index in more speculative loans, including unrated
loans and loans rated CCC(5) and below.
It is worth noting that the Fund pays a floating-rate dividend, unlike the
Index, which does not pay dividends. The Fund's 30-day yield on April 30, 2005,
was 4.05%.
WHICH INDUSTRIES DID YOU FIND ATTRACTIVE DURING THE PERIOD?
The largest industry concentrations in the Fund were broadcasting & cable TV
(10.06% of net assets), health care (9.32%), chemicals (7.98%), utilities
(7.48%), and consumer non-durable goods (6.61%). Among its largest industry
concentrations, the Fund was overweighted relative to the Index in health care,
chemicals, utilities, and nondurable consumer goods. We felt comfortable with
overweighted positions in health care and nondurable consumer goods because of
the defensive nature of the industries. We overweighted the chemicals and
utilities sectors for the historically strong cash flow and because issuers in
these sectors typically provide substantial collateral coverage. The Fund held a
modestly underweighted position relative to the Index in broadcasting & cable TV
because of relative value judgments.
HOW WAS THE FUND'S PORTFOLIO POSITIONED IN TERMS OF CREDIT QUALITY?
As we mentioned, the Fund was significantly underweighted relative to the Credit
Suisse First Boston(TM) Leveraged Loan Index in unrated loans and loans rated
CCC or below. As of April 30, 2005, the Fund held 0.39% of its investments in
loans rated CCC or lower, compared to 3.38% for the Index. At the same time, the
Fund held 1.21% in unrated loans, compared to 7.42% in the Index. The Fund had a
weighted average credit rating of approximately Ba3/B1 from Moody's(6) and
BB-/B+ from Standard & Poor's.(7)
WHAT DO YOU ANTICIPATE GOING FORWARD?
We expect further Federal Open Market Committee tightening in 2005, which should
continue to bolster investor demand in the floating-rate loan asset class. The
combination of a growing economy, low default rates, and strong technicals will
likely enable deals with higher leverage and looser covenants to clear the
market. In fact, leverage has already crept
5. Debt rated CCC by Standard & Poor's is deemed by Standard & Poor's to be
currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor. It is the opinion of
Standard & Poor's 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. Bonds rated Ba by Moody's Investors Service are judged by Moody's to have
speculative elements, and Moody's believes that the future of the bonds
cannot be considered well-assured. Moody's believes that often, the
protection of interest and principal payments on such bonds may be very
moderate and thereby not well safeguarded during both good and bad times in
the future. According to Moody's, uncertainty of position characterizes bonds
in this class. Bonds rated B by Moody's Investors Service are deemed by
Moody's to generally lack characteristics of the desirable investment.
According to Moody's, assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small. Moody's applies numerical modifiers, 1, 2, and 3, to certain
generic rating categories. The modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates a
midrange ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. 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. Debt rated BB by Standard & Poor's is deemed by Standard & Poor's to be less
vulnerable to nonpayment than other speculative issues. In the opinion of
Standard & Poor's, however, debt rated BB faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation. Debt rated B by Standard & Poor's is deemed by
Standard & Poor's to be more vulnerable to nonpayment than obligations rated
BB, but it is the opinion of Standard & Poor's that the obligor currently has
the capacity to meet its financial commitment on the obligation. Standard &
Poor's believes that adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation. Certain ratings 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.
www.mainstayfunds.com 101
upward, primarily because of a growing number of aggressive deals. The average
debt multiple of new, large leveraged buyouts expanded during the reporting
period to its highest reading since 1998. Although difficult to measure,
covenant positions on loans seem to be eroding.
Like most credit markets, the leveraged-loan market seems increasingly
overbought. We expect the spread environment to remain challenging in 2005.
Maintaining appropriate investment levels for the Fund given natural repayments
and refinancing activity will require creativity and careful analysis as we
balance risk against the need to remain fully invested. A resurgence of
merger-and-acquisition-related deal flow, may help to alleviate some of the
spread compression.
Perhaps the greater challenge in this seemingly benign credit environment is to
remain focused on conditions that may affect credit quality. We are committed to
capital preservation through fundamental research, underwriting scrutiny, and
constant portfolio surveillance. We believe the Fund is attractively positioned
as we look toward the second half of 2005.
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.
102 MainStay Floating Rate Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS (90.7%)+
FOREIGN CORPORATE BOND (0.2%)
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
Intelsat Bermuda Ltd.
7.805%, due 1/15/12 (a) $ 1,000,000 $ 1,002,500
------------
Total Foreign Corporate Bond
(Cost $1,000,000) 1,002,500
------------
FLOATING RATE LOANS (84.9%) (b)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.4%)
Hexcel Corp.
Term Loan B
4.75%-4.875%, due 3/1/12 2,000,000 2,020,626
TransDigm, Inc.
Term Loan
5.30%, due 7/22/10 2,472,525 2,504,977
Vought Aircraft Industries, Inc.
Term Loan
5.57%, due 12/22/11 4,489,412 4,545,529
------------
9,071,132
------------
ALUMINUM (0.4%)
Novelis, Inc.
Term Loan
4.50%, due 1/9/12 2,372,485 2,405,645
------------
APPAREL, ACCESSORIES & LUXURY GOODS (1.9%)
St. John's Knits International, Inc.
Tranche B Term Loan
5.5625%, due 3/23/12 5,500,000 5,541,250
V Visant Holding Corp.
Term Loan C
5.19%, due 12/21/11 6,577,500 6,669,309
------------
12,210,559
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
AUTO PARTS & EQUIPMENT (3.0%)
Accuride Corp.
Term Loan B
5.25%-5.50%, due 1/31/12 $ 3,233,636 $ 3,228,246
Affinia Group, Inc.
Term Loan B
5.44%, due 11/30/11 2,369,063 2,394,530
Dayco Products LLC
Term Loan B
5.77%-6.37%, due 6/23/11 2,977,500 3,025,884
HLI Operating Co., Inc.
Term Loan
5.85%-6.66%, due 6/4/09 1,669,976 1,665,801
2nd Lien Term Loan 8.41%-8.83%, due 6/30/10 1,000,000 992,500
Key Automotive Group
Term Loan B
5.85%-7.75%, due 6/29/10 1,422,067 1,427,400
Term Loan C
8.60%-8.64%, due 6/29/11 2,000,000 1,977,500
Safelite Glass Corp.
Term Loan A
8.10%, due 9/30/07 306,993 274,758
Term Loan B
8.60%, due 9/30/07 612,101 547,831
TRW Automotive Holdings Corp.
Term Loan E
3.875%, due 10/31/10 1,995,000 2,001,234
Term Loan B
4.375%, due 6/30/12 1,995,000 1,996,995
United Components, Inc.
Tranche C Term Loan
5.29%, due 6/30/10 348,000 351,915
------------
19,884,594
------------
BROADCASTING & CABLE TV (7.3%)
Atlantic Broadband Finance LLC
Tranche B-1 Term Loan
5.70%, due 9/1/11 3,000,000 3,061,251
Bragg Communications, Inc.
Term Loan B
5.39%, due 8/31/11 2,985,000 3,014,850
Charter Communications Operating LLC
Term Loan A
6.19%, due 4/27/11 2,000,000 1,968,864
Charter Operating Co. LLC
Term Loan B
6.37%-6.44%, due 4/7/11 4,967,475 4,908,486
V Direct TV
Term Loan B
4.454%, due 4/13/13 6,500,000 6,516,250
Emmis Operating Co.
Term Loan B
4.66%, due 11/10/11 2,992,500 3,027,829
Insight Midwest Holdings LLC
Term Loan B
5.75%, due 12/31/09 1,979,950 2,007,794
MCC Iowa LLC
Tranche C
5.25%-5.59%, due 9/30/10 1,959,195 1,959,501
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. 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. www.mainstayfunds.com 103
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
BROADCASTING & CABLE TV (CONTINUED)
Mediacom Broadcasting
Term Loan A
4.33%-4.89%, due 3/31/10 $ 2,923,469 $ 2,907,025
Mission Broadcasting, Inc.
Term Loan
4.87%, due 10/1/12 3,405,352 3,419,542
Nexstar Broadcasting, Inc.
Term Loan
4.87%, due 10/1/12 3,594,648 3,609,627
Olympus Cable Holdings, Inc.
Term Loan B
7.75%, due 9/30/10 3,000,000 2,967,321
Persona Cable, Inc.
Term Loan B
6.0925%, due 8/1/11 2,985,000 3,018,581
Rainbow National Services LLC
Term B Loan
5.69%, due 3/31/12 1,000,000 1,012,500
UPC Financing
Term Loan
6.60%, due 12/31/11 4,000,000 4,038,752
------------
47,438,173
------------
BUILDING PRODUCTS (1.4%)
Nortek, Inc.
Term Loan
5.34%-7.00%, due 8/27/11 4,985,000 5,043,160
Stile Acquisition Corp.
U.S. Term Loan
6.75%, due 4/6/13 2,001,702 2,001,390
Canadian Term Loan
7.25%, due 4/6/13 1,998,298 1,997,986
------------
9,042,536
------------
CASINOS & GAMING (1.8%)
Boyd Gaming Corp.
Term Loan B
4.53%-5.13%, due 6/30/11 3,468,775 3,508,885
Resorts International Holdings LLC
2nd Lien Term Loan
5.75%, due 4/26/13 2,000,000 2,002,500
Term B Loan
7.25%, due 4/26/12 984,252 992,044
Venetian Casino Resort LLC
Term Loan B
4.81%, due 6/15/11 (c) 4,974,359 5,000,474
------------
11,503,903
------------
COMMODITY CHEMICALS (0.8%)
Huntsman International LLC
Term Loan B
5.50%, due 12/31/10 5,413,609 5,494,813
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.9%)
Agco Corp.
Term Loan
4.82%-4.843%, due 3/31/08 $ 1,336,735 $ 1,353,444
New Flyer
Term Loan
4.37429%, due 2/27/10 380,952 385,238
Term Loan B
4.85%-5.38%, due 2/27/10 1,036,238 1,047,896
Terex Corp.
Term Loan B
4.89%, due 7/3/09 3,104,253 3,136,590
------------
5,923,168
------------
DISTILLERS & VINTNERS (0.4%)
Constellation Brands, Inc.
Term Loan B
4.5625%-5.1875%,
due 11/30/11 2,596,354 2,616,639
------------
DIVERSIFIED CHEMICALS (1.0%)
BCP Crystal US Holdings Corp.
Term Loan
5.625%, due 4/6/11 4,444,922 4,509,374
Brentag
Term Loan B
5.88%, due 2/27/12 2,000,000 2,024,584
------------
6,533,958
------------
DIVERSIFIED COMMERCIAL SERVICES (0.7%)
Coinstar, Inc.
Term Loan
5.13%, due 7/7/11 1,243,983 1,265,753
Pike Electric, Inc.
Term Loan
5.1875%, due 7/2/12 2,600,000 2,634,125
Tranche C Term Loan
5.1875%, due 12/10/12 986,667 999,000
------------
4,898,878
------------
DIVERSIFIED METALS & MINING (1.6%)
Foundation PA Coal Co.
Term Loan B
4.78%-5.38%, due 7/30/11 3,276,596 3,318,920
International Mills Service
Tranche C Term Loan
5.57%, due 12/31/10 1,995,000 2,014,950
</Table>
104 MainStay Floating Rate Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
DIVERSIFIED METALS & MINING (CONTINUED)
Murray Energy
1st Lien Term Loan
5.9375%, due 1/28/10 $ 2,000,000 $ 1,997,500
2nd Lien Term Loan
10.64%, due 1/28/11 500,000 521,250
Trout Coal Holdings LLC
1st Lien Term Loan
7.25%, due 3/23/11 2,000,000 2,000,626
2nd Lien Term Loan
9.75%, due 3/23/12 500,000 508,125
------------
10,361,371
------------
DRUG RETAIL (0.8%)
Jean Coutu Group, Inc. (The)
Term Loan B
5.375%-5.50%, due 7/30/11 4,979,987 5,052,352
------------
ELECTRIC UTILITIES (0.5%)
Allegheny Energy Supply Co. LLC
Term Advance
5.59%-5.88%, due 3/8/11 3,361,151 3,387,199
------------
ELECTRICAL COMPONENTS & EQUIPMENT (1.2%)
Exide Technologies, Inc.
U.S. Term Loan D
6.063%-6.50%, due 5/5/10 610,513 615,091
V PP Acquisition Corp.
Term Loan
5.35%, due 11/12/11 6,995,903 7,065,862
------------
7,680,953
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
ENVIRONMENTAL SERVICES (1.1%)
Allied Waste North America, Inc.
Tranche A Credit Linked Deposit
4.9925%, due 1/15/12 $ 1,351,351 $ 1,352,365
Term Loan
5.00%-5.37%, due 1/15/12 5,648,649 5,655,709
------------
7,008,074
------------
FERTILIZERS & AGRICULTURAL CHEMICALS (0.4%)
Mosaic Co. (The)
Term Loan B
4.375%-4.688%, due 2/21/12 2,500,000 2,522,918
------------
FOREST PRODUCTS (0.5%)
RLC Industries Co.
Term Loan B
4.5925%, due 2/24/10 3,097,485 3,105,228
------------
FOREST PRODUCTS & PAPER (0.2%)
Boise Cascade LLC
Tranche D Term Loan
4.74%, due 10/28/11 1,315,069 1,328,384
------------
HEALTH CARE DISTRIBUTORS (0.4%)
VWR International, Inc.
Term Loan B
5.65%, due 4/7/11 2,746,000 2,784,903
------------
HEALTH CARE EQUIPMENT (1.1%)
Medical Device Manufacturing, Inc.
Term Loan C
5.34%, due 6/30/10 2,977,500 3,003,553
Sunrise Medical Holdings, Inc.
Term Loan B1
6.25%, due 5/13/10 3,967,462 3,967,462
------------
6,971,015
------------
HEALTH CARE FACILITIES (3.4%)
Community Health Systems, Inc.
Term Loan
4.64%, due 8/19/11 4,979,987 5,028,752
HCA, Inc.
Term Loan
4.07%, due 11/9/09 3,000,000 2,984,064
Healthsouth Corp.
LC Facility
5.35%, due 3/21/10 637,500 640,289
Term Loan
5.52%, due 6/14/07 2,362,500 2,372,836
Lifepoint Hospitals, Inc.
Term B Loans
4.57875%-4.615%,
due 4/15/12 3,000,000 3,003,750
Select Medical Corp.
Tranche B Term Loan
4.63%, due 2/24/12 6,000,000 5,982,000
Vanguard Health Holdings Co.
Term Loan
6.34%, due 9/23/11 1,990,000 2,023,581
------------
22,035,272
------------
HEALTH CARE SERVICES (2.7%)
Alliance Imaging, Inc.
Term Loan C
5.125%-5.50%, due 12/29/11 4,934,295 4,992,890
AMR HoldCo, Inc./Emcare HoldCo., Inc.
Term Loan
5.27%-5.50%, due 2/10/12 5,000,000 5,056,250
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 105
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
HEALTH CARE SERVICES (CONTINUED)
Concentra Operating Corp.
Term Loan
5.10%-5.37%, due 6/30/10 $ 3,034,784 $ 3,073,984
Rural Metro Operating Co., LLC
LC Facility
5.37%, due 3/4/11 411,765 412,279
Term Loan
5.43%, due 3/4/11 1,588,235 1,590,221
US Oncology, Inc.
Term Loan B
5.51%-6.125%, due 8/20/11 2,396,699 2,435,645
------------
17,561,269
------------
HEALTH CARE SUPPLIES (0.2%)
Advanced Medical Optics, Inc.
Term Loan
4.84%-4.97%, due 6/25/09 1,547,981 1,569,265
------------
HOME FURNISHINGS (1.5%)
Berkline/Benchcraft LLC
1st Lien Term Loan
6.00%, due 11/3/11 3,209,375 3,209,375
2nd Lien Term Loan
11.02%, due 5/3/12 750,000 766,875
Sealy Mattress Co.
Term Loan C
4.73%-6.25%, due 4/6/12 2,491,071 2,497,299
Simmons Co.
Term Loan C
5.4375%-7.25%, due 12/19/11 1,426,245 1,445,261
Senior Unsecured Floater
7.00%, due 6/19/12 2,000,000 2,032,500
------------
9,951,310
------------
HOUSEHOLD PRODUCTS (2.9%)
Amscan Holdings, Inc.
Term Loan
5.62%-5.89%, due 4/30/12 5,575,955 5,589,895
Johnsondiversey Holdings, Inc.
Term Loan B
4.50%-4.61%, due 11/3/09 1,850,808 1,871,630
Rayovac Corp.
Term Loan
4.77%-5.13%, due 2/6/12 5,000,000 5,082,815
V Solo Cup Co.
Term Loan B
5.00%-5.093%, due 2/27/11 6,207,500 6,277,334
------------
18,821,674
------------
HOUSEWARES & SPECIALTIES (0.8%)
Jarden Corp.
Term Loan
5.05%-5.0925%, due 1/21/12 5,000,000 5,019,790
------------
INDUSTRIAL CONGLOMERATES (0.1%)
SPX Corp.
Tranche B-1
5.375%, due 9/30/09 580,631 582,372
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INDUSTRIAL MACHINERY (1.2%)
Flowserve Corp.
Tranche C Term Loan
5.6875%-5.875%, due 6/30/09 $ 727,866 $ 740,604
Gleason Corp.
1st Lien US Term Loan
5.79%-5.93%, due 7/27/11 987,323 998,430
2nd Lien Eurodollar Term Loan
8.097%, due 1/31/12 (d) 2,000,000 2,035,000
Mueller Industries, Inc.
Term Loan
5.64%-5.94%, due 4/25/11 3,884,425 3,918,413
------------
7,692,447
------------
INTERNET RETAIL (0.3%)
Ftd.com, Inc.
Term Loan
5.14%-7.00%, due 2/28/11 1,862,353 1,885,632
------------
INVESTMENT BANKING & BROKERAGE (1.1%)
V Refco Finance Holdings LLC
Term Loan B
5.02%, due 8/5/11 7,034,414 7,091,568
------------
LEISURE FACILITIES (0.4%)
24 Hour Fitness Worldwide, Inc.
Term Loan (Add On)
6.25%, due 7/1/09 2,470,782 2,504,755
Six Flags Theme Parks, Inc.
Term Loan B
5.38%, due 6/30/09 488,290 489,307
------------
2,994,062
------------
LEISURE PRODUCTS (0.4%)
Fender Musical Instruments Corp.
1st Lien Term Loan
7.00%, due 3/30/12 1,000,000 1,005,000
2nd Lien Term Loan
9.25%, due 9/30/12 1,500,000 1,485,000
------------
2,490,000
------------
</Table>
106 MainStay Floating Rate Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
METAL & GLASS CONTAINERS (2.7%)
Ball Corp.
Term B Dollar Loan
4.8144%, due 12/19/09 $ 2,074,242 $ 2,079,427
BWAY Corp.
Term Loan B
5.25%, due 6/30/11 3,552,744 3,600,113
Graham Packaging Co., LLC
Term Loan B
5.50%-5.6875%, due 10/7/11 5,486,250 5,552,869
2nd Lien Term Loan C
7.313%, due 4/7/12 1,000,000 1,022,750
Kerr Group, Inc.
Term Loan B
6.60%, due 8/13/10 846,068 855,058
Owens-Brockway Glass Container, Inc.
Term Loan B
5.73%, due 4/1/08 525,619 535,343
Owens-Illinois Group, Inc.
Term Loan A1
5.53%, due 4/1/07 973,465 988,067
Precise Technology, Inc.
1st Lien Term Loan B
6.125%, due 3/22/11 903,331 910,671
Silgan Corp.
Term Loan B
4.87%, due 11/30/08 2,037,970 2,063,445
------------
17,607,743
------------
MOVIES & ENTERTAINMENT (3.0%)
Loews Cineplex Entertainment Corp.
Term Loan B
5.00%-5.3725%, due 6/30/11 2,954,405 2,996,874
Metro-Goldwyn-Mayer Studios, Inc.
Term Loan A
5.38%, due 4/8/11 2,000,000 1,994,688
Term Loan
5.38%, due 4/8/12 6,000,000 6,001,878
Regal Cinemas, Inc.
Term Loan
4.8425%, due 11/10/10 3,904,812 3,957,109
WMG Acquisition Corp.
Term Loan
5.13%-5.65%, due 2/28/11 4,973,722 5,008,538
------------
19,959,087
------------
MULTI-UTILITIES & UNREGULATED POWER (5.5%)
AES Corp. (The)
Term Loan
5.25%-5.57%, due 4/30/08 2,000,000 2,016,000
Calpine Generating Co.
1st Lien Term Loan
6.61%, due 4/1/09 5,000,000 5,026,250
Cogentrix Energy, Inc.
Term Loan
4.71%, due 4/14/12 3,000,000 3,006,000
Kgen LLC
Tranche A Term Loan
5.635%, due 8/5/11 5,000,000 4,850,000
Midwest Generation LLC
Term Loan
4.85%-5.39%, due 4/27/11 2,311,050 2,342,106
NRG Energy, Inc.
Credit-Linked Deposit
4.8675%, due 12/24/11 2,844,982 2,872,721
Term Loan
4.9675%-5.255%, due 12/24/11 3,648,690 3,684,264
V Reliant Energy, Inc.
Term Loan
5.395%-6.0875%, due 4/30/10 6,982,500 6,978,136
Texas Genco LLC
Initial Term Loan
4.97%-5.0925%, due 12/14/11 3,529,615 3,551,675
Delayed Draw Term Loan
5.06%, due 12/14/11 1,461,538 1,470,673
------------
35,797,825
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
OFFICE SERVICES & SUPPLIES (2.1%)
American Reprographics Co., LLC
1st Lien Term Loan B
6.04%, due 6/18/09 $ 2,570,799 $ 2,577,226
V Fidelity National Information Services, Inc.
Term Loan B
4.66%, due 3/9/13 8,475,000 8,442,539
Language Line, Inc.
Term Loan B
7.35%-7.42%, due 6/10/11 2,304,816 2,328,586
Relizon Co.
Tranche B Term Loan
5.54%-5.85%, due 2/20/11 669,228 670,064
Incremental Tranche B-1 Term Loan
5.85%, due 2/20/11 73,054 73,145
------------
14,091,560
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 107
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
OIL & GAS DRILLING (0.2%)
Pride Offshore, Inc.
Term Loan B
4.64%, due 7/26/11 $ 1,118,333 $ 1,133,710
------------
OIL & GAS EQUIPMENT & SERVICES (0.8%)
Dresser Rand Group, Inc.
Term Loan B1
5.125%-5.4375%, due 10/29/11 1,138,923 1,154,583
Dresser, Inc.
1st Lien Term Loan C
5.60%, due 4/10/09 1,853,659 1,888,415
Universal Compression Holdings, Inc.
Term Loan
4.85%, due 2/15/12 2,000,000 2,026,250
------------
5,069,248
------------
OIL & GAS EXPLORATION & PRODUCTION (0.6%)
LB Pacific L.P.
Term Loan
5.8452%-6.13%, due 3/3/12 2,000,000 2,013,750
Quest Cherokee, LLC
Letter of Credit Facility
7.715%, due 12/31/08 222,222 223,333
Term Loan B
7.85%, due 7/22/10 1,768,889 1,777,733
------------
4,014,816
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
OIL & GAS REFINING & MARKETING & TRANSPORTATION (0.6%)
Lyondell-Citgo Refining L.P.
Term Loan B
4.5913%, due 5/21/07 $ 2,481,250 $ 2,512,266
Williams Production RMT Co.
Term Loan C
5.46%, due 5/30/08 1,385,413 1,404,463
------------
3,916,729
------------
PACKAGED FOODS & MEATS (3.6%)
American Seafoods Group LLC
Term Loan A
6.09%, due 9/30/07 1,257,674 1,259,247
Culligan International Co.
Term Loan
5.41%, due 9/30/10 1,978,097 2,002,823
Del Monte Corp.
Term Loan
4.69%, due 2/8/12 2,000,000 2,025,500
Dole Food Co., Inc.
Term Loan B
4.50%-6.25%, due 4/18/12 2,729,703 2,749,037
Michael Foods, Inc.
Term Loan B
4.8413%-5.098%, due 11/21/10 2,464,429 2,495,234
Nellson Nutraceutical, Inc.
1st Lien Term Loan
9.75%, due 10/4/09 912,220 784,509
OSI Group LLC
Dutch Term Loan
5.343%, due 9/2/11 1,105,556 1,117,993
German Term Loan
5.343%, due 9/2/11 884,444 894,394
U.S. Term Loan
5.343%, due 9/2/11 1,990,000 2,012,387
Pinnacle Foods Holding Corp.
Term Loan
6.04%-6.37%, due 11/25/10 4,972,443 5,022,168
Reddy Ice Group, Inc.
Supplemental Term Loan
5.5644%, due 8/15/09 738,750 741,520
Term Loan
5.5644%, due 8/15/09 2,206,251 2,221,418
------------
23,326,230
------------
PAPER PACKAGING (0.9%)
Graphic Packaging International Corp.
Term Loan C
5.29%-5.91%, due 8/8/10 2,751,403 2,787,859
Smurfit-Stone Container Enterprises, Inc.
Tranche B Loan
4.688%-4.938%, due 11/1/11 2,088,538 2,120,300
Tranche C Loan
4.875%-4.938%, due 11/1/11 642,627 652,400
Deposit Fund
5.093%, due 11/1/10 261,990 266,247
------------
5,826,806
------------
PAPER PRODUCTS (0.4%)
Appleton Papers, Inc.
Term Loan
4.79%-5.55%, due 6/11/10 2,977,500 3,003,553
------------
PERSONAL PRODUCTS (0.8%)
Aearo Co.
Term Loan
5.625%, due 4/7/11 2,970,000 3,003,413
Del Laboratories, Inc.
Term Loan
5.00%-5.55%, due 7/27/11 1,995,000 2,006,222
------------
5,009,635
------------
</Table>
108 MainStay Floating Rate Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
PHARMACEUTICALS (0.3%)
Warner Chilcott Corp.
Tranche B Acquisition
5.72%, due 1/18/12 $ 1,637,731 $ 1,650,014
Tranche C Acquisition
5.72%, due 1/18/12 659,926 664,875
------------
2,314,889
------------
PUBLISHING (2.9%)
Dex Media East LLC
Term Loan B
4.52%-5.05%, due 5/8/09 1,798,828 1,822,625
Dex Media West LLC
Term Loan B
4.62%-5.05%, due 3/9/10 3,078,101 3,117,541
Freedom Communications, Inc.
Term Loan B
4.59%-4.60%, due 5/18/12 4,000,000 4,000,000
Morris Publishing Group LLC
Term Loan A
4.625%, due 9/30/10 1,030,435 1,037,519
Term Loan C
4.875%, due 3/31/11 1,951,631 1,973,587
Network Communications, Inc.
Term Loan B
5.62%-6.14%, due 6/30/11 2,992,500 3,022,425
R.H. Donnelley Corp.
Tranche A-3 Term Loan
4.50%-4.85%, due 12/31/09 1,238,532 1,251,359
Tranche D
4.70%-4.88%, due 6/30/11 2,615,436 2,646,345
------------
18,871,401
------------
REAL ESTATE INVESTMENT TRUSTS (2.9%)
General Growth Properties
Term Loan A
5.10%, due 11/12/08 1,995,515 2,003,623
Tranche B Term Loan
5.11%, due 11/12/07 2,987,027 3,005,075
Macerich Co.
Term Loan
6.25%, due 4/25/10 3,500,000 3,495,625
Interim Term Loan
6.35%, due 4/25/06 4,500,000 4,494,375
V Maguire Properties, Inc.
Term Loan B
6.50%, due 3/15/10 6,000,000 6,030,000
------------
19,028,698
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REAL ESTATE MANAGEMENT & DEVELOPMENT (1.0%)
CB Richard Ellis Services, Inc.
Term Loan
4.69%-6.75%, due 3/31/10 $ 4,280,160 $ 4,296,210
LNR Property Group
Term Loan
5.81%, due 2/3/08 1,959,940 1,966,800
------------
6,263,010
------------
RESTAURANTS (0.8%)
Buffets, Inc.
Term Loan
6.2663%, due 6/28/09 2,272,981 2,284,346
CKE Restaurants, Inc.
Term Loan
5.4375%, due 5/1/10 844,231 852,674
Dominos Pizza, Inc.
Term Loan
4.875%, due 6/25/10 1,844,058 1,870,183
------------
5,007,203
------------
SOFT DRINKS (0.5%)
Dr. Pepper/Seven Up Bottling Co.
Term Loan B
5.08%-5.3388%, due 12/19/10 3,523,671 3,578,288
------------
SPECIALTY CHEMICALS (4.5%)
Gentek, Inc.
1st Lien Term Loan
5.66%-6.01%, due 2/28/11 3,000,000 2,982,189
2nd Lien Term Loan
8.8906%, due 2/28/12 1,500,000 1,463,438
Hercules, Inc.
Term Loan B
4.8425%-4.8731%, due 10/8/10 4,531,173 4,586,399
Innophos, Inc.
Tranche B Term Loan
5.22%-5.55%, due 8/13/10 1,990,952 2,005,884
Koch Cellulose
LC Facility Deposit
4.60%, due 5/7/11 593,660 602,936
Term Loan
5.09%, due 5/7/11 1,932,161 1,962,351
Kraton Polymers LLC
Term Loan
5.5625%-6.125%, due 12/23/10 1,102,804 1,119,346
Nalco Chemical Co.
Term Loan B
4.92%-5.05%, due 11/4/10 1,728,881 1,752,923
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 109
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
SPECIALTY CHEMICALS (CONTINUED)
Polymer Group, Inc.
1st Lien Term Loan
6.34%, due 4/27/10 $ 2,807,500 $ 2,856,631
PQ Corp.
Term Loan
5.125%, due 2/11/12 3,000,000 3,033,750
Resolution Specialty Materials LLC
Term Loan
5.6875%, due 8/2/10 1,990,000 2,004,925
Rockwood Specialties Group, Inc.
Tranche D Term Loan
5.43%, due 12/10/12 5,000,000 5,052,085
------------
29,422,857
------------
SPECIALTY STORES (1.0%)
Advanced Auto Stores, Inc.
Delayed Draw Term Loan
4.6875%-4.875%, due 9/30/10 556,154 563,106
Tranche B Term Loan
4.6875%-4.75%, due 9/30/10 941,487 953,255
Affinity Group, Inc.
Term Loan B1
5.97%-6.12%, due 6/17/09 1,658,129 1,676,091
Eye Care Centers of America, Inc.
Term Loan
6.06%-6.37%, due 3/1/12 3,500,000 3,545,938
------------
6,738,390
------------
SYSTEMS SOFTWARE (0.5%)
Telcordia Technologies, Inc.
Term Loan
5.8288%, due 9/15/12 3,500,000 3,474,846
------------
TEXTILES (1.0%)
V Spring Industries, Inc.
Term Loan
5.875%, due 12/7/10 6,234,375 6,351,270
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIRE & RUBBER (0.3%)
Goodyear Tire & Rubber Co.
2nd Lien Term Loan
5.89%, due 4/30/10 $ 1,750,000 $ 1,732,813
------------
TRUCKING (0.4%)
Performance Transportation Services
Tranche A Credit-Linked
7.2425%, due 1/31/10 586,957 584,022
Term Loan
7.3425%, due 1/31/12 910,761 906,207
Sirva Worldwide, Inc.
Tranche B Term Loan
5.37%-5.62%, due 12/1/10 1,000,000 981,250
------------
2,471,479
------------
WIRELESS TELECOMMUNICATION SERVICES (3.8%)
American Tower, Inc.
Term Loan A
4.52%, due 2/28/11 5,000,000 5,015,625
Centennial Cellular Operating Co. LLC
Term Loan
4.843%-5.63%, due 2/9/11 3,972,444 4,015,894
Nextel Partners Operating Corp.
Term Loan C
5.438%, due 5/31/11 3,000,000 3,039,999
PanAmSat Corp.
Term Loan B1
5.31%, due 8/22/11 2,977,410 3,014,913
Term Loan A1
5.45%, due 8/20/09 656,251 660,428
Term Loan A2
5.45%, due 8/20/09 305,955 307,902
Spectrasite Communications, Inc.
Term Loan B
4.52%, due 5/19/12 3,990,000 4,019,925
Western Wireless Corp.
Term Loan A
5.10%-5.32%, due 5/28/10 1,658,878 1,660,655
Term Loan B
5.87%-6.19%, due 5/31/11 2,977,500 2,988,666
------------
24,724,007
------------
Total Floating Rate Loans
(Cost $552,954,063) 553,657,149
------------
FOREIGN FLOATING RATE LOANS (5.6%)
- ------------------------------------------------------------------------------
ALUMINUM (0.2%)
Novelis, Inc.
Term Loan
4.50%, due 1/9/12 1,365,976 1,385,069
------------
</Table>
110 MainStay Floating Rate Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
BROADCASTING & CABLE TV (0.8%)
New Skies Satellites B.V.
Term Loan
5.50%-5.688%, due 5/2/11 $ 3,227,478 $ 3,237,564
UPC Broadband Holdings B.V.
Term Loan H-2
5.752%, due 9/30/12 2,000,000 1,998,572
------------
5,236,136
------------
CONSTRUCTION MATERIALS (0.6%)
St. Mary's Cement, Inc.
Term Loan B
5.0925%, due 12/4/09 3,979,874 4,014,698
------------
DIVERSIFIED CHEMICALS (0.5%)
Invista Canada Co.
Tranche B2 Term Loan
5.375%, due 4/29/11 1,021,794 1,040,314
Invista S.A.R.L.
Tranche B1 Term Loan
5.375%, due 4/29/11 2,355,088 2,397,774
------------
3,438,088
------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.1%)
Exide Technologies, Inc.
Euro Term Loan D
6.063%-6.50%, due 5/5/10 946,294 953,392
------------
ELECTRONIC EQUIPMENT MANUFACTURERS (0.8%)
Invensys International Holdings, Ltd.
Bonding Facility
5.951%, due 3/5/09 972,960 980,257
First Lien Term Loan
6.881%, due 9/5/09 1,250,000 1,267,188
Term Loan B
6.881%, due 9/5/09 2,941,998 2,982,451
------------
5,229,896
------------
GENERAL MERCHANDISE STORES (0.6%)
Dollarama Group L.P.
Term Loan B
5.02%, due 11/18/11 3,990,000 4,012,444
------------
PHARMACEUTICALS (0.1%)
Warner Chilcott Corp.
Tranche D Acquisition
5.72%, due 1/18/12 304,867 307,154
------------
TRADING COMPANIES & DISTRIBUTORS (0.8%)
Ashtead Group PLC
Term Loan B
5.0625%, due 11/12/09 5,000,000 5,064,585
------------
WIRELESS TELECOMMUNICATION SERVICES (1.1%)
V Intelsat Bermuda Ltd.
Term Loan
4.84325%, due 7/28/11 6,982,500 7,024,395
------------
Total Foreign Floating Rate Loans
(Cost $36,640,291) 36,665,857
------------
Total Long-Term Investments
(Cost $590,594,354) 591,325,506
------------
SHORT TERM INVESTMENT (10.2%)
- ------------------------------------------------------------------------------
FEDERAL AGENCY
Federal Home Loan Bank
2.65%, due 5/2/05 66,804,000 66,799,082
------------
Total Short-Term Investment
(Cost $66,799,082) 66,799,082
------------
Total Investments
(Cost $657,393,436) (e) 100.9% 658,124,588(f)
------------
Liabilities in Excess of
Cash and Other Assets (0.9) (5,796,782)
----- ------------
Net Assets 100.0% $652,327,806
====== ============
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) Floating Rate Loans generally pay interest at rates which are periodically
re-determined at a margin above the London Inter-Bank Offered Rate
("LIBOR") or other short-term rates. The rate show is the rate(s) in effect
at April 30, 2005. Floating Rate Loans are generally considered restrictive
in that the Fund is ordinarily contractually obligated to receive consent
from the Agent Bank and/or borrower prior to disposition of a Floating Rate
Loan (see Note 2(H)).
(c) This security has additional commitments and contingencies (see Note 6).
(d) Illiquid security.
(e) The cost stated also represents the aggregate cost for federal income tax
purposes.
(f) At April 30, 2005 net unrealized appreciation was $731,152, based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $2,271,522 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $1,540,370.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 111
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $657,393,436) $658,124,588
Cash 1,381,764
Receivables:
Fund shares sold 8,077,521
Investment securities sold 2,024,776
Interest 2,553,041
Other Assets 116,647
------------
Total assets 672,278,337
------------
LIABILITIES:
Payables:
Investment securities purchased 17,631,197
Fund shares redeemed 786,216
Manager 304,335
NYLIFE Distributors 113,062
Transfer agent 73,399
Accrued expenses 222,296
Dividend payable 820,026
------------
Total liabilities 19,950,531
------------
Net assets $652,327,806
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of .001 per share)
1 billion shares authorized:
Class A $ 45,056
Class B 5,554
Class C 14,185
Class I 312
Additional paid-in capital 652,684,029
Distribution in excess of net investment
income (374,155)
Net realized loss on investments (778,327)
Net unrealized appreciation on investments 731,152
------------
Net assets $652,327,806
============
CLASS A
Net assets applicable to outstanding shares $451,351,993
============
Shares of capital stock outstanding 45,056,012
============
Net asset value per share outstanding $ 10.02
============
Maximum sales charge (3.00% of offering price) 0.31
------------
Maximum offering price per share outstanding $ 10.33
============
CLASS B
Net assets applicable to outstanding shares $ 55,662,792
============
Shares of capital stock outstanding 5,553,523
============
Net asset value per share outstanding $ 10.02
============
CLASS C
Net assets applicable to outstanding shares $142,182,638
============
Shares of capital stock outstanding 14,184,941
============
Net asset value per share outstanding $ 10.02
============
CLASS I
Net assets applicable to outstanding shares $ 3,130,383
============
Shares of capital stock outstanding 312,327
============
Net asset value per share outstanding $ 10.02
============
</Table>
112 MainStay Floating Rate 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $11,476,452
-----------
Total Income 11,476,452
-----------
EXPENSES:
Manager 1,467,691
Service -- Class A 427,334
Service -- Class B 52,590
Service -- Class C 128,517
Distribution -- Class B 157,770
Distribution -- Class C 385,550
Transfer agent 140,832
Professional 107,248
Offering 81,794
Custodian 29,927
Directors 19,397
Portfolio pricing 19,298
Shareholder communication 18,288
Registration 3,510
Miscellaneous 56,319
-----------
Net expenses 3,096,065
-----------
Net investment income 8,380,387
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (549,319)
Net change in unrealized appreciation on
investments (460,039)
-----------
Net realized and unrealized loss on investments (1,009,358)
-----------
Net increase in net assets resulting from
operations $ 7,371,029
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 113
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 8,380,387 $ 2,982,232
Net realized loss on investments (549,319) (229,008)
Net change in unrealized
appreciation on investments (460,039) 1,191,191
---------------------------
Net increase in net assets
resulting from operations 7,371,029 3,944,415
---------------------------
Dividends to shareholders:
From net investment income:
Class A (6,233,181) (2,420,439)
Class B (612,434) (337,800)
Class C (1,486,525) (596,756)
Class I (48,237) (17,539)
---------------------------
Total dividends to shareholders (8,380,377) (3,372,534)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 245,710,530 269,458,103
Class B 25,042,837 42,644,547
Class C 72,937,912 89,961,938
Class I 847,607 2,283,052
Net asset value of shares issued to
shareholders in reinvestment of
dividends:
Class A 3,163,445 1,301,078
Class B 496,114 269,715
Class C 950,262 384,865
Class I 46,572 16,626
---------------------------
349,195,279 406,319,924
Cost of shares redeemed:+
Class A (51,809,006) (16,151,177)
Class B (8,019,917) (4,759,409)
Class C (17,279,262) (4,669,150)
Class I (57,689) (4,320)
---------------------------
(77,165,874) (25,584,056)
---------------------------
Increase in net assets derived
from capital share transactions 272,029,405 380,735,868
---------------------------
Net increase in net assets 271,020,057 381,307,749
NET ASSETS:
Beginning of year 381,307,749 --
---------------------------
End of year $652,327,806 $381,307,749
===========================
Distribution in excess of net
investment income at end of period $ (374,155) $ (374,165)
===========================
</Table>
+ Cost of shares redeemed net of redemption fee of $43,747 for the six months
ended April 30, 2005 and $47,683 for the year ended October 31, 2004,
respectively.
114 MainStay Floating Rate 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
<Table>
<Caption>
CLASS A CLASS B
--------------------------- ---------------------------
MAY 3, MAY 3,
SIX MONTHS 2004* SIX MONTHS 2004**
ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005** 2004 2005** 2004
Net asset value at beginning of period $ 10.03 $ 10.00 $ 10.03 $ 10.00
-------- -------- ------- -------
Net investment income 0.18 0.14(a) 0.14 0.10(a)
Net realized and unrealized gain (loss) on
investments (0.01) 0.04 (0.01) 0.04
-------- -------- ------- -------
Total from investment operations 0.17 0.18 0.13 0.14
-------- -------- ------- -------
Less dividends:
From net investment income (0.18) (0.15) (0.14) (0.11)
-------- -------- ------- -------
Redemption fee 0.00(b) 0.00(b) 0.00(b) 0.00(b)
-------- -------- ------- -------
Net asset value at end of period $ 10.02 $ 10.03 $ 10.02 $ 10.03
======== ======== ======= =======
Total investment return (c) 1.71%(d) 1.79%(d) 1.33%(d) 1.41%(d)
Ratios (to average net assets)/Supplemental Data:
Net investment income 3.65%+ 2.83%+ 2.90%+ 2.08%+
Net expenses 1.04%+ 1.07%+ 1.79%+ 1.82%+
Expenses (before reimbursement) 1.04%+ 1.07%+ 1.79%+ 1.82%+
Portfolio turnover rate 4% 3% 4% 3%
Net assets at end of period (in 000's) $451,352 $254,969 $55,663 $38,233
</Table>
<Table>
* Commencement of Operations.
** Unaudited.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Less than one cent per share.
(c) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(d) Total return is not annualized.
</Table>
116 MainStay Floating Rate 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
<Table>
<Caption>
CLASS C CLASS I
--------------------------- ---------------------------
MAY 3, MAY 3,
SIX MONTHS 2004* SIX MONTHS 2004*
ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005** 2004 2005** 2004
$ 10.03 $ 10.00 $10.03 $10.00
-------- ------- ------ ------
0.14 0.10(a) 0.19 0.15(a)
(0.01) 0.04 (0.01) 0.04
-------- ------- ------ ------
0.13 0.14 0.18 0.19
-------- ------- ------ ------
(0.14) (0.11) (0.19) (0.16)
-------- ------- ------ ------
0.00(b) 0.00(b) 0.00(b) 0.00(b)
-------- ------- ------ ------
$ 10.02 $ 10.03 $10.02 $10.03
======== ======= ====== ======
1.33%(d) 1.41%(d) 1.83%(d) 1.92%(d)
2.90%+ 2.08%+ 3.90%+ 3.08%+
1.79%+ 1.82%+ 0.79%+ 0.82%+
1.79%+ 1.82%+ 0.79%+ 0.82%+
4% 3% 4% 3%
$142,184 $85,807 $3,130 $2,298
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 117
MAINSTAY INDEXED BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -2.39% 1.40% 6.03% 5.93%
Excluding sales charges 0.63 4.54 6.68 6.25
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INDEXED BOND FUND CITIGROUP BIG BOND INDEX
-------------------------- ------------------------
4/30/95 9700 10000
10470 10855
11086 11637
12201 12914
12788 13728
12870 13889
14319 15608
15303 16832
16856 18591
17011 18941
4/30/05 17783 19961
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
0.78% 4.77% 6.93% 6.50%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY INDEXED BOND FUND CITIGROUP BIG BOND INDEX
-------------------------- ------------------------
4/30/95 10000 10000
10818 10855
11481 11637
12665 12914
13306 13728
13426 13889
14971 15608
16036 16832
17706 18591
17912 18941
4/30/05 18766 19961
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
Citigroup Broad Investment Grade (BIG) Bond
Index(1) 1.01% 5.39% 7.52% 7.16%
Average Lipper general U.S. government fund(2) 1.07 4.80 6.21 5.94
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 3% and an annual 12b-1
fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have
no annual 12b-1 fee, and are generally available to corporate and institutional
investors with a minimum initial investment of $5 million. Performance figures
reflect certain fee waivers and/or expense limitations, without which total
returns may have been lower. The fee waivers and/or expense limitations are
voluntary and may be discontinued at any time. From inception (1/2/91) through
12/31/03, performance for Class A shares (first offered 1/2/04) includes the
historical performance of Class I shares adjusted to reflect the applicable
sales charge and fees and expenses for Class A shares.
1. The Citigroup Broad Investment Grade (BIG) Bond Index--the BIG Index--is an
unmanaged index that is considered representative of the U.S.
investment-grade bond market. Results assume reinvestment of all income and
capital gains. The BIG Index is considered to be the Fund's broad-based
securities-market index for comparison purposes. An investment cannot be made
directly into an index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
118 MainStay Indexed Bond Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY INDEXED BOND FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,006.30 $3.98 $1,021.00 $4.01
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,007.85 $2.44 $1,022.55 $2.46
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.80% for Class A, and 0.49% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 181 (to reflect the
one-half year period).
www.mainstayfunds.com 119
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 73.5%
Short-Term Investments (collateral from securities lending is 25.6%) 40.5%
Corporate Bonds 20.1%
Foreign Corporate Bonds 3.2%
Yankee Bonds 1.3%
Asset-Backed Securities 0.8%
Liabilities in Excess of Cash and Other Assets (39.4)%
</Table>
See Portfolio of Investments on page 123 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Note 3.375%, due 2/15/08
2. Federal Home Loan Mortgage Corporation (Mortgage
Pass-Through Security) 5.50%, due 5/15/34 TBA
3. Federal National Mortgage Association (Mortgage
Pass-Through Security) 5.00%, due 5/15/34 TBA
4. United States Treasury Note 4.00%, due 2/15/14
5. United States Treasury Bond 5.375%, due 2/15/31
6. Federal National Mortgage Association (Mortgage
Pass-Through Security) 6.00%, due 5/15/34 TBA
7. Federal National Mortgage Association (Mortgage
Pass-Through Security) 5.50%, due 5/15/34 TBA
8. United States Treasury Note 3.125%, due 5/15/07
9. United States Treasury Note 2.625%, due 11/15/06
10. United States Treasury Note 2.375%, due 8/15/06
</Table>
120 MainStay Indexed Bond Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Paul Cunningham and Donald F. Serek of
New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its total assets in fixed-income
securities, including investment-grade corporate bonds, U.S. dollar-denominated
securities of foreign issuers, U.S. Treasury or agency issues, and other
securities. In implementing this strategy, we employ a specialized method to
track the performance of the Citigroup Broad Investment Grade Bond Index (the
BIG Index).(1) Typically, the Fund does not invest in all of the securities in
the BIG Index. Instead it invests in a representative selection of fixed-income
securities that, in the aggregate, are expected to mirror the performance of the
BIG Index.
WHAT WERE THE MAJOR FACTORS THAT AFFECTED THE INVESTMENT-GRADE BOND MARKET
DURING THE SIX-MONTH REPORTING PERIOD?
Bond prices fluctuated during the Fund's semiannual period in response to the
changing outlook for the U.S. economy and for inflation. As expected, when the
economy appeared to be strengthening or when inflation appeared to be
accelerating, interest rates rose and bond prices fell. (Interest rates and bond
prices tend to move in opposite directions.) On the other hand, when the
economic recovery appeared to be losing momentum or when inflation appeared to
be decelerating, interest rates declined and bond prices rose.
During the reporting period, the Federal Open Market Committee raised interest
rates 25 basis points on four separate occasions--in November and December 2004
and in February and March 2005. (A basis point is 1/100th of one percentage
point.) These four rate hikes brought the targeted federal funds rate from 1.75%
at the beginning of the reporting period to 2.75% at the end. The 10-year
Treasury note closed the reporting period at 4.20%, although it traded as low as
3.99% in February 2005 and as high as 4.64% in March 2005.
HOW DID YOU POSITION THE FUND DURING THE REPORTING PERIOD?
The Fund seeks to track the total-return performance of the BIG Index. Since the
Fund does not hold every security in the Index, the Fund's performance will vary
from that of the Index. Aside from activity to accommodate new investments and
share redemptions, most of the Fund's investment activity during the reporting
period was intended to reduce excess exposure of the Fund relative to the
benchmark.
HOW DID THE FUND PERFORM RELATIVE TO THE BIG INDEX?
The Fund's results and those of its benchmark are provided on page 118.
Excluding all sales charges, both share classes of the Fund underperformed the
BIG Index for the six months ended April 30, 2005, largely because of sector and
issue selection. Of course, the Fund incurs expenses that an unmanaged index
does not. As a result, there are times when the Fund's performance will lag the
Index.
HOW DID THE VARIOUS SECTORS OF THE BIG INDEX PERFORM?
For the six months ended April 30, 2005, mortgage-backed securities showed the
strongest performance, with a total return of 1.43%.(2) In the credit component
of the BIG Index, A-rated bonds(3) returned
Index funds generally seek to reflect the performance of an index or an
allocation among indices, unlike other funds, whose objectives may, in some
cases, involve seeking to outperform an index or other benchmark. Foreign
securities may be subject to greater risks than U.S. investments, including
currency fluctuations, less-liquid trading markets, greater price volatility,
political and economic instability, less publicly available information, and
changes in tax or currency laws or monetary policy. These risks are likely to be
greater in emerging markets than in developed markets. The Fund may invest in
derivatives, which may increase the volatility of the Fund's net asset value and
may result in a loss to the Fund. Funds that invest in bonds are subject to
credit, inflation, interest- rate, and maturities risk and can lose principal
value when interest rates rise. The Fund may experience a turnover rate of 100%,
which may generate short-term capital gains, which are taxable to the
shareholder.
1. See footnote on page 118 for more information on the Citigroup Broad
Investment Grade Bond Index.
2. Performance figures represent total-return performance for BIG Index
securities in the sectors mentioned. Since the Fund does not invest in all of
the securities in the Index, Fund results may differ.
3. Debt rated AA by Standard & Poor's is deemed by Standard & Poor's to differ
from the highest-rated issues only in small degree. In the opinion of
Standard & Poor's, the obligor's capacity to meet its financial commitment on
the obligation is very strong. Debt rated A by Standard & Poor's is deemed by
Standard & Poor's to be somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. In the opinion of Standard & Poor's, however, the obligor's
capacity to meet its financial commitment on the obligation is still strong.
Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit
adequate protection parameters. It is the opinion of Standard & Poor's,
however, that adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation than would be the case for debt in higher-rated
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.
www.mainstayfunds.com 121
1.29%, and AA-rated bonds returned 0.58%. At -0.10%, bonds rated BBB provided
the weakest performance.
WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE FUND?
As we approach the middle of 2005, we believe that the performance of the
investment-grade fixed-income market and the Fund may be affected by several
factors. Economic reports that indicate strength in the economy--such as an
improving job market or heightened inflation--will likely cause interest rates
to rise. Other concerns, such as geopolitical unrest, terrorism, and
issuer-specific uncertainties, could also have an impact on the bond market and
on 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.
122 MainStay Indexed Bond Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (98.9%)+
ASSET-BACKED SECURITIES (0.8%)
- -------------------------------------------------------------------------------
AIRLINES (0.1%)
Northwest Airlines, Inc. Series 2000-1 Class G
8.072%, due 10/1/19 $ 176,968 $ 194,816
------------
CREDIT CARDS (0.7%)
Bank One Issuance Trust Series 2002-A3 Class A3
3.59%, due 9/15/07 1,000,000 990,367
MBNA Credit Card Master Note Trust
Series 2002-A1 Class A1
4.95%, due 1/15/07 1,000,000 1,018,937
------------
2,009,304
------------
Total Asset-Backed Securities (Cost $2,205,392) 2,204,120
------------
CORPORATE BONDS (20.1%)
- -------------------------------------------------------------------------------
AEROSPACE (0.5%)
Boeing Co. (The)
6.125%, due 2/15/33 250,000 277,060
General Dynamics Corp.
4.25%, due 5/15/13 100,000 96,887
Goodrich Corp.
6.45%, due 12/15/07 46,000 48,366
Litton Industries, Inc.
8.00%, due 10/15/09 100,000 113,666
Lockheed Martin Corp.
7.65%, due 5/1/16 250,000 303,599
Northrop Grumman Corp.
7.125%, due 2/15/11 100,000 112,475
7.875%, due 3/1/26 100,000 128,209
Raytheon Co.
5.50%, due 11/15/12 100,000 104,825
6.40%, due 12/15/18 100,000 110,615
6.75%, due 8/15/07 88,000 92,527
------------
1,388,229
------------
AUTOMOTIVE MANUFACTURERS (1.5%)
DaimlerChrysler North America Holdings, Inc.
4.05%, due 6/4/08 250,000 240,825
6.40%, due 5/15/06 250,000 254,158
8.50%, due 1/18/31 250,000 285,504
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
AUTOMOTIVE MANUFACTURERS (CONTINUED)
Ford Motor Credit Co.
6.50%, due 1/25/07 $ 250,000 $ 249,975
6.875%, due 2/1/06 200,000 202,303
7.00%, due 10/1/13 (d) 350,000 314,991
7.25%, due 10/25/11 250,000 231,075
7.375%, due 2/1/11 500,000 468,298
7.875%, due 6/15/10 504,000 485,048
General Motors Acceptance Corp.
5.85%, due 1/14/09 100,000 91,578
6.125%, due 9/15/06 700,000 695,827
6.15%, due 4/5/07 100,000 98,076
6.875%, due 8/28/12 400,000 344,581
General Motors Corp.
7.125%, due 7/15/13 (d) 100,000 79,394
8.375%, due 7/15/33 (d) 500,000 380,590
Toyota Motor Credit Corp.
4.25%, due 3/15/10 100,000 99,570
------------
4,521,793
------------
BANKING (3.1%)
ABN-Amro Bank N.V.
7.55%, due 6/28/06 403,000 419,511
Bank of America Corp.
5.375%, due 6/15/14 250,000 260,469
5.875%, due 2/15/09 250,000 263,443
7.40%, due 1/15/11 500,000 568,808
Bank One Corp.
5.90%, due 11/15/11 250,000 266,485
6.875%, due 8/1/06 250,000 259,007
Bankers Trust Corp.
8.25%, due 5/1/05 250,000 250,000
Branch Banking & Trust Co.
Wilson North Carolina Series BKNT
4.875%, due 1/15/13 100,000 100,719
Capital One Bank
Series BNKT
4.25%, due 12/1/08 100,000 98,807
5.125%, due 2/15/14 100,000 99,219
Citigroup, Inc.
4.875%, due 5/7/15 250,000 248,863
5.00%, due 3/6/07 250,000 254,135
5.625%, due 8/27/12 100,000 105,370
5.875%, due 2/22/33 250,000 262,149
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. 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. www.mainstayfunds.com 123
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
BANKING (CONTINUED)
Fleet National Bank
5.75%, due 1/15/09 $ 250,000 $ 261,281
HSBC Bank USA
Series BNKT
3.875%, due 9/15/09 100,000 97,603
JPMorgan Chase & Co.
4.875%, due 3/15/14 250,000 248,122
6.75%, due 2/1/11 500,000 552,385
Key Bank National Association
5.00%, due 7/17/07 100,000 101,913
MBNA America Bank
5.375%, due 1/15/08 300,000 306,885
Mellon Funding Corp.
5.00%, due 12/1/14 250,000 253,149
National City Bank of Pennsylvania
6.25%, due 3/15/11 250,000 272,866
PNC Bank NA
Series BNKT
5.25%, due 1/15/17 75,000 75,972
PNC Funding Corp.
7.50%, due 11/1/09 100,000 111,862
SunTrust Banks, Inc.
5.05%, due 7/1/07 250,000 254,515
U.S. Bank National Association
6.375%, due 8/1/11 250,000 274,263
UFJ Bank Ltd.
7.40%, due 6/15/11 100,000 112,739
Union Bank of Switzerland-New York
7.25%, due 7/15/06 250,000 258,594
Wachovia Bank National Association
4.85%, due 7/30/07 500,000 510,329
4.875%, due 2/1/15 250,000 249,502
Wachovia Corp.
6.25%, due 8/4/08 250,000 264,864
Washington Mutual Financial Corp.
6.875%, due 5/15/11 100,000 111,749
Washington Mutual, Inc.
4.00%, due 1/15/09 100,000 98,203
4.20%, due 1/15/10 250,000 245,266
7.50%, due 8/15/06 250,000 260,222
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BANKING (CONTINUED)
Wells Fargo Bank NA
6.45%, due 2/1/11 $ 500,000 $ 546,859
------------
8,926,128
------------
BEVERAGE/BOTTLING (0.3%)
Anheuser-Busch Cos., Inc.
5.95%, due 1/15/33 250,000 274,598
Coca-Cola Enterprises, Inc.
8.50%, due 2/1/22 252,000 339,375
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (a) 250,000 261,467
------------
875,440
------------
BROADCAST/OUTDOOR (0.1%)
Clear Channel Communications, Inc.
5.50%, due 9/15/14 100,000 94,715
6.00%, due 11/1/06 200,000 203,276
7.65%, due 9/15/10 100,000 107,955
------------
405,946
------------
BUILDING PRODUCTS (0.1%)
American Standard, Inc.
7.375%, due 2/1/08 50,000 53,670
CRH America, Inc.
5.30%, due 10/15/13 100,000 101,699
Masco Corp.
6.75%, due 3/15/06 100,000 102,391
------------
257,760
------------
CABLE (1.1%)
AT&T Broadband Corp.
8.375%, due 3/15/13 250,000 303,503
Comcast Cable Communications, Inc.
6.375%, due 1/30/06 100,000 101,691
7.125%, due 6/15/13 250,000 284,648
Comcast Corp.
7.05%, due 3/15/33 100,000 116,866
Cox Communications, Inc.
7.75%, due 8/15/06-11/1/10 300,000 328,966
Liberty Media Corp.
8.25%, due 2/1/30 100,000 102,123
News America, Inc.
5.30%, due 12/15/14 200,000 200,335
7.25%, due 5/18/18 100,000 115,170
Time Warner, Inc.
5.625%, due 5/1/05 250,000 250,000
6.625%, due 5/15/29 250,000 271,795
6.75%, due 4/15/11 250,000 274,643
6.875%, due 5/1/12 125,000 139,208
7.625%, due 4/15/31 150,000 182,790
</Table>
124 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
CABLE (CONTINUED)
Viacom, Inc.
5.625%, due 8/15/12 $ 250,000 $ 251,737
Walt Disney Co. (The)
6.375%, due 3/1/12 250,000 272,659
6.75%, due 3/30/06 100,000 102,578
------------
3,298,712
------------
CHEMICALS (0.3%)
Dow Chemical Co. (The)
6.00%, due 10/1/12 100,000 108,304
E.I. du Pont de Nemours & Co.
4.75%, due 11/15/12 250,000 253,725
Eastman Chemical Co.
7.25%, due 1/15/24 100,000 117,545
ICI Wilmington, Inc.
4.375%, due 12/1/08 100,000 98,873
Praxair, Inc.
3.95%, due 6/1/13 100,000 95,118
Rohm & Haas Co.
7.85%, due 7/15/29 100,000 134,195
------------
807,760
------------
CONGLOMERATE/DIVERSIFIED MANUFACTURING (0.2%)
Emerson Electric Co.
7.125%, due 8/15/10 250,000 281,457
Honeywell International, Inc.
7.50%, due 3/1/10 100,000 113,104
United Technologies Corp.
6.35%, due 3/1/11 250,000 273,181
------------
667,742
------------
CONSUMER PRODUCTS (0.2%)
Procter & Gamble Co. (The)
6.875%, due 9/15/09 250,000 276,456
Unilever Capital Corp.
6.875%, due 11/1/05 285,000 289,648
------------
566,104
------------
DIVERSIFIED TELECOMMUNICATIONS (1.1%)
ALLTEL Corp.
4.656%, due 5/17/07 100,000 100,850
7.00%, due 7/1/12 250,000 284,052
BellSouth Corp.
5.20%, due 9/15/14 100,000 101,303
6.875%, due 10/15/31 250,000 287,642
CenturyTel, Inc.
Series H
8.375%, due 10/15/10 100,000 113,894
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED TELECOMMUNICATIONS (CONTINUED)
SBC Communications, Inc.
5.10%, due 9/15/14 $ 200,000 $ 200,090
5.875%, due 2/1/12 100,000 106,103
6.15%, due 9/15/34 250,000 259,400
Sprint Capital Corp.
8.375%, due 3/15/12 500,000 592,099
8.75%, due 3/15/32 100,000 134,468
Telecom Italia Capital
4.95%, due 9/30/14 150,000 146,111
6.375%, due 11/15/33 100,000 104,263
Verizon Global Funding Corp.
6.125%, due 6/15/07 250,000 259,788
7.75%, due 12/1/30 250,000 311,079
Verizon Pennsylvania
Series A
5.65%, due 11/15/11 250,000 259,194
------------
3,260,336
------------
ELECTRIC UTILITIES (1.3%)
American Electric Power Co., Inc.
5.375%, due 3/15/10 200,000 205,832
Arizona Public Service Co.
6.375%, due 10/15/11 100,000 109,203
CenterPoint Energy Houston Electric LLC
Series K2
6.95%, due 3/15/33 100,000 120,231
Consolidated Edison Co. of New York
Series 2002 A
5.625%, due 7/1/12 100,000 105,356
Constellation Energy Group, Inc.
6.125%, due 9/1/09 100,000 106,049
Consumers Energy Co.
Series B
5.375%, due 4/15/13 100,000 102,018
Dominion Resources, Inc.
5.00%, due 3/15/13 100,000 100,103
Series B
6.25%, due 6/30/12 150,000 162,059
DTE Energy Co.
7.05%, due 6/1/11 100,000 111,435
Duke Energy Corp.
6.45%, due 10/15/32 250,000 274,040
FirstEnergy Corp.
Series B
6.45%, due 11/15/11 200,000 214,799
FPL Group Capital, Inc.
7.375%, due 6/1/09 250,000 277,006
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 125
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
MidAmerican Energy Holdings Co.
5.875%, due 10/1/12 $ 100,000 $ 105,338
MidAmerican Funding LLC
6.75%, due 3/1/11 100,000 109,964
Northern States Power Co.
6.875%, due 8/1/09 100,000 109,238
Oncor Electric Delivery Co.
6.375%, due 5/1/12 100,000 108,748
7.00%, due 9/1/22 100,000 115,764
Pacific Electric & Gas Co.
6.05%, due 3/1/34 250,000 267,136
Pepco Holdings, Inc.
6.45%, due 8/15/12 100,000 108,096
Progress Energy, Inc.
6.85%, due 4/15/12 250,000 272,979
PSI Energy, Inc.
5.00%, due 9/15/13 100,000 100,995
Scana Corp.
6.25%, due 2/1/12 100,000 108,841
Sempra Energy
6.00%, due 2/1/13 100,000 105,996
Southern California Edison Co.
5.00%, due 1/15/14 100,000 101,238
6.00%, due 1/15/34 100,000 107,940
Southern Power Co.
Series B
6.25%, due 7/15/12 100,000 107,889
Union Electric Co.
4.65%, due 10/1/13 100,000 99,631
Wisconsin Energy Corp.
6.50%, due 4/1/11 100,000 109,209
------------
3,927,133
------------
ELECTRONICS (0.1%)
Motorola, Inc.
7.50%, due 5/15/25 100,000 116,842
------------
ENVIRONMENTAL SERVICES (0.1%)
Waste Management, Inc.
7.00%, due 10/15/06 100,000 103,899
7.125%, due 12/15/17 100,000 115,029
------------
218,928
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FINANCE -- OTHER (0.3%)
American Express Treasury
Series E
3.625%, due 2/20/09 $ 250,000 $ 243,910
National Rural Utilities Cooperative Finance Corp.
5.75%, due 8/28/09 250,000 262,173
SLM Corp.
5.625%, due 8/1/33 250,000 256,788
UFJ Finance Aruba AEC
6.75%, due 7/15/13 100,000 110,228
------------
873,099
------------
FOOD PROCESSORS (0.6%)
Archer-Daniels-Midland Co.
8.125%, due 6/1/12 250,000 303,919
Campbell Soup Co.
4.875%, due 10/1/13 100,000 101,200
ConAgra Foods, Inc.
6.00%, due 9/15/06 100,000 102,435
7.875%, due 9/15/10 100,000 115,305
General Mills, Inc.
5.125%, due 2/15/07 100,000 101,834
6.00%, due 2/15/12 65,000 69,939
H.J. Heinz Finance Co.
6.625%, due 7/15/11 250,000 277,825
Kellogg Co.
Series B
6.00%, due 4/1/06 100,000 102,002
6.60%, due 4/1/11 100,000 110,587
Kraft Foods, Inc.
6.25%, due 6/1/12 250,000 271,560
Sara Lee Corp.
6.25%, due 9/15/11 150,000 163,332
Tyson Foods, Inc.
7.25%, due 10/1/06 140,000 146,097
------------
1,866,035
------------
FOREIGN SOVEREIGN (0.1%)
Republic of Korea
8.875%, due 4/15/08 250,000 280,760
------------
GAMING (0.0%) (g)
Harrah's Operating Co., Inc.
8.00%, due 2/1/11 100,000 114,116
------------
GAS PIPELINES (0.2%)
Enterprise Products Partners L.P.
Series B
6.875%, due 3/1/33 100,000 107,628
</Table>
126 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
GAS PIPELINES (CONTINUED)
Kinder Morgan Energy Partners, L.P.
5.15%, due 3/1/15 $ 100,000 $ 99,387
6.75%, due 3/15/11 100,000 110,104
7.125%, due 3/15/12 150,000 169,405
TransCanada Pipelines Ltd.
4.00%, due 5/15/13 100,000 95,105
------------
581,629
------------
GAS UTILITIES -- LOCAL DISTRIBUTORS (0.2%)
KeySpan Corp.
4.65%, due 4/1/13 100,000 99,649
Michigan Consolidated Gas Co.
Series B
7.15%, due 5/30/06 375,000 387,441
NiSource Finance Corp.
6.15%, due 3/1/13 100,000 108,243
7.625%, due 11/15/05 100,000 102,042
------------
697,375
------------
HEALTH CARE FACILITIES (0.1%)
HCA, Inc.
6.75%, due 7/15/13 100,000 103,009
7.125%, due 6/1/06 100,000 102,616
------------
205,625
------------
HOME BUILDERS (0.1%)
Centex Corp.
7.50%, due 1/15/12 100,000 112,960
Pulte Homes, Inc.
7.875%, due 8/1/11 100,000 113,460
------------
226,420
------------
INDEPENDENT FINANCE (1.6%)
American General Finance Corp.
Series G
5.75%, due 3/15/07 250,000 256,523
CIT Group, Inc.
5.75%, due 9/25/07 250,000 258,360
7.75%, due 4/2/12 250,000 291,516
CitiFinancial Credit Co.
8.70%, due 6/15/10 227,000 269,921
General Electric Capital Corp.
5.00%, due 6/15/07 750,000 763,085
6.00%, due 6/15/12 1,000,000 1,075,035
6.75%, due 3/15/32 250,000 298,347
Series A
6.80%, due 11/1/05 250,000 254,075
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INDEPENDENT FINANCE (CONTINUED)
Household Finance Corp.
5.75%, due 1/30/07 $ 250,000 $ 256,807
6.375%, due 10/15/11 350,000 381,133
6.40%, due 6/17/08 250,000 264,641
International Lease Finance Corp.
Series O
4.375%, due 11/1/09 250,000 247,951
------------
4,617,394
------------
INFORMATION/DATA TECHNOLOGY (0.3%)
Computer Sciences Corp.
5.00%, due 2/15/13 100,000 99,916
Electronic Data Systems Corp.
Series B
6.50%, due 8/1/13 100,000 102,075
First Data Corp.
4.70%, due 8/1/13 100,000 99,619
Hewlett-Packard Co.
3.625%, due 3/15/08 250,000 246,714
International Business Machines Corp.
4.25%, due 9/15/09 150,000 149,579
6.50%, due 1/15/28 100,000 114,425
7.50%, due 6/15/13 100,000 117,962
------------
930,290
------------
INTEGRATED OIL (0.5%)
Amerada Hess Corp.
7.30%, due 8/15/31 100,000 114,306
Amoco Co.
6.50%, due 8/1/07 250,000 262,924
Conoco, Inc.
6.35%, due 4/15/09 150,000 161,097
ConocoPhillips
5.90%, due 10/15/32 250,000 270,796
Marathon Oil Corp.
6.80%, due 3/15/32 100,000 113,223
Pemex Project Funding Master Trust
7.375%, due 12/15/14 350,000 380,275
Texaco Capital, Inc.
9.75%, due 3/15/20 176,000 264,984
------------
1,567,605
------------
LIFE INSURANCE (0.3%)
Aetna, Inc.
7.875%, due 3/1/11 100,000 115,297
AIG Sunamer Global Financing VI
6.30%, due 5/10/11 (a) 250,000 270,540
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 127
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
LIFE INSURANCE (CONTINUED)
Assurant, Inc.
5.625%, due 2/15/14 $ 100,000 $ 103,599
MetLife, Inc.
6.125%, due 12/1/11 100,000 108,269
Prudential Financial, Inc.
5.10%, due 9/20/14 100,000 101,111
UnitedHealth Group, Inc.
5.00%, due 8/15/14 100,000 101,401
WellPoint, Inc.
5.95%, due 12/15/34 150,000 154,884
------------
955,101
------------
MACHINERY (0.2%)
Caterpillar, Inc.
8.00%, due 2/15/23 250,000 329,156
Deere (John) Capital Corp.
7.00%, due 3/15/12 250,000 284,694
------------
613,850
------------
METALS/MINING (0.2%)
Alcoa, Inc.
6.00%, due 1/15/12 250,000 269,170
BHP Finance USA Ltd.
4.80%, due 4/15/13 100,000 100,611
Phelps Dodge Corp.
8.75%, due 6/1/11 100,000 120,098
------------
489,879
------------
MORTGAGE BANKING (0.1%)
Countrywide Home Loans, Inc.
3.25%, due 5/21/08 250,000 241,415
5.625%, due 5/15/07 100,000 102,487
------------
343,902
------------
OIL REFINING & MARKETING (0.1%)
Valero Energy Corp.
7.50%, due 4/15/32 100,000 118,101
------------
OIL SERVICE (0.0%) (g)
Halliburton Co.
5.50%, due 10/15/10 100,000 104,080
------------
PAPER/FOREST PRODUCTS (0.2%)
International Paper Co.
5.25%, due 4/1/16 100,000 98,205
5.85%, due 10/30/12 100,000 103,514
MeadWestvaco Corp.
6.85%, due 4/1/12 100,000 110,343
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
PAPER/FOREST PRODUCTS (CONTINUED)
Weyerhaeuser Co.
6.75%, due 3/15/12 $ 200,000 $ 213,508
7.375%, due 3/15/32 100,000 108,760
------------
634,330
------------
PHARMACEUTICALS (0.5%)
Bristol-Myers Squibb Co.
5.75%, due 10/1/11 250,000 264,717
GlaxoSmithKline Capital, Inc.
4.375%, due 4/15/14 100,000 97,503
Lilly (Eli) & Co.
4.50%, due 3/15/18 100,000 95,359
Merck & Co., Inc.
4.75%, due 3/1/15 250,000 245,897
Pfizer, Inc.
4.65%, due 3/1/18 300,000 291,788
Schering-Plough Corp.
6.50%, due 12/1/33 100,000 115,991
Wyeth
5.50%, due 3/15/13 250,000 258,907
------------
1,370,162
------------
POWER (0.1%)
Exelon Corp.
6.75%, due 5/1/11 200,000 219,521
PSE&G Power LLC
7.75%, due 4/15/11 100,000 114,807
------------
334,328
------------
PROPERTY & CASUALTY INSURANCE (0.4%)
ACE Ltd.
6.00%, due 4/1/07 175,000 179,757
Allstate Corp. (The)
5.00%, due 8/15/14 100,000 101,295
7.20%, due 12/1/09 100,000 111,452
Aon Corp.
7.375%, due 12/14/12 100,000 113,206
Berkshire Hathaway, Inc.
4.85%, due 1/15/15 250,000 248,183
Chubb Corp. (The)
5.20%, due 4/1/13 100,000 102,348
Hartford Financial Services Group, Inc. (The)
7.90%, due 6/15/10 100,000 113,287
Marsh & McLennan Cos., Inc.
5.375%, due 7/15/14 100,000 97,480
SAFECO Corp.
4.20%, due 2/1/08 100,000 99,606
Travelers Property Casualty Corp.
5.00%, due 3/15/13 100,000 100,468
------------
1,267,082
------------
</Table>
128 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
PUBLISHING (0.0%) (G)
Belo Corp.
8.00%, due 11/1/08 $ 100,000 $ 109,428
------------
RAILROADS (0.4%)
Burlington Northern Santa Fe Corp.
6.75%, due 7/15/11 100,000 111,171
7.125%, due 12/15/10 100,000 112,354
CSX Corp.
6.30%, due 3/15/12 100,000 108,904
7.95%, due 5/1/27 100,000 128,752
Norfolk Southern Corp.
6.00%, due 4/30/08 100,000 104,511
7.80%, due 5/15/27 150,000 192,591
Union Pacific Corp.
5.75%, due 10/15/07 100,000 103,312
6.125%, due 1/15/12 100,000 107,378
6.65%, due 1/15/11 100,000 109,549
------------
1,078,522
------------
REAL ESTATE INVESTMENT TRUSTS (0.4%)
Avalonbay Communities, Inc.
4.95%, due 3/15/13 100,000 99,247
Boston Properties, Inc.
6.25%, due 1/15/13 100,000 107,443
Camden Property Trust
4.375%, due 1/15/10 100,000 97,917
EOP Operating LP
4.75%, due 3/15/14 100,000 96,014
7.75%, due 11/15/07 425,000 458,008
ERP Operating LP
6.95%, due 3/2/11 100,000 110,618
Simon Property Group, L.P.
5.375%, due 8/28/08 100,000 102,446
------------
1,071,693
------------
RESTAURANTS (0.1%)
Yum! Brands, Inc.
8.875%, due 4/15/11 100,000 120,759
------------
RETAIL STORES -- FOOD/DRUGS (0.2%)
Albertson's, Inc.
8.00%, due 5/1/31 100,000 116,592
Kroger Co. (The)
5.50%, due 2/1/13 250,000 255,271
Safeway, Inc.
5.80%, due 8/15/12 200,000 207,019
------------
578,882
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
RETAIL STORES -- OTHER (0.4%)
Federated Department Stores, Inc.
6.625%, due 9/1/08 $ 100,000 $ 106,172
Lowe's Cos., Inc.
6.875%, due 2/15/28 100,000 120,200
May Department
Stores Co. (The)
6.70%, due 9/15/28 100,000 107,100
Target Corp.
5.875%, due 3/1/12 150,000 160,808
7.00%, due 7/15/31 100,000 124,545
Wal-Mart Stores, Inc.
6.875%, due 8/10/09 250,000 274,355
7.55%, due 2/15/30 100,000 131,365
------------
1,024,545
------------
SECONDARY OIL & GAS PRODUCERS (0.2%)
Burlington Resources, Inc.
7.375%, due 3/1/29 104,000 126,384
Devon Financing Corp. ULC
6.875%, due 9/30/11 200,000 222,115
Kerr-McGee Corp.
6.625%, due 10/15/07 100,000 101,414
Occidental Petroleum Corp.
7.20%, due 4/1/28 100,000 122,133
Union Oil Co. of California
7.35%, due 6/15/09 100,000 111,221
------------
683,267
------------
SECURITIES (1.8%)
Bear Stearns Cos., Inc. (The)
5.70%, due 11/15/14 250,000 261,834
Credit Suisse FirstBoston USA, Inc.
3.875%, due 1/15/09 125,000 122,592
4.875%, due 1/15/15 250,000 247,540
5.125%, due 1/15/14 100,000 101,712
6.50%, due 1/15/12 250,000 275,621
Goldman Sachs
Group, Inc. (The)
4.75%, due 7/15/13 250,000 245,648
5.15%, due 1/15/14 625,000 629,057
5.70%, due 9/1/12 250,000 262,099
Lehman Brothers Holdings, Inc.
Series G
4.80%, due 3/13/14 200,000 197,813
6.625%, due 2/5/06 250,000 255,224
7.00%, due 2/1/08 250,000 268,028
Merrill Lynch & Co., Inc.
Series B (MTN)
5.30%, due 9/30/15 250,000 255,726
6.00%, due 2/17/09 250,000 263,543
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 129
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
SECURITIES (CONTINUED)
Morgan Stanley
3.625%, due 4/1/08 $ 250,000 $ 244,953
4.00%, due 1/15/10 350,000 340,889
6.10%, due 4/15/06 250,000 255,069
6.60%, due 4/1/12 175,000 191,642
6.75%, due 10/15/13 175,000 195,923
Salomon, Smith Barney Holdings, Inc.
6.875%, due 6/15/05 504,000 506,179
------------
5,121,092
------------
SERVICE -- OTHER (0.2%)
Bunge Limited Finance Corp.
5.35%, due 4/15/14 (a) 100,000 102,149
Cendant Corp.
6.25%, due 1/15/08 200,000 208,463
IAC/InterActive Corp.
7.00%, due 1/15/13 100,000 106,170
Science Applications International Corp.
6.25%, due 7/1/12 100,000 107,762
------------
524,544
------------
SUPRANATIONAL (0.1%)
International Bank of Reconstruction & Development
Series C
(zero coupon), due 3/11/31 504,000 130,640
------------
TEXTILES/APPAREL/SHOES (0.0%) (g)
Jones Apparel Group, Inc.
5.125%, due 11/15/14 50,000 47,837
------------
TOBACCO (0.0%) (g)
Altria Group, Inc.
7.65%, due 7/1/08 100,000 109,348
------------
VEHICLE PARTS (0.0%) (g)
Delphi Corp.
6.50%, due 5/1/09 100,000 79,000
------------
WIRELESS (0.2%)
AT&T Wireless Services, Inc.
7.35%, due 3/1/06 150,000 154,338
8.125%, due 5/1/12 100,000 118,229
8.75%, due 3/1/31 100,000 136,375
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
WIRELESS (CONTINUED)
Cingular Wireless LLC
6.50%, due 12/15/11 $ 100,000 $ 109,012
------------
517,954
------------
Total Corporate Bonds
(Cost $57,733,702) 58,627,527
------------
FOREIGN CORPORATE BONDS (3.2%)
- -------------------------------------------------------------------------------
BANKING (0.3%)
Bank of Tokyo-Mitsubishi, Ltd.
8.40%, due 4/15/10 100,000 116,179
HSBC Holding PLC
7.50%, due 7/15/09 250,000 278,919
Landwirtschaftliche Rentenbank
Series E
3.25%, due 6/16/08 250,000 243,992
Royal Bank of Scotland Group PLC
5.00%, due 11/12/13 100,000 101,755
------------
740,845
------------
BEVERAGE/BOTTLING (0.1%)
Diageo Capital PLC
3.375%, due 3/20/08 250,000 244,836
------------
BUILDING PRODUCTS (0.0%) (G)
Hanson Australia Funding
5.25%, due 3/15/13 100,000 100,293
------------
DIVERSIFIED TELECOMMUNICATIONS (0.5%)
British Telecommunications PLC
8.375%, due 12/15/10 100,000 117,317
8.875%, due 12/15/30 100,000 136,554
Deutsche Telekom International Finance BV
5.25%, due 7/22/13 100,000 102,113
8.50%, due 6/15/10 350,000 405,913
France Telecom S.A.
9.25%, due 3/1/31 250,000 338,458
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10 100,000 115,201
Telefonica Europe B.V.
7.35%, due 9/15/05 150,000 152,064
8.25%, due 9/15/30 100,000 135,329
Telefonos de Mexico, S.A. de C.V.
4.50%, due 11/19/08 100,000 98,489
------------
1,601,438
------------
</Table>
130 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN CORPORATE BONDS (CONTINUED)
- -------------------------------------------------------------------------------
FOREIGN AGENCY (0.3%)
Korea Development Bank
4.25%, due 11/13/07 $ 100,000 $ 99,814
Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08 550,000 543,105
World Savings Bank
4.125%, due 12/15/09 100,000 98,818
------------
741,737
------------
FOREIGN SOVEREIGN (1.3%)
Canadian Government
5.25%, due 11/5/08 500,000 521,468
Malaysian Government
7.50%, due 7/15/11 100,000 114,743
Republic of Chile
5.50%, due 1/15/13 100,000 103,980
Republic of Finland
4.75%, due 3/6/07 250,000 253,826
Republic of Italy
Series DTC
4.375%, due 10/25/06 250,000 252,219
5.625%, due 6/15/12 750,000 809,216
Republic of Poland
5.25%, due 1/15/14 100,000 103,350
Republic of South Africa
7.375%, due 4/25/12 100,000 112,250
United Mexican States
Series A
5.875%, due 1/15/14 500,000 505,000
6.375%, due 1/16/13 550,000 573,650
7.50%, due 1/14/12 250,000 277,500
Series A
8.50%, due 2/1/06 250,000 259,500
------------
3,886,702
------------
LIFE INSURANCE (0.1%)
Axa
8.60%, due 12/15/30 105,000 140,155
------------
OIL EQUIPMENT (0.1%)
Transocean, Inc.
7.375%, due 4/15/18 100,000 120,212
------------
PAPER/FOREST PRODUCTS (0.0%) (g)
Stora Enso Oyj
7.375%, due 5/15/11 100,000 112,492
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REGIONAL GOVERNMENT (0.4%)
Hydro-Quebec
Series JL
6.30%, due 5/11/11 $ 250,000 $ 273,138
Province of British Columbia
5.375%, due 10/29/08 250,000 261,114
Province of Ontario
6.00%, due 2/21/06 511,000 520,265
------------
1,054,517
------------
SECONDARY OIL & GAS PRODUCERS (0.0%) (g)
Anadarko Finance Co.
Series B
6.75%, due 5/1/11 100,000 111,202
------------
SERVICE -- OTHER (0.0%) (g)
Thomson Corp. (The)
6.20%, due 1/5/12 100,000 108,418
------------
WIRELESS (0.1%)
Vodafone Group PLC
7.75%, due 2/15/10 250,000 284,620
------------
Total Foreign Corporate Bonds
(Cost $9,116,071) 9,247,467
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (73.5%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (1.5%)
Series 430
2.875%, due 9/15/06 1,000,000 988,678
3.375%, due 9/14/07 (d) 1,500,000 1,483,142
4.25%, due 5/15/09 (d) 2,000,000 2,005,536
------------
4,477,356
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (5.0%)
2.75%, due 8/15/06 1,000,000 987,618
2.875%, due 12/15/06 (c) 3,000,000 2,955,186
4.00%, due 12/15/09 (d) 3,250,000 3,230,302
4.50%, due 7/15/13 (d) 1,000,000 1,001,514
5.00%, due 7/15/14 1,000,000 1,033,423
5.25%, due 1/15/06 2,000,000 2,024,136
5.50%, due 9/15/11 1,000,000 1,061,591
6.25%, due 7/15/32 2,000,000 2,382,790
------------
14,676,560
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (12.0%)
4.00%, due 1/1/20-4/1/20 3,500,000 3,398,359
4.50%, due 11/1/18-6/1/34 1,500,483 1,463,384
4.50%, due 5/15/19
TBA (b) 2,500,000 2,473,438
5.00%, due 5/1/18-11/1/33 5,467,880 5,475,847
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 131
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
5.00%, due 11/13/33
TBA (b) $ 3,500,000 $ 3,482,188
5.50%, due 3/1/17-11/1/33 1,146,680 1,173,818
V 5.50%, due 5/15/34
TBA (b) 10,500,000 10,614,849
6.00%, due 12/1/13-4/1/33 4,116,655 4,283,480
6.50%, due 4/1/11-7/1/32 1,704,020 1,774,696
7.00%, due 6/1/11-3/1/32 527,130 556,833
7.50%, due 9/1/11-2/1/32 196,998 210,951
8.00%, due 7/1/26 14,482 15,815
------------
34,923,658
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (2.4%)
3.25%, due 11/15/07-8/15/08 3,000,000 2,932,116
4.625%, due 10/15/13 2,000,000 2,013,490
5.00%, due 1/15/07 1,500,000 1,528,157
6.21%, due 8/6/38 475,000 570,312
------------
7,044,075
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (16.3%)
4.50%, due 4/1/18-7/1/34 6,388,672 6,310,113
5.00%, due 10/1/17-5/1/34 2,480,039 2,501,483
5.00%, due 5/15/19
TBA (b) 2,000,000 2,013,750
V 5.00%, due 5/15/34
TBA (b) 9,500,000 9,405,000
5.50%, due 6/1/16-9/1/34 9,327,158 9,449,237
V 5.50%, due 5/15/34
TBA (b) 5,000,000 5,046,875
6.00%, due 6/1/16-5/1/33 1,895,548 1,953,902
V 6.00%, due 5/15/34
TBA (b) 5,000,000 5,132,810
6.50%, due 3/1/11-9/1/32 3,871,126 4,031,777
7.00%, due 5/1/11-5/1/32 1,180,496 1,245,778
7.50%, due 3/1/30-8/1/31 144,433 154,759
8.00%, due 7/1/07-1/1/28 128,137 138,998
9.50%, due 3/1/16-9/1/19 99,397 105,586
------------
47,490,068
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.7%)
5.00%, due 7/15/33-8/15/33 1,164,527 1,164,434
5.00%, due 5/20/35
TBA (b) 1,000,000 997,812
5.50%, due 3/15/33-6/15/34 2,492,349 2,538,330
5.50%, due 5/20/35
TBA (b) 1,000,000 1,031,719
6.00%, due 1/15/32 1,867,093 1,927,698
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 5/15/35
TBA (b) $ 500,000 $ 515,469
6.50%, due 2/15/29-10/15/32 958,759 1,004,368
6.50%, due 5/20/35
TBA (b) 500,000 523,281
7.00%, due 3/15/07-8/15/32 570,529 603,354
7.50%, due 8/15/08-3/15/32 272,310 291,511
8.00%, due 6/15/26-11/15/30 117,843 127,762
8.50%, due 7/15/26-11/15/26 12,745 13,916
------------
10,739,654
------------
UNITED STATES TREASURY BONDS (5.2%)
V 5.375%, due 2/15/31 (d) 4,800,000 5,421,374
6.00%, due 2/15/26 (d) 2,500,000 2,958,105
6.25%, due
8/15/23-5/15/30 (d) 2,807,000 3,321,276
7.50%, due 11/15/16 403,000 517,666
8.50%, due 2/15/20 201,000 287,140
8.75%, due 5/15/17-8/15/20 756,000 1,092,873
8.875%, due 2/15/19 302,000 438,348
9.875%, due 11/15/15 302,000 444,577
10.375%, due 11/15/12 252,000 292,162
11.25%, due 2/15/15 201,000 313,615
12.75%, due 11/15/10 201,000 211,011
------------
15,298,147
------------
UNITED STATES TREASURY NOTES (27.4%)
V 2.375%, due 8/15/06 (d) 5,000,000 4,929,490
V 2.625%, due 11/15/06 5,000,000 4,930,470
2.75%, due 6/30/06-8/15/07 1,000,000 991,992
3.00%, due 12/31/06 (d) 2,225,000 2,203,533
3.125%, due 1/31/07-9/15/08 5,800,000 5,708,493
V 3.125%, due 5/15/07 (d) 5,000,000 4,948,440
V 3.375%, due 2/15/08 (d) 25,920,000 25,691,178
3.375%, due 9/15/09-10/15/09 2,500,000 2,450,781
3.625%, due 1/15/10 500,000 494,414
3.75%, due 3/31/07 (d) 4,200,000 4,207,711
3.875%, due 5/15/09 (d) 2,500,000 2,504,005
4.00%, due 3/15/10-2/15/15 (d) 8,950,000 8,940,008
V 4.00%, due 2/15/14 (d) 6,650,000 6,572,328
4.25%, due 11/15/14 1,900,000 1,906,234
4.75%, due 5/15/14 (d) 2,600,000 2,710,297
6.125%, due 8/15/07 705,000 742,894
------------
79,932,268
------------
Total U.S. Government & Federal Agencies
(Cost $212,857,312) 214,581,786(f)
------------
</Table>
132 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
YANKEE BONDS (1.3%) (h)
- -------------------------------------------------------------------------------
BANKING (0.3%)
Abbey National PLC
7.95%, due 10/26/29 $ 100,000 $ 132,426
Australia & New Zealand Banking Group Ltd.
7.55%, due 9/15/06 353,000 369,270
HSBC Bank PLC
6.95%, due 3/15/11 200,000 227,809
Santander Financial Issuances
6.375%, due 2/15/11 100,000 108,986
------------
838,491
------------
CONGLOMERATE/DIVERSIFIED MANUFACTURING (0.1%)
Tyco International Group Ltd. SA
6.375%, due 10/15/11 250,000 270,918
------------
DIVERSIFIED TELECOMMUNICATIONS (0.1%)
TELUS Corp.
7.50%, due 6/1/07 100,000 106,185
8.00%, due 6/1/11 100,000 115,500
------------
221,685
------------
ELECTRIC UTILITIES (0.0%) (g)
United Utilities PLC
5.375%, due 2/1/19 100,000 99,243
------------
GAS PIPELINES (0.0%) (g)
TransCanada Pipelines Ltd.
4.00%, due 6/15/13 100,000 95,705
------------
INTEGRATED OIL (0.1%)
Norsk Hydro ASA
7.25%, due 9/23/27 250,000 307,435
Petro-Canada
4.00%, due 7/15/13 100,000 93,637
------------
401,072
------------
METALS/MINING (0.1%)
Alcan, Inc.
6.45%, due 3/15/11 100,000 110,142
Inco Ltd.
5.70%, due 10/15/15 100,000 103,174
------------
213,316
------------
RAILROADS (0.0%) (g)
Canadian National Railway Co.
6.375%, due 10/15/11 100,000 109,698
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REGIONAL GOVERNMENT (0.2%)
Province of Manitoba
5.50%, due 10/1/08 $ 250,000 $ 260,243
Province of Quebec
Series NJ
7.50%, due 7/15/23 302,000 388,131
------------
648,374
------------
SECONDARY OIL & GAS PRODUCERS (0.1%)
Canadian National Resources Ltd.
5.45%, due 10/1/12 100,000 103,547
EnCana Corp.
4.75%, due 10/15/13 100,000 98,610
6.30%, due 11/1/11 100,000 108,903
------------
311,060
------------
SUPRANATIONAL (0.3%)
Inter-American Development Bank
6.80%, due 10/15/25 604,000 736,528
------------
Total Yankee Bonds
(Cost $3,675,211) 3,946,090
------------
Total Long-Term Bonds
(Cost $285,587,688) 288,606,990
------------
SHORT-TERM INVESTMENTS (40.5%)
- -------------------------------------------------------------------------------
COMMERCIAL PAPER (12.9%) (c)
Becton, Dickinson & Co.
2.82%, due 5/17/05 3,000,000 2,996,228
E.I. du Pont de Nemours & Co.
2.74%, due 5/4/05 5,000,000 4,998,858
Florida Power & Light Co.
2.92%, due 5/19/05 3,240,000 3,235,268
Illinois Tool Works, Inc.
2.80%, due 5/10/05 5,000,000 4,996,485
International Business Machines Corp.
2.83%, due 5/12/05 5,000,000 4,995,674
Minnesota Mining and Manufacturing Co.
2.73%, due 5/19/05 3,065,000 3,060,800
UBS Finance (Delaware) LLC
2.93%, due 5/2/05 4,715,000 4,714,616
Wells Fargo & Co.
2.87%, due 5/23/05 5,785,000 5,774,845
Wisconsin Public Service Co.
2.82%, due 5/6/05 3,000,000 2,998,825
------------
Total Commercial Paper
(Cost $37,771,599) 37,771,599
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 133
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
FEDERAL AGENCIES (2.0%) (C)
Federal Farm Credit Bank
2.69%, due 5/5/05 $ 5,405,000 $ 5,403,383
United States Treasury Bill
2.91%, due 9/1/05 300,000 297,008
------------
Total Federal Agencies
(Cost $5,700,391) 5,700,391
------------
SHARES
INVESTMENT COMPANY (0.3%)
AIM Institutional Funds Group
2.88%, due 5/2/05 (e) 853,994 853,994
------------
Total Investment Company
(Cost $853,994) 853,994
------------
PRINCIPAL
AMOUNT
MASTER NOTE (3.5%)
Bank of America LLC
3.08%, due 5/2/05 (e) $ 10,250,000 10,250,000
------------
Total Master Note
(Cost $10,250,000) 10,250,000
------------
REPURCHASE AGREEMENTS (21.8%)
Credit Suisse First Boston Corp.
3.05%, dated 4/29/05
due 5/2/05
Proceeds at Maturity
$11,602,948 (e)
(Collateralized by Various Bonds with a
Principal Amount of $12,222,074 and a Market
Value of $11,873,414) 11,600,000 11,600,000
Deutsche Bank Securities, Inc.
3.06%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $6,001,530 (e)
(Collateralized by Various Bonds with a
Principal Amount of $6,031,095 and a Market
Value of $6,120,000) 6,000,000 6,000,000
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REPURCHASE AGREEMENTS (CONTINUED)
Dresdner Kleinwort Wasserstein Securities, LLC.
3.07%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $10,002,558 (e)
(Collateralized by Various Bonds with a
Principal Amount of $10,520,336 and a Market
Value of $10,489,591) $ 10,000,000 $ 10,000,000
Merrill Lynch Pierce Fenner & Smith, Inc.
3.08%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $12,003,080 (e)
(Collateralized by Various Bonds with a
Principal Amount of $12,145,788 and a Market
Value of $12,587,507) 12,000,000 12,000,000
Morgan Stanley & Co., Inc.
3.05%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $13,203,355 (e)
(Collateralized by Various Bonds with a
Principal Amount of $14,217,400 and a Market
Value of $13,634,828) 13,200,000 13,200,000
Wachovia Capital Markets LLC
3.07% dated 4/29/05
due 5/2/05
Proceeds at Maturity $11,002,796 (e)
(Collateralized by Various Bonds with a
Principal Amount of $25,882,886 and a Market
Value of $11,336,974) 11,000,000 11,000,000
------------
Total Repurchase Agreements
(Cost $63,800,000) 63,800,000
------------
Total Short-Term Investments
(Cost $118,375,984) 118,375,984
------------
Total Investments
(Cost $403,963,672) (i) 139.4% 406,982,974(j)
Liabilities in Excess of Cash and Other Assets (39.4) (114,986,007)
------------ ------------
Net Assets 100.0% $291,996,967
============ ============
</Table>
134 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
CONTRACTS UNREALIZED
LONG APPRECIATION (k)
FUTURES CONTRACTS (0.0%) (g)
- --------------------------------------------------------------------------------
United States Treasury Note
June 2005 (5 Year) 23 $ 10,223
----------------
Total Futures Contracts
(Settlement Value $2,484,199) (f) $ 10,223
================
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment basis
with an approximate principal amount and maturity date.
The actual principal amount and maturity date will be
determined upon settlement. The market value of these
securities at April 30, 2005 is $40,721,722.
(c) Segregated, partially segregated or designated as
collateral for futures contracts and TBAs.
(d) Represents securities out on loan or a portion which is
out on loan.
(e) Represents a security or a portion thereof, purchased
with cash collateral received for securities on loan.
(f) The combined market value of U.S. Government and Federal
Agencies investments and settlement value of U.S.
Treasury Note futures contracts represents 76.3% of net
assets.
(g) Less than one tenth of a percent.
(h) Yankee bond -- dollar-denominated bond issued in the
United States by foreign banks and corporations.
(i) The cost for federal income tax purposes is
$404,066,098.
(j) At April 30, 2005 net unrealized appreciation was
$2,916,876, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $4,898,160 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $1,981,284.
(k) Represents the difference between the value of the
contracts at the time they were opened and the value at
April 30, 2005.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 135
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $403,963,672) including
$74,903,994 market value of securities
loaned $406,982,974
Cash 2,408
Cash at lending agent 62
Receivables:
Investment securities sold 989,887
Interest 2,527,665
Fund shares sold 300,556
Other assets 31,833
------------
Total assets 410,835,385
------------
LIABILITIES:
Securities lending collateral 74,904,056
Payables:
Investment securities purchased 43,431,199
Fund shares redeemed 272,327
Manager 82,397
Transfer agent 20,066
Variation margin on futures contracts 17,628
NYLIFE Distributors 11,923
Custodian 7,760
Accrued expenses 87,360
Dividends payable 3,702
------------
Total liabilities 118,838,418
------------
Net assets $291,996,967
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 5,371
Class I 21,421
Additional paid-in capital 292,818,848
Accumulated distribution in excess of net
investment income (42)
Accumulated net realized loss on investments
and futures contracts (3,878,156)
Net unrealized appreciation on investments and
futures contracts 3,029,525
------------
Net assets $291,996,967
============
CLASS A
Net assets applicable to outstanding shares $ 58,517,373
============
Shares of capital stock outstanding 5,370,945
============
Net asset value per share outstanding $ 10.90
Maximum sales charge (3.00% of offering price) 0.33
------------
Maximum offering price per share outstanding $ 11.23
============
CLASS I
Net assets applicable to outstanding shares $233,479,594
============
Shares of beneficial interest outstanding 21,420,806
============
Net asset value and offering price per share
outstanding $ 10.90
============
</Table>
136 MainStay Indexed 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 5,568,642
Income from securities loaned -- net 62,868
-----------
Total income 5,631,510
-----------
EXPENSES:
Manager 678,765
Service -- Class A 66,041
Professional 45,392
Portfolio pricing 38,051
Transfer agent -- Class A 19,384
Transfer agent -- Class I 14,848
Custodian 33,900
Registration 15,889
Directors 12,128
Shareholder communication 11,453
Miscellaneous 17,914
-----------
Total expenses before reimbursement and
waiver 953,765
Expense reimbursement from Manager (66,458)
Expense waiver from Manager (136,644)
-----------
Net expenses 750,663
-----------
Net investment income 4,880,847
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments from:
Security transactions (261,196)
Futures transactions (33,056)
-----------
Net realized loss on investments (294,252)
-----------
Net change in unrealized appreciation on
investments:
Security transactions (2,300,106)
Futures transactions (51,581)
-----------
Net unrealized loss on investments (2,351,687)
-----------
Net realized and unrealized loss on investments (2,645,939)
-----------
Net increase in net assets resulting from
operations $ 2,234,908
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 137
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 4,880,847 $ 7,953,195
Net realized gain (loss) on
investments and futures contracts (294,252) 918,947
Net change in unrealized
appreciation (depreciation) on
investments (2,351,687) 2,429,573
----------------------------
Net increase in net assets
resulting from operations 2,234,908 11,301,715
----------------------------
Dividends to shareholders:
From net investment income:
Class A (1,133,053) (1,084,652)
Class I (5,128,716) (6,323,062)
Service Class -- (156,873)
----------------------------
Total dividends to shareholders (6,261,769) (7,564,587)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 20,650,993 66,652,900
Class I 50,751,304 62,155,413
Service Class -- 5,106,292
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Class A 5,113,506 1,078,191
Class I 1,121,911 6,314,766
Service Class -- 156,825
----------------------------
77,637,714 141,464,387
Cost of shares redeemed:
Class A (27,332,947) (20,219,408)
Class I (10,551,113) (47,411,486)
Service Class -- (36,166,785)
----------------------------
(37,884,060) (103,797,679)
----------------------------
Increase in net assets derived
from capital share
transactions 39,753,654 37,666,708
----------------------------
Net increase in net assets 35,726,793 41,403,836
NET ASSETS:
Beginning of period 256,270,174 214,866,338
----------------------------
End of period $291,996,967 $ 256,270,174
============================
Accumulated undistributed (over
distributed) net investment income
at end of period $ (42) $ 1,380,880
============================
</Table>
138 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
This page intentionally left blank
139
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
------------------------- ------------------------------------------
SIX JANUARY 2, SIX
MONTHS 2004* MONTHS
ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, APRIL 30, YEAR ENDED OCTOBER 31,
2005*** 2004 2005*** 2004 2003 2002
Net asset value at beginning of
period $ 11.07 $ 10.95 $ 11.07 $ 10.89 $ 10.86 $ 11.21
------- ------- -------- -------- -------- --------
Net investment income 0.20 0.33 0.18 0.34 0.39 0.52(d)
Net realized and unrealized gain
(loss) on investments (0.12) 0.13 (0.11) 0.19 0.04 0.08
------- ------- -------- -------- -------- --------
Total from investment operations 0.08 0.46 0.07 0.53 0.43 0.60
------- ------- -------- -------- -------- --------
Less dividends:
From net investment income (0.25) (0.34) (0.24) (0.35) (0.40) (0.95)
------- ------- -------- -------- -------- --------
Net asset value at end of period $ 10.90 $ 11.07 $ 10.90 $ 11.07 $ 10.89 $ 10.86
======= ======= ======== ======== ======== ========
Total investment return (a) 0.63%(b) 3.65%(b) 0.78%(b) 5.01% 3.97% 5.92%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.36%+ 3.16%+ 3.65%+ 3.43% 3.39% 4.83%
Net expenses 0.80%+ 0.78%+ 0.49%+ 0.50% 0.50% 0.50%
Expenses (before reimbursement and
waiver) 0.95%+ 0.94%+ 0.64%+ 0.66% 0.68% 0.74%
Portfolio turnover rate 83%(e) 104% 83%(e) 104% 110% 56%
Net assets at end of period (in
000's) $58,517 $48,062 $233,480 $208,208 $184,051 $125,169
<Caption>
CLASS I
-----------------------
YEAR ENDED OCTOBER 31,
2001 2000
Net asset value at beginning of
period $ 10.73 $ 10.76
------- --------
Net investment income 0.65(d) 0.72
Net realized and unrealized gain
(loss) on investments 0.72 0.00(c)
------- --------
Total from investment operations 1.37 0.72
------- --------
Less dividends:
From net investment income (0.89) (0.75)
------- --------
Net asset value at end of period $ 11.21 $ 10.73
======= ========
Total investment return (a) 13.44% 7.27%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 6.00%(e) 6.63%
Net expenses 0.50% 0.50%
Expenses (before reimbursement and
waiver) 0.71% 0.63%
Portfolio turnover rate 57% 20%
Net assets at end of period (in
000's) $81,890 $136,033
</Table>
<Table>
* Commencement of Operations.
** The fund changed its fiscal year from December 31 to October 31.
*** Unaudited.
+ Annualized.
++ Service Class shares ceased operation on January 9, 2004.
(a) Total return is calculated exclusive of sales charge. Class I and Service Class are not
subject to sales charges.
(b) Total return is not annualized.
(c) Less than one cent per share.
(d) Per share data based on average shares outstanding during the period.
(e) The portfolio turnover rate not including mortgage dollar rolls for the six months ending
April 30, 2005 is 26%.
(f) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000 have not been
restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
SERVICE
CLASS I CLASS
Decrease net investment income ($0.02) ($0.02)
Increase net realized and unrealized gains and losses 0.02 0.02
Decrease ratio of net investment income (0.16%) (0.15%)
</Table>
140 MainStay Indexed 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
<Table>
<Caption>
SERVICE CLASS++
- --------------------------------------------------------------------------------------------------
NOVEMBER 1,
2003
THROUGH
JANUARY 9, YEAR ENDED OCTOBER 31,
2004 2003 2002 2001 2000
$10.88 $ 10.85 $ 11.19 $ 10.70 $10.74
------ ------- ------- ------- ------
0.05 0.36 0.49(d) 0.62(d) 0.67
0.17 0.04 0.08 0.73 0.01
------ ------- ------- ------- ------
0.22 0.40 0.57 1.35 0.68
------ ------- ------- ------- ------
(0.05) (0.37) (0.91) (0.86) (0.72)
------ ------- ------- ------- ------
$11.05 $ 10.88 $ 10.85 $ 11.19 $10.70
====== ======= ======= ======= ======
2.05%(b) 3.71% 5.61% 13.21% 6.87%
3.32%+ 3.14% 4.58% 5.75%(e) 6.38%
0.75%+ 0.75% 0.75% 0.75% 0.75%
0.93%+ 0.93% 0.99% 0.96% 0.88%
45% 110% 56% 57% 20%
$ 0 $30,815 $17,670 $10,470 $3,634
<Caption>
SERVICE CLASS++
- --- ----------------------------------
JANUARY 1,
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999** 1998
$10.92 $10.74
------ ------
0.61 0.66
(0.79) 0.18
------ ------
(0.18) 0.84
------ ------
-- (0.66)
------ ------
$10.74 $10.92
====== ======
(1.65%)(b) 7.86%
6.17%+ 6.12%
0.75%+ 0.75%
0.87%+ 0.90%
31% 14%
$3,345 $3,881
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 141
MAINSTAY INTERMEDIATE TERM BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges -3.97% -0.02% 5.31% 5.43%
Excluding sales charges 0.55 4.69 6.29 5.92
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
4/30/95 9550 10000
10290 10864
10942 11634
11983 12903
12590 13713
12510 13886
13954 15606
14657 16829
16027 18590
16209 18929
4/30/05 16969 19924
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges -4.75% -1.08% 5.19% 5.14%
Excluding sales charges 0.19 3.92 5.52 5.14
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
4/30/95 10000 10000
10695 10864
11288 11634
12267 12903
12801 13713
12623 13886
13981 15606
14565 16829
15809 18590
15888 18929
4/30/05 16510 19924
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -0.80% 2.92% 5.52% 5.14%
Excluding sales charges 0.19 3.92 5.52 5.14
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
4/30/95 10000 10000
10695 10864
11288 11634
12267 12903
12801 13713
12623 13886
13981 15606
14565 16829
15809 18590
15888 18929
4/30/05 16510 19924
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 4.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at any time. From inception (1/2/91) through 12/31/03,
performance for Class A, B, and C shares (each first offered 1/2/04) includes
the historical performance of Class I shares adjusted to reflect the applicable
sales charge (or CDSC) and fees and expenses for Class A, B, and C shares.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
142 MainStay Intermediate Term Bond Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
0.79% 5.15% 6.57% 6.19%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
4/30/95 10000 10000
10800 10864
11511 11634
12636 12903
13308 13713
13258 13886
14820 15606
15599 16829
17097 18590
17334 18929
4/30/05 18227 19924
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- ---------------------------------------------------------------------------------------
Lehman Brothers(R) Aggregate Bond Index(1) 0.98% 5.26% 7.49% 7.14%
Average Lipper intermediate investment grade fund(2) 0.75 4.51 6.77 6.31
</Table>
1. The Lehman Brothers(R) Aggregate Bond Index is an unmanaged index that
includes the following other unmanaged Lehman Brothers(R) indices: the
Government Index, the Corporate Index, the Mortgage-Backed Securities Index
and the Asset-Backed Securities Index. To qualify for inclusion in the Lehman
Brothers(R) Aggregate Bond Index, securities must be U.S. dollar denominated
and investment grade and have a fixed-rate coupon, a remaining maturity of at
least one year, and a par amount outstanding of at least $150 million.
Results assume reinvestment of all income and capital gains. The Lehman
Brothers(R) Aggregate Bond Index is considered to be the Fund's broad-based
securities-market index for comparison purposes. An investment cannot be made
directly into an index.
2. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 143
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY INTERMEDIATE TERM BOND FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,005.50 $6.07 $1,018.90 $6.11
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,001.85 $9.78 $1,015.15 $9.84
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,001.85 $9.78 $1,015.15 $9.84
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,007.85 $3.73 $1,021.25 $3.76
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.22% for Class A, 1.97% for Class B and Class C, and 0.75% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
144 MainStay Intermediate Term Bond Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 57.9%
Short-Term Investments (collateral from securities lending is 11.3%) 29.2%
Corporate Bonds 22.7%
Foreign Corporate Bonds 4.2%
Mortgage-Backed Securities 3.8%
Asset-Backed Securities 2.9%
Foreign Government Bonds 1.6%
Yankee Bonds 1.4%
Municipal Bond 0.3%
Preferred Stock 0.1%
Warrants 0.0%*
Liabilities in Excess of Cash and Other Assets (24.1)%
</Table>
* Less than one tenth of a percent.
See Portfolio of Investments on page 148 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Federal National Mortgage Association (Mortgage
Pass-Through Security) 5.50%, due
5/18/19-6/13/35 TBA
2. Federal National Mortgage Association (Mortgage
Pass-Through Security) 6.00%, due 6/13/35 TBA
3. Federal National Mortgage Association (Mortgage
Pass-Through Security) 4.50%, due 4/1/18-11/1/18
4. United States Treasury Note 4.625%, due 5/15/06
5. Federal Home Loan Mortgage Corporation (Mortgage
Pass-Through Security) 5.50%, due 2/1/33-3/1/35
6. United States Treasury Bond 6.00%, due 2/15/26
7. Federal National Mortgage Association 5.50%, due
5/2/06
8. Federal Home Loan Mortgage Corporation (Mortgage
Pass-Through Security) 5.00%, due 8/1/33
9. Federal National Mortgage Association 4.75%, due
1/2/07
10. Federal National Mortgage Association 6.625%,
due 9/15/09
</Table>
www.mainstayfunds.com 145
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Gary Goodenough and Christopher Harms
of MacKay Shields LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in bonds, and at least 65%
of its total assets will be invested in debt securities rated Baa or better by
Moody's Investors Service, Inc.,(1) or BBB or better by S&P when purchased, or
if unrated, determined to be of comparable quality. The effective maturity of
the portfolio is usually in the three- to 10-year range. The Fund may invest in
both U.S. and foreign debt securities. In implementing this strategy, we conduct
a continuing review of yields and other information from a proprietary data
base. Among the principal factors we consider in determining whether to increase
or decrease the emphasis placed upon a particular type of security or industry
sector are fundamental economic cycle analysis, credit quality, and interest
rate trends. We make shifts in maturity based on a broad range of fundamental
and technical indicators.
WHAT ECONOMIC FORCES AFFECTED THE BOND MARKET DURING THE SIX MONTHS ENDED APRIL
30, 2005?
The U.S. economy grew at its historical average pace during the reporting
period, and corporate profitability remained solid. Consumer-related
inflationary pressures were absent, because businesses could not meaningfully
increase prices. The Federal Reserve maintained its policy of gradually raising
interest rates. During the reporting period, the Federal Open Market Committee
increased the targeted federal funds rate four times, with a 25 basis point move
on each occasion. This brought the federal funds target rate to 2.75% at the end
of April 2005.
HOW DID THESE FACTORS AFFECT TREASURY YIELDS?
U.S. Treasury yields showed contrasting price action in the early and late
portions of the reporting period. From November 2004 through February 2005,
Treasurys traded in a fairly narrow range, which hinted that the bond market and
the economy had settled into a comfort zone. Treasurys turned more volatile in
the final two months of the reporting period. Yields rose in March because of
inflationary concerns but then retreated to their prior levels on a "soft patch"
of economic data in April.
Looking at the period as a whole, the Treasury yield curve flattened. The
longer-end of the yield curve was supported by solid demand from foreign
investors and pension funds. Short-term yields were pushed higher as the Federal
Reserve tightened monetary policy. During the six-month period, two-year
Treasury yields rose from 2.56% to 3.65%, five-year Treasurys advanced from
3.29% to 3.90%, 10-year Treasurys climbed a modest 17 basis points from 4.03% to
4.20%, and 30-year Treasury yields declined from 4.79% to 4.52%.
HOW DID YOU POSITION THE FUND'S PORTFOLIO AMONG THE VARIOUS BOND SECTORS?
As of April 30, 2005, the Fund's net assets were invested 13% in Treasurys, 10%
in agency debentures, 35% in residential mortgage-backed securities issued by
government-sponsored and government-related enterprises, 4% in commercial
mortgage-backed securities, 3% in asset-backed securities, 23% in
investment-grade corporates, 7% in high-yield corporates, and 5% in money-market
instruments. Compared with the Lehman Brothers(R) Aggregate Bond Index,(2) the
Fund held overweighted positions in mortgage-backed securities, asset-backed
securities, high-yield corporates, and money market instruments. The Fund held a
neutral-to-the-Index position in investment-grade corporates and held
underweighted positions in Treasurys and agency debentures.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These risks
are likely to be greater in emerging markets than in developed markets. The Fund
may invest in derivatives, which may increase the volatility of the Fund's net
asset value and may result in a loss to the Fund. Funds that invest in bonds are
subject to credit, inflation, and interest-rate risk and can lose principal
value when interest rates rise.
1. Bonds rated Baa by Moody's Investors Service are considered by Moody's to be
medium-grade obligations (i.e., obligations that Moody's believes are neither
highly protected nor poorly secured). It is Moody's opinion that interest
payments and principal security appear adequate for the present, but that
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Moody's believes that such bonds
lack outstanding investment characteristics and that they in fact have
speculative characteristics as well. Debt rated BBB by Standard & Poor's is
deemed by Standard & Poor's to exhibit adequate protection parameters. It is
the opinion of Standard & Poor's, however, that adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation than would be
the case for debt in higher-rated 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.
2. See footnote on page 143 for more information on the Lehman Brothers(R)
Aggregate Bond Index.
146 MainStay Intermediate Term Bond Fund
HOW DID THE FUND'S EXPOSURE TO THE CORPORATE BOND SECTOR IMPACT PERFORMANCE?
The Fund began the reporting period with a 35% allocation to investment-grade
and high-yield corporates. Compared to the 25% credit allocation in the Lehman
Brothers(R) Aggregate Bond Index, the Fund was overweighted by 10 percentage
points (or 40%). This initially enhanced results, as credit spreads tightened
during the fourth quarter of 2004 on the back of declining default rates, lower
volatility in the equity market, and solid demand from investors seeking
incremental yield in a low interest-rate environment.
A benign economic backdrop and worldwide demand for yield carried the strong
momentum into the new year. By March 2005, corporate spreads were reminiscent of
spring 1997, the last quiet period for corporate bonds prior to an annual series
of unsettling events that included the Asian currency crisis, the bursting of
the Nasdaq bubble, September 11, 2001, and the fallout from lax corporate
governance. The market appeared to be growing complacent about event risk, and
we reacted by cutting the Fund's corporate allocation to 31% of net assets.
Since the credit allocation of the Lehman Brothers(R) Aggregate Bond Index
remained at 25%, our adjustment reduced the Fund's corporate overweight to just
six percentage points (or 24%). These actions, however, were not sufficient to
avoid the fallout that occurred when corporate spreads widened over the next two
months of the reporting period.
WHAT DO YOU ANTICIPATE FOR THE ECONOMY AND INTEREST RATES GOING FORWARD?
Looking ahead, it may be difficult to say whether the U.S. economy is best
characterized as a glass half-empty or as a glass half-full. Particular
attention will no doubt be paid to payroll and inflation data. Economic
naysayers typically cite a variety of concerns, including mixed monthly
employment data, sluggish capital spending, a record trade deficit, high oil
prices, and the inflationary effects of a weak U.S. dollar.
An alternate, more constructive, perspective relies on the following lines of
reasoning. The corporate sector may be operating leaner than in past recoveries,
leading to hiring that is less robust. Corporate America has transitioned from a
labor-intensive to a capital-intensive enterprise. The run-up in oil reflects
the tight balance between global supply and demand, and as these transients
pass, prices may retreat to more reasonable levels. The U.S. dollar could
strengthen on its own accord in response to economic growth, and new mortgage
products could extend the refinancing trend. If so, the economy may be in better
shape than a soft patch in April 2005 suggested. This optimistic view is
supported by pockets of data, such as the booming rate of new home sales. The
Federal Reserve clearly believes that a 2.75% targeted federal funds rate
remains accommodative.
HOW ARE YOU POSITIONING THE FUND GIVEN YOUR OUTLOOK?
While the market ruminates over mixed data signals, a short duration is not
advisable, so we have neutralized the Fund's duration posture relative to the
benchmark. We can still implicitly express a bearish interest-rate view
elsewhere in the Fund's portfolio. For example, we favor mortgage-backed
securities backed by 15-year loans, half the term of the traditional 30-year
product, because the durations of these securities are less prone to extend as
Treasury yields rise. A healthy commitment to securitized product complements
the Fund's credit allocation. We believe that the securities offer reasonably
attractive yields relative to Treasurys and that spreads are unlikely to move
much while interest-rate volatility is low. Since market exuberance has
tightened spreads considerably, the Fund cut its corporate exposure in the first
quarter of 2005 and may do so again in the second quarter as investor confidence
wanes and event risk emerges.
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.
www.mainstayfunds.com 147
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS (94.8%)+
ASSET-BACKED SECURITIES (2.9%)
- -----------------------------------------------------------------------------
CONSUMER FINANCE (1.2%)
Harley-Davidson Motorcycle Trust
Series 2004-1 Class A2
2.53%, due 11/15/11 $1,695,000 $ 1,646,254
------------
CONSUMER LOANS (0.5%)
Atlantic City Electric
Transition Funding LLC
Series 2002-1 Class A4
5.55%, due 10/20/23 675,000 715,590
------------
DIVERSIFIED FINANCIAL SERVICES (0.4%)
Capital One Master Trust
Series 2001-5 Class A
5.30%, due 6/15/09 460,000 468,299
------------
MULTI-UTILITIES & UNREGULATED POWER (0.7%)
Public Service of New Hampshire Funding LLC
Pass-Through Certificates Series 2002-1 Class A
4.58%, due 2/1/08 871,639 879,270
------------
THRIFTS & MORTGAGE FINANCE (0.1%)
Vanderbilt Mortgage Finance
Series 1999-B Class 1A4
6.545%, due 4/7/18 154,076 156,305
------------
Total Asset-Backed Securities
(Cost $3,882,741) 3,865,718
------------
CORPORATE BONDS (22.7%)
- -----------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.0%) (b)
Sequa Corp.
9.00%, due 8/1/09 45,000 47,475
------------
AIRLINES (0.6%)
Delta Air Lines, Inc.
8.30%, due 12/15/29 590,000 153,400
Southwest Airlines Co.
5.25%, due 10/1/14 645,000 636,968
------------
790,368
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
AUTO COMPONENTS (0.2%)
Collins & Aikman Products
12.875%, due 8/15/12 (a)(d) $ 185,000 $ 55,500
Goodyear Tire & Rubber Co. (The)
6.625%, due 12/1/06 240,000 241,800
------------
297,300
------------
AUTOMOBILES (0.1%)
General Motors Corp.
8.375%, due 7/15/33 (d) 265,000 201,713
------------
BEVERAGES (0.6%)
Miller Brewing Co.
4.25%, due 8/15/08 (a) 825,000 816,818
------------
BIOTECHNOLOGY (0.0%) (B)
Amgen, Inc.
(zero coupon), due 3/1/32 (i) 45,000 32,963
------------
BUILDING PRODUCTS (0.1%)
Dayton Superior Corp.
10.75%, due 9/15/08 160,000 156,800
------------
CAPITAL MARKETS (1.5%)
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08 450,000 446,507
Goldman Sachs Group, Inc. (The)
6.345%, due 2/15/34 800,000 837,516
LaBranche & Co., Inc.
11.00%, due 5/15/12 (a) 120,000 126,000
Morgan Stanley
3.625%, due 4/1/08 630,000 617,282
------------
2,027,305
------------
CHEMICALS (0.3%)
Crompton Corp.
9.875%, due 8/1/12 (a) 255,000 291,975
Invista S.A.R.L.
9.25%, due 5/1/12 (a) 65,000 69,306
Witco Corp.
7.75%, due 4/1/23 85,000 87,550
------------
448,831
------------
COMMERCIAL BANKS (0.8%)
BankBoston NA
7.00%, due 9/15/07 520,000 553,973
FleetBoston Financial Corp.
3.85%, due 2/15/08 500,000 495,038
------------
1,049,011
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
148 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.2%)
Geo Sub Corp.
11.00%, due 5/15/12 (a) $ 200,000 $ 196,000
------------
CONSUMER FINANCE (1.5%)
Capital One Bank
5.75%, due 9/15/10 355,000 370,712
Ford Motor Credit Co.
7.00%, due 10/1/13 (d) 658,000 592,184
General Motors Acceptance Corp.
5.625%, due 5/15/09 20,000 18,104
6.75%, due 12/1/14 65,000 54,453
6.875%, due 9/15/11 410,000 359,209
8.00%, due 11/1/31 25,000 21,035
HSBC Finance Corp.
7.25%, due 5/15/06 208,000 215,008
MBNA Corp.
6.25%, due 1/17/07 370,000 381,591
------------
2,012,296
------------
CONTAINERS & PACKAGING (0.2%)
Owens-Illinois, Inc.
8.10%, due 5/15/07 185,000 193,325
------------
DIVERSIFIED FINANCIAL SERVICES (1.3%)
Canwest Media, Inc.
8.00%, due 9/15/12 (a) 90,000 92,025
Dollar Financial Group, Inc.
9.75%, due 11/15/11 15,000 15,750
FGIC Corp.
6.00%, due 1/15/34 (a) 835,000 899,355
J Paul Getty Trust, Series 2003
5.875%, due 10/1/33 460,000 496,863
Rainbow National Services LLC
8.75%, due 9/1/12 (a) 190,000 203,300
10.375%, due 9/15/12 (a) 45,000 50,850
------------
1,758,143
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%)
Qwest Communications International, Inc.
7.75%, due 2/15/11 (a) 165,000 155,100
Qwest Corp.
9.125%, due 3/15/12 (a) 20,000 21,200
Qwest Services Corp.
14.00%, due 12/15/10 (a) 230,000 258,750
SBC Communications, Inc.
4.125%, due 9/15/09 415,000 408,135
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
TSI Telecommunication
Services, Inc., Series B
12.75%, due 2/1/09 $ 100,000 $ 111,000
------------
954,185
------------
ELECTRIC UTILITIES (1.5%)
American Electric Power Co., Inc.
5.375%, due 3/15/10 215,000 221,269
Kiowa Power Partners LLC
5.737%, due 3/30/21 (a) 825,000 828,267
Tenaska Virginia Partners L.P.
6.119%, due 3/30/24 (a) 973,351 1,025,163
------------
2,074,699
------------
ELECTRICAL EQUIPMENT (0.3%)
Emerson Electric Co.
6.00%, due 8/15/32 340,000 375,143
------------
ENERGY EQUIPMENT & SERVICES (0.1%)
Lone Star Technologies, Inc. Series B
9.00%, due 6/1/11 50,000 52,500
Parker Drilling Co.
9.625%, due 10/1/13 (a) 15,000 16,500
Seitel, Inc.
11.75%, due 7/15/11 25,000 27,875
------------
96,875
------------
FOOD & STAPLES RETAILING (1.1%)
CVS Corp.
5.298%, due 1/11/27 (a) 594,396 606,112
5.789%, due 1/10/26 (a) 426,853 444,319
Duane Reade, Inc.
7.51%, due 12/15/10 (a)(g) 135,000 135,675
Safeway, Inc.
4.125%, due 11/1/08 355,000 347,105
------------
1,533,211
------------
FOOD PRODUCTS (0.7%)
Cargill, Inc.
4.375%, due 6/1/13 (a) 245,000 238,890
5.00%, due 11/15/13 (a) 570,000 578,691
Chiquita Brands International, Inc.
7.50%, due 11/1/14 5,000 4,575
Pinnacle Foods Holding Corp.
8.25%, due 12/1/13 (a) 105,000 87,150
------------
909,306
------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.1%)
Fisher Scientific International, Inc.
6.75%, due 8/15/14 (a) 155,000 156,162
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 149
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (1.1%)
AmeriPath, Inc.
10.50%, due 4/1/13 $ 45,000 $ 45,000
Highmark, Inc.
6.80%, due 8/15/13 (a) 920,000 1,004,944
Laboratory Corp. of America Holdings
(zero coupon), due 9/11/21 (i) 55,000 41,869
Medco Health Solutions, Inc.
7.25%, due 8/15/13 155,000 172,286
Vanguard Health Holding Co. II
9.00%, due 10/1/14 (a) 155,000 161,587
------------
1,425,686
------------
HOTELS, RESTAURANTS & LEISURE (0.1%)
Six Flags, Inc.
9.625%, due 6/1/14 105,000 88,725
------------
HOUSEHOLD DURABLES (0.6%)
D.R. Horton, Inc.
5.625%, due 1/15/16 845,000 812,881
------------
HOUSEHOLD PRODUCTS (0.0%) (b)
Rayovac Corp.
8.50%, due 10/1/13 30,000 30,825
------------
INSURANCE (0.6%)
Crum & Forster
10.375%, due 6/15/13 295,000 320,075
Phoenix Life Insurance
7.15%, due 12/15/34 (a) 270,000 281,243
Provident Cos., Inc.
7.25%, due 3/15/28 60,000 59,013
UnumProvident Corp.
6.75%, due 12/15/28 135,000 126,700
------------
787,031
------------
IT SERVICES (0.0%) (b)
SunGard Data Systems, Inc.
3.75%, due 1/15/09 25,000 23,119
4.875%, due 1/15/14 5,000 4,092
------------
27,211
------------
MACHINERY (0.0%) (b)
Mark IV Industries, Inc.
7.50%, due 9/1/07 60,000 57,150
------------
MARINE (0.1%)
Gulfmark Offshore, Inc.
7.75%, due 7/15/14 (a) 145,000 146,450
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MEDIA (2.2%)
Bear Creek Corp.
9.00%, due 3/1/13 (a) $ 5,000 $ 4,900
Clear Channel
Communications, Inc.
5.50%, due 9/15/14 925,000 876,114
Dex Media East LLC
12.125%, due 11/15/12 41,000 48,226
PanAmSat Corp.
9.00%, due 8/15/14 (a) 72,000 74,880
Time Warner
Entertainment Co. L.P.
10.15%, due 5/1/12 1,436,000 1,852,809
Ziff Davis Media, Inc.
9.15%, due 5/1/12 (a)(g) 30,000 30,187
------------
2,887,116
------------
MULTILINE RETAIL (1.0%)
Kohl's Corp.
6.00%, due 1/15/33 810,000 847,041
Target Corp.
8.60%, due 1/15/12 390,000 478,172
------------
1,325,213
------------
MULTI-UTILITIES & UNREGULATED POWER (0.6%)
AES Eastern Energy L.P.
Series 1999-A
9.00%, due 1/2/17 217,355 247,785
Series 1999-B
9.67%, due 1/2/29 25,000 31,250
TXU Corp.
5.55%, due 11/15/14 (a) 520,000 501,254
------------
780,289
------------
OIL & GAS (1.7%)
El Paso Production Holding Co.
7.75%, due 6/1/13 75,000 75,563
Energy Transfer Partners, L.P.
5.95%, due 2/1/15 (a) 625,000 627,204
Enterprise Products Operating L.P. Series B
6.65%, due 10/15/34 535,000 560,651
Kern River Funding Corp.
4.893%, due 4/30/18 (a) 852,810 859,965
Mission Resources Corp.
9.875%, due 4/1/11 65,000 71,175
Pacific Energy Partners L.P.
7.125%, due 6/15/14 20,000 20,850
------------
2,215,408
------------
</Table>
150 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.5%)
Georgia-Pacific Corp.
8.875%, due 5/15/31 $ 360,000 $ 413,550
OMX Timber Finance
Investments LLC
5.42%, due 1/29/20 (a) 255,000 256,961
------------
670,511
------------
PHARMACEUTICALS (0.5%)
Lilly (Eli) & Co.
6.77%, due 1/1/36 500,000 613,672
------------
REAL ESTATE (1.5%)
American Real Estate Partners L.P.
American Real Estate Finance
8.125%, due 6/1/12 (a) 155,000 156,550
CB Richard Ellis Services, Inc.
9.75%, due 5/15/10 156,000 173,940
HRPT Properties Trust
5.75%, due 2/15/14 595,000 610,612
iStar Financial, Inc.
6.50%, due 12/15/13 780,000 803,581
OMEGA Healthcare Investors, Inc.
7.00%, due 4/1/14 260,000 250,900
Trustreet Properties, Inc.
7.50%, due 4/1/15 (a) 50,000 50,125
------------
2,045,708
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.0%) (b)
Amkor Technology, Inc.
7.125%, due 3/15/11 15,000 11,775
7.75%, due 5/15/13 20,000 15,675
------------
27,450
------------
SPECIALTY RETAIL (0.1%)
Blockbuster, Inc.
9.00%, due 9/1/12 (a) 20,000 17,900
Toys 'R' Us, Inc.
7.625%, due 8/1/11 70,000 63,175
------------
81,075
------------
WIRELESS TELECOMMUNICATION SERVICES (0.2%)
Dobson Cellular Systems
7.4925%, due 11/1/11 (a) 65,000 66,300
8.375%, due 11/1/11 (a)(g) 65,000 65,650
9.875%, due 11/1/12 (a) 70,000 70,700
Triton PCS, Inc.
8.50%, due 6/1/13 140,000 121,100
------------
323,750
------------
Total Corporate Bonds
(Cost $30,525,999) 30,474,080
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN CORPORATE BONDS (4.2%)
- -----------------------------------------------------------------------------
BRAZIL (0.7%)
CIA Brazileira de Bebidas
10.50%, due 12/15/11 $ 800,000 $ 968,000
------------
CANADA (0.4%)
Acetex Corp.
10.875%, due 8/1/09 210,000 221,550
BP Canada Finance Co.
3.375%, due 10/31/07 305,000 300,433
Quebecor Media, Inc.
(zero coupon), due 7/15/11
13.75%, beginning 7/15/06 25,000 24,563
Tembec Industries, Inc.
7.75%, due 3/15/12 5,000 3,775
8.50%, due 2/1/11 65,000 49,725
------------
600,046
------------
CAYMAN ISLANDS (0.3%)
Arcel Finance Ltd.
6.361%, due 5/1/12 (a) 450,000 449,541
------------
CHILE (0.3%)
Corporacion Nacional del
Cobre-Codelco, Inc.
5.50%, due 10/15/13 (a) 330,000 340,030
------------
DENMARK (0.1%)
Citigroup (JSC Severstal) Series REGS
9.25%, due 4/19/14 80,000 82,608
------------
GERMANY (0.3%)
Citibank Global Markets
Deutschland for Severstal
9.25%, due 4/19/14 (a) 335,000 345,050
------------
LIBERIA (0.2%)
Royal Caribbean Cruises Ltd.
6.875%, due 12/1/13 290,000 300,875
------------
LUXEMBOURG (0.6%)
Gazprom International S.A.
7.201%, due 2/1/20 (a) 420,000 436,800
Millicom International Cellular S.A.
10.00%, due 12/1/13 (a) 180,000 175,050
Tengizchevroil LLP
6.124%, due 11/15/14 (a) 235,000 235,588
------------
847,438
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 151
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
MALAYSIA (0.1%)
Tenga Nasional Berhad
5.25%, due 5/5/15 (a) $ 155,000 $ 153,540
------------
MEXICO (0.5%)
Telefonos de Mexico S.A. de C.V.
4.50%, due 11/19/08 415,000 408,728
4.75%, due 1/27/10 (a) 250,000 244,702
------------
653,430
------------
NETHERLANDS (0.2%)
Coca-Cola HBC Finance BV
5.125%, due 9/17/13 260,000 265,573
------------
SINGAPORE (0.3%)
PSA Corp. Ltd.
7.125%, due 8/1/05 (a) 80,000 80,648
Singapore Powerassets Ltd.
5.00%, due 10/22/13 (a) 305,000 309,134
------------
389,782
------------
UNITED KINGDOM (0.2%)
Ono Finance PLC
10.50%, due 5/15/14 (a)(m) E 170,000 227,515
------------
Total Foreign Corporate Bonds
(Cost $5,460,758) 5,623,428
------------
FOREIGN GOVERNMENT BONDS (1.6%)
- -----------------------------------------------------------------------------
CANADA (0.3%)
Province of Quebec
5.00%, due 7/17/09 $ 315,000 323,668
------------
DENMARK (0.2%)
Aries Vermogensverwaltungs GmbH
9.60%, due 10/25/14 (a) 250,000 317,500
------------
MEXICO (0.7%)
United Mexican States
7.50%, due 1/14/12 240,000 266,400
8.125%, due 12/30/19 590,000 690,890
------------
957,290
------------
RUSSIA (0.4%)
Russian Federation
5.00%, due 3/31/30
7.50%, beginning 3/31/07 488,000 518,842
------------
Total Foreign Government Bonds
(Cost $1,944,358) 2,117,300
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MORTGAGE-BACKED SECURITIES (3.8%)
- -----------------------------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (3.8%)
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1 Class A1
4.907%, due 1/11/10 $ 804,662 $ 814,664
Citigroup Commercial
Mortgage Trust
Series 2004-C2 Class A5
4.733%, due 10/15/41 760,000 752,755
LB-UBS Commercial
Mortgage Trust
Series 2004-C2 Class A2
3.246%, due 3/15/29 600,000 575,952
Series 2004-C7 Class A1
3.625%, due 10/15/29 1,004,865 991,097
Merrill Lynch Mortgage Trust
Series 2004-MKB1 Class A1
3.563%, due 2/12/42 959,234 946,290
Morgan Stanley Capital I
Series 2003-IQ5 Class A1
3.02%, due 4/15/38 720,436 704,058
Wachovia Bank National Association
Series 2004-C14 Class A1
3.477%, due 8/15/41 (g) 371,694 365,945
------------
Total Mortgage-Backed Securities
(Cost $5,227,739) 5,150,761
------------
MUNICIPAL BOND (0.3%)
- -----------------------------------------------------------------------------
TEXAS (0.3%)
Harris County Texas Industrial Development Corp.
Solid Waste Deer Park
5.683%, due 3/1/23 (g) 390,000 396,057
------------
Total Municipal Bond
(Cost $390,000) 396,057
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (57.9%)
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (8.0%)
3.00%, due 8/1/10 (f) 451,094 432,655
V 5.00%, due 8/1/33 (f) 2,848,792 2,828,752
5.00%, due 6/16/20 TBA (c) 2,405,000 2,417,775
V 5.50%, due 2/1/33-3/1/35 (f) 4,948,156 5,009,180
------------
10,688,362
------------
</Table>
152 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- -----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (10.0%)
4.00%, due 9/2/08 $2,025,000 $ 2,009,852
4.625%, due 5/1/13 670,000 663,149
V 4.75%, due 1/2/07 2,715,000 2,747,409
5.125%, due 1/2/14 550,000 560,922
5.25%, due 8/1/12 1,500,000 1,554,483
V 5.50%, due 5/2/06 2,860,000 2,908,623
6.25%, due 2/1/11 255,000 275,833
V 6.625%, due 9/15/09 2,455,000 2,690,692
------------
13,410,963
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.5%)
Series 1998-M6 Class A2
6.32%, due 8/15/08 638,386 671,001
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (24.2%)
V 4.50%, due 4/1/18-11/1/18 (f) 6,780,683 6,723,581
5.00%, due 9/1/17 (f) 1,598,403 1,612,755
5.00%, due 5/12/35 TBA (c) 1,655,000 1,638,450
5.50%, due 2/1/17-12/1/33 (f) 5,561,927 5,638,316
V 5.50%, due 5/18/19-6/13/35
TBA (c) 7,120,000 7,237,251
6.00%, due 8/1/17 (f) 221,370 229,520
V 6.00%, due 6/13/35 TBA (c) 6,735,000 6,901,274
6.50%, due 6/1/31-6/1/32 (f) 860,368 896,237
7.00%, due 2/1/32-4/1/32 (f) 935,687 988,893
7.50%, due 8/1/31 (f) 616,020 660,181
------------
32,526,458
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (2.5%)
6.00%, due 2/15/29-8/15/32 (f) 2,277,385 2,353,028
6.50%, due 7/15/28-5/15/29 (f) 262,728 275,593
7.50%, due 12/15/28-8/15/30 (f) 688,338 740,157
------------
3,368,778
------------
UNITED STATES TREASURY BONDS (4.7%)
5.375%, due 2/15/31 120,000 135,534
V 6.00%, due 2/15/26 (d) 3,245,000 3,839,620
6.875%, due 8/15/25 1,070,000 1,386,737
8.75%, due 8/15/20 620,000 908,107
------------
6,269,998
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
UNITED STATES TREASURY NOTES (8.0%)
4.00%, due 2/15/15 (d) $1,630,000 $ 1,603,576
4.25%, due 8/15/14 (d) 1,970,000 1,978,311
V 4.625%, due 5/15/06 (d) 5,955,000 6,028,044
4.875%, due 2/15/12 265,000 278,405
5.75%, due 8/15/10 (d) 830,000 901,912
------------
10,790,248
------------
Total U.S. Government &
Federal Agencies
(Cost $77,302,327) 77,725,808
------------
YANKEE BONDS (1.4%) (h)
- -----------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (0.3%)
Petroleum Geo-Services ASA
8.00%, due 11/5/06 51,001 52,021
10.00%, due 11/5/10 345,000 384,675
------------
436,696
------------
INSURANCE (1.0%)
Fairfax Financial Holdings Ltd.
7.375%, due 4/15/18 20,000 16,850
7.75%, due 4/26/12-7/15/37 170,000 149,350
8.30%, due 4/15/26 20,000 16,700
Montpelier Re Holdings Ltd.
6.125%, due 8/15/13 1,010,000 1,051,435
------------
1,234,335
------------
MEDIA (0.0%) (b)
Rogers Cablesystem, Ltd.
11.00%, due 12/1/15 25,000 27,031
------------
PAPER & FOREST PRODUCTS (0.1%)
Tembec Industries, Inc.
8.625%, due 6/30/09 215,000 173,075
------------
Total Yankee Bonds
(Cost $1,851,169) 1,871,137
------------
Total Long-Term Investments
(Cost $126,585,091) 127,224,289
------------
<Caption>
SHARES
PREFERRED STOCK (0.1%)
- -----------------------------------------------------------------------------
REAL ESTATE (0.1%)
Sovereign Real Estate Investment Corp.
12.00%, Class A (a) 50 71,000
------------
Total Preferred Stock
(Cost $76,875) 71,000
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 153
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
WARRANTS (0.0%) (b)
- -----------------------------------------------------------------------------
MEDIA (0.0%) (b)
Ono Finance PLC
Strike Price $0.01
Expire 2/15/11 (a)(j) 60 $ 1
Ziff Davis Media, Inc.
Strike Price $0.001
Expire 8/12/12 (a) 1,210 121
------------
Total Warrants
(Cost $2,393) 122
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (29.2%)
- -----------------------------------------------------------------------------
COMMERCIAL PAPER (17.9%)
American General Finance Corp.
2.86%, due 5/4/05 $3,000,000 2,999,285
Federal Home Loan Bank
2.68%, due 5/3/05 1,590,000 1,589,764
Freddie Mac Discount Note
2.84%, due 5/18/05 2,005,000 2,002,310
General Electric Capital Corp.
2.84%, due 5/10/05 2,200,000 2,198,437
Merrill Lynch & Co., Inc.
2.95%, due 5/4/05 2,950,000 2,949,275
Rabobank USA Financial Corp.
2.90%, due 5/3/05 1,770,000 1,769,715
Toyota Motor Credit Corp.
2.80%, due 5/5/05 4,855,000 4,853,488
UBS Finance (Delaware) LLC
2.93%, due 5/2/05 5,640,000 5,639,541
------------
Total Commercial Paper
(Cost $24,001,815) 24,001,815
------------
<Caption>
SHARES
INVESTMENT COMPANY (0.1%)
AIM Institutional Funds Group (e) 192,455 192,455
------------
Total Investment Company
(Cost $192,455) 192,455
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
MASTER NOTE (4.1%)
Bank of America LLC
3.0799%, due 5/2/05 (e) $5,550,000 $ 5,550,000
------------
Total Master Note
(Cost $5,550,000) 5,550,000
------------
REPURCHASE AGREEMENTS (7.1%)
Credit Suisse First Boston LLC
3.0499%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $4,451,131 (e)
(Collateralized by Various Bonds with a
Principal Amount of $4,672,408 and a Market
Value of $4,539,118) 4,450,000 4,450,000
Dresdner Kleinwort Wasserstein Securities LLC
3.0699%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $3,000,767 (e)
(Collateralized by Various Bonds with a
Principal Amount of $3,159,260 and a Market
Value of $3,150,027) 3,000,000 3,000,000
Merrill Lynch Pierce Fenner & Smith, Inc.
3.0799%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $1,500,385 (e)
(Collateralized by Various Bonds with a
Principal Amount of $1,519,743 and a Market
Value of $1,575,013) 1,500,000 1,500,000
</Table>
154 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS (CONTINUED)
Morgan Stanley & Co., Inc.
3.0501%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $550,140 (e)
(Collateralized by Various Bonds with a
Principal Amount of $592,123 and a Market Value
of $567,860) $ 550,000 $ 550,000
------------
Total Repurchase Agreements (Cost $9,500,000) 9,500,000
------------
Total Short-Term Investments (Cost $39,244,270) 39,244,270
------------
Total Investments (Cost $165,908,629) (k) 124.1% 166,539,681(l)
Liabilities in Excess of
Cash and Other Assets (24.1) (32,392,609)
----- ------------
Net Assets 100.0% $134,147,072
----- ------------
----- ------------
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) Less than one tenth of a percent.
(c) TBA: Securities purchased on a forward commitment basis
with an approximate principal amount and maturity date.
The actual principal amount and maturity date will be
determined upon settlement. The market value of these
securities at April 30, 2005 is $18,194,750.
(d) Represents securities out on loan or a portion which is
out on loan.
(e) Represents a security or a portion thereof, purchased
with cash collateral received for securities on loan.
(f) Segregated or partially segregated as collateral for
TBAs.
(g) Floating rate. Rate shown is the rate in effect at
April 30, 2005.
(h) Yankee bond -- dollar-denominated bond issued in the
United States by foreign banks and corporations.
(i) Convertible security.
(j) Illiquid security.
(k) The cost for federal income tax purposes is
$165,923,379.
(l) At April 30, 2005 net unrealized appreciation was
$616,302, based on cost for federal income tax
purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $2,009,683 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $1,393,380.
(m) The following abbreviation is used in the above
portfolio:
E -- Euro
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 155
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $165,908,629) including
$14,691,495 market value of securities
loaned $166,539,681
Cash 1,955
Receivables:
Investment securities sold 2,748,341
Dividends and interest 1,331,722
Fund shares sold 23,994
Other assets 35,743
------------
Total assets 170,681,436
------------
LIABILITIES:
Securities lending collateral 15,242,455
Payables:
Investment securities purchased 20,734,548
Fund shares redeemed 321,492
Manager 72,626
Transfer agent 17,603
NYLIFE Distributors 5,600
Custodian 4,171
Accrued expenses 50,161
Dividend payable 84,555
Unrealized appreciation on foreign currency
forward contracts 1,153
------------
Total liabilities 36,534,364
------------
Net assets $134,147,072
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 671
Class B 387
Class C 149
Class I 12,359
Additional paid-in capital 141,672,032
Accumulated undistributed net investment
income 130,804
Accumulated net realized loss on investments (8,317,550)
Accumulated undistributed net realized gain on
foreign currencies and foreign currency
forward contracts 18,379
Net unrealized appreciation on investments 631,052
Net unrealized depreciation on translation of
other assets and liabilities in foreign
currencies and foreign currency forward
contracts (1,211)
------------
Net assets $134,147,072
============
CLASS A
Net assets applicable to outstanding shares $ 6,622,284
============
Shares of capital stock outstanding 671,058
============
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
============
CLASS B
Net assets applicable to outstanding shares $ 3,821,101
============
Shares of capital stock outstanding 386,906
============
Net asset value and offering price per share
outstanding $ 9.88
============
CLASS C
Net assets applicable to outstanding shares $ 1,470,413
============
Shares of capital stock outstanding 148,868
============
Net asset value and offering price per share
outstanding $ 9.88
============
CLASS I
Net assets applicable to outstanding shares $122,233,274
============
Shares of capital stock outstanding 12,359,398
============
Net asset value and offering price per share
outstanding $ 9.89
============
</Table>
156 MainStay Intermediate Term 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 3,418,920
Income from securities loaned -- net 14,956
Dividends 3,000
-----------
Total income 3,436,876
-----------
EXPENSES:
Manager 572,060
Transfer agent -- Classes A, B and C 16,360
Transfer agent -- Class I 34,177
Professional 33,426
Registration 23,954
Custodian 18,264
Distribution -- Class B 11,356
Distribution -- Class C 4,047
Portfolio pricing 13,098
Service -- Class A 9,858
Service -- Class B 3,785
Service -- Class C 1,349
Directors 7,760
Shareholder communication 6,659
Miscellaneous 15,528
-----------
Total expenses before reimbursement 771,681
Expenses reimbursement from Manager (155,371)
-----------
Net expenses 616,310
-----------
Net investment income 2,820,566
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Security transactions 1,182,811
Foreign currency transactions 18,379
-----------
Net realized gain on investments and foreign
currency transactions 1,201,190
-----------
Net change in unrealized appreciation on:
Security transactions (2,564,744)
Translation of other assets and liabilities
in foreign currencies and foreign currency
forward contracts (2,505)
-----------
Net unrealized loss on investments and foreign
currency transactions (2,567,249)
-----------
Net realized and unrealized loss on investments
and foreign currency transactions (1,366,059)
-----------
Net increase in net assets resulting from
operations $ 1,454,507
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 157
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 2,820,566 $ 5,512,283
Net realized gain on investments
and foreign currency transactions 1,201,190 1,524,551
Net change in unrealized
appreciation on investments and
foreign currency transactions (2,567,249) 1,145,004
---------------------------
Net increase in net assets
resulting from operations 1,454,507 8,181,838
---------------------------
Dividends to shareholders:
From net investment income:
Class A (131,914) (172,999)
Class B (40,616) (34,439)
Class C (15,022) (12,080)
Class I (2,616,199) (5,382,172)
Service Class -- (34,690)
---------------------------
Total dividends to shareholders (2,803,751) (5,636,380)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 1,751,198 9,342,314
Class B 1,481,650 3,085,894
Class C 779,835 1,131,696
Class I 9,315,416 41,460,887
Service Class -- 122,232
Net asset value of shares issued
in connection with acquisition of
Eclipse Core Bond Plus Fund: -- 26,793,396
Net asset value of shares issued
to shareholders in reinvestment
of dividends:
Class A 119,671 160,488
Class B 33,121 26,657
Class C 12,319 8,931
Class I 2,123,111 4,629,462
Service Class -- 34,517
---------------------------
15,616,321 86,796,474
</Table>
<Table>
<Caption>
2005 2004
Cost of shares redeemed:
Class A $ (3,232,484) $ (1,514,090)
Class B (396,365) (415,152)
Class C (250,405) (205,362)
Class I (42,614,115) (53,701,731)
Service Class -- (5,930,466)
---------------------------
(46,493,369) (61,766,801)
---------------------------
Increase (decrease) in net
assets derived from capital
share transactions (30,877,048) 25,029,673
---------------------------
Net increase (decrease) in net
assets (32,226,292) 27,575,131
NET ASSETS:
Beginning of period 166,373,364 138,798,233
---------------------------
End of period $134,147,072 $166,373,364
===========================
Accumulated undistributed net
investment income at end of
period $ 130,804 $ 113,989
===========================
</Table>
158 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
This page intentionally left blank
159
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- ---------------------------
JANUARY 2, JANUARY 2, JANUARY 2,
SIX MONTHS 2004* SIX MONTHS 2004* SIX MONTHS 2004*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2005** 2004 2005** 2004 2005** 2004
Net asset value at beginning
of period $ 9.98 $ 9.86 $ 9.99 $ 9.86 $ 9.99 $ 9.86
------ ------ ------ ------ ------ ------
Net investment income 0.17 0.25 0.13 0.19 0.13 0.19
Net realized and unrealized
gain (loss) on investments (0.12) 0.12 (0.11) 0.13 (0.11) 0.13
Net realized and unrealized
gain (loss) on foreign
currency transactions (0.00)(a) -- (0.00)(a) -- (0.00)(a) --
------ ------ ------ ------ ------ ------
Total from investment
operations 0.05 0.37 0.02 0.32 0.02 0.32
------ ------ ------ ------ ------ ------
Less dividends:
From net investment income (0.16) (0.25) (0.13) (0.19) (0.13) (0.19)
------ ------ ------ ------ ------ ------
Net asset value at end of
period $ 9.87 $ 9.98 $ 9.88 $ 9.99 $ 9.88 $ 9.99
====== ====== ====== ====== ====== ======
Total investment return (b) 0.55%(c) 3.79%(c) 0.19%(c) 3.25%(c) 0.19%(c) 3.25%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.25%+ 2.89%+ 2.50%+ 2.14%+ 2.50%+ 2.14%+
Net expenses 1.22%+ 1.19%+ 1.97%+ 1.94%+ 1.97%+ 1.94%+
Expenses (before
reimbursement) 1.43%+ 1.37%+ 2.18%+ 2.12%+ 2.18%+ 2.12%+
Portfolio turnover rate 97%(d) 193% 97%(d) 193% 97%(d) 193%
Net assets at end of period
(in 000's) $6,622 $8,084 $3,821 $2,732 $1,470 $ 937
</Table>
<Table>
* Commencement of Operations.
** Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
(d) The portfolio turnover rate not including mortgage dollar rolls for the six months ending
April 30, 2005 is 42%.
(e) Per share data based on average shares outstanding during the period.
(f) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000, have not
been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
CLASS I
Decrease net investment income ($0.02)
Increase net realized and unrealized gains and losses 0.02
Decrease ratio of net investment income (0.21%)
</Table>
160 MainStay Intermediate Term 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
<Table>
<Caption>
CLASS I
- ----------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005** 2004 2003 2002 2001 2000
$ 10.00 $ 9.83 $ 9.66 $ 10.32 $ 9.75 $ 9.75
-------- -------- -------- -------- -------- --------
0.19 0.34 0.36(e) 0.45(e) 0.55(e)(f) 0.57
(0.11) 0.17 0.18 (0.30) 0.76(f) (0.01)
)(a) -- -- -- -- --
(0.00
-------- -------- -------- -------- -------- --------
0.08 0.51 0.54 0.15 1.31 0.56
-------- -------- -------- -------- -------- --------
(0.19) (0.34) (0.37) (0.81) (0.74) (0.56)
-------- -------- -------- -------- -------- --------
$ 9.89 $ 10.00 $ 9.83 $ 9.66 $ 10.32 $ 9.75
======== ======== ======== ======== ======== ========
0.79%(c) 5.30% 5.69% 1.73% 14.06% 6.21%
3.72%+ 3.33% 3.66% 4.62% 5.53%(f) 6.05%
0.75%+ 0.75% 0.75% 0.75% 0.75% 0.75%
0.96%+ 0.93% 0.90% 0.91% 0.88% 0.83%
97%(d) 193% 153% 159% 257% 361%
$122,233 $154,620 $133,041 $130,813 $116,344 $193,466
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 161
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
SERVICE CLASS++
--------------------------------------------------------------
NOVEMBER 1,
2003
THROUGH
JANUARY 9, YEAR ENDED DECEMBER 31,
2004 2003 2002 2001 2000
Net asset value at beginning of period $ 9.81 $9.64 $10.28 $ 9.70 $9.69
------ ------ ------ ------ ------
Net investment income 0.05 0.34 (d) 0.42 (d) 0.53 (d)(e) 0.55
Net realized and unrealized gain (loss)
on investments 0.17 0.18 (0.28) 0.76 (e) (0.01)
------ ------ ------ ------ ------
Total from investment operations 0.22 0.52 0.14 1.29 0.54
------ ------ ------ ------ ------
Less dividends:
From net investment income (0.06) (0.35) (0.78) (0.71) (0.53)
------ ------ ------ ------ ------
Net asset value at end of period $ 9.97 $9.81 $ 9.64 $10.28 $9.70
====== ====== ====== ====== ======
Total investment return (b) 2.24%(c) 5.43% 1.57% 13.87% 5.96%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.22%+ 3.41% 4.37% 5.28%(e) 5.80%
Net expenses 1.00%+ 1.00% 1.00% 1.00% 1.00%
Expenses (before reimbursement) 1.15%+ 1.15% 1.16% 1.13% 1.08%
Portfolio turnover rate 35% 153% 159% 257% 361%
Net assets at end of period (in 000's) $ 0 $5,757 $5,879 $4,981 $3,181
<Caption>
SERVICE CLASS++
-----------------------------
JANUARY 1,
THROUGH YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999* 1998
Net asset value at beginning of period $ 9.88 $ 9.68
------ ------
Net investment income 0.47 0.54
Net realized and unrealized gain (loss)
on investments (0.66) 0.20
------ ------
Total from investment operations (0.19) 0.74
------ ------
Less dividends:
From net investment income (0.00)(a) (0.54)
------ ------
Net asset value at end of period $ 9.69 $ 9.88
====== ======
Total investment return (b) (1.92%)(c) 7.73%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 5.30%+ 5.32%
Net expenses 1.00%+ 1.00%
Expenses (before reimbursement) 1.10%+ 1.11%
Portfolio turnover rate 245% 335%
Net assets at end of period (in 000's) $3,742 $4,290
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
+ Annualized.
++ Service Class ceased operations on January 9, 2004.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges. Service Class is not subject to
sales charges.
(c) Total return is not annualized.
(d) Per share data based on average shares outstanding during the period.
(e) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000, have not
been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
SERVICE CLASS
Decrease net investment income ($0.02)
Increase net realized and unrealized gains and losses 0.02
Decrease ratio of net investment income (0.21%)
</Table>
162 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
MAINSTAY SHORT TERM BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------
With sales charges -3.27% -2.55% 3.34% 4.23%
Excluding sales charges -0.28 0.46 3.97 4.55
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY SHORT TERM CITIGROUP 1-3 YEAR CITIGROUP 1-3 YEAR U.S.
BOND FUND TREASURY INDEX TREASURY AGENCY INDEX
------------------- ------------------ -----------------------
4/30/95 9700 10000 10000
10288 10680 10680
10859 11332 11335
11548 12141 12145
12125 12862 12867
12460 13327 13334
13645 14612 14639
14273 15530 15604
14981 16370 16488
15066 16549 16687
4/30/05 15136 16747 16905
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
-0.03% 1.01% 4.28% 4.83%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY SHORT TERM CITIGROUP 1-3 YEAR CITIGROUP 1-3 YEAR U.S.
BOND FUND TREASURY INDEX TREASURY AGENCY INDEX
------------------- ------------------ -----------------------
4/30/95 10000 10000 10000
10631 10680 10680
11248 11332 11335
11989 12141 12145
12619 12862 12867
13000 13327 13334
14269 14612 14639
14958 15530 15604
15738 16370 16488
15868 16549 16687
4/30/05 16028 16747 16905
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------------------------------
Citigroup 1-3 Year Treasury Index(1) 0.00% 1.19% 4.67% 5.29%
Citigroup 1-3 Year U.S. Treasury Agency Index(2) 0.04 1.30 4.86 5.39
Average Lipper short U.S. government fund(3) 0.10 1.02 4.16 4.69
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 3% and an annual 12b-1
fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have
no annual 12b-1 fee, and are generally available to corporate and institutional
investors with a minimum initial investment of $5 million. Performance figures
reflect certain fee waivers and/or expense limitations, without which total
returns may have been lower. The fee waivers and/or expense limitations are
voluntary and may be discontinued at any time. From inception (1/2/91) through
12/31/03, performance for Class A shares (first offered 1/2/04) includes the
historical performance of Class I shares adjusted to reflect the applicable
sales charge and fees and expenses for Class A shares.
1. The Citigroup 1-3 Year Treasury Index is an unmanaged index comprised of U.S.
Treasury notes and bonds with maturities of one year or greater, but less
than three years (minimum amount outstanding is $1 billion per issue).
Results assume reinvestment of all income and capital gains. An investment
cannot be made directly into an index.
2. MainStay Short Term Bond Fund, going forward, will measure its performance
against the Citigroup 1-3 Year U.S. Treasury Agency Index. The Citigroup 1-3
Year U.S. Treasury Agency Index is an unmanaged index that is comprised of
U.S. Treasury notes (minimum amount outstanding is $1 billion per issue) and
agency securities (minimum amount outstanding is $200 million per issue) with
maturities of one year or greater, but less than three years. Results assume
reinvestment of all income and capital gains. The Citigroup 1-3 Year U.S.
Treasury Agency Index is considered to be the Fund's broad-based securities
market index for comparison purposed. An investment cannot be made directly
into an index.
3. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
www.mainstayfunds.com 163
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY SHORT TERM BOND FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $997.15 $5.50 $1,019.45 $5.56
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $999.70 $2.97 $1,022.00 $3.01
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.11% for Class A, and 0.60% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 181 (to reflect the
one-half year period).
164 MainStay Short Term Bond Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 84.7%
Short-Term Investments (collateral from securities lending is 20.0%) 20.0%
Mortgage-Backed Securities 6.4%
Corporate Bonds 4.8%
Asset-Backed Securities 1.9%
Foreign Corporate Bond 0.3%
Liabilities in Excess of Cash and Other Assets (18.1)%
</Table>
See Portfolio of Investments on page 167 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Note 3.375%, due 2/15/08
2. United States Treasury Note 4.625%, due 5/15/06
3. United States Treasury Note 2.375%, due 8/15/06
4. United States Treasury Note 3.50%, due 11/15/06
5. Federal National Mortgage Association 5.50%, due
5/2/06
6. Federal National Mortgage Association 1.75%, due
6/16/06
7. United States Treasury Note 1.625%, due 2/28/06
8. Federal National Mortgage Association 4.75%, due
1/2/07
9. Federal Home Loan Bank 3.625%, due 2/16/07
10. Federal National Mortgage Association 6.625%,
due 9/15/09
</Table>
www.mainstayfunds.com 165
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Claude Athaide, Ph.D., CFA, and Gary
Goodenough of MacKay Shields LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests at least 80% of its assets in an actively managed,
diversified portfolio of fixed-income securities. Normally, the Fund will have a
dollar-weighted average maturity of three years or less. In implementing this
strategy, we continually review yields and other information derived from
databases that we maintain to manage fixed-income portfolios. Fundamental
economic cycle analysis, credit quality, and interest rate trends are the
principal factors that we consider in determining whether to increase or
decrease the investment emphasis placed on a particular type of security or
industry sector within the Fund's portfolio.
WHAT WAS THE ECONOMIC AND INTEREST-RATE ENVIRONMENT DURING THE REPORTING PERIOD?
According to preliminary estimates, real gross domestic product increased at a
seasonally adjusted annual rate of 3.5% in the first quarter of 2005, after
growing 3.8% in the fourth quarter of 2004. The Federal Open Market Committee
met four times during the six months ended April 30, 2005, and raised the
targeted federal funds rate 25 basis points at each meeting. (A basis point is
1/100th of one percentage point.) These four rate hikes brought the targeted
federal funds rate from 1.75% at the beginning of the reporting period to 2.75%
at the end of April. During the six-month period, yields on two-year Treasury
notes rose from 2.56% to 3.65%. The yield curve flattened substantially during
the six-month reporting period.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
The Fund was positioned to benefit from a flattening yield curve during the
reporting period. In fact, the spread(1) between one-year and three-year
constant-maturity Treasurys declined from 54 basis points to 40 basis points
during the six-month period.
Shorter-maturity agency-security spreads were generally unchanged over the six
months ended April 30, 2005, while longer-maturity agency-security spreads
tightened. Swap spreads(2) and corporate spreads widened. Spreads in the
automotive sector of the corporate bond market were extremely volatile, since
both General Motors and Ford issued profit warnings during the period. We
reduced the Fund's exposure to corporate bonds from about 17.6% to 5.1% during
the six-month period and reallocated those assets primarily into U.S. Treasurys.
As a result, the Fund's allocation to U.S. Treasurys increased from 33.4% at the
end of October 2004 to approximately 49% at the end of April 2005.
WHAT DO YOU ANTICIPATE GOING FORWARD?
Economic data released in April 2005 was generally weaker than the markets
expected, sparking a decline in interest rates. The yield on the benchmark
two-year Treasury note declined from 3.79% to 3.65% during the month of April.
At the same time, statements from the Federal Open Market Committee became
noticeably more hawkish, especially with respect to the inflation outlook.
Given this environment, we allowed the duration of the Fund to shorten relative
to the Citigroup 1-3 Year U.S. Treasury Agency Index(3) toward the end of the
reporting period, because we felt that the difference between the yield on the
two-year Treasury note and the targeted federal funds rate was too small. We
intend to maintain this shorter duration until market conditions change.
The Fund may invest in derivatives, which may increase the volatility of the
Fund's net asset value and may result in a loss to the Fund. Funds that invest
in bonds are subject to credit, inflation, and interest-rate risk and can lose
principal value when interest rates rise.
1. The terms "spread" and "yield spread" refer to the difference in yield
between a specific 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.
2. The term "swap spread" refers to the difference in yield between a fixed
interest-rate swap and a U.S. Treasury bond of equal maturity. For example, a
10-year swap, bid at 7.66% when the 10-year Treasury is yielding 7.32%, has a
swap spread of 34 basis points (7.66% - 7.32%). A bond swap is the
simultaneous sale of one bond issue and purchase of another. Yield swaps seek
to improve return.
3. See footnote on page 163 for more information about the Citigroup 1-3 Year
U.S. Treasury Agency Index.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
166 MainStay Short Term Bond Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (98.1%)+
ASSET-BACKED SECURITIES (1.9%)
- ------------------------------------------------------------------------------
CONSUMER FINANCE (0.8%)
BMW Vehicle Owner Trust
Class 2003-A Series A3
1.94%, due 2/25/07 $ 76,020 $ 75,708
Harley-Davidson Motorcycle Trust
Series 2002-1 Class A2
4.50%, due 1/15/10 353,859 356,130
Volkswagen Auto Loan Enhanced Trust
Series 2003-2 Class A3
2.27%, due 10/22/07 310,000 307,306
------------
739,144
------------
CONSUMER LOANS (0.9%)
Atlantic City Electric Transition Funding LLC
Series 2002-1 Class A1
2.89%, due 7/20/08 875,145 859,829
------------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
Capital One Master Trust
Series 2001-5 Class A
5.30%, due 6/15/09 110,000 111,984
------------
THRIFTS & MORTGAGE FINANCE (0.1%)
Vanderbilt Mortgage Finance
Series 1999-B Class 1A4
6.545%, due 4/7/18 107,853 109,414
------------
Total Asset-Backed Securities
(Cost $1,845,234) 1,820,371
------------
CORPORATE BONDS (4.8%)
- ------------------------------------------------------------------------------
BEVERAGES (0.7%)
Coca-Cola Co. (The)
4.00%, due 6/1/05 630,000 630,354
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.5%)
BellSouth Telecommunications, Inc.
6.50%, due 6/15/05 470,000 471,771
------------
ELECTRICAL EQUIPMENT (0.3%)
Emerson Electric Co.
7.875%, due 6/1/05 300,000 301,029
------------
FOOD PRODUCTS (1.3%)
Cargill, Inc.
6.25%, due 5/1/06 (a) 1,210,000 1,237,769
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
HEALTH CARE PROVIDERS & SERVICES (2.0%)
Quest Diagnostics, Inc.
6.75%, due 7/12/06 $ 1,860,000 $ 1,916,888
------------
Total Corporate Bonds
(Cost $4,606,987) 4,557,811
------------
FOREIGN CORPORATE BOND (0.3%)
- ------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (0.3%)
PSA Corp. Ltd.
7.125%, due 8/1/05 (a) 300,000 302,430
------------
Total Foreign Corporate Bond
(Cost $302,923) 302,430
------------
MORTGAGE-BACKED SECURITIES (6.4%)
- ------------------------------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (6.4%)
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1 Class A1
4.907%, due 5/11/35 532,742 539,364
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2004-CB9 Series A1
3.475%, due 6/12/41 1,503,163 1,475,152
LB-UBS Commercial Mortgage Trust
Series 2004-C2 Class A2
3.246%, due 3/15/29 470,000 451,162
Series 2004-C7 Class A1
3.625%, due 10/15/29 668,374 659,216
Merrill Lynch Mortgage Trust
Series 2004-MKB1 Class A1
3.563%, due 2/12/42 1,412,205 1,393,149
Morgan Stanley Capital I
Series 2003-IQ5 Class A1
3.02%, due 4/15/38 475,181 464,379
Wachovia Bank National Association
Series 2004-C14 Class A1
3.477%, due 8/15/41 (b) 1,039,859 1,023,776
------------
Total Mortgage-Backed Securities
(Cost $6,102,917) 6,006,198
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. 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. www.mainstayfunds.com 167
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (84.7%)
- ------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (7.0%)
2.125%, due 8/15/05 $ 1,000,000 $ 997,081
2.15%, due 2/17/06 3,080,000 3,046,727
3.30%, due 9/14/07 2,680,000 2,638,530
------------
6,682,338
------------
FEDERAL HOME LOAN BANK (6.8%)
Series 1
V 3.625%, due 2/16/07 3,880,000 3,863,537
4.125%, due 4/18/08 2,550,000 2,557,597
------------
6,421,134
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.1%)
Series 1364 Class K
5.00%, due 9/15/07 87,650 87,888
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE-PASS THROUGH SECURITY) (0.1%)
5.00%, due 1/1/07 60,300 61,264
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (20.6%)
V 1.75%, due 6/16/06 5,961,000 5,834,663
3.15%, due 5/28/08 330,000 321,405
V 4.75%, due 1/2/07 4,050,000 4,098,345
V 5.50%, due 5/2/06 6,100,000 6,203,706
V 6.625%, due 9/15/09 2,845,000 3,118,134
------------
19,576,253
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.5%)
Series 1998-M6 Class A2
6.32%, due 8/15/08 422,827 444,429
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (1.0%)
4.50%, due 11/1/18 780,223 773,652
7.50%, due 4/1/31 117,250 126,100
------------
899,752
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
UNITED STATES TREASURY NOTES (48.6%)
V 1.625%, due 2/28/06 $ 4,815,000 $ 4,747,855
V 2.375%, due 8/15/06 8,700,000 8,577,313
3.00%, due 11/15/07 185,000 181,921
V 3.375%, due 2/15/08 (c) 12,350,000 12,240,974
V 3.50%, due 11/15/06 (c) 8,185,000 8,179,565
4.375%, due 5/15/07 540,000 547,615
V 4.625%, due 5/15/06 (c) 11,325,000 11,463,912
------------
45,939,155
------------
Total U.S. Government &
Federal Agencies
(Cost $80,619,789) 80,112,213
------------
Total Long-Term Bonds
(Cost $93,477,850) 92,799,023
------------
<Caption>
SHARES
SHORT-TERM INVESTMENTS (20.0%)
- ------------------------------------------------------------------------------
INVESTMENT COMPANY (1.9%)
AIM Institutional Funds Group (d) 1,782,658 1,782,658
------------
Total Investment Company
(Cost $1,782,658) 1,782,658
------------
<Caption>
PRINCIPAL
AMOUNT
MASTER NOTE (4.1%)
Banc of America Securities LLC
3.08%, due 5/2/05 (d) $ 3,900,000 3,900,000
------------
Total Master Note
(Cost $3,900,000) 3,900,000
------------
REPURCHASE AGREEMENTS (14.0%)
Credit Suisse First Boston LLC
3.0499%, dated 4/29/05
due 5/2/05
Proceeds at Maturity
$2,950,750 (d)
(Collateralized by Various Bonds
with a Principal Amount of
$3,097,439 and a Market Value of $3,009,078) 2,950,000 2,950,000
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
168 MainStay Short Term Bond Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (CONTINUED)
Deutsche Bank Securities, Inc.
3.06%, dated 4/29/05
due 5/2/05
Proceeds at Maturity
$1,000,255 (d)
(Collateralized by Various Bonds
with a Principal Amount of $1,005,183 and a
Market Value of $1,020,000) $ 1,000,000 $ 1,000,000
Dresdner Kleinwort Wasserstein Securities, LLC
3.07%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $500,128 (d)
(Collateralized by Various Bonds
with a Principal Amount of
$526,543 and a Market Value of $525,004) 500,000 500,000
Merrill Lynch Pierce Fenner & Smith, Inc.
3.0799%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $4,001,027 (d)
(Collateralized by Various Bonds
with a Principal Amount of
$4,052,649 and a Market Value of $4,200,036) 4,000,000 4,000,000
Morgan Stanley & Co., Inc.
3.0504%, dated 4/29/05
due 5/2/05
Proceeds at Maturity
$300,076 (d)
(Collateralized by Various Bonds with a
Principal Amount of $322,976 and a Market Value
of $309,742) 300,000 300,000
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REPURCHASE AGREEMENTS (CONTINUED)
Wachovia Capital Markets, LLC
3.07%, dated 4/29/05
due 5/2/05
Proceeds at Maturity $4,501,151 (d)
(Collateralized by Various Bonds
with a Principal Amount of
$10,588,453 and a Market Value of $4,637,853) $ 4,500,000 $ 4,500,000
------------
Total Repurchase Agreements
(Cost $13,250,000) 13,250,000
------------
Total Short-Term Investments
(Cost $18,932,658) 18,932,658
------------
Total Investments
(Cost $112,410,508) (e) 118.1% 111,731,681(f)
Liabilities in Excess of
Cash and Other Assets (18.1) (17,089,431)
----------- ------------
Net Assets 100.0% $ 94,642,250
=========== ============
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at April 30, 2005.
(c) Represents securities out on loan or a portion which is out on loan.
(d) Represents a security or a portion thereof, purchased with cash collateral
received for securities on loan.
(e) The cost for federal income tax purposes is $112,436,878.
(f) At April 30, 2005 net unrealized depreciation was $705,197, based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $25,727 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $730,924.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 169
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $112,410,508) including
$18,441,468 market value of securities
loaned $111,731,681
Cash 933,881
Receivables:
Interest 1,036,781
Fund shares sold 169,115
Other assets 20,101
------------
Total assets 113,891,559
------------
LIABILITIES:
Securities lending collateral 18,932,658
Payables:
Fund shares redeemed 118,890
Manager 32,123
Transfer agent 13,759
Custodian 2,510
NYLIFE Distributors 1,347
Accrued expenses 38,799
Dividend payable 109,223
------------
Total liabilities 19,249,309
------------
Net assets $ 94,642,250
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 732
Class I 9,612
Additional paid-in capital 98,190,991
Accumulated distribution in excess of net
investment income (90,429)
Accumulated net realized loss on investments (2,789,828)
Net unrealized depreciation on investments (678,828)
------------
Net assets $ 94,642,250
============
CLASS A
Net assets applicable to outstanding shares $ 6,683,551
============
Shares of capital stock outstanding 732,100
============
Net asset value per share outstanding $ 9.13
Maximum sales charge (3.00% of offering price) 0.28
------------
Maximum offering price per share outstanding $ 9.41
============
CLASS I
Net assets applicable to outstanding shares $ 87,958,699
============
Shares of capital stock outstanding 9,612,358
============
Net asset value and offering price per share
outstanding $ 9.15
============
</Table>
170 MainStay Short Term 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 1,403,641
Income from securities loaned -- net 22,981
-----------
Total income 1,426,622
-----------
EXPENSES:
Manager 292,970
Professional 24,798
Registration 15,451
Transfer agent -- Class A 7,958
Transfer agent -- Class I 13,230
Custodian 7,496
Service -- Class A 6,827
Directors 5,318
Shareholder communication 4,778
Portfolio pricing 4,697
Miscellaneous 11,191
-----------
Total expenses before reimbursement 394,714
Expense reimbursement from Manager (87,597)
-----------
Net expenses 307,117
-----------
Net investment income 1,119,505
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (687,807)
Net change in unrealized depreciation on
investments (516,290)
-----------
Net realized and unrealized loss on investments (1,204,097)
-----------
Net decrease in net assets resulting from
operations $ (84,592)
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 171
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income $ 1,119,505 $ 1,825,945
Net realized loss on investments (687,807) (308,327)
Net change in unrealized
appreciation (depreciation) on
investments (516,290) (301,216)
---------------------------
Net increase (decrease) in net
assets resulting from operations (84,592) 1,216,402
---------------------------
Dividends to shareholders:
From net investment income:
Class A (52,887) (99,114)
Class I (1,066,407) (1,827,034)
Service Class -- (1,630)
Return of capital:
Class A -- (4,736)
Class I -- (87,299)
Service Class -- (78)
---------------------------
Total dividends to shareholders (1,119,294) (2,019,891)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 2,245,811 20,321,429
Class I 4,212,009 18,601,113
Service Class -- 17,020
Net asset value of shares issued
in connection with acquisition of
Eclipse Ultra Short Duration
Fund:
Class I -- 74,520,760
Service Class -- 218,328
Net asset value of shares issued
to shareholders in reinvestment
of dividends:
Class A 46,223 90,912
Class I 468,627 929,769
Service Class -- 1,608
---------------------------
6,972,670 114,700,939
Cost of shares redeemed:
Class A (740,480) (15,105,952)
Class I (10,979,871) (33,490,788)
Service Class -- (780,868)
---------------------------
(11,720,351) (49,377,608)
---------------------------
Increase (decrease) in net
assets derived from capital
share transactions (4,747,681) 65,323,331
---------------------------
Net increase (decrease) in net
assets (5,951,567) 64,519,842
NET ASSETS:
Beginning of period 100,593,817 36,073,975
---------------------------
End of period $ 94,642,250 $100,593,817
===========================
Accumulated distribution in excess
of net investment income at end
of period $ (90,429) $ (90,640)
===========================
</Table>
172 MainStay Short Term Bond Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
This page intentionally left blank
173
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
--------------------------- ---------------------------------------
JANUARY 2,
SIX MONTHS 2004** SIX MONTHS
ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, APRIL 30, YEAR ENDED OCTOBER 31,
2005*** 2004 2005*** 2004 2003
Net asset value at beginning
of period $ 9.24 $ 9.32 $ 9.26 $ 9.31 $ 9.34
------ ------ ------- ------- -------
Net investment income 0.09 0.06 0.11 0.17 0.19
Net realized and unrealized
gain (loss) on Investments (0.12) (0.01) (0.11) (0.03) (0.01)
------ ------ ------- ------- -------
Total from investment
operations (0.03) 0.05 0.00(e) 0.14 0.18
------ ------ ------- ------- -------
Less dividends:
From net investment income (0.08) (0.12) (0.11) (0.18) (0.21)
Return of capital -- (0.01) -- (0.01) --
------ ------ ------- ------- -------
Total dividends and
distributions (0.08) (0.13) (0.11) (0.19) (0.21)
------ ------ ------- ------- -------
Net asset value at end of
period $ 9.13 $ 9.24 $ 9.15 $ 9.26 $ 9.31
====== ====== ======= ======= =======
Total investment return (b) (0.28%)(c) 0.57%(c) (0.03%)(c) 1.50% 1.94%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.19%+ 1.43%+ 1.70%+ 1.83% 2.02%
Net expenses 1.11%+ 1.00%+ 0.60%+ 0.60% 0.60%
Expenses (before
reimbursement) 1.29%+ 1.18%+ 0.78%+ 0.78% 0.98%
Portfolio turnover rate 67% 151% 67% 151% 173%
Net assets at end of period
(in 000's) $6,684 $5,192 $87,959 $95,402 $35,532
<Caption>
CLASS I
---------------------------------
YEAR ENDED OCTOBER 31,
2002 2001 2000
Net asset value at beginning
of period $ 9.57 $ 9.36 $ 9.63
------- ------- -------
Net investment income 0.29(a) 0.47(f) 0.57(a)
Net realized and unrealized
gain (loss) on Investments 0.00(e) 0.48(f) (0.03)
------- ------- -------
Total from investment
operations 0.29 0.95 0.54
------- ------- -------
Less dividends:
From net investment income (0.52) (0.74) (0.81)
Return of capital -- -- --
------- ------- -------
Total dividends and
distributions (0.52) (0.74) (0.81)
------- ------- -------
Net asset value at end of
period $ 9.34 $ 9.57 $ 9.36
======= ======= =======
Total investment return (b) 3.21% 10.68% 6.05%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.13% 4.93%(f) 6.20%
Net expenses 0.60% 0.60% 0.61%(d)
Expenses (before
reimbursement) 0.96% 1.03% 0.99%
Portfolio turnover rate 228% 149% 165%
Net assets at end of period
(in 000's) $37,201 $30,065 $31,146
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges. Class I and Service Class are not
subject to sales charges.
(c) Total return is not annualized.
(d) The effect of non-reimbursable interest expense on the expense ratio was 0.01%.
(e) Less than one cent per share.
(f) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000, have not
been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
CLASS I SERVICE CLASS
Decrease net investment income ($0.12) ($0.11)
Increase net realized and unrealized gains and losses 0.12 0.11
Decrease ratio of net investment income (1.26%) (1.20%)
</Table>
174 MainStay Short Term 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
<Table>
<Caption>
SERVICE CLASS++
- --------------------------------------------------------------------------------------------------
NOVEMBER 1,
2003 JANUARY 1,
THROUGH THROUGH YEAR ENDED
JANUARY 9, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2004 2003 2002 2001 2000 1999* 1998
$ 9.29 $ 9.32 $ 9.54 $ 9.32 $ 9.59 $ 9.41 $ 9.38
------ ------ ------ ------ ------ ------ ------
0.03 0.16 0.27(a) 0.45(f) 0.54(a) 0.45 0.53
0.06 (0.00)(e) 0.00(e) 0.48(f) (0.03) (0.27) 0.03
------ ------ ------ ------ ------ ------ ------
0.09 0.16 0.27 0.93 0.51 0.18 0.56
------ ------ ------ ------ ------ ------ ------
(0.03) (0.19) (0.49) (0.71) (0.78) -- (0.53)
(0.00)(e) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
(0.03) (0.19) (0.49) (0.71) (0.78) -- (0.53)
------ ------ ------ ------ ------ ------ ------
$ 9.35 $ 9.29 $ 9.32 $ 9.54 $ 9.32 $ 9.59 $ 9.41
====== ====== ====== ====== ====== ====== ======
0.93%(c) 1.69% 2.93% 10.46% 5.78% 1.91%(c) 5.98%
1.29%+ 1.77% 2.88% 4.68%(f) 5.95% 5.17%+ 5.70%
0.85%+ 0.85% 0.85% 0.85% 0.86%(d) 0.85%+ 0.85%
1.06%+ 1.23% 1.21% 1.28% 1.24% 1.10%+ 1.14%
90% 173% 228% 149% 165% 105% 125%
$ 0 $ 542 $ 733 $1,032 $1,061 $1,036 $1,273
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 175
MAINSTAY ASSET MANAGER FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM INITIAL SALES CHARGE 5.5%
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -3.22% 0.18% -0.66% 8.66%
Excluding sales charges 2.41 6.01 0.47 9.28
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
4/30/95 9450 10000 10000 10000
11673 13021 12079 10855
13772 16294 14206 11637
18010 22985 18152 12914
20694 28001 21025 13728
22415 30837 22526 13889
21525 26837 21679 15608
20545 23448 20585 16832
18945 20328 19624 18591
21643 24979 22383 18941
4/30/05 22945 26562 23654 19961
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -3.00% 0.19% -0.61% 8.51%
Excluding sales charges 2.00 5.19 -0.26 8.51
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
4/30/95 10000 10000 10000 10000
12261 13021 12079 10855
14362 16294 14206 11637
18658 22985 18152 12914
21300 28001 21025 13728
22929 30837 22526 13889
21871 26837 21679 15608
20726 23448 20585 16832
18966 20328 19624 18591
21520 24979 22383 18941
4/30/05 22636 26562 23654 19961
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges 1.00% 4.27% -0.28% 8.48%
Excluding sales charges 2.00 5.27 -0.28 8.48
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
4/30/95 10000 10000 10000 10000
12260 13021 12079 10855
14362 16294 14206 11637
18636 22985 18152 12914
21275 28001 21025 13728
22879 30837 22526 13889
21813 26837 21679 15608
20677 23448 20585 16832
18913 20328 19624 18591
21431 24979 22383 18941
4/30/05 22561 26562 23654 19961
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C
shares are sold with no initial sales charge, are subject to a CDSC of 1% if
redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%.
Class I shares are sold with no initial sales charge or CDSC, have no annual
12b-1 fee, and are generally available to corporate and institutional investors
with a minimum initial investment of $5 million. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns may
have been lower. The fee waivers and/or expense limitations are voluntary and
may be discontinued at
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
176 MainStay Asset Manager Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
2.51% 6.17% 0.68% 9.49%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
4/30/95 10000 10000 10000 10000
12371 13021 12079 10855
14630 16294 14206 11637
19159 22985 18152 12914
22058 28001 21025 13728
23937 30837 22526 13889
23018 26837 21679 15608
22030 23448 20585 16832
20359 20328 19624 18591
23317 24979 22383 18941
4/30/05 24757 26562 23654 19961
</Table>
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------------------------------
Asset Manager Composite Index(1) 2.44% 5.68% 0.98% 8.99%
S&P 500(R) Index(2) 3.28 6.34 -2.94 10.26
Citigroup Broad Investment Grade (BIG) Bond Index(3) 1.01 5.39 7.52 7.16
Average Lipper flexible portfolio fund(4) 2.80 6.09 0.80 7.95
</Table>
any time. From inception (1/2/91) through 12/31/03, performance for Class A and
B shares (each first offered 1/2/04) includes the historical performance of
Class I shares adjusted to reflect the applicable sales charge (or CDSC) and
fees and expenses for Class A and B shares. Prior to 1/2/04, the Fund offered
Class L shares, which were subject to a 1% sales charge and a 1% CDSC on
redemptions within one year of purchase. From inception through 12/29/02,
performance for Class L shares (first offered 12/30/02) includes the historical
performance of Class I shares adjusted to reflect the applicable sales charge,
CDSC, and fees and expenses for Class L shares. Effective 1/02/04, all
outstanding Class L shares of the Fund were converted to Class C shares,
redesignated Class C shares, or both.
1. The Asset Manager Composite Index is comprised of the S&P 500(R) Index, the
Citigroup Broad Investment Grade (BIG) Bond Index, and the Citigroup 1-Month
T-Bill Index weighted 60%/30%/10%, respectively. The S&P 500(R) Index is an
unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock market performance. The Citigroup Broad Investment Grade
(BIG) Bond Index--The Citigroup BIG Bond Index--is an unmanaged index that is
considered representative of the U.S. investment-grade bond market. The
Citigroup 1-Month T-Bill Index includes the monthly return equivalents of
yield averages that are not marked to market. The Index is an average of the
last one-month Treasury bill issue. Results for all indices assume
reinvestment of all income and capital gains. The Asset Manager Composite
Index is considered to be the Fund's broad-based securities-market index for
comparison purposes. An investment cannot be made directly into an index.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc., and has been
licensed for use. Standard & Poor's does not sponsor, endorse, sell, or
promote the Fund or represent the advisability of investing in the Fund. The
S&P 500(R) is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock-market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
3. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG Bond
Index--is an unmanaged index that is considered representative of the U.S.
investment-grade bond market. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index.
4. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 177
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ASSET MANAGER FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,024.20 $5.42 $1,019.60 $5.41
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,020.15 $9.17 $1,015.85 $9.15
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,020.15 $9.17 $1,015.85 $9.15
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,025.15 $4.17 $1,020.85 $4.16
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.08% for Class A, 1.83% for Class B and Class C, and 0.83% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 181 (to reflect the one-half year period).
178 MainStay Asset Manager Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 58.4%
U.S. Government & Federal Agencies 20.5%
Short-Term Investments (collateral from securities lending is 3.6% 18.2%
Corporate Bonds 6.4%
Real Estate Investment Trusts 1.3%
Foreign Bonds 1.1%
Asset-Backed Security 0.3%
Yankee Bonds 0.1%
Liabilities in Excess of Cash and Other Assets (6.3)%
</Table>
See Portfolio of Investments on page 182 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. ExxonMobil Corp.
2. General Electric Co.
3. United States Treasury Note 4.00%, due 2/15/14
4. Johnson & Johnson
5. Microsoft Corp.
6. Gillette Co. (The)
7. Altria Group, Inc.
8. Federal National Mortgage Association (Mortgage
Pass-Through Security) 5.00%, due 5/15/34 TBA
9. Federal Home Loan Bank 2.875%, due 9/15/06
10. International Business Machines Corp.
</Table>
www.mainstayfunds.com 179
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Devon McCormick of New
York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund normally invests in three asset classes, subject to the following
constraints: 30% to 80% of its net assets in common stocks (with specific
allocation ranges for stocks that seek to track the performance of the S&P
500(R) Index, the S&P MidCap 400(R) Index, the S&P SmallCap 600(R) Index, and
the Morgan Stanley REIT(R) Index),(1) 10% to 60% of its net assets in
fixed-income securities selected to parallel the performance of the Citigroup
BIG Bond Index,(2) and 10% to 60% of its net assets in selected money-market
instruments. In implementing this strategy, we use a disciplined methodology to
determine the best allocation within the Fund's percentage constraints. We use a
proprietary model to estimate expected returns, volatilities, and correlations
on domestic and foreign stock markets and on domestic fixed-income securities.
The Fund's allocations among stocks, bonds, and money-market securities are
structured to take advantage of perceived imbalances in relative pricing.
WHAT WERE SOME OF THE MAJOR MARKET FACTORS THAT AFFECTED THE FUND'S PERFORMANCE
DURING THE REPORTING PERIOD?
For the six months ended April 30, 2005, the broadly watched equity indices
produced mixed results. During this period, mid-cap stocks performed relatively
better than their large- and small-cap counterparts. The market clearly favored
value equities over growth stocks for large- and mid-cap issues, although
different data sources suggested different style preferences among small-cap
issues.(3) Throughout much of the reporting period, the domestic equity market
was influenced by crude-oil price fluctuations, job-growth concerns, the U.S.
dollar's decline, and continuing instability in the Middle East.
HOW DID YOU POSITION THE FUND'S PORTFOLIO DURING THE SIX MONTHS ENDED APRIL 30,
2005?
During the reporting period, the Fund had an average allocation of 56% in
equities, 32% in bonds, and 12% in cash. Within the equity allocation, U.S.
equities were underweighted relative to the Fund's custom benchmark(4) by 12
percentage points, international equities were overweighted by 7 percentage
points, and REITs were overweighted by 1 percentage point. While the custom
benchmark allocates 60% to U.S. equities, the Fund's allocation averaged 48%.
Although the custom benchmark has no allocation to international equities or
REITs, international equities averaged 7% of net assets in the Fund's portfolio
and REITs averaged 1%.
HOW DID THE FUND'S EQUITIES PERFORM?
All foreign markets in the investable universe, with the exception of Japan and
Germany, outperformed the U.S. during the six-month reporting period. The
decision to invest in the equity markets of Australia (+6.16%),(5) Hong Kong
(+6.54%), Italy (+7.11%), and Spain (+6.93%) proved beneficial for the six
months ended April 30, 2005.
The economy appears to be well on its way to recovery after the 2001 recession,
and the Federal Reserve is now trying to ease inflation.
Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy. These risks
are likely to be greater in emerging markets than in developed markets. Stocks
of small companies may be subject to greater price volatility, significantly
lower trading volumes, and greater spreads between bid and ask prices than
stocks of larger companies. Small companies may be more vulnerable to adverse
business or market developments than mid- or large- capitalization companies.
The Fund may invest in derivatives, which may increase the volatility of the
Fund's net asset value and may result in a loss to the Fund.
1. "S&P 500(R) Index," "S&P MidCap 400(R) Index," and "S&P SmallCap 600(R)
Index" are trademarks of The McGraw-Hill Companies, Inc., and have been
licensed for use by the Fund. Each index is unmanaged and is considered to be
generally representative of a different capitalization segment of the U.S.
stock market. The Morgan Stanley REIT(R) Index is an unmanaged,
capitalization- weighted index of the most actively traded real estate
investment trusts (REITs) and is designed to measure real estate equity
performance. Results for all indices assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index.
2. See footnote on page 177 for more information on the Citigroup Broad
Investment Grade (BIG) Bond Index.
3. Specifically, for the six months ended April 30, 2005, the Russell 2000(R)
Growth Index underperformed the Russell 2000(R) Value Index, while the S&P
SmallCap 600/Barra Growth Index outperformed the S&P SmallCap 600/Barra Value
Index. Each of these indices is unmanaged, contains different issues, and is
considered to be generally representative of small-cap growth or small-cap
value stocks, as the index name suggests. An investment cannot be made
directly into an index.
4. See footnote on page 177 for more information on the Asset Manager Composite
Index.
5. Returns for individual markets or sectors reflect the performance of major
unmanaged indices or index components considered to be reflective of the
markets or sectors mentioned. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly into an index. Foreign
market returns are in local currency terms.
180 MainStay Asset Manager Fund
In four separate moves during the reporting period, the Federal Open Market
Committee gradually raised the targeted federal funds rate from 1.75% on October
31, 2004, to 2.75% on April 30, 2005. The rising rate environment hurt the
Fund's REIT component.
DID THE FUND'S BOND ALLOCATION HELP RESULTS?
The bond portion of the Fund's portfolio showed strong relative performance,
largely because of sector and issue selection. Of course, the Fund incurs
expenses that an unmanaged index does not. As a result, there will be times when
the bond portion of the Fund will lag the BIG Index.
For the six months ended April 30, 2005, the mortgage-backed securities of the
BIG Index showed the strongest performance, with a total return of 1.43%. In the
credit component of the BIG Index, A-rated bonds(6) returned 1.29%, and AA-rated
bonds returned 0.58%. At -0.10%, bonds rated BBB provided the weakest
performance.
HOW DID THE ACTIVELY MANAGED SEGMENTS OF THE FUND AFFECT RESULTS?
The Fund's allocation to an actively managed enhanced index fund helped returns,
since this portion of the Fund's portfolio outperformed the S&P 500(R) Index by
94 basis points for the reporting period. Similarly, the Fund's allocation to
the actively managed mid-cap strategy enhanced results, because this portion of
the Fund's portfolio outperformed the S&P MidCap 400(R) Index by 115 basis
points. The Fund's allocation to the actively managed fixed-income strategy
fared well, since this portion of the Fund's portfolio outperformed the
Citigroup BIG Bond Index by 19 basis points.
WHAT IS YOUR OUTLOOK FOR THE MARKETS AND THE FUND?
While many factors may influence the stock and bond markets, we will continue to
rely on our proprietary asset-allocation model to determine which asset classes
offer the greatest investment potential. We will continue to select investments
for the Fund's portfolio within the allocation constraints outlined in the
prospectus.
6. Debt rated AA by Standard & Poor's is deemed by Standard & Poor's to differ
from the highest-rated issues only in small degree. In the opinion of
Standard & Poor's, the obligor's capacity to meet its financial commitment on
the obligation is very strong. Debt rated A by Standard & Poor's is deemed by
Standard & Poors to be somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories. In the opinion of Standard & Poor's, however, the obligor's
capacity to meet its financial commitment on the obligation is still strong.
Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit
adequate protection parameters. It is the opinion of Standard & Poor's,
however, that adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation than would be the case for debt in higher-rated
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.
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.
www.mainstayfunds.com 181
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (28.4%)+
ASSET-BACKED SECURITY (0.3%)
- ------------------------------------------------------------------------------
CONSUMER FINANCE (0.3%)
Citibank Credit Card Issuance Trust
Series 2003-A2 Class A2
2.70%, due 1/15/06 $ 1,000,000 $ 993,862
------------
Total Asset-Backed Security
(Cost $1,004,250) 993,862
------------
CORPORATE BONDS (6.4%)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.2%)
Honeywell International, Inc.
7.50%, due 3/1/10 100,000 113,104
Lockheed Martin Corp.
7.65%, due 5/1/16 100,000 121,440
Northrop Grumman Corp.
7.13%, due 2/15/11 100,000 112,474
7.875%, due 3/1/26 50,000 64,105
Raytheon Co.
6.40%, due 12/15/18 50,000 55,307
6.75%, due 8/15/07 58,000 60,984
United Technologies Corp.
6.35%, due 3/1/11 100,000 109,272
------------
636,686
------------
AUTOMOBILES (0.1%)
DaimlerChrysler North America Holdings, Inc.
7.30%, due 1/15/12 250,000 267,779
General Motors Corp.
8.375%, due 7/15/33 (j) 250,000 190,295
------------
458,074
------------
BEVERAGES (0.1%)
Anheuser-Busch Cos., Inc.
5.75%, due 4/1/10 100,000 105,671
Coca-Cola Enterprises, Inc.
7.00%, due 5/15/98 100,000 121,835
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (c) 100,000 104,587
------------
332,093
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BUILDING PRODUCTS (0.0%) (b)
Masco Corp.
6.75%, due 3/15/06 $ 100,000 $ 102,391
------------
CAPITAL MARKETS (0.5%)
Bear Stearns Cos., Inc. (The)
5.70%, due 1/15/07 250,000 256,554
Credit Suisse FirstBoston USA, Inc.
4.625%, due 1/15/08 250,000 252,325
Goldman Sachs Group, Inc. (The)
5.70%, due 9/1/12 150,000 157,259
6.125%, due 2/15/33 100,000 105,736
JPMorgan Chase & Co.
5.75%, due 1/2/13 250,000 264,251
Lehman Brothers Holdings, Inc.
Series G
4.80%, due 3/13/14 100,000 98,906
7.00%, due 2/1/08 150,000 160,817
Merrill Lynch & Co., Inc.
Series B
4.00%, due 11/15/07 250,000 249,655
Morgan Stanley
6.60%, due 4/1/12 125,000 136,888
6.75%, due 10/15/13 125,000 139,945
------------
1,822,336
------------
CHEMICALS (0.1%)
Dow Chemical Co. (The)
5.75%, due 11/15/09 100,000 106,350
E.I. du Pont de Nemours & Co.
6.875%, due 10/15/09 100,000 110,149
------------
216,499
------------
COMMERCIAL BANKS (0.6%)
Bank of America Corp.
5.875%, due 2/15/09 500,000 526,885
Bank One Corp., Series A
6.00%, due 2/17/09 250,000 263,153
FleetBoston Financial Corp.
3.85%, due 2/15/08 250,000 247,519
PNC Bank NA, Series BKNT
5.25%, due 1/15/17 75,000 75,972
U.S. Bancorp, Series N
3.95%, due 8/23/07 250,000 249,340
Wachovia Bank National Association
4.85%, due 7/30/07 250,000 255,165
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. May be
subject to change daily.
182 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (CONTINUED)
Wachovia Corp.
6.25%, due 8/4/08 $ 100,000 $ 105,946
Wells Fargo Bank NA
6.45%, due 2/1/11 250,000 273,429
------------
1,997,409
------------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Cendant Corp.
6.25%, due 1/15/08 100,000 104,232
Waste Management, Inc.
7.375%, due 8/1/10 100,000 111,931
------------
216,163
------------
COMMUNICATIONS EQUIPMENT (0.1%)
Motorola, Inc.
4.61%, due 11/16/07 100,000 100,704
5.80%, due 10/15/08 100,000 104,151
------------
204,855
------------
COMPUTERS & PERIPHERALS (0.1%)
International Business Machines Corp.
4.25%, due 9/15/09 250,000 249,300
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CONSUMER FINANCE (0.7%)
American General Finance Corp.
Series H
4.50%, due 11/15/07 $ 250,000 $ 250,718
Capital One Bank
5.125%, due 2/15/14 100,000 99,219
Ford Motor Credit Co.
7.375%, due 2/1/11 250,000 234,149
7.875%, due 6/15/10 500,000 481,198
General Motors Acceptance Corp.
6.125%, due 8/28/07 350,000 341,038
HSBC Finance Corp.
4.125%, due 11/16/09 500,000 490,713
John Deere Capital Corp.
3.90%, due 1/15/08 250,000 247,405
MBNA Corp.
6.125%, due 3/1/13 100,000 105,880
SLM Corp.
5.625%, due 8/1/33 100,000 102,715
Toyota Motor Credit Corp.
4.25%, due 3/15/10 50,000 49,785
------------
2,402,820
------------
DIVERSIFIED FINANCIAL SERVICES (0.5%)
Boeing Capital Corp.
5.75%, due 2/15/07 250,000 256,821
CIT Group, Inc.
5.50%, due 11/30/07 250,000 256,961
Citigroup, Inc.
3.50%, due 2/1/08 500,000 490,977
5.875%, due 2/22/33 250,000 262,150
National Rural Utilities Cooperative Finance Corp.
5.75%, due 8/28/09 250,000 262,173
UFJ Finance Aruba AEC
6.75%, due 7/15/13 100,000 110,228
Verizon Global Funding Corp.
7.75%, due 12/1/30 100,000 124,432
------------
1,763,742
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
ALLTEL Corp.
4.656%, due 5/17/07 100,000 100,849
Ameritech Capital Funding
6.55%, due 1/15/28 100,000 109,655
BellSouth Corp.
6.00%, due 10/15/11 250,000 267,846
GTE South, Inc., Series C
6.00%, due 2/15/08 300,000 311,376
SBC Communications, Inc.
5.75%, due 5/2/06 150,000 152,684
Sprint Capital Corp.
6.125%, due 11/15/08 150,000 157,643
8.75%, due 3/15/32 100,000 134,468
------------
1,234,521
------------
ELECTRIC UTILITIES (0.4%)
American Electric Power Co., Inc.
5.375%, due 3/15/10 100,000 102,916
Consumers Energy Co., Series B
5.375%, due 4/15/13 100,000 102,018
Dominion Resources, Inc. Series B
6.25%, due 6/30/12 100,000 108,039
DTE Energy Co., Series A
6.65%, due 4/15/09 100,000 107,521
FirstEnergy Corp., Series A
5.50%, due 11/15/06 100,000 101,850
6.45%, due 11/15/11 100,000 107,399
Northern States Power Co.
6.875%, due 8/1/09 100,000 109,238
Oncor Electric Delivery Co.
7.00%, due 9/1/22 100,000 115,764
Peco Energy Co.
3.50%, due 5/1/08 100,000 98,023
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 183
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
Progress Energy, Inc.
7.10%, due 3/1/11 $ 100,000 $ 109,523
Southern California Edison Co.
6.65%, due 4/1/29 100,000 114,619
------------
1,176,910
------------
FOOD & STAPLES RETAILING (0.1%)
Albertson's, Inc.
7.50%, due 2/15/11 100,000 110,558
Kroger Co. (The)
4.95%, due 1/15/15 100,000 96,919
Safeway, Inc.
6.50%, due 3/1/11 100,000 106,263
Wal-Mart Stores, Inc.
7.55%, due 2/15/30 100,000 131,365
------------
445,105
------------
FOOD PRODUCTS (0.2%)
Archer-Daniels-Midland Co.
8.125%, due 6/1/12 100,000 121,568
ConAgra Foods, Inc.
6.75%, due 9/15/11 100,000 111,314
General Mills, Inc.
3.875%, due 11/30/07 100,000 99,077
Kellogg Co., Series B
6.00%, due 4/1/06 100,000 102,002
Kraft Foods, Inc.
4.125%, due 11/12/09 100,000 98,199
5.25%, due 6/1/07 100,000 101,916
Unilever Capital Corp.
7.125%, due 11/1/10 100,000 112,963
------------
747,039
------------
GAS UTILITIES (0.0%) (b)
Kinder Morgan Energy Partners, L.P.
7.125%, due 3/15/12 100,000 112,937
------------
HEALTH CARE PROVIDERS & SERVICES (0.1%)
Aetna, Inc.
7.875%, due 3/1/11 50,000 57,648
HCA, Inc.
8.75%, due 9/1/10 100,000 112,533
------------
170,181
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
HOUSEHOLD PRODUCTS (0.0%) (b)
Procter & Gamble Co. (The)
4.85%, due 12/15/15 $ 100,000 $ 100,468
------------
INSURANCE (0.1%)
Allstate Corp. (The)
7.20%, due 12/1/09 100,000 111,452
ASIF Global Financial XVIII
3.85%, due 11/26/07 (c) 50,000 49,419
Berkshire Hathaway, Inc.
4.625%, due 10/15/13 100,000 98,490
MetLife, Inc.
5.50%, due 6/15/14 100,000 104,073
Prudential Financial, Inc.
4.50%, due 7/15/13 100,000 97,514
------------
460,948
------------
MACHINERY (0.0%) (b)
Caterpillar, Inc.
7.25%, due 9/15/09 100,000 110,987
------------
MEDIA (0.4%)
AT&T Broadband Corp.
8.375%, due 3/15/13 150,000 182,102
Clear Channel Communications, Inc.
4.25%, due 5/15/09 100,000 95,896
6.00%, due 11/1/06 50,000 50,819
Comcast Cable Communications, Inc.
6.375%, due 1/30/06 50,000 50,846
Comcast Corp.
6.50%, due 1/15/15 100,000 110,090
Cox Enterprises, Inc.
7.875%, due 9/15/10 (c) 100,000 112,030
Liberty Media Corp.
7.875%, due 7/15/09 100,000 108,914
News America Holdings
9.25%, due 2/1/13 100,000 126,233
Time Warner, Inc.
7.625%, due 4/15/31 250,000 304,649
Viacom, Inc.
7.70%, due 7/30/10 100,000 110,709
Walt Disney Co. (The)
Series B
6.75%, due 3/30/06 100,000 102,578
7.00%, due 3/1/32 100,000 116,977
------------
1,471,843
------------
METALS & MINING (0.1%)
Alcoa, Inc.
4.25%, due 8/15/07 250,000 250,354
------------
</Table>
184 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
MULTILINE RETAIL (0.1%)
Federated Department Stores, Inc.
7.00%, due 2/15/28 $ 100,000 $ 112,588
Target Corp.
7.00%, due 7/15/31 100,000 124,545
------------
237,133
------------
MULTI-UTILITIES & UNREGULATED POWER (0.2%)
Constellation Energy Group, Inc.
6.35%, due 4/1/07 100,000 103,772
Duke Energy Corp.
6.25%, due 1/15/12 100,000 107,957
Michigan Consolidated Gas Co. Series B
7.15%, due 5/30/06 125,000 129,147
Pacific Electric & Gas Co.
4.80%, due 3/1/14 100,000 99,263
PSE&G Power LLC
7.75%, due 4/15/11 100,000 114,807
------------
554,946
------------
OIL & GAS (0.3%)
Amerada Hess Corp.
7.30%, due 8/15/31 100,000 114,306
Anadarko Petroleum Corp.
7.20%, due 3/15/29 100,000 120,464
Devon Financing Corp.
6.875%, due 9/30/11 100,000 111,058
Enterprise Products Operating L.P., Series B
4.625%, due 10/15/09 100,000 98,440
Marathon Oil Corp.
6.85%, due 3/1/08 100,000 106,492
Occidental Petroleum Corp.
5.875%, due 1/15/07 100,000 102,917
Pemex Project Funding Master Trust
7.375%, due 12/15/14 100,000 108,650
Valero Energy Corp.
6.125%, due 4/15/07 100,000 102,822
------------
865,149
------------
PAPER & FOREST PRODUCTS (0.1%)
International Paper Co.
6.75%, due 9/1/11 100,000 109,095
Weyerhaeuser Co.
6.75%, due 3/15/12 100,000 106,754
------------
215,849
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
PHARMACEUTICALS (0.2%)
Bristol-Myers Squibb Co.
5.75%, due 10/1/11 $ 150,000 $ 158,830
Lilly (Eli) & Co.
4.50%, due 3/15/18 100,000 95,359
Merck & Co., Inc.
4.75%, due 3/1/15 100,000 98,359
Pfizer, Inc.
4.65%, due 3/1/18 50,000 48,631
Pharmacia Corp.
6.60%, due 12/1/28 100,000 117,077
Schering-Plough Corp.
5.30%, due 12/1/13 100,000 103,772
Wyeth
5.50%, due 3/15/13 100,000 103,563
------------
725,591
------------
REAL ESTATE (0.1%)
Camden Property Trust
4.375%, due 1/15/10 65,000 63,646
EOP Operating L.P.
7.00%, due 7/15/11 100,000 110,464
Simon Property Group, L.P.
6.375%, due 11/15/07 100,000 104,500
------------
278,610
------------
ROAD & RAIL (0.1%)
Burlington Northern Santa Fe Corp.
7.125%, due 12/15/10 100,000 112,354
CSX Corp.
7.45%, due 5/1/07 100,000 106,225
Norfolk Southern Corp.
6.75%, due 2/15/11 100,000 111,128
Union Pacific Corp.
6.65%, due 1/15/11 100,000 109,549
------------
439,256
------------
TEXTILES, APPAREL & LUXURY GOODS (0.0%) (b)
Jones Apparel Group, Inc.
5.125%, due 11/15/14 (c) 50,000 47,837
------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Countrywide Home Loans, Inc.
5.625%, due 5/15/07 100,000 102,487
General Electric Capital Corp.
6.00%, due 6/15/12 500,000 537,517
6.75%, due 3/15/32 250,000 298,346
Washington Mutual, Inc.
4.20%, due 1/15/10 250,000 245,266
7.50%, due 8/15/06 250,000 260,223
------------
1,443,839
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 185
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
TOBACCO (0.0%) (b)
Altria Group, Inc.
7.20%, due 2/1/07 $ 100,000 $ 104,612
------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%) (b)
AT&T Wireless Services, Inc.
7.875%, due 3/1/11 100,000 115,054
------------
Total Corporate Bonds
(Cost $21,748,209) 21,711,537
------------
FOREIGN BONDS (1.1%)
- ------------------------------------------------------------------------------
BEVERAGES (0.0%) (b)
Diageo Capital PLC
3.375%, due 3/20/08 100,000 97,935
------------
CAPITAL MARKETS (0.1%)
Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08 250,000 246,866
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
British Telecommunications PLC
8.875%, due 12/15/30 100,000 136,554
Deutsche Telekom International Finance BV
8.50%, due 6/15/10 250,000 289,938
France Telecom S.A.
7.95%, due 3/1/06 150,000 154,341
9.25%, due 3/1/31 100,000 135,383
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10 100,000 115,201
Telecom Italia Capital
6.375%, due 11/15/33 100,000 104,263
------------
935,680
------------
FOREIGN GOVERNMENTS (0.5%)
Malaysian Government
8.75%, due 6/1/09 100,000 115,553
Province of Ontario
5.50%, due 10/1/08 250,000 261,455
Province of Quebec
7.50%, due 9/15/29 150,000 198,374
Republic of Italy, Series DTC
5.625%, due 6/15/12 500,000 539,477
Republic of South Africa
6.50%, due 6/2/14 100,000 108,000
United Mexican States
6.375%, due 1/16/13 500,000 521,500
------------
1,744,359
------------
INDUSTRIAL CONGLOMERATES (0.0%) (b)
Tyco International Group S.A.
6.00%, due 11/15/13 100,000 106,802
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INSURANCE (0.1%)
Axa
8.60%, due 12/15/30 $ 100,000 $ 133,481
------------
OIL & GAS (0.1%)
Conoco Funding Co.
6.35%, due 10/15/11 250,000 276,396
------------
PAPER & FOREST PRODUCTS (0.0%) (b)
Stora Enso Oyj
7.375%, due 5/15/11 100,000 112,492
------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%) (b)
Vodafone Group PLC
7.75%, due 2/15/10 100,000 113,848
------------
Total Foreign Bonds
(Cost $3,704,324) 3,767,859
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (20.5%)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (1.8%)
2.75%, due 3/14/08 1,000,000 968,145
V 2.875%, due 9/15/06 3,000,000 2,966,034
3.375%, due 9/14/07 1,500,000 1,483,142
5.25%, due 6/18/14 500,000 525,290
------------
5,942,611
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.7%)
2.75%, due 8/15/06 1,500,000 1,481,427
3.625%, due 9/15/08 1,000,000 985,687
4.875%, due 11/15/13 1,000,000 1,023,911
5.50%, due 9/15/11 1,000,000 1,061,591
6.25%, due 7/15/32 1,000,000 1,191,395
------------
5,744,011
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.5%)
4.00%, due 1/1/20-2/1/20 1,000,000 970,800
4.50%, due 7/1/18-8/1/33 1,288,345 1,266,304
5.00%, due 12/1/18-5/15/34 1,260,935 1,258,798
5.00%, due 12/1/18-5/15/34 TBA (e) 1,500,000 1,485,000
5.50%, due 12/1/17-10/1/33 954,293 974,799
5.50%, due 5/15/34 TBA (e) 2,500,000 2,527,345
6.00%, due 5/1/16-11/1/32 1,421,962 1,466,176
6.50%, due 2/1/27-6/1/32 1,255,660 1,308,625
7.00%, due 3/1/26-7/1/32 283,330 299,551
</Table>
186 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
7.50%, due 7/1/11-5/1/32 $ 280,069 $ 299,443
7.75%, due 10/1/07 27,269 28,196
8.00%, due 10/1/11-11/1/11 45,895 48,399
------------
11,933,436
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (4.9%)
4.50%, due 5/1/18-11/1/18 2,050,209 2,032,943
4.50%, due 5/12/35 TBA (e) 500,000 482,656
5.00%, due 10/1/17-3/1/18 1,764,412 1,780,084
5.00%, due 5/15/19 TBA (e) 500,000 503,437
V 5.00%, due 5/15/34 TBA (e) 3,000,000 2,970,000
5.50%, due 9/1/18-10/1/34 5,182,047 5,242,373
6.00%, due 4/1/19-2/1/33 932,011 958,880
6.00%, due 5/15/34 TBA (e) 1,500,000 1,539,843
6.50%, due 7/1/29-8/1/32 544,232 567,302
7.00%, due 5/1/26-7/1/30 143,513 151,816
7.50%, due 7/1/11-10/1/15 196,349 207,016
8.00%, due 7/1/09-11/1/11 80,626 84,783
8.50%, due 8/1/26-10/1/26 5,229 5,719
9.00%, due 6/1/26-9/1/26 25,367 27,879
------------
16,554,731
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (1.0%)
5.00%, due 8/15/33 378,773 378,743
5.50%, due 8/15/33 647,831 659,831
5.50%, due 5/15/34 TBA (e) 500,000 508,437
6.00%, due 1/15/33-11/15/33 694,972 717,556
6.50%, due 4/15/29-7/15/32 394,188 412,994
7.00%, due 7/15/11-6/15/28 464,648 491,601
7.50%, due 3/15/26-10/15/30 136,640 146,838
8.00%, due 8/15/26-10/15/26 49,436 53,651
8.50%, due 11/15/26 27,665 30,206
9.00%, due 11/15/26 6,227 6,872
------------
3,406,729
------------
UNITED STATES TREASURY BONDS (1.2%)
5.25%, due 2/15/29 (j) 1,900,000 2,074,933
6.25%, due 8/15/23 1,800,000 2,163,235
------------
4,238,168
------------
UNITED STATES TREASURY NOTES (6.4%)
1.625%, due 2/28/06 2,000,000 1,972,110
3.125%, due 5/15/07 1,000,000 989,688
3.375%, due 2/28/07-2/15/08 1,150,000 1,141,598
3.625%, due 1/15/10 (j) 1,900,000 1,878,773
3.75%, due 3/31/07 2,000,000 2,003,672
3.875%, due 5/15/09 (j) 1,000,000 1,001,602
4.00%, due 6/15/09-2/15/15 (j) 4,500,000 4,487,393
V 4.00%, due 2/15/14 (j) 4,750,000 4,694,520
4.25%, due 11/15/14 225,000 225,738
4.625%, due 5/15/06 2,875,000 2,910,265
4.75%, due 5/15/14 650,000 677,574
------------
21,982,933
------------
Total U.S. Government & Federal Agencies
(Cost $69,316,043) 69,802,619(g)
------------
YANKEE BONDS (0.1%) (d)
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.0%) (b)
TELUS Corp.
8.00%, due 6/1/11 50,000 57,750
------------
INSURANCE (0.0%) (b)
ACE Ltd.
6.00%, due 4/1/07 75,000 77,039
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
OIL & GAS (0.1%)
EnCana Corp.
6.30%, due 11/1/11 $ 100,000 $ 108,903
Norsk Hydro ASA
7.25%, due 9/23/27 100,000 122,974
------------
231,877
------------
ROAD & RAIL (0.0%) (b)
Canadian National Railway Co.
7.625%, due 5/15/23 50,000 62,926
------------
Total Yankee Bonds
(Cost $420,753) 429,592
------------
Total Long-Term Bonds
(Cost $96,193,579) 96,705,469
------------
<Caption>
SHARES
COMMON STOCKS (58.4%)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.0%)
AAR Corp. 582 8,573
Applied Signal Technology, Inc. 195 3,804
Armor Holdings, Inc. (a) 549 19,220
Boeing Co. (The) 23,467 1,396,756
Cubic Corp. 355 6,244
Curtiss-Wright Corp. 353 19,133
DRS Technologies, Inc. (a) 439 19,426
EDO Corp. 297 8,859
Engineered Support Systems, Inc. 661 23,346
Esterline Technologies Corp. (a) 383 12,379
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 187
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (CONTINUED)
GenCorp, Inc. 799 $ 15,189
General Dynamics Corp. 2,371 249,074
Honeywell International, Inc. 6,981 249,641
Kaman Corp. Class A 413 5,319
Lockheed Martin Corp. 3,009 183,399
Mercury Computer
Systems, Inc. (a) 338 8,900
Moog, Inc. Class A (a) 661 19,704
Precision Castparts Corp. 6,176 454,924
Raytheon Co. 14,597 548,993
Rockwell Collins, Inc. 5,719 262,388
Teledyne Technologies, Inc. (a) 540 16,427
Triumph Group, Inc. (a) 290 9,028
------------
3,540,726
------------
AIR FREIGHT & LOGISTICS (0.4%)
C.H. Robinson Worldwide, Inc. 1,536 79,257
CNF, Inc. 5,929 253,465
EGL, Inc. (a) 825 16,096
FedEx Corp. 4,884 414,896
Forward Air Corp. (a) 537 12,920
J.B. Hunt Transport Services, Inc. 6,865 268,353
Ryder System, Inc. 2,606 96,239
United Parcel Service, Inc. Class B 3,103 221,275
------------
1,362,501
------------
AIRLINES (0.0%) (b)
Alaska Air Group, Inc. (a) 3,030 80,810
Frontier Airlines, Inc. (a) 607 5,894
Mesa Air Group, Inc. (a) 576 3,070
SkyWest, Inc. 970 17,538
------------
107,312
------------
</Table>
<Table>
<Caption>
SHARES VALUE
AUTO COMPONENTS (0.2%)
ArvinMeritor, Inc. 1,493 $ 17,737
BorgWarner, Inc. 6,445 294,665
Cooper Tire & Rubber Co. 473 8,254
Dana Corp. 781 8,919
Delphi Corp. 12,631 41,682
Goodyear Tire & Rubber Co. (The) 7,017 83,292
Lear Corp. (a) 3,801 128,816
Midas, Inc. 270 5,838
Standard Motor Products, Inc. 303 2,751
Superior Industries International, Inc. 400 8,132
Visteon Corp. 5,188 18,158
------------
618,244
------------
AUTOMOBILES (0.4%)
Coachmen Industries, Inc. 271 3,114
Ford Motor Co. 89,126 811,938
General Motors Corp. 17,573 468,848
Monaco Coach Corp. (a) 531 7,529
Winnebago Industries, Inc. 510 14,861
------------
1,306,290
------------
BEVERAGES (0.4%)
Coca-Cola Co. (The) 10,386 451,168
Coca-Cola Enterprises, Inc. 5,670 115,101
Constellation Brands, Inc. Class A 3,644 192,075
Molson Coors Brewing Co. Class B 991 61,194
Pepsi Bottling Group, Inc. (The) 9,718 278,615
PepsiAmericas, Inc. 1,085 26,789
PepsiCo, Inc. 5,392 300,011
------------
1,424,953
------------
BIOTECHNOLOGY (0.5%)
Amgen, Inc. (a) 17,458 1,016,230
ArQule, Inc. (a) 563 2,956
Biogen Idec, Inc. (a) 1,466 53,128
Cephalon, Inc. 1,260 55,314
Charles River Laboratories International, Inc. 1,434 67,929
Enzo Biochem, Inc. (a) 573 7,804
Genzyme Corp. 2,038 119,447
Invitrogen Corp. 2,120 155,332
Millennium Pharmaceuticals, Inc. (a) 5,578 48,863
Regeneron Pharmaceuticals, Inc. (a) 952 5,293
Savient Pharmaceuticals, Inc. (a) 1,087 3,000
Techne Corp. (a) 889 37,143
Vertex Pharmaceuticals, Inc. 4,233 40,383
------------
1,612,822
------------
BUILDING PRODUCTS (0.2%)
Apogee Enterprises, Inc. 502 6,466
ElkCorp. 319 8,772
Griffon Corp. (a) 488 9,365
Lennox International, Inc. 987 19,296
Masco Corp. 21,430 674,831
Simpson Manufacturing Co., Inc. (a) 711 19,197
Universal Forest Products, Inc. 288 10,961
------------
748,888
------------
CAPITAL MARKETS (1.5%)
A.G. Edwards, Inc. 6,289 249,736
Bank of New York Co., Inc. (The) 25,328 707,664
Bear Stearns Cos., Inc. (The) 3,431 324,779
E*TRADE Financial Corp. (a) 17,703 196,680
</Table>
188 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
CAPITAL MARKETS (CONTINUED)
Eaton Vance Corp. 15,468 $ 362,415
Franklin Resources, Inc. 9,354 642,433
Investment Technology
Group, Inc. (a) 697 13,250
Janus Capital Group, Inc. 5,789 75,199
LaBranche & Co., Inc. 471 3,132
Legg Mason, Inc. 8,019 568,226
Lehman Brothers Holdings, Inc. 4,533 415,767
Merrill Lynch & Co., Inc. 2,816 151,867
Raymond James Financial, Inc. 1,639 44,204
S&P 500 Index-SPDR Trust Series 1 (h) 8,313 962,230
SEI Investments Co. 3,619 118,739
State Street Corp. 2,736 126,485
SWS Group, Inc. 310 4,526
T. Rowe Price Group, Inc. 1,044 57,598
------------
5,024,930
------------
</Table>
<Table>
<Caption>
SHARES VALUE
CHEMICALS (1.6%)
Airgas, Inc. 1,656 $ 36,300
Albemarle Corp. 1,528 55,940
Arch Chemicals, Inc. 410 10,570
Cabot Corp. 1,311 40,051
Cambrex Corp. 470 8,930
Dow Chemical Co. (The) 32,403 1,488,270
E.I. du Pont de Nemours & Co. 33,106 1,559,624
Eastman Chemical Co. 3,750 202,500
FMC Corp. (a) 1,140 55,860
Georgia Gulf Corp. 556 20,522
Great Lakes Chemical Corp. 6,809 211,351
H.B. Fuller Co. 476 14,432
Headwaters, Inc. (a) 673 21,516
Lyondell Chemical Co. 15,216 381,770
MacDermid, Inc. 464 14,082
Material Sciences Corp. 253 3,104
Monsanto Co. 12,893 755,788
OM Group, Inc. 477 10,465
Omnova Solutions, Inc. 714 2,891
Penford Corp. 153 2,203
PolyOne Corp. 1,525 11,773
PPG Industries, Inc. 6,474 437,319
Quaker Chemical Corp. 169 3,294
RPM International, Inc. 2,503 43,177
Schulman (A.), Inc. 539 9,001
Wellman, Inc. 570 6,133
------------
5,406,866
------------
COMMERCIAL BANKS (2.8%)
AmSouth Bancorp 2,868 75,486
Associated Banc-Corp 4,540 140,377
Bank of America Corp. 41,636 1,875,285
Bank of Hawaii Corp. 438 20,739
BB&T Corp. 23,617 926,023
Boston Private Financial Holdings, Inc. 455 10,165
Chittenden Corp. 777 19,510
Colonial BancGroup, Inc. (The) 5,843 128,897
Comerica, Inc. 4,182 239,461
Commerce Bancorp, Inc. 1,302 36,443
Community Bank System, Inc. 514 11,375
Compass Bancshares, Inc. 3,658 157,367
East West Bancorp, Inc. 884 28,394
Fifth Third Bancorp 9,157 398,330
First BanCorp 630 22,844
First Midwest Bancorp, Inc. 729 23,809
First Republic Bank 399 12,485
Gold Banc Corp., Inc. 672 9,294
Hibernia Corp. Class A 13,069 408,145
Hudson United Bancorp 757 25,935
Huntington Bancshares, Inc. 1,736 40,813
Irwin Financial Corp. 389 7,807
KeyCorp 6,669 221,144
Nara Bancorp, Inc. 390 5,242
National City Corp. 21,213 720,393
PNC Financial Services
Group, Inc. (The) 1,769 94,164
PrivateBancorp, Inc. 354 11,062
Provident Bankshares Corp. 549 16,075
Regions Financial Corp. 3,443 115,306
Republic Bancorp, Inc. 1,172 14,861
Riggs National Corp. 522 10,195
Silicon Valley Bancshares (a) 837 39,674
South Financial Group, Inc. (The) 1,197 31,589
Southwest Bancorp. of
Texas, Inc. 1,164 19,322
State Financial Services Corp. Class A 323 11,802
Sterling Bancshares, Inc. 807 10,838
SunTrust Banks, Inc. 5,206 379,153
Susquehanna Bancshares, Inc. 776 16,319
TCF Financial Corp. 2,530 63,984
TrustCo Bank Corp. of NY 1,270 13,983
U.S. Bancorp 20,286 565,979
UCBH Holdings, Inc. 1,532 24,098
Umpqua Holdings Corp. 745 16,554
United Bankshares, Inc. 678 20,760
Unizan Financial Corp. 4,984 126,693
Wachovia Corp. 3,667 187,677
Wells Fargo & Co. 33,049 1,980,957
Whitney Holding Corp. 688 31,146
Wilmington Trust Corp. 6,116 216,201
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 189
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (CONTINUED)
Wintrust Financial Corp. 341 $ 15,655
Zions Bancorp 671 46,990
------------
9,646,800
------------
COMMERCIAL SERVICES & SUPPLIES (0.9%)
ABM Industries, Inc. 828 15,045
Administaff, Inc. (a) 487 6,657
Allied Waste Industries, Inc. (a) 7,225 57,728
Angelica Corp. 158 4,263
Arbitron, Inc. (a) 509 21,541
Bowne & Co., Inc. 616 8,020
Brady Corp. Class A 792 23,483
Brink's Co. (The) 6,527 210,561
Career Education Corp. (a) 5,799 182,321
CDI Corp. 262 5,793
Cendant Corp. (a) 51,450 1,024,369
Central Parking Corp. 530 8,665
Chemed Corp. 204 14,451
Coinstar, Inc. (a) 393 6,736
Consolidated Graphics, Inc. (a) 245 11,246
Corinthian Colleges, Inc. 2,102 29,869
CPI Corp. 145 2,382
Donnelley (R.R.) & Sons Co. 1,771 58,284
Equifax, Inc. 2,220 74,703
G&K Services, Inc. Class A 347 13,318
H&R Block, Inc. 1,987 98,972
Healthcare Services Group, Inc. 100 2,525
Heidrick & Struggles International, Inc. (a) 334 8,637
IAAI Finance Corp. 206 5,809
Imagistics International, Inc. (a) 276 7,411
John H. Harland Co. 473 17,028
Korn/Ferry International (a) 1,123 16,171
Labor Ready, Inc. (a) 735 12,267
Mobile Mini, Inc. (a) 261 9,151
NCO Group, Inc. (a) 530 9,874
On Assignment, Inc. (a) 450 1,935
Pre-Paid Legal Services, Inc. (a) 275 9,820
PRG-Schultz International, Inc. 719 3,430
Republic Services, Inc. 5,133 177,602
School Specialty, Inc. (a) 377 13,990
Sotheby's Holdings, Inc. Class A (a) 3,354 54,939
SOURCECORP, Inc. (a) 295 5,266
Spherion Corp. (a) 1,089 6,109
Standard Register Co. (The) 517 6,447
Tetra Tech, Inc. (a) 912 9,658
United Rentals, Inc. (a) 8,752 160,949
United Stationers, Inc. 520 21,934
Vertrue, Inc. 176 5,352
Viad Corp. 377 9,708
Volt Information Sciences, Inc. (a) 198 3,916
Waste Connections, Inc. (a) 803 28,282
Waste Management, Inc. 19,106 544,330
Watson Wyatt & Co. Holdings (a) 542 14,309
------------
3,045,256
------------
</Table>
<Table>
<Caption>
SHARES VALUE
COMMUNICATIONS EQUIPMENT (1.4%)
3Com Corp. (a) 7,766 $ 24,463
Adaptec, Inc. (a) 1,826 6,683
ADTRAN, Inc. 3,411 70,710
Audiovox Corp. Class A (a) 419 5,724
Bel Fuse, Inc. Class B 201 5,397
Belden CDT, Inc. 780 14,305
Black Box Corp. 301 9,789
Brooktrout, Inc. 220 2,165
C-COR, Inc. 665 4,396
CIENA Corp. 3,535 8,130
Cisco Systems, Inc. 129,586 2,239,246
CommScope, Inc. (a) 407 5,747
Comverse Technology, Inc. 5,020 114,406
Corning, Inc. 13,590 186,862
Digi International, Inc. 361 3,845
Ditech Communications Corp. 200 2,262
Harmonic, Inc. 1,242 6,843
Harris Corp. 11,284 318,209
Inter-Tel, Inc. 457 8,701
Motorola, Inc. 107,110 1,643,067
NETGEAR, Inc. 100 1,613
Network Equipment Technology, Inc. 411 2,117
PC-Tel, Inc. (a) 363 2,628
QLogic Corp. 2,150 71,466
QUALCOMM, Inc. 3,181 110,985
Symmertricom, Inc. (a) 770 7,931
Tellabs, Inc. 5,720 44,387
Tollgrade Communications, Inc. (a) 243 1,716
ViaSat, Inc. (a) 479 8,531
------------
4,932,324
------------
COMPUTERS & PERIPHERALS (1.9%)
Apple Computer, Inc. 30,341 1,094,097
Avid Technology, Inc. (a) 559 27,676
Dell, Inc. (a) 10,607 369,442
EMC Corp. 11,296 148,204
Hewlett-Packard Co. 10,370 212,274
Hutchinson Technology, Inc. (a) 434 16,075
Imation Corp. 786 27,408
V International Business Machines Corp. 38,340 2,928,409
NCR Corp. (a) 9,070 299,310
</Table>
190 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (CONTINUED)
Network Appliance, Inc. 9,855 $ 262,437
Pinnacle Systems, Inc. (a) 1,154 5,747
SBS Technologies, Inc. (a) 261 2,456
Storage Technology Corp. (a) 12,417 345,193
Sun Microsystems, Inc. (a) 145,450 527,984
Synaptics, Inc. 400 7,252
------------
6,273,964
------------
CONSTRUCTION & ENGINEERING (0.1%)
Dycom Industries, Inc. 1,077 25,051
EMCOR Group, Inc. (a) 274 12,242
Granite Construction, Inc. 669 15,106
Insituform Technologies, Inc. Class A (a) 483 7,202
Jacobs Engineering Group, Inc. 1,316 64,102
Quanta Services, Inc. (a) 10,033 80,063
Shaw Group, Inc. (The) (a) 1,010 18,251
URS Corp. (a) 684 21,033
------------
243,050
------------
CONSTRUCTION MATERIALS (0.1%)
AMCOL International Corp. 502 9,593
Florida Rock Industries, Inc. 629 36,532
Martin Marietta Materials, Inc. 4,789 263,347
Texas Industries, Inc. 356 16,440
Vulcan Materials Co. 2,710 143,739
------------
469,651
------------
</Table>
<Table>
<Caption>
SHARES VALUE
CONSUMER FINANCE (0.9%)
American Express Co. 13,312 $ 701,543
AmeriCredit Corp. (a) 16,141 377,699
Capital One Financial Corp. 9,928 703,796
Cash America International, Inc. 472 7,009
MBNA Corp. 51,769 1,022,438
MoneyGram International, Inc. 3,414 66,232
Providian Financial Corp. 14,024 233,780
Rewards Network, Inc. (a) 415 2,054
World Acceptance Corp. 300 7,635
------------
3,122,186
------------
CONTAINERS & PACKAGING (0.1%)
Aptargroup, Inc. 570 27,491
Ball Corp. 3,730 147,335
Caraustar Industries, Inc. 510 4,559
Chesapeake Corp. 328 6,370
Longview Fibre Co. 4,622 85,415
Myers Industries, Inc. 605 5,814
Pactiv Corp. (a) 3,599 77,163
Rock-Tenn Co. 637 6,465
------------
360,612
------------
DISTRIBUTORS (0.0%) (b)
Adesa, Inc. 5,563 134,569
Advanced Marketing Services, Inc. 241 1,091
Genuine Parts Co. 1,366 58,601
------------
194,261
------------
DIVERSIFIED FINANCIAL SERVICES (1.3%)
CIT Group, Inc. 5,163 207,966
Citigroup, Inc. (f) 58,064 2,726,686
Financial Federal Corp. 291 10,272
GATX Corp. 5,677 185,751
JPMorgan Chase & Co. 25,485 904,463
Moody's Corp. 1,195 98,157
Piper Jaffray Cos., Inc. (a) 324 8,959
Principal Financial Group, Inc. 10,003 390,917
------------
4,533,171
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.8%)
AT&T Corp. 145,248 2,778,594
BellSouth Corp. 4,861 128,768
CenturyTel, Inc. 2,150 65,983
Cincinnati Bell, Inc. 22,060 88,240
Citizens Communications Co. 10,885 138,784
Commonwealth Telephone Enterprises, Inc. 337 15,657
General Communication, Inc. Class A (a) 1,023 8,634
Qwest Communications International, Inc. 52,616 179,947
Verizon Communications, Inc. 70,570 2,526,406
------------
5,931,013
------------
ELECTRIC UTILITIES (2.3%)
Allegheny Energy, Inc. 6,576 160,717
Alliant Energy Corp. 9,517 250,678
American Electric Power Co., Inc. 19,125 673,583
Carolina Power & Light 2,965 124,500
CenterPoint Energy, Inc. 2,254 26,687
Central Vermont Public Service Corp. 213 4,496
CH Energy Group, Inc. 262 11,174
Cleco Corp. 784 16,009
CMS Energy Corp. 4,821 62,287
DPL, Inc. 11,805 300,319
DTE Energy Co. 1,422 65,341
Duquesne Light Holdings, Inc. 1,685 29,639
Edison International 13,134 476,764
El Paso Electric Co. (a) 801 15,628
Entergy Corp. 5,306 388,930
FirstEnergy Corp. 2,661 115,807
FPL Group, Inc. 11,613 474,043
Great Plains Energy, Inc. 1,724 52,720
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 191
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
Green Mountain Power Corp. 119 $ 3,552
IDACORP, Inc. 2,947 79,510
Northeast Utilities 13,676 250,408
NSTAR 1,180 63,885
OGE Energy Corp. 4,575 126,270
Pepco Holdings, Inc. 5,365 116,260
Pinnacle West Capital Corp. 4,371 183,145
PNM Resources, Inc. 3,605 99,678
Public Service Enterprise Group, Inc. 37,858 2,199,550
Puget Energy, Inc. 1,357 29,094
TECO Energy, Inc. 3,319 55,129
TXU Corp. 12,232 1,049,383
UIL Holdings Corp. 242 12,424
UniSource Energy Corp. 570 17,813
Wisconsin Energy Corp. 4,466 157,471
Xcel Energy, Inc. 9,475 162,781
------------
7,855,675
------------
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRICAL EQUIPMENT (0.3%)
A.O. Smith Corp. 415 $ 11,827
Acuity Brands, Inc. 709 16,952
AMETEK, Inc. 4,588 173,747
Baldor Electric Co. 548 13,645
C&D Technologies, Inc. 467 3,283
Cooper Industries, Ltd. Class A 1,527 97,209
Emerson Electric Co. 3,392 212,577
Hubbell, Inc. Class B 565 24,549
Intermagnetics General Corp. (a) 454 11,150
MagneTek, Inc. (a) 421 1,524
Regal-Beloit Corp. 466 12,326
Rockwell Automation, Inc. 6,608 305,488
Roper Industries, Inc. 709 47,978
Thomas & Betts Corp. (a) 3,449 107,333
Vicor Corp. (a) 517 6,101
Woodward Governor Co. 182 12,842
------------
1,058,531
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%)
Aeroflex, Inc. 1,205 9,556
Agilysys, Inc. 484 6,399
Amphenol Corp. Class A 2,003 78,998
Anixter International, Inc. (a) 608 22,447
Artesyn Technologies, Inc. (a) 707 4,984
BEI Technologies, Inc. 260 5,980
Bell Microproducts, Inc. (a) 474 3,792
Benchmark Electronics, Inc. (a) 681 18,414
Checkpoint Systems, Inc. (a) 599 9,482
Cognex Corp. 735 16,052
Coherent, Inc. (a) 505 16,200
CTS Corp. 632 6,668
Daktronics, Inc. (a) 300 6,108
Electro Scientific
Industries, Inc. (a) 509 8,414
FLIR Systems, Inc. (a) 1,124 29,898
Global Imaging Systems, Inc. (a) 392 13,599
Itron, Inc. (a) 374 13,490
Keithley Instruments, Inc. 271 3,764
Littelfuse, Inc. (a) 371 9,995
Methode Electronics, Inc. 651 7,337
MTS Systems Corp. 321 9,296
Park Electrochemical Corp. 361 7,996
Paxar Corp. (a) 660 11,827
PerkinElmer, Inc. 4,089 75,647
Photon Dynamics, Inc. (a) 295 5,708
Planar Systems, Inc. (a) 261 2,012
RadiSys Corp. (a) 326 4,564
Rogers Corp. (a) 295 10,189
ScanSource, Inc. 222 10,268
Solectron Corp. 23,304 76,903
Tech Data Corp. (a) 1,718 62,759
Technitrol, Inc. (a) 679 8,813
Thermo Electron Corp. (a) 3,490 87,180
Trimble Navigation Ltd. (a) 832 28,638
Varian, Inc. (a) 279 9,254
Veeco Instruments, Inc. (a) 535 7,121
Vishay Intertechnology, Inc. (a) 10,017 107,082
X-Rite, Inc. 367 3,806
------------
820,640
------------
ENERGY EQUIPMENT & SERVICES (0.6%)
Atwood Oceanics, Inc. (a) 227 12,955
Cal Dive International, Inc. (a) 643 28,601
CARBO Ceramics, Inc. 266 17,657
Dril-Quip, Inc. (a) 201 5,859
ENSCO International, Inc. 5,214 169,976
FMC Technologies, Inc. (a) 38 1,153
Grant Prideco, Inc. 987 21,862
Halliburton Co. 14,471 601,849
Hanover Compressor Co. (a) 5,220 54,131
Helmerich & Payne, Inc. 3,909 150,262
Hydril (a) 383 20,146
Input/Output, Inc. (a) 1,231 7,435
Lone Star Technologies, Inc. (a) 482 18,769
Maverick Tube Corp. (a) 716 20,828
Oceaneering International, Inc. (a) 442 14,502
Offshore Logistics, Inc. (a) 380 11,009
Patterson-UTI Energy, Inc. 3,308 79,293
Pride International, Inc. 6,720 149,856
SEACOR Holdings, Inc. (a) 312 17,787
TETRA Technologies, Inc. (a) 395 10,677
</Table>
192 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (CONTINUED)
Tidewater, Inc. 1,305 $ 44,983
Transocean, Inc. 7,984 370,218
Unit Corp. (a) 735 28,195
Veritas DGC, Inc. (a) 556 14,234
Weatherford International Ltd. 3,834 199,943
W-H Energy Services, Inc. (a) 498 10,966
------------
2,083,146
------------
FOOD & STAPLES RETAILING (1.2%)
Albertson's, Inc. 9,005 178,209
BJ's Wholesale Club, Inc. (a) 5,782 154,090
Casey's General Stores, Inc. 842 14,213
Costco Wholesale Corp. (a) 12,473 506,154
Great Atlantic & Pacific
Tea Co., Inc. (The) (a) 475 7,448
Kroger Co. (The) (a) 29,394 463,544
Longs Drug Stores Corp. 600 21,810
Nash Finch Co. 214 7,569
Performance Food Group Co. (a) 781 21,001
Ruddick Corp. 1,358 30,501
Safeway, Inc. (a) 21,621 460,311
SUPERVALU, Inc. 6,622 208,990
United Natural Foods, Inc. (a) 656 17,581
Wal-Mart Stores, Inc. (a)(f) 40,485 1,908,463
------------
3,999,884
------------
</Table>
<Table>
<Caption>
SHARES VALUE
FOOD PRODUCTS (0.5%)
American Italian Pasta Co. Class A (a) 327 $ 7,737
Archer-Daniels-Midland Co. 25,886 465,689
ConAgra Foods, Inc. 7,288 194,954
Corn Products International, Inc. 1,266 27,877
Delta and Pine Land Co. 650 16,380
Flowers Foods, Inc. 663 19,121
Hain Celestial Group, Inc. (a) 622 11,041
Hershey Foods Corp. 1,988 127,033
J&J Snack Foods Corp. (a) 159 7,783
Lance, Inc. 532 8,768
Ralcorp Holdings, Inc. (a) 492 19,493
Sanderson Farms, Inc. 259 9,386
Sara Lee Corp. 25,488 545,188
Sensient Technologies Corp. 2,515 50,325
Tyson Foods, Inc. Class A 13,195 222,864
------------
1,733,639
------------
GAS UTILITIES (0.2%)
Atmos Energy Corp. 1,336 35,137
Cascade Natural Gas Corp. 199 3,727
KeySpan Corp. 2,611 99,035
Laclede Group, Inc. (The) 349 9,552
New Jersey Resources Corp. 459 19,902
Nicor, Inc. 1,705 63,034
NiSource, Inc. 1,577 36,649
Northwest Natural Gas Co. 470 16,685
Peoples Energy Corp. 305 12,078
Piedmont Natural Gas Co., Inc. 1,268 29,101
Southern Union Co. (a) 1,696 40,602
Southwest Gas Corp. 618 15,122
Southwestern Energy Co. (a) 614 36,073
UGI Corp. 868 43,600
WGL Holdings, Inc. 2,912 88,263
------------
548,560
------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.5%)
Advanced Medical Optics, Inc. (a) 610 22,558
American Medical Systems Holdings, Inc. (a) 1,024 17,879
Analogic Corp. 245 10,219
Applera Corp.-Applied Biosystems Group 4,173 88,468
ArthroCare Corp. (a) 377 11,076
Bausch & Lomb, Inc. 921 69,075
Baxter International, Inc. 5,086 188,691
Becton, Dickinson & Co. 6,088 356,270
BioLase Technology, Inc. (a) 406 2,671
Biosite, Inc. (a) 283 16,131
C.R. Bard, Inc. 1,267 90,172
CONMED Corp. (a) 480 14,266
Cooper Cos., Inc. (The) 720 48,636
Cyberonics, Inc. (a) 400 15,076
Datascope Corp. 270 7,754
DENTSPLY International, Inc. 2,155 117,792
Diagnostic Products Corp. 442 21,437
DJ Orthopedics, Inc. 400 10,060
Edwards Lifesciences Corp. 1,758 77,422
Guidant Corp. 1,708 126,529
Haemonetics Corp. (a) 440 18,819
Hologic, Inc. (a) 362 12,880
ICU Medical, Inc. (a) 247 8,751
IDEXX Laboratories, Inc. 567 32,172
Immucor, Inc. 744 22,201
Integra LifeSciences Holdings (a) 413 14,633
Invacare Corp. 529 21,668
Kensey Nash Corp. 191 5,249
Mentor Corp. (a) 594 21,800
Merit Medical Systems, Inc. (a) 439 5,553
Osteotech, Inc. (a) 306 789
PolyMedica Corp. 454 14,069
Possis Medical, Inc. (a) 325 2,879
Resmed, Inc. (a) 577 35,832
Respironics, Inc. (a) 598 37,788
STERIS Corp. 1,487 35,212
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 193
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED)
SurModics, Inc. (a) 319 $ 11,506
Sybron Dental Specialties, Inc. (a) 642 23,914
Theragenics Corp. (a) 535 1,878
Varian Medical Systems, Inc. (a) 2,201 74,262
Viasys Healthcare, Inc. (a) 549 11,661
Vital Signs, Inc. 155 6,324
Wilson Greatbatch Technologies, Inc. (a) 387 7,423
------------
1,739,445
------------
HEALTH CARE PROVIDERS & SERVICES (3.1%)
Accredo Health, Inc. (a) 816 $ 36,965
Aetna, Inc. 14,430 1,058,729
Amedisys, Inc. 232 6,962
American Healthways, Inc. (a) 560 20,916
AMERIGROUP Corp. (a) 856 30,063
AmerisourceBergen Corp. 5,286 323,926
AmSurg Corp. (a) 467 12,091
Apria Healthcare Group, Inc. (a) 4,433 133,433
Cardinal Health, Inc. 20,955 1,164,469
Caremark Rx, Inc. 8,385 335,819
Centene Corp. 700 19,495
Cerner Corp. 551 31,991
CIGNA Corp. 6,544 601,917
Coventry Health Care, Inc. (a) 5,874 401,958
Cross Country Healthcare, Inc. 443 7,137
Cryolife, Inc. (a)(j) 472 2,837
Curative Health Services, Inc. (a) 227 359
Dendrite International, Inc. (a) 739 11,395
Gentiva Health Services, Inc. 412 8,067
HCA, Inc. 16,926 945,148
Hooper Holmes, Inc. 1,184 4,333
Humana, Inc. 5,231 181,254
LabOne, Inc. 300 10,524
Laboratory Corp. of America Holdings 349 17,276
LCA-Vision, Inc. 350 13,717
LifePoint Hospitals, Inc. (a) 241 10,723
Lincare Holdings, Inc. (a) 10,444 445,750
Manor Care, Inc. 709 23,645
McKesson Corp. 9,875 365,375
Medco Health Solutions, Inc. (a) 6,717 342,365
NDC Health Corp. 638 9,742
OCA, Inc. 918 3,727
Odyssey Healthcare, Inc. (a) 657 7,504
Owens & Minor, Inc. 668 19,379
PacifiCare Health Systems, Inc. (a) 6,604 394,655
PAREXEL International Corp. (a) 469 8,550
Patterson Cos., Inc. 1,146 57,930
Pediatrix Medical Group, Inc. 384 26,147
Pharmaceutical Product Development, Inc. (a) 902 40,933
Priority Healthcare Corp. (a) 609 13,873
RehabCare Group, Inc. (a) 294 8,826
SFBC International, Inc. 282 8,798
Sierra Health Services, Inc. (a) 446 28,852
Sunrise Senior Living, Inc. (a) 345 17,678
Tenet Healthcare Corp. (a) 10,606 126,954
Triad Hospitals, Inc. (a) 5,769 295,661
United Surgical Partners International, Inc. (a) 467 20,665
UnitedHealth Group, Inc. 20,780 1,963,918
Universal Health Services, Inc. Class B (a) 3,083 174,929
WellPoint, Inc. (a) 6,571 839,445
------------
10,636,805
------------
HOTELS, RESTAURANTS & LEISURE (1.5%)
Argosy Gaming Co. (a) 500 22,970
Aztar Corp. (a) 585 15,976
Bally Total Fitness Holding Corp. (a) 621 1,975
Boyd Gaming Corp. 1,926 101,654
Brinker International, Inc. (a) 5,316 179,681
Caesars Entertainment, Inc. (a) 24,455 487,877
Carnival Corp. 4,972 243,031
CBRL Group, Inc. 2,896 111,583
CEC Entertainment, Inc. (a) 610 22,082
Darden Restaurants, Inc. 6,338 190,140
GTECH Holdings Corp. 7,576 185,385
Harrah's Entertainment, Inc. 2,753 180,652
Hilton Hotels Corp. 13,755 300,272
IHOP Corp. 320 13,088
Jack In The Box, Inc. (a) 614 22,448
Krispy Kreme Doughnuts, Inc. 1,799 10,650
Landry's Restaurants, Inc. 459 11,934
LoneStar Steakhouse & Saloon, Inc. 328 9,299
Marcus Corp. (The) 463 8,866
Marriott International, Inc. Class A 3,472 217,868
McDonald's Corp. 45,984 1,347,791
Multimedia Games, Inc. (a) 500 3,955
O'Charley's, Inc. (a) 380 7,577
P.F. Chang's China Bistro, Inc. (a) 434 24,096
Panera Bread Co. Class A (a) 503 25,160
Papa John's International, Inc. (a) 280 9,598
Pinnacle Entertainment, Inc. (a) 603 9,141
RARE Hospitality International, Inc. (a) 564 15,691
</Table>
194 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (CONTINUED)
Ruby Tuesday, Inc. 2,905 $ 65,363
Ryan's Restaurant Group, Inc. (a) 693 8,787
Shuffle Master, Inc. (a) 586 14,761
Six Flags, Inc. (a) 1,990 7,761
Sonic Corp. (a) 988 31,656
Starbucks Corp. 9,638 477,274
Starwood Hotels & Resorts Worldwide, Inc. 5,084 276,265
Steak n Shake Co. (The) (a) 494 8,932
Triarc Cos., Inc. Class B (a) 923 11,851
WMS Industries, Inc. (a) 493 12,522
Yum! Brands, Inc. (a) 4,670 219,303
------------
4,914,915
------------
HOUSEHOLD DURABLES (0.6%)
American Greetings Corp. Class A (a) 7,901 178,958
Applica, Inc. (a) 423 986
Bassett Furniture Industries, Inc. 207 4,065
Black & Decker Corp. (The) 2,573 215,180
Champion Enterprises, Inc. (a) 1,188 11,215
D.R. Horton, Inc. 1,433 43,706
Department 56, Inc. (a) 234 3,051
Enesco Group, Inc. (a) 251 1,408
Ethan Allen Interiors, Inc. 573 17,265
Fedders Corp. 530 1,055
Fleetwood Enterprises, Inc. (a) 950 7,258
Fortune Brands, Inc. 943 79,759
Furniture Brands International, Inc. 2,421 46,919
Harman International Industries, Inc. 3,865 303,712
Interface, Inc. Class A (a) 937 5,622
La-Z-Boy, Inc. 910 10,774
Leggett & Platt, Inc. 1,553 41,869
Lennar Corp. 3,483 179,270
Libbey, Inc. 248 4,347
M.D.C. Holdings, Inc. 635 41,516
Maytag Corp. 3,788 36,706
Meritage Homes Corp. 390 24,683
National Presto Industries, Inc. 122 4,758
Newell Rubbermaid, Inc. 11,171 242,746
NVR, Inc. (a) 96 68,962
Russ Berrie & Co., Inc. 284 3,672
Ryland Group, Inc. (The) 1,412 86,697
Skyline Corp. 153 5,523
Standard Pacific Corp. 569 40,746
Toll Brothers, Inc. (a) 1,107 83,911
Toro Co. (The) 760 31,403
Whirlpool Corp. 2,170 134,670
------------
1,962,412
------------
</Table>
<Table>
<Caption>
SHARES VALUE
HOUSEHOLD PRODUCTS (0.2%)
Church & Dwight Co., Inc. 1,468 $ 52,878
Clorox Co. (The) 3,694 233,830
Energizer Holdings, Inc. 5,042 287,243
Kimberly-Clark Corp. 2,771 173,049
Rayovac Corp. 719 26,200
WD-40 Co. 304 8,524
------------
781,724
------------
INDUSTRIAL CONGLOMERATES (1.9%)
ALLETE, Inc. 497 20,710
V General Electric Co. (f) 135,422 4,902,277
Standex International Corp. 219 5,738
Textron, Inc. 6,551 493,618
Tredegar Corp. 639 10,390
Tyco International Ltd. 29,740 931,159
------------
6,363,892
------------
INSURANCE (3.9%)
ACE, Ltd. 13,757 591,001
AFLAC, Inc. 24,573 998,892
American Financial Group, Inc. 3,288 102,224
American International Group, Inc. 50,694 2,577,790
AmerUs Group Co. 4,513 212,156
Aon Corp. 10,281 214,359
Chubb Corp. (The) 9,282 759,082
Delphi Financial Group, Inc. Class A 519 21,549
Everest Re Group Ltd. 5,631 462,868
Fidelity National Financial, Inc. 2,366 75,972
First American Corp. 7,192 257,474
Gallagher (Arthur J.) & Co. 6,180 172,051
Hartford Financial Services Group, Inc. (The) 5,975 432,411
HCC Insurance Holdings, Inc. 7,751 275,703
Hilb, Rogal and Hobbs Co. 565 19,781
Horace Mann Educators Corp. 4,178 68,436
Infinity Property & Casualty Corp. 352 11,422
LandAmerica Financial Group, Inc. 302 14,979
Lincoln National Corp. 1,320 59,360
Loews Corp. 1,721 121,985
MetLife, Inc. 36,104 1,404,446
Ohio Casualty Corp. (a) 1,462 34,284
Old Republic International Corp. 6,372 150,379
Philadelphia Consolidated Holding Corp. 341 25,575
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 195
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
INSURANCE (CONTINUED)
Presidential Life Corp. 430 $ 6,239
ProAssurance Corp. 500 18,755
Progressive Corp. (The) 4,852 442,842
Protective Life Corp. 6,253 239,115
Prudential Financial, Inc. (a) 16,937 967,950
RLI Corp. 424 18,190
SAFECO Corp. 5,797 305,328
SCPIE Holdings, Inc. 237 2,607
Selective Insurance Group, Inc. 463 20,441
St. Paul Travelers Cos., Inc. (The) 27,248 975,478
StanCorp Financial Group, Inc. 2,818 215,633
Stewart Information Services Corp. (a) 301 10,842
UICI (a) 719 16,695
UnumProvident Corp. 9,652 161,381
W.R. Berkley Corp. 11,337 368,453
XL Capital Ltd. Class A 6,827 479,938
Zenith National Insurance Corp. 310 17,828
------------
13,331,894
------------
INTERNET & CATALOG RETAIL (0.1%)
eBay, Inc. 12,284 389,771
FindWhat.com 500 4,210
Insight Enterprises, Inc. (a) 844 15,277
J. Jill Group, Inc. (a) 350 4,389
------------
413,647
------------
INTERNET SOFTWARE & SERVICES (0.0%) (b)
Digital Insight 600 $ 12,042
Internet Security Systems, Inc. (a) 786 15,288
j2 Global Communications, Inc. (a) 378 13,502
WebEx Communications, Inc. (a) 647 14,117
Websense, Inc. (a) 375 19,894
Zix Corp. (a) 497 1,367
------------
76,210
------------
IT SERVICES (0.7%)
Acxiom Corp. (a) 9,870 187,530
Alliance Data Systems Corp. 4,626 186,890
Anteon International Corp. 4,200 175,560
BISYS Group, Inc. (The) 9,065 127,998
CACI International, Inc. Class A (a) 504 31,309
Carreker Corp. (a) 421 1,903
CheckFree Corp. (a) 8,408 308,405
CIBER, Inc. (a) 1,015 7,897
Cognizant Technology Solutions Corp. (a) 8,642 363,050
Computer Sciences Corp. 9,323 405,364
</Table>
<Table>
<Caption>
SHARES VALUE
IT SERVICES (CONTINUED)
CSG Systems International, Inc. 2,397 41,205
eFunds Corp. (a) 767 16,767
Electronic Data Systems Corp. 12,450 240,908
Global Payments, Inc. 600 38,856
Intrado, Inc. (a) 270 3,405
iPayment Holdings, Inc. 100 3,639
ManTech International Corp. Class A 420 10,101
MAXIMUS, Inc. (a) 382 11,727
Pegasus Solutions, Inc. (a) 370 3,955
Sabre Holdings Corp. Class A 1,090 21,320
StarTek, Inc. 260 3,783
SunGard Data Systems, Inc. 846 28,256
Unisys Corp. (a) 12,662 82,176
------------
2,302,004
------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Action Performance Cos., Inc. 327 3,463
Arctic Cat, Inc. 267 6,323
Eastman Kodak Co. 12,211 305,275
Hasbro, Inc. 2,856 54,035
JAKKS Pacific, Inc. (a) 449 8,437
K2, Inc. (a) 776 9,871
Mattel, Inc. 3,420 61,731
Meade Instruments Corp. (a) 477 1,412
Nautilus Group, Inc. (The) 545 13,549
Polaris Industries, Inc. 724 41,673
SCP Pool Corp. (a) 881 28,703
Sturm, Ruger & Co., Inc. 492 3,247
------------
537,719
------------
MACHINERY (0.5%)
Albany International Corp. Class A 510 15,994
Astec Industries, Inc. (a) 352 8,202
Barnes Group, Inc. 412 11,845
Briggs & Stratton Corp. 852 27,579
Ceradyne, Inc. 382 7,587
CLARCOR, Inc. 432 21,863
Cummins, Inc. 1,475 100,300
CUNO, Inc. (a) 282 14,303
Dionex Corp. (a) 354 15,204
Eaton Corp. 411 24,105
Federal Signal Corp. 391 5,486
Flowserve Corp. (a) 431 11,965
Gardner Denver, Inc. (a) 294 10,743
Graco, Inc. 4,150 140,145
Harsco Corp. 3,771 202,314
IDEX Corp. 840 31,290
Ingersoll-Rand Co. Class A 1,805 138,750
JLG Industries, Inc. 786 16,019
Kaydon Corp. 470 12,897
</Table>
196 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
MACHINERY (CONTINUED)
Kennametal, Inc. 817 $ 37,010
Lindsay Manufacturing Co. 205 3,825
Lydall, Inc. (a) 290 2,593
Manitowoc Co., Inc. (The) 497 19,880
Milacron, Inc. 814 1,709
Mueller Industries, Inc. (a) 575 14,892
Navistar International Corp. 538 15,887
Nordson Corp. 1,067 34,379
Oshkosh Truck Corp. 611 45,917
PACCAR, Inc. 2,850 193,515
Parker-Hannifin Corp. 1,941 116,344
Pentair, Inc. 1,565 62,256
Reliance Steel & Aluminum Co. 500 18,865
Robbins & Myers, Inc. 263 5,733
Stewart & Stevenson Services, Inc. 522 12,528
Tecumseh Products Co. Class A 833 28,938
Thomas Industries, Inc. 247 9,749
Timken Co. (The) 1,536 38,154
Valmont Industries, Inc. 342 7,955
Wabash National Corp. (a) 488 12,444
Watts Water Technologies, Inc. Class A 485 15,156
Wolverine Tube, Inc. (a) 296 1,924
------------
1,516,244
------------
MARINE (0.0%) (b)
Alexander & Baldwin, Inc. 3,305 134,612
Kirby Corp. (a) 409 16,663
------------
151,275
------------
MEDIA (1.1%)
4Kids Entertainment, Inc. 236 $ 4,758
Advo, Inc. 512 14,736
Catalina Marketing Corp. 5,938 138,058
Comcast Corp. Class A (a) 610 19,587
Emmis Communications Corp. Class A 1,697 26,185
Media General, Inc. Class A 188 11,521
Reader's Digest Association, Inc. (The) 8,994 152,898
Scholastic Corp. 1,156 40,287
Thomas Nelson, Inc. 257 6,163
Time Warner, Inc. 52,345 879,919
Viacom, Inc. Class B 29,362 1,016,512
Walt Disney Co. (The) 58,022 1,531,781
Washington Post Co. (The) Class B 34 29,385
------------
3,871,790
------------
</Table>
<Table>
<Caption>
SHARES VALUE
METALS & MINING (0.6%)
Alcoa, Inc. 4,220 122,464
Aleris International, Inc. 480 10,301
Allegheny Technologies, Inc. 795 17,808
Brush Engineered Materials, Inc. (a) 296 4,236
Carpenter Technology Corp. 409 22,618
Castle (A.M.) & Co. (a) 266 3,179
Century Aluminum Co. (a) 502 11,697
Cleveland-Cliffs, Inc. (a) 364 21,116
Commercial Metals Co. 993 25,331
Freeport-McMoRan Copper & Gold, Inc. Class B 1,470 50,950
Massey Energy Co. 1,280 46,221
Nucor Corp. 7,814 399,295
Peabody Energy Corp. 9,312 407,586
Phelps Dodge Corp. (a) 4,614 396,112
Quanex Corp. 396 19,982
RTI International Metals, Inc. (a) 372 8,366
Ryerson Tull, Inc. 444 4,640
Steel Dynamics, Inc. (a) 2,164 58,818
Steel Technologies, Inc. 175 3,358
United States Steel Corp. 5,577 238,472
------------
1,872,550
------------
MULTILINE RETAIL (0.9%)
Dillard's, Inc. Class A 3,888 90,474
Federated Department Stores, Inc. 6,960 400,200
Fred's, Inc. 656 9,473
J.C. Penney Co., Inc. Holding Co. 9,560 453,239
May Department Stores Co. 7,229 253,593
Neiman Marcus Group, Inc. (The) Class A 2,131 209,520
Saks, Inc. (a) 3,432 58,481
Sears Holdings Corp. 1,941 262,501
Shopko Stores, Inc. 532 12,747
Target Corp. 30,737 1,426,504
------------
3,176,732
------------
MULTI-UTILITIES & UNREGULATED POWER (1.3%)
AES Corp. (The) (a) 31,797 511,296
Avista Corp. 815 13,684
Constellation Energy Group, Inc. 2,829 148,692
Duke Energy Corp. 46,312 1,351,847
El Paso Corp. 20,565 205,444
Energen Corp. 616 38,161
Energy East Corp. 8,802 229,028
Equitable Resources, Inc. 1,298 74,817
MDU Resources Group, Inc. 7,697 208,050
National Fuel Gas Co. 6,101 166,130
ONEOK, Inc. 10,264 296,219
Questar Corp. 7,305 426,612
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 197
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER (CONTINUED)
Sierra Pacific Resources (a) 13,336 $ 144,296
Westar Energy, Inc. 7,141 163,529
Williams Cos., Inc. (The) 27,179 462,587
------------
4,440,392
------------
OFFICE ELECTRONICS (0.2%)
Gerber Scientific, Inc. (a) 396 2,803
Xerox Corp. (a) 45,607 604,293
------------
607,096
------------
OIL & GAS (5.2%)
Amerada Hess Corp. 1,496 140,100
Anadarko Petroleum Corp. 7,773 567,740
Apache Corp. 1,117 62,876
Burlington Resources, Inc. 19,091 928,013
Cabot Oil & Gas Corp. 831 24,465
ChevronTexaco Corp. 16,246 844,792
Cimarex Energy Co. (a) 699 24,814
ConocoPhillips 18,778 1,968,873
Devon Energy Corp. 23,655 1,068,496
EOG Resources, Inc. 3,876 184,304
V ExxonMobil Corp. (f) 105,297 6,005,088
Forest Oil Corp. (a) 3,517 135,510
Frontier Oil Corp. 478 20,114
Kerr-McGee Corp. 6,425 498,580
Marathon Oil Corp. 12,696 591,253
Murphy Oil Corp. 3,262 290,612
Newfield Exploration Co. (a) 5,112 363,105
Noble Energy, Inc. 5,067 324,896
Occidental Petroleum Corp. 12,947 893,343
Overseas Shipholding Group, Inc. 3,248 183,285
Patina Oil & Gas Corp. 1,199 46,042
Penn Virginia Corp. 311 12,773
Petroleum Development Corp. 274 7,014
Pioneer Natural Resources Co. (a) 4,271 173,659
Plains Exploration & Production Co. 8,815 283,667
Pogo Producing Co. 3,997 179,905
Remington Oil & Gas Corp. (a) 421 12,281
Spinnaker Exploration Co. 558 17,862
St. Mary Land & Exploration Co. 962 20,875
Stone Energy Corp. (a) 443 19,908
Sunoco, Inc. 3,500 347,410
Swift Energy Co. (a) 501 13,191
Unocal Corp. 6,513 355,284
Valero Energy Corp. 10,692 732,723
Vintage Petroleum, Inc. 1,012 29,237
XTO Energy, Inc. 12,646 381,530
------------
17,753,620
------------
</Table>
<Table>
<Caption>
SHARES VALUE
PAPER & FOREST PRODUCTS (0.3%)
Buckeye Technologies, Inc. (a) 676 $ 5,340
Deltic Timber Corp. 217 7,693
Georgia-Pacific Corp. 11,480 393,420
Louisiana-Pacific Corp. (a) 2,631 64,723
MeadWestvaco Corp. 2,208 65,026
Neenah Paper, Inc. 235 7,071
Pope & Talbot, Inc. 280 3,654
Potlatch Corp. 3,380 159,637
Rayonier, Inc. 2,783 139,873
Schweitzer-Mauduit International, Inc. 270 7,889
Wausau-Mosinee Paper Corp. 866 11,492
Weyerhaeuser Co. 2,093 143,601
------------
1,009,419
------------
PERSONAL PRODUCTS (0.9%)
V Gillette Co. (The) 60,193 3,108,366
Nature's Sunshine Products, Inc. 238 3,568
NBTY, Inc. (a) 1,075 22,919
------------
3,134,853
------------
PHARMACEUTICALS (2.9%)
Abbott Laboratories 399 19,615
Alpharma, Inc. 871 8,222
Bradley Pharmaceuticals, Inc. 276 2,467
Connetics Corp. 572 12,430
V Johnson & Johnson 63,937 4,387,996
King Pharmaceuticals, Inc. (a) 3,250 26,000
Medicis Pharmaceutical Corp. Class A 873 24,531
Merck & Co., Inc. 70,584 2,392,798
MGI Pharma, Inc. (a) 1,203 26,526
Mylan Laboratories, Inc. 2,838 46,827
Noven Pharmaceuticals, Inc. (a) 411 6,835
Pfizer, Inc. (f) 95,610 2,597,724
Wyeth 4,369 196,343
------------
9,748,314
------------
ROAD & RAIL (0.7%)
Arkansas Best Corp. 415 13,085
Burlington Northern Santa Fe Corp. 18,424 888,958
CSX Corp. 3,505 140,656
Heartland Express, Inc. 1,023 18,966
Kansas City Southern 1,043 19,733
Knight Transportation, Inc. (a) 790 16,693
Landstar System, Inc. (a) 1,021 31,294
Norfolk Southern Corp. 14,600 458,440
Swift Transportation Co., Inc. (a) 6,142 131,009
Union Pacific Corp. 6,355 406,275
</Table>
198 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ROAD & RAIL (CONTINUED)
USF Corp. 462 $ 19,695
Yellow Roadway Corp. (a) 1,923 94,227
------------
2,239,031
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.4%)
Actel Corp. (a) 456 6,398
Advanced Energy Industries, Inc. (a) 590 6,242
Advanced Micro Devices, Inc. (a) 18,806 267,609
Alliance Semiconductor Corp. (a) 612 967
Altera Corp. (a) 3,008 62,356
Applied Materials, Inc. 3,228 48,000
Atmel Corp. (a) 34,249 79,115
ATMI, Inc. 505 11,572
Axcelis Technologies, Inc. (a) 1,660 10,309
Brooks Automation, Inc. 758 9,748
Cabot Microelectronics Corp. 1,132 32,590
Cohu, Inc. 388 6,926
Cree, Inc. (a) 6,787 164,177
Cymer, Inc. (a) 605 14,998
Cypress Semiconductor Corp. (a) 2,707 32,457
DSP Group, Inc. (a) 450 10,845
ESS Technology, Inc. (a) 707 2,715
Exar Corp. (a) 740 9,391
Fairchild Semiconductor International, Inc. (a) 7,264 97,701
</Table>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED)
FEI Co. (a) 535 $ 9,646
Freescale Semiconductor, Inc. Class B 14,645 276,205
Helix Technology Corp. (a) 477 5,745
Integrated Device Technology, Inc. (a) 7,952 85,086
Intel Corp. 76,534 1,800,080
Kopin Corp. (a) 1,270 3,899
Kulicke & Soffa Industries, Inc. (a) 914 4,670
Lam Research Corp. (a) 11,105 284,843
Lattice Semiconductor Corp. 2,632 12,002
Maxim Integrated Products, Inc. 4,135 154,649
Micron Technology, Inc. (a) 17,635 171,236
Microsemi Corp. (a) 937 15,854
National Semiconductor Corp. (a) 5,686 108,489
Pericom Semiconductor Corp. (a) 469 3,930
Phototronics, Inc. (a) 586 9,317
Power Integrations, Inc. (a) 541 11,767
RF Micro Devices, Inc. 4,141 16,233
Rudolph Technologies, Inc. (a) 299 3,857
Skyworks Solutions, Inc. (a) 2,531 13,262
Standard Microsystems Corp. (a) 307 4,344
Supertex, Inc. (a) 227 3,237
Texas Instruments, Inc. 37,856 944,886
Ultratech, Inc. (a) 418 6,655
Varian Semiconductor Equipment Associates, Inc.
(a) 572 21,330
------------
4,845,338
------------
SOFTWARE (2.1%)
Activision, Inc. (a) 9,879 142,850
Advent Software, Inc. 704 12,559
Altiris, Inc. 430 7,005
ANSYS, Inc. (a) 502 15,281
Autodesk, Inc. (a) 11,192 356,241
BMC Software, Inc. (a) 10,709 173,486
Cadence Design Systems, Inc. (a) 5,345 74,830
Captaris, Inc. (a) 546 1,998
Catapult Communications Corp. (a) 230 3,399
Citrix Systems, Inc. (a) 6,776 152,460
Computer Associates International, Inc. (a) 4,646 124,977
Compuware Corp. (a) 11,836 70,424
Concord Communications, Inc. (a) 311 5,116
Electronic Arts, Inc. 2,458 131,233
EPIQ Systems, Inc. (a) 324 4,915
FactSet Research Systems, Inc. 653 18,127
Fair Isaac Corp. 1,548 50,898
FileNet Corp. (a) 667 17,676
Hyperion Solutions Corp. (a) 651 26,476
Intuit, Inc. 6,083 245,145
JDA Software Group, Inc. (a) 522 5,345
Kronos, Inc. (a) 516 20,150
Macromedia, Inc. 19,099 756,511
Macrovision Corp. 1,500 30,675
Manhattan Associates, Inc. (a) 501 9,459
MapInfo Corp. (a) 275 3,116
McAfee, Inc. 15,654 327,325
Mercury Interactive Corp. 1,384 57,201
MICROS Systems, Inc. (a) 634 25,138
V Microsoft Corp. (f) 124,829 3,158,174
MRO Software, Inc. 448 5,730
Napster, Inc. 563 3,220
Novell, Inc. 3,094 18,286
NYFIX, Inc. (a) 559 2,957
Parametric Technology Corp. 5,805 30,883
Phoenix Technologies Ltd. (a) 434 3,511
Progress Software Corp. (a) 632 16,862
Radiant Systems, Inc. (a) 495 4,257
Reynolds & Reynolds Co. (The) Class A 4,166 109,857
SERENA Software, Inc. (a) 589 11,209
Sonic Solutions 394 5,788
SPSS, Inc. (a) 316 5,084
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 199
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
SOFTWARE (CONTINUED)
Sybase, Inc. 5,965 $ 112,918
Synopsys, Inc. 16,191 266,180
Take-Two Interactive Software, Inc. (a) 1,143 26,895
TALX Corp. 370 9,146
THQ, Inc. (a) 653 16,469
Transaction Systems Architects, Inc. 765 15,859
VERITAS Software Corp. 12,448 256,304
Verity, Inc. (a) 683 5,601
Wind River Systems, Inc. 1,927 25,012
------------
6,980,218
------------
SPECIALTY RETAIL (1.3%)
Aaron Rents, Inc. 746 $ 16,378
Abercrombie & Fitch Co. Class A (a) 9,200 496,340
Advanced Auto Parts, Inc. 604 32,223
Aeropostale, Inc. 1,198 33,460
American Eagle Outfitters, Inc. (a) 14,541 381,265
AutoZone, Inc. (a) 659 54,697
Barnes & Noble, Inc. (a) 7,283 259,275
Borders Group, Inc. (a) 3,698 89,455
Building Materials Holding Corp. 238 13,076
Burlington Coat Factory Warehouse Corp. 534 14,712
CarMax, Inc. 2,261 61,680
Cato Corp. (The) Class A 371 9,535
Chico's FAS, Inc. 73 1,871
Children's Place Retail Stores, Inc. (The) (a) 350 13,024
Christopher & Banks Corp. 607 9,481
Circuit City Stores, Inc. 8,009 126,542
Claire's Stores, Inc. 2,197 47,939
Cost Plus, Inc. 391 9,067
Dress Barn, Inc. (The) (a) 437 7,516
Electronics Boutique Holdings Corp. (a) 298 16,608
Finish Line, Inc. (The) Class A 774 13,947
GameStop Corp. Class B 786 18,345
Gap, Inc. (The) 7,088 151,329
Genesco, Inc. (a) 397 10,215
Goody's Family Clothing, Inc. 442 3,647
Group 1 Automotive, Inc. (a) 413 10,387
Guitar Center, Inc. (a) 415 20,480
Gymboree Corp. (The) (a) 538 6,149
Hancock Fabrics, Inc. 337 1,995
Haverty Furniture Cos., Inc. 401 5,754
Hibbett Sporting Goods, Inc. (a) 410 11,058
Home Depot, Inc. (The) 14,976 529,701
</Table>
<Table>
<Caption>
SHARES VALUE
SPECIALTY RETAIL (CONTINUED)
Hot Topic, Inc. (a) 803 16,052
Jo-Ann Stores, Inc. (a) 387 9,791
Limited Brands, Inc. 9,854 213,733
Linens 'n Things, Inc. (a) 751 17,521
Men's Wearhouse, Inc. (The) (a) 576 23,772
Michaels Stores, Inc. 14,147 469,680
Movie Gallery, Inc. (a) 499 13,488
Office Depot, Inc. 9,614 188,242
Pacific Sunwear of California, Inc. (a) 3,484 78,773
Payless ShoeSource, Inc. (a) 7,926 108,269
Pep Boys-Manny, Moe & Jack (The) 919 13,031
Rent-A-Center, Inc. (a) 3,962 95,247
Ross Stores, Inc. 2,798 74,763
Select Comfort Corp. (a) 600 13,272
Sonic Automotive, Inc. 660 12,982
Stage Stores, Inc. 300 11,346
Staples, Inc. 6,103 116,384
Stein Mart, Inc. (a) 573 11,609
TBC Corp. (a) 397 10,386
Too, Inc. (a) 543 12,494
Toys "R" Us, Inc. (a) 8,189 207,591
Tractor Supply Co. (a) 594 23,891
Urban Outfitters, Inc. 1,677 74,291
Zale Corp. (a) 815 22,029
------------
4,315,788
------------
TEXTILES, APPAREL & LUXURY GOODS (0.1%)
Ashworth, Inc. (a) 312 3,429
Brown Shoe Co., Inc. 326 10,073
Fossil, Inc. (a) 946 22,004
Haggar Corp. 155 3,007
Kellwood Co. 448 11,442
K-Swiss, Inc. Class A 513 15,390
Oshkosh B' Gosh, Inc. Class A 217 5,718
Oxford Industries, Inc. 270 9,887
Phillips-Van Heusen Corp. 498 12,888
Quiksilver, Inc. (a) 950 26,173
Russell Corp. 593 10,384
Stride Rite Corp. (The) 591 7,210
Wolverine World Wide, Inc. 901 18,281
------------
155,886
------------
THRIFTS & MORTGAGE FINANCE (1.5%)
Anchor BanCorp Wisconsin, Inc. 384 10,145
BankAtlantic Bancorp, Inc. Class A 887 15,132
BankUnited Financial Corp. (a) 499 11,916
Brookline Bancorp, Inc. 984 14,760
Commercial Federal Corp. 661 17,259
Countrywide Financial Corp. 23,084 835,410
</Table>
200 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (CONTINUED)
Dime Community Bancshares 628 $ 9,320
Downey Financial Corp. 399 25,827
Fannie Mae 33,543 1,809,645
FirstFed Financial Corp. (a) 273 13,822
Flagstar Bancorp, Inc. 785 14,946
Freddie Mac 23,232 1,429,233
Fremont General Corp. 1,194 25,898
Independence Community Bank Corp. 7,679 273,987
MAF Bancorp, Inc. 562 22,694
New Century Financial Corp. 878 39,905
Sterling Financial Corp. (a) 377 12,324
Washington Mutual, Inc. 6,007 248,209
Webster Financial Corp. 3,256 147,985
------------
4,978,417
------------
TOBACCO (1.0%)
V Altria Group, Inc. 46,876 3,046,471
DIMON, Inc. 818 4,867
Reynolds American, Inc. 1,312 102,297
UST, Inc. 4,046 185,307
------------
3,338,942
------------
TRADING COMPANIES & DISTRIBUTORS (0.0%) (b)
Applied Industrial Technologies, Inc. 457 12,750
Grainger (W.W.), Inc. 729 40,307
Hughes Supply, Inc. 1,101 28,736
Lawson Products, Inc. 120 4,624
Watsco, Inc. 429 18,614
------------
105,031
------------
WATER UTILITIES (0.0%) (b)
American States Water Co. 278 7,061
------------
</Table>
<Table>
<Caption>
SHARES VALUE
WIRELESS TELECOMMUNICATION SERVICES (0.9%)
Boston Communications
Group, Inc. (a) 325 $ 1,807
Nextel Communications, Inc. Class A (a) 94,238 2,637,722
Telephone & Data Systems, Inc. 4,433 342,183
------------
2,981,712
------------
Total Common Stocks
(Cost $162,176,773) 198,296,271(i)
------------
REAL ESTATE INVESTMENT TRUSTS (1.3%)
- ------------------------------------------------------------------------------
Acadia Realty Trust 406 6,516
Affordable Residential Communities 513 6,607
Alexandria Real Estate Equities, Inc. 256 17,618
AMB Property Corp. 4,709 183,604
America First Apartment Investors, Inc. 129 1,539
American Financial Realty Trust 1,446 22,167
American Land Lease, Inc. 111 2,412
Amli Residential Properties Trust 332 9,269
Apartment Investment & Management Co. Class A 5,024 191,515
Archstone-Smith Trust 5,852 210,496
Arden Realty, Inc. 864 30,836
Ashford Hospitality Trust 326 3,338
Associated Estates Realty Corp. 305 3,001
Avalonbay Communities, Inc. 967 69,624
Bedford Property Investors, Inc. 216 4,599
Boston Properties, Inc. 1,392 92,526
Boykin Lodging Co. 273 2,659
Brandywine Realty Trust 702 19,867
BRE Properties, Inc. Class A 661 24,602
Camden Property Trust 709 36,159
Capital Automotive REIT 1,248 42,407
CarrAmerica Realty Corp. 717 23,690
Catellus Development Corp. 1,359 37,644
CBL & Associates Properties, Inc. 405 31,335
Cedar Shopping Centers, Inc. 257 3,547
Centerpoint Properties Corp. 616 25,385
Colonial Properties Trust 1,018 39,346
Commercial Net Lease Realty 1,516 28,774
Corporate Office Properties Trust 460 12,098
Correctional Properties Trust 173 4,439
Cousins Properties, Inc. 646 17,442
Crescent Real Estate Equities Co. 1,311 22,025
CRT Properties, Inc. 907 20,943
Developers Diversified Realty Corp. 1,398 59,331
Duke Realty Corp. 1,909 58,415
EastGroup Properties, Inc. 283 10,613
Entertainment Properties Trust 700 30,240
Equity Inns, Inc. 638 7,184
Equity Lifestyle Properties, Inc. 302 11,053
Equity Office Properties Trust 5,384 169,434
Equity One, Inc. 732 15,328
Equity Residential 8,325 285,964
Essex Property Trust, Inc. 687 52,178
Federal Realty Investment Trust 680 36,380
FelCor Lodging Trust, Inc. 784 9,596
First Industrial Realty Trust, Inc. 541 20,666
First Potomac Realty Trust 187 4,191
Gables Residential Trust 889 32,582
General Growth Properties, Inc. 3,044 119,051
Getty Realty Corp. 326 8,225
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 201
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
- ------------------------------------------------------------------------------
Glenborough Realty Trust, Inc. 943 $ 19,369
Glimcher Realty Trust 468 11,780
Government Properties Trust 265 2,613
Health Care Property Investors, Inc. 1,788 45,844
Health Care REIT, Inc. 677 22,680
Healthcare Realty Trust, Inc. 618 23,861
Heritage Property Investment Trust 469 14,445
Hersha Hospitality Trust 200 2,080
Highland Hospitality Corp. 527 5,528
Highwoods Properties, Inc. 1,803 50,718
Home Properties, Inc. 440 18,414
Hospitality Properties Trust 861 35,973
Host Marriot Corp. 4,469 75,169
HRPT Properties Trust 2,669 31,361
Innkeepers USA Trust 492 6,529
Investors Real Estate Trust 562 5,086
Kilroy Realty Corp. 848 36,998
Kimco Realty Corp. 1,280 70,899
LaSalle Hotel Properties 386 11,727
Lexington Corporate Properties Trust 1,463 33,620
Liberty Property Trust 1,117 44,490
Macerich Co. (The) 773 46,612
Mack-Cali Realty Corp. 799 35,148
Maguire Properties, Inc. 562 14,331
Mid-America Apartment Communities, Inc. 282 10,781
Mills Corp. (The) 708 40,455
Mission West Properties, Inc. 282 2,862
Monmouth Real Estate Investment Corp. Class A 229 1,926
National Health Realty, Inc. 127 2,477
Nationwide Health Properties, Inc. 852 18,258
New Plan Excel Realty Trust 1,321 34,095
OMEGA Healthcare Investors, Inc. 650 7,293
One Liberty Properties, Inc. 139 2,694
Pan Pacific Retail Properties, Inc. 489 29,545
Parkway Properties, Inc. 399 18,194
Pennsylvania Real Estate Investment Trust 472 19,895
Plum Creek Timber Co., Inc. 1,433 49,496
Post Properties, Inc. 525 17,105
Prentiss Properties Trust 587 19,500
ProLogis 2,456 97,233
PS Business Parks, Inc. 288 11,624
Public Storage, Inc. 1,471 86,348
Ramco-Gershenson Properties Trust 228 6,313
Realty Income Corp. 1,044 25,171
Reckson Associates Realty Corp. 1,038 33,475
Regency Centers Corp. 898 47,280
Saul Centers, Inc. 212 7,102
Senior Housing Properties Trust 837 14,480
Shurgard Storage Centers, Inc. Class A 1,389 58,102
Simon Property Group, Inc. 6,433 425,028
Sizeler Property Investors, Inc. 207 2,385
SL Green Realty Corp. 546 33,306
Sovran Self Storage, Inc. 457 19,537
Sun Communities, Inc. 252 8,782
Tanger Factory Outlet Centers, Inc. 334 7,735
Taubman Centers, Inc. 656 19,418
Town & Country Trust 258 6,927
Trizec Properties, Inc. 1,625 32,484
Trustreet Properties, Inc. 312 4,880
United Dominion Realty Trust, Inc. 4,635 102,665
United Mobile Homes, Inc. 127 1,953
Universal Health Realty Income Trust 150 4,912
Urstadt Biddle Properties Class A 292 4,345
Ventas, Inc. 1,107 29,867
Vornado Realty Trust 1,535 117,351
Washington Real Estate Investment Trust 551 16,425
Weingarten Realty Investors 3,742 134,749
Windrose Medical Properties Trust 131 1,847
Winston Hotels, Inc. 410 4,715
------------
Total Real Estate Investment Trusts
(Cost $3,264,260) 4,484,750
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (18.2%)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (9.7%)
7-Eleven, Inc.
2.77%, due 5/5/05 $ 800,000 799,754
Becton, Dickinson & Co.
2.83%, due 5/17/05 1,000,000 998,743
Dealers Capital Access Trust
2.91%, due 5/18/05 400,000 399,449
2.99%, due 6/3/05 2,350,000 2,343,574
3.02%, due 6/6/05 300,000 299,096
</Table>
202 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
E.I. du Pont de Nemours & Co.
2.74%, due 5/4/05 $ 2,100,000 $ 2,099,520
Federal Farm Credit Bank
2.69%, due 5/5/05 2,000,000 1,999,401
General Electric Capital Corp.
2.96%, due 6/17/05 7,100,000 7,072,630
Illinois Tool Works, Inc.
2.81%, due 5/10/05 1,000,000 999,298
International Business Machines Corp.
2.83%, due 5/12/05 2,350,000 2,347,967
Minnesota Mining and Manufacturing Co.
2.74%, due 5/19/05 450,000 449,383
2.78%, due 5/19/05 550,000 549,235
National Rural Utilities Cooperative Finance Corp.
2.92%, due 5/20/05 1,000,000 998,463
UBS Finance (Delaware) LLC
2.98%, due 5/13/05 10,500,000 10,489,571
Wells Fargo & Co.
2.88%, due 5/23/05 1,000,000 998,245
------------
Total Commercial Paper
(Cost $32,844,329) 32,844,329
------------
<Caption>
SHARES
INVESTMENT COMPANY (0.2%)
AIM Institutional Funds Group (k) 530,183 530,183
------------
Total Investment Company
(Cost $530,183) 530,183
------------
<Caption>
PRINCIPAL
AMOUNT
MASTER NOTE (0.2%)
Banc of America Securities LLC
3.08%, due 5/2/05 (k) $ 500,000 500,000
------------
Total Master Note
(Cost $500,000) 500,000
------------
REPURCHASE AGREEMENTS (3.2%)
Credit Suisse First Boston LLC
3.05%, dated 4/29/05 due 5/2/05
Proceeds at Maturity
$1,300,340 (k)
(Collateralized by Various Bonds with a
Principal Amount of $1,364,973 and a Market
Value of $1,326,034) 1,300,000 1,300,000
Deutsche Bank Securities, Inc.
3.06%, dated 4/29/05 due 5/2/05
Proceeds at Maturity $1,000,255 (k)
(Collateralized by Various Bonds with a
Principal Amount of $1,005,183 and a Market
Value of $1,020,000) 1,000,000 1,000,000
Dresdner Kleinwort Wasserstein Securities, LCC
3.07%, dated 4/29/05 due 5/2/05
Proceeds at Maturity $750,192 (k)
(Collateralized by Various Bonds with a
Principal Amount of $789,815 and a Market Value
of $787,507) 750,000 750,000
Morgan Stanley & Co., Inc.
3.05%, dated 4/29/05 due 5/2/05
Proceeds at Maturity $8,002,033 (k)
(Collateralized by Various Bonds with a
Principal Amount of $8,612,691 and a Market
Value of $8,259,778) 8,000,000 8,000,000
------------
Total Repurchase Agreements
(Cost $11,050,000) 11,050,000
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 203
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
U.S. GOVERNMENT (4.9%)
United States Treasury Bills
2.99%, due 10/6/05 $ 7,000,000 $ 6,908,503
3.01%, due 10/13/05 10,000,000 9,863,436
------------
Total U.S. Government
(Cost $16,771,939) 16,771,939
------------
Total Short-Term Investments
(Cost $61,696,451) 61,696,451
------------
Total Investments
(Cost $323,331,063) (l) 106.3% 361,182,941(m)
Liabilities in Excess of
Cash and Other Assets (6.3) (21,354,122)
----------- ------------
Net Assets 100.0% $339,828,819
=========== ============
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (N)
FUTURES CONTRACTS (0.1%)
- -----------------------------------------------------------------------------
CANADA (-0.0%) (b)
Standard & Poor's Toronto Stock Exchange 60
Index
June 2005 13 $ (30,705)
-------------------
ITALY (-0.0%) (b)
Milan MIB 30 Index
June 2005 35 (154,819)
-------------------
SPAIN (-0.1%)
IBEX 35 Index
June 2005 56 (176,349)
-------------------
UNITED STATES (0.0%) (b)
United States Treasury Note
June 2005 (10 Year) 4 9,718
-------------------
Total Futures Contracts Long
(Settlement Value $14,849,435) (352,155)
-------------------
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
SHORT (DEPRECIATION) (N)
UNITED STATES (0.2%)
Standard & Poor's 500 Index
June 2005 15 $ 145,222
Standard & Poor's
MidCap 400 Index
June 2005 29 563,401
-------------------
Total Futures Contracts Short
(Settlement Value $13,541,000) 708,623
-------------------
Total Futures Contracts
(Settlement Value $28,390,435) (g)(i) $ 356,468
===================
</Table>
<Table>
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) Yankee bond -- dollar-denominated bond issued in the United States by
foreign banks and corporations.
(e) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and
maturity date will be determined upon settlement. The market value of these
securities at April 30, 2005 is $10,016,720.
(f) Segregated, partially segregated or designed as collateral for futures
contracts and TBAs.
(g) The combined market value of U.S. Government & Federal Agencies investments
and settlement value of U.S. Treasury Note futures contracts represents
20.7% of net assets.
(h) Exchange Traded Fund -- represents a basket of securities that are traded
on an exchange.
(i) The combined market value of common stocks and settlement value of Index
futures contracts represents 66.7% of net assets.
(j) Represents securities out on loan or a portion which is out on loan.
(k) Represents a security or a portion thereof, purchased with cash collateral
received for securities on loan.
(l) The cost for federal income tax purposes is $327,537,782.
(m) At April 30, 2005 net unrealized appreciation was $33,645,159 based on cost
for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $42,975,092 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $9,329,933.
(n) Represents the difference between the value of the contracts at the time
they were opened and the value at April 30, 2005.
</Table>
204 MainStay Asset Manager 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $323,331,063) including
$11,910,653 market value of securities
loaned $361,182,941
Cash 1,026,620
Receivables:
Investment securities sold 9,709,268
Dividends and interest 1,096,681
Fund shares sold 939,406
Variation margin on futures contracts 9,952
Other assets 103,962
------------
Total assets 374,068,830
------------
LIABILITIES:
Securities lending collateral 12,080,183
Payable due to broker for futures contracts 132,047
Payables:
Investment securities purchased 21,389,176
Transfer agent 201,820
Fund shares redeemed 151,296
Manager 133,645
NYLIFE Distributors 42,098
Custodian 22,673
Directors 3,001
Accrued expenses 84,072
------------
Total liabilities 34,240,011
------------
Net assets $339,828,819
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 5,233
Class B 2,443
Class C 368
Class I 18,446
Additional paid-in capital 346,739,012
Accumulated undistributed net investment
income 3,069,055
Accumulated net realized loss on investments,
futures contracts and foreign currency
transactions (48,219,772)
Net unrealized appreciation on investments and
futures contracts 38,208,346
Net unrealized appreciation on foreign
currency transactions 5,688
------------
Net assets $339,828,819
============
CLASS A
Net assets applicable to outstanding shares $ 66,910,961
============
Shares of capital stock outstanding 5,232,690
============
Net asset value per share outstanding $ 12.79
Maximum sales change (5.50% of offering price) 0.74
------------
Maximum offering price per share outstanding $ 13.53
============
CLASS B
Net assets applicable to outstanding shares $ 30,876,368
============
Shares of capital stock outstanding 2,442,992
============
Net asset and offering price per share
outstanding $ 12.64
============
CLASS C
Net assets applicable to outstanding shares $ 4,651,529
============
Shares of capital stock outstanding 367,875
============
Net asset and offering price per share
outstanding $ 12.64
============
CLASS I
Net assets applicable to outstanding shares $237,389,961
============
Shares of capital stock outstanding 18,446,203
============
Net asset and offering price per share
outstanding $ 12.87
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 205
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 2,357,883
Dividends (a) 2,291,117
Income from securities loaned -- net 18,380
-----------
Total income 4,667,380
-----------
EXPENSES:
Manager 1,074,761
Transfer agent -- Classes A, B and C 89,456
Transfer agent -- Class I 216,078
Distribution -- Class B 94,785
Distribution -- Class C 14,805
Service -- Class A 78,572
Service -- Class B 31,596
Service -- Class C 4,935
Custodian 56,621
Professional 53,330
Registration 31,185
Interest 20,404
Shareholder communication 14,731
Directors 14,509
Miscellaneous 63,953
-----------
Total expenses before reimbursement 1,859,721
Expenses reimbursement from Manager (265,558)
-----------
Net expenses 1,594,163
-----------
Net investment income 3,073,217
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Security transactions 11,193,706
Futures transaction (1,084,747)
Foreign currency transactions 92,934
-----------
Net realized gain on investments and foreign
currency transactions 10,201,893
-----------
Net change in unrealized appreciation
(depreciation) on investments:
Security transactions (5,768,471)
Futures transaction (29,623)
Foreign currency transactions 28,332
-----------
Net unrealized loss on investments and foreign
currency transactions (5,769,762)
-----------
Net realized and unrealized gain on investments
and foreign currency transactions 4,432,131
-----------
Net increase in net assets resulting from
operations $ 7,505,348
===========
</Table>
(a)Dividends recorded net of foreign withholding taxes in the amount of $16.
206 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 3,073,217 $ 4,675,300
Net realized gain on
investments, futures
contracts and foreign
currency transactions 10,201,893 25,456,712
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency transactions (5,769,762) (5,846,554)
----------------------------
Net increase in net assets
resulting from operations 7,505,348 24,285,458
----------------------------
Dividends to shareholders:
From net investment income:
Class A (883,795) --
Class B (271,640) --
Class C (42,898) (757)
Class I (3,506,544) (5,321,664)
Service Class -- (680,408)
----------------------------
Total dividends to
shareholders (4,704,877) (6,002,829)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 16,099,826 62,346,988
Class B 11,898,058 20,384,771
Class C 2,086,336 3,296,544
Class I 16,056,370 35,028,829
Service Class -- 869,829
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued to
shareholders in reinvestment of dividends:
Class A $ 836,184 $ --
Class B 257,612 --
Class C 37,036 757
Class I 3,485,389 5,295,326
Service Class -- 634,600
----------------------------
50,756,811 127,857,644
Cost of shares redeemed:
Class A (6,199,729) (8,381,903)
Class B (1,365,664) (655,422)
Class C (696,375) (189,336)
Class I (18,823,304) (83,823,084)
Service Class -- (38,107,319)
----------------------------
(27,085,072) (131,157,064)
----------------------------
Increase in net assets
derived from capital
share transactions 23,671,739 (3,299,420)
----------------------------
Net increase in net assets 26,472,210 14,983,209
NET ASSETS:
Beginning of period 313,356,609 298,373,400
----------------------------
End of period $339,828,819 $ 313,356,609
============================
Accumulated undistributed net
investment income at end of
period $ 3,069,055 $ 4,700,715
============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 207
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- -------------
JANUARY 2, JANUARY 2,
SIX MONTHS 2004** SIX MONTHS 2004** SIX MONTHS
ENDED THROUGH ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
2005*** 2004 2005*** 2004 2005***
Net asset value at beginning of period $ 12.67 $ 12.17 $ 12.54 $ 12.12 $12.54
------- ------- ------- ------- ------
Net investment income 0.11 (e) 0.12 0.06 (e) 0.04 0.06 (e)
Net realized and unrealized gain on
investments 0.20 0.38 0.19 0.38 0.19
Net realized and unrealized gain on
foreign currency transactions (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a)
------- ------- ------- ------- ------
Total from investment operations 0.31 0.50 0.25 0.42 0.25
------- ------- ------- ------- ------
Less dividends and distributions:
From net investment income (0.19) -- (0.15) -- (0.15)
From net realized gain on investments -- -- -- -- --
------- ------- ------- ------- ------
Total dividends and distributions (0.19) -- (0.15) -- (0.15)
------- ------- ------- ------- ------
Net asset value at end of period $ 12.79 $ 12.67 $ 12.64 $ 12.54 $12.64
======= ======= ======= ======= ======
Total investment return (b) 2.41%(c) 4.11%(c) 2.00%(c) 3.47%(c) 2.00%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.74%+ 1.40%+ 0.99%+ 0.65%+ 0.99%+
Net expenses 1.08%+ 1.02%+ 1.83%+ 1.77%+ 1.83%+
Expenses (before reimbursement) 1.24%+ 1.23%+ 1.99%+ 1.98%+ 1.99%+
Portfolio turnover rate 52%(f) 89% 52%(f) 89% 52%(f)
Net assets at end of period (in 000's) $66,911 $55,796 $30,876 $20,087 $4,652
<Caption>
CLASS C
-----------
YEAR
ENDED
OCTOBER 31,
2004
Net asset value at beginning of period $11.86
------
Net investment income 0.11
Net realized and unrealized gain on
investments 0.76
Net realized and unrealized gain on
foreign currency transactions (0.00)(a)
------
Total from investment operations 0.87
------
Less dividends and distributions:
From net investment income (0.19)
From net realized gain on investments --
------
Total dividends and distributions (0.19)
------
Net asset value at end of period $12.54
======
Total investment return (b) 7.39%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.65%
Net expenses 1.77%
Expenses (before reimbursement) 1.98%
Portfolio turnover rate 89%
Net assets at end of period (in 000's) $3,218
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
(d) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000, have not
been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
CLASS I
Decrease net investment income ($0.01)
Increase net realized and unrealized gains and losses 0.01
Decrease ratio of net investment income (0.06%)
</Table>
<Table>
(e) Per share data on average shares outstanding during the period.
(f) The portfolio turnover rate not including mortgage dollar rolls for the six months ending
April 30, 2005 is 42%.
</Table>
208 MainStay Asset Manager 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
<Table>
<Caption>
CLASS I
- -------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2005*** 2004 2003 2002 2001 2000
$ 12.74 $ 11.99 $ 10.81 $ 12.11 $ 15.21 $ 14.57
-------- -------- -------- -------- -------- --------
0.13 (e) 0.22 0.18 (e) 0.22 0.37 (d) 0.51
0.19 0.78 1.22 (1.25) (2.09)(d) 1.08
(0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.01)
-------- -------- -------- -------- -------- --------
0.32 1.00 1.40 (1.03) (1.72) 1.58
-------- -------- -------- -------- -------- --------
(0.19) (0.25) (0.22) (0.27) (0.50) (0.50)
-- -- -- -- (0.88) (0.44)
-------- -------- -------- -------- -------- --------
(0.19) (0.25) (0.22) (0.27) (1.38) (0.94)
-------- -------- -------- -------- -------- --------
$ 12.87 $ 12.74 $ 11.99 $ 10.81 $ 12.11 $ 15.21
======== ======== ======== ======== ======== ========
2.51%(c) 8.43% 13.17% (8.78%) (12.12%) 11.18%
2.00%+ 1.59% 1.65% 1.84% 2.66% 3.45%
0.83%+ 0.83% 0.83% 0.83%# 0.83% 0.83%
0.99%+ 1.04% 1.06% 0.94%# 0.87% 0.83%
52%(f) 89% 113% 4% 15% 49%
$237,390 $234,256 $262,438 $399,199 $452,246 $561,329
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 209
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
SERVICE CLASS++
------------------------------------------------------------------
NOVEMBER 1,
2003
THROUGH
JANUARY 9, YEAR ENDED OCTOBER 31,
2004 2003 2002 2001 2000
Net asset value at beginning of period $11.94 $ 10.76 $ 12.05 $ 15.14 $ 14.50
------ ------- ------- ------- -------
Net investment income (loss) (1.08) 0.15 0.18 0.33 (e) 0.50
Net realized and unrealized gain (loss) on
investments 1.68 1.22 (1.23) (2.08)(e) 1.05
Net realized and unrealized gain (loss) on
foreign currency transactions (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.01)
------ ------- ------- ------- -------
Total from investment operations 0.60 1.37 (1.05) (1.75) 1.54
------ ------- ------- ------- -------
Less dividends and distributions:
From net investment income (0.23) (0.19) (0.24) (0.46) (0.46)
From net realized gain on investments -- -- -- (0.88) (0.44)
------ ------- ------- ------- -------
Total dividends and distributions (0.23) (0.19) (0.24) (1.34) (0.90)
------ ------- ------- ------- -------
Net asset value at end of period $12.31 $ 11.94 $ 10.76 $ 12.05 $ 15.14
====== ======= ======= ======= =======
Total investment return (b) 5.06%(c) 12.92% (8.96%) (12.36%) 10.96%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.47%+ 1.40% 1.59% 2.41%(e) 3.20%
Net expenses 1.08%+ 1.08% 1.08% 1.08% 1.08%
Expenses (before reimbursement) 1.31%+ 1.31% 1.19% 1.12% 1.08%
Portfolio turnover rate 113% 113% 4% 15% 49%
Net assets at end of period (in 000's) $ 0 $35,889 $22,980 $23,675 $27,978
<Caption>
SERVICE CLASS++
-----------------------------
JANUARY 1,
THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1999* 1998
Net asset value at beginning of period $ 15.33 $ 14.81
------- -------
Net investment income (loss) 0.39 0.39
Net realized and unrealized gain (loss) on
investments 0.38 2.69
Net realized and unrealized gain (loss) on
foreign currency transactions (0.03) 0.02
------- -------
Total from investment operations 0.74 3.10
------- -------
Less dividends and distributions:
From net investment income (0.00)(a) (0.39)
From net realized gain on investments (1.57) (2.19)
------- -------
Total dividends and distributions (1.57) (2.58)
------- -------
Net asset value at end of period $ 14.50 $ 15.33
======= =======
Total investment return (b) 5.31%(c) 21.00%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.15%+ 2.39%
Net expenses 1.03%+ 1.05%
Expenses (before reimbursement) 1.03%+ 1.05%
Portfolio turnover rate 18% 55%
Net assets at end of period (in 000's) $29,087 $16,853
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Total return is calculated exclusive of sales charges and is not annualized.
(c) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the year ended October 31, 2001 is shown below.
Per share ratios and supplemental data for periods prior to November 1, 2000, have not
been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
CLASS I
Decrease net investment income ($0.01)
Increase net realized and unrealized gains and losses 0.01
Decrease ratio of net investment income (0.06%)
</Table>
<Table>
(d) Per share data on average shares outstanding during the period.
</Table>
210 MainStay Asset Manager Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY BALANCED FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -1.42% 2.80% 8.58% 9.41
Excluding sales charges 4.32 8.78 9.81 10.03
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 9450 10000 10000 10000 10000
11056 10790 13021 11956 13079
12448 11487 16294 13536 14512
16240 12514 22985 17253 20458
16668 13320 28001 17992 21673
15396 13532 30837 17665 25142
17934 15157 26837 20621 25214
19584 16242 23448 22329 25037
18912 17962 20328 21428 21498
22602 18327 24979 25912 29120
4/30/05 24588 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges -1.07% 2.99% 8.74% 9.23%
Excluding sales charges 3.93 7.99 9.02 9.23
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 10000 10000 10000 10000 10000
11613 10790 13021 11956 13079
12980 11487 16294 13536 14512
16810 12514 22985 17253 20458
17136 13320 28001 17992 21673
15702 13532 30837 17665 25142
18157 15157 26837 20621 25214
19682 16242 23448 22329 25037
18868 17962 20328 21428 21498
22392 18327 24979 25912 29120
4/30/05 24182 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
With sales charges 2.89% 6.95% 9.01% 9.24%
Excluding sales charges 3.89 7.95 9.01 9.24
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 10000 10000 10000 10000 10000
11621 10790 13021 11956 13079
12985 11487 16294 13536 14512
16822 12514 22985 17253 20458
17148 13320 28001 17992 21673
15719 13532 30837 17665 25142
18171 15157 26837 20621 25214
19700 16242 23448 22329 25037
18882 17962 20328 21428 21498
22414 18327 24979 25912 29120
4/30/05 24196 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
Performance tables and graphs do not reflect the deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total returns
reflect change in share price, reinvestment of dividend and capital-gain
distributions, and maximum applicable sales charges explained in this paragraph.
The graphs assume an initial investment of $10,000 and reflect the deduction of
all sales charges that would have applied for the period of investment. Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1
fee of .25%. Class B shares are sold with no initial sales charge, are subject
to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the
first six years of purchase, and
THE DISCLOSURE AND FOOTNOTES ON THE NEXT TWO PAGES ARE AN INTEGRAL PART OF THE
TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 211
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
4.54% 9.27% 10.14% 10.33%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 10000 10000 10000 10000 10000
11733 10790 13021 11956 13079
13243 11487 16294 13536 14512
17318 12514 22985 17253 20458
17822 13320 28001 17992 21673
16498 13532 30837 17665 25142
19265 15157 26837 20621 25214
21089 16242 23448 22329 25037
20418 17962 20328 21428 21498
24465 18327 24979 25912 29120
4/30/05 26734 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
CLASS R1 SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
4.42% 9.13% 10.01% 10.21%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 10000 10000 10000 10000 10000
11722 10790 13021 11956 13079
13216 11487 16294 13536 14512
17265 12514 22985 17253 20458
17749 13320 28001 17992 21673
16413 13532 30837 17665 25142
19147 15157 26837 20621 25214
20938 16242 23448 22329 25037
20251 17962 20328 21428 21498
24233 18327 24979 25912 29120
4/30/05 26445 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
CLASS R2 SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------
4.31% 8.79% 9.73% 9.94%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MERRILL LYNCH
CORPORATE &
GOVERNMENT BALANCED
MAINSTAY 1-10 YEARS COMPOSITE RUSSELL
BALANCED FUND BOND INDEX S&P 500 INDEX INDEX MIDCAP INDEX
------------- ------------- ------------- --------- ------------
4/30/95 10000 10000 10000 10000 10000
11695 10790 13021 11956 13079
13154 11487 16294 13536 14512
17145 12514 22985 17253 20458
17579 13320 28001 17992 21673
16221 13532 30837 17665 25142
18877 15157 26837 20621 25214
20592 16242 23448 22329 25037
19865 17962 20328 21428 21498
23722 18327 24979 25912 29120
4/30/05 25807 18913 26562 29369 33378
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
4/30/95 10000
11898
13526
17085
18987
19934
19983
19183
18055
20976
4/30/05 22247
</Table>
have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales
charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and
have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales
charge or CDSC, have no annual 12b-1 fee, and are generally available to
corporate and institutional investors with a minimum initial investment of $5
million. Class R1 shares are sold with no initial sales charge or CDSC and have
no annual 12b-1 fee. Class R2 shares are sold with no initial sales charge or
CDSC and have an annual 12b-1 fee of .25%. Class R1 and R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns may have been lower. The disclosure and footnotes on
the preceding page and the following page are an integral part of these graphs
and should be carefully read in conjunction with them. The fee waivers and/or
expense limitations are voluntary and may be discontinued at any time. From
inception (5/1/89) through 12/31/03, performance for Class A, B, R1, and R2
shares (each first offered 1/2/04) includes the historical performance of Class
I shares adjusted to reflect the applicable sales charge (or CDSC) and fees and
expenses for Class A, B, R1, and R2 shares. Prior to 1/2/04, the Fund offered
Class L shares, which were subject
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE AND THE FOLLOWING PAGE ARE AN
INTEGRAL PART OF THE TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH THEM.
212 MainStay Balanced Fund
<Table>
<Caption>
SIX ONE FIVE TEN
BENCHMARK PERFORMANCE MONTHS YEAR YEARS YEARS
Balanced Composite Index(1) 5.36% 13.34% 10.70% 11.38%
Merrill Lynch Corporate & Government 1-10 Years Bond
Index(2) 0.08 3.20 6.93 6.58
Russell Midcap Index(3) 6.81 14.62 5.83 12.81
S&P 500(R) Index(4) 3.28 6.34 -2.94 10.26
Lipper Balanced Fund Index(5) 2.67 6.06 2.22 8.32
Average Lipper balanced fund(6) 2.54 5.42 1.41 7.87
</Table>
to a 1% sales charge and a 1% CDSC on redemptions within one year of purchase.
From inception through 12/29/02, performance for Class L shares (first offered
12/30/02) includes the historical performance of Class I shares adjusted to
reflect the applicable sales charge, CDSC, and fees and expenses for Class L
shares. Effective 1/02/04, all outstanding Class L shares of the Fund were
converted to Class C shares, redesignated Class C shares, or both.
1. The Fund's Balanced Composite Index is comprised of the Russell Midcap(R)
Value Index and the Merrill Lynch Corporate and Government 1-10 Years Bond
Index weighted 60%/40%. The Russell Midcap(R) Value Index is an unmanaged
index that measures the performance of those Russell Midcap(R) companies with
lower price-to-book ratios and lower forecasted growth values. Results assume
reinvestment of all income and capital gains. The Fund's Balanced Composite
Index is considered to be the Fund's broad-based securities-market index for
comparison purposes. An investment cannot be made directly into an index or a
composite.
2. The Merrill Lynch Corporate & Government 1-10 Years Bond Index is a
market-capitalization-weighted index including U.S. government and
fixed-coupon domestic investment-grade corporate bonds. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
3. The Russell Midcap(R) Index is an unmanaged index that measures the
performance of the 800 smallest companies in the Russell 1000(R) Index,
which, in turn, is an unmanaged index that measures the performance of the
1,000 largest U.S. companies based on total market capitalization. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly into an index.
4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
5. The Lipper Balanced Fund Index tracks the performance of the 30 largest
balanced funds, with adjustments for the reinvestment of capital-gain and
income distributions. An investment cannot be made directly into an index.
6. Lipper Inc. is an independent fund performance monitor. Results are based on
total returns with all dividend and capital-gain distributions reinvested.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING TWO PAGES ARE AN INTEGRAL PART OF
THE TABLES AND GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 213
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY BALANCED FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/04 4/30/05 PERIOD(1) 4/30/05 PERIOD(1)
CLASS A SHARES $1,000.00 $1,043.45 $ 6.33 $1,018.75 $6.26
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,039.70 $10.11 $1,015.00 $9.99
- --------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,039.30 $10.11 $1,015.00 $9.99
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,045.55 $ 4.31 $1,020.75 $4.26
- --------------------------------------------------------------------------------------------------------------------------
CLASS R1 SHARES $1,000.00 $1,044.35 $ 4.82 $1,020.25 $4.76
- --------------------------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,043.30 $ 6.08 $1,019.00 $6.01
- --------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.25% for Class A, 2.00% for Class B and Class C, 0.85% for Class I, 0.95%
for Class R1, and 1.20% for Class R2) multiplied by the average account value
over the period, divided by 365, multiplied by 181 (to reflect the one-half
year period).
214 MainStay Balanced Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 59.1%
Corporate Bonds 37.2%
Investment Companies 2.2%
Federal Agencies 2.0%
Short-Term Investments 1.9%
Convertible Bond 0.0%*
Convertible Preferred Stock 0.0%*
Warrants 0.0%*
Liabilities in Excess of Cash and Other Assets (2.4)%
</Table>
* Less than one tenth of a percent.
See Portfolio of Investments on page 219 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. ExxonMobil Corp.
2. Edison International
3. Citigroup, Inc.
4. DPL, Inc.
5. Sunoco, Inc.
6. Burlington Resources, Inc.
7. CenturyTel, Inc.
8. Nuveen Investments Class A
9. Amerada Hess Corp.
10. Bank of America Corp.
</Table>
www.mainstayfunds.com 215
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Joan M. Sabella of New
York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
The Fund invests approximately 60% of its assets in stocks and 40% of its assets
in fixed-income securities (such as bonds) and cash equivalents. By including
both stocks and bonds, the Fund seeks a balance between capital gains from stock
appreciation and current income from interest and dividends. In implementing
this strategy, the Fund generally invests in dividend-paying mid-capitalization
stocks that have been determined to have strong or improving operating
characteristics and to be relatively overlooked or undervalued by the market.
The Fund uses a quantitative and statistical model to analyze the relative
quality and value of stocks. The Fund selects fixed-income securities based on
their credit quality and duration.
During the reporting period, all of the assets and liabilities of MainStay
Strategic Value Fund were transferred to MainStay Balanced Fund in exchange for
shares of MainStay Balanced Fund.
WHAT MAJOR FACTORS INFLUENCED THE STOCK AND BOND MARKETS DURING THE SIX MONTHS
ENDED APRIL 30, 2005?
During the six months ended April 30, 2005, most broadly watched equity indices
saw positive performance, but small-cap core and growth indices declined.
Mid-capitalization stocks showed the strongest overall performance, followed by
large- and then small-capitalization stocks. The market's general preference for
value equities over growth stocks was clearly evident among mid-capitalization
issues. During the reporting period, the domestic equity market was influenced
by crude-oil price fluctuations, job-growth concerns, the U.S. dollar's decline,
and continuing instability in the Middle East.
The Federal Open Market Committee raised the federal funds target rate four
times during the six months ended April 30, 2005. That brought the targeted
federal funds rate from 1.75% at the beginning of the reporting period to 2.75%
at the end. The economy appears to be well on its way to recovery after the 2001
recession, and the Federal Reserve is now trying to ease inflation. The 10-year
Treasury note stood at 4.20% at the end of April 2005, compared to 4.02% at the
end of October 2004.
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All share classes of MainStay Balanced Fund underperformed the Fund's Balanced
Composite Index(1) for the semiannual period ended April 30, 2005. The stock and
bond portions of the Fund both underperformed their respective components of the
Balanced Composite Index.
The equity portion of the Fund's portfolio was hurt by weakness in its
technology hardware & equipment and real estate holdings relative to peer stocks
in the Russell Midcap(R) Value Index.(2) The utilities industry group had strong
performance for the six-month reporting period, but the Fund's underweighted
position relative to the Russell Midcap(R) Value Index detracted from the Fund's
relative performance.
The Russell Midcap(R) Value Index is a capitalization-weighted index, which
means that it has larger weightings among securities with larger market
capitalizations. MainStay Balanced Fund attempts to have equal weights among the
equity holdings in its portfolio.
For the six months ended April 30, 2005, the Russell Midcap(R) Value Index was
approximately 50% weighted in the top 25% of Index companies (from largest
market capitalization to smallest). This significantly contributed to the return
of the Russell Midcap(R) Value Index. On the other hand, MainStay Balanced Fund
was weighted only 35% in the top 25% of Index companies with rank determined by
market capitalization. This underweighted position and lower overall exposure to
the top 25% of companies relative to the Russell Midcap(R) Value Index held back
the relative performance of the equity portion of the Fund.
It is important to note that the equity portion of the Fund was invested in
some, but not all of the companies in the Russell Midcap(R) Value Index.
The Fund is subject to market, interest rate, credit, and maturity risks. The
Fund can invest in foreign securities, which may be subject to greater risks
than U.S. investments, including currency fluctuations, less-liquid trading
markets, greater price volatility, political and economic instability, less
publicly available information, and changes in tax or currency laws or monetary
policy. The Fund may invest in derivatives, which may increase the volatility of
the Fund's net asset value and may result in a loss to the Fund. The Fund's use
of securities lending presents the risk of default by the borrower, which may
also result in a loss to the Fund. The Fund invests in mid-cap stocks which may
be more volatile and less liquid than the securities of larger companies.
1. See footnote on page 213 for more information about the Fund's Balanced
Composite Index.
2. See footnote 1 on page 213 for information about the Russell Midcap(R) Value
Index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly into an index.
216 MainStay Balanced Fund
HOW DID THE BOND PORTION OF THE FUND PERFORM?
With a return of -0.08%, the fixed-income portion of the Fund slightly
underperformed the +0.08% return of the Merrill Lynch Corporate & Government
1-10 Years Bond Index(3) for the six-month reporting period.
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS PROVIDED THE STRONGEST PERFORMANCE
FOR THE FUND DURING THE REPORTING PERIOD?
In the equity portion of the Fund, the five strongest performing industry groups
were energy; food, beverage & tobacco; utilities; health care equipment &
services; and retailing. Among the strongest contributors to the Fund's equity
performance were petroleum refiner Premcor (+68.8%),(4) refiner Valero Energy
(+61.8%), poultry producer Pilgrim's Pride (+30.0%), refiner and chemical
company Sunoco (+26.0%), and transportation and health care services provider
Laidlaw International (+31.8%).
WHICH INDUSTRY GROUPS AND INDIVIDUAL SECURITIES DETRACTED FROM PERFORMANCE IN
THE EQUITY PORTION OF THE FUND?
The Fund's five weakest-performing industry groups during the six-month
reporting period were technology hardware & equipment, banks, capital goods,
automobiles & components, and telecommunication services. Particularly weak
performers included two steel companies--Steel Dynamics (-27.7%) and Commercial
Metals (-20.6%). Cummins (-16.3%), which provides engines, electric power, and
engine-related products, also detracted from the Fund's equity performance. TCF
Financials (-17.4%), a holding company for TCF National Bank, and Sabre Holdings
(-13.9%), which provides products and technology for the travel industry, were
also among the Fund's five weakest holdings during the reporting period.
WERE THERE ANY SIGNIFICANT EQUITY PURCHASES OR SALES DURING THE REPORTING
PERIOD?
The Fund uses its proprietary model to select stocks that have relatively
improving operating characteristics and are relatively undervalued. One of the
stocks the Fund purchased during the reporting period was Toys "R" Us (+28.6%),
a worldwide retailer of toys, apparel, and other children's products. The Fund
purchased the stock in November 2004. We established a position in Apache
(+9.0%), an energy company, in November 2004 and added to the position in
January 2005. The Fund also established a position in independent oil and gas
exploration and production company Anadarko Petroleum (+8.0%) in November 2004
and added to the position in April 2005. All three of these companies exhibited
improving fundamentals and, according to our proprietary model, were relatively
undervalued at the time of purchase.
The Fund sells stocks that exhibit deteriorating operating results, are
relatively overvalued, or both. In December 2004, the Fund sold its position in
Saks (+17.8%), when the retailer decided to close some of its stores as part of
a reorganization. The Fund sold its entire position in Outback Steakhouse
(+17.4%) in February 2005 when our quantitative model showed that the stock had
become overvalued. Homebuilder Toll Brothers (+17.1%) was sold for a similar
reason in December 2004.
HOW DID THE EQUITY PORTION OF THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING
PERIOD?
The Fund's equity weighting in diversified financials increased from 3.42% at
the end of October 2004 to 7.13% at the end of April 2005. The shift in weight
was the result of new purchases and improved performance of the industry group
relative to other industry groups. Another significant change in the Fund's
industry-group weightings was in commercial services & supplies, which declined
from 6.94% at the beginning of the reporting period to 3.39% on April 30, 2005.
The decline in weight was the result of weak performance.
HOW DID THE FUND'S EQUITY WEIGHTINGS COMPARE WITH THOSE OF THE RUSSELL MIDCAP(R)
VALUE INDEX AT THE END OF THE REPORTING PERIOD?
As of April 30, 2005, the equity portion of the Fund was overweighted relative
to the Russell Midcap(R) Value Index in energy, in the food, beverage & tobacco
industry group, and in banks. During the reporting period, the Fund's
overweighted positions in the energy and in the food, beverage & tobacco
industry groups benefited the Fund's performance. The overweighted position in
banks, however, showed weaker performance than peer stocks in the Russell
Midcap(R) Value Index. As of April 30, 2005, the equity portion of the Fund was
underweighted relative to the Russell Midcap(R) Value Index in the real estate,
utilities, and insurance industry groups.
3. See footnote on page 213 for more information about the Merrill Lynch
Corporate & Government 1-10 Years Bond Index.
4. Performance percentages reflect total returns of Fund holdings in the
securities mentioned, including purchases and sales, for the six months ended
April 30, 2005, or for the portion of the reporting period such securities
were held in the Fund, if shorter. Securities are mentioned in the order of
their contribution to Fund performance, which takes total returns and
weightings both into account.
www.mainstayfunds.com 217
WERE THERE ANY SIGNIFICANT CHANGES IN THE FIXED-INCOME PORTION OF THE FUND
DURING THE REPORTING PERIOD?
No, there were no significant or strategic purchases or sales for the
fixed-income portion of the Fund. The fixed-income portion of MainStay Balanced
Fund selects short- to intermediate-term bonds from among U.S. government
securities and investment-grade corporate bonds. The Fund may also invest in
mortgage-backed securities, asset-backed securities, and foreign-debt
securities. We maintain a laddered maturity schedule and employ a bottom-up
credit analysis with a controlled duration of three to five years.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
As always the Fund will continue to focus on securities that are appropriate
given the Fund's stated objective and its valuation, quality, duration, and
maturity parameters.
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.
218 MainStay Balanced Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (39.2%)+
CONVERTIBLE BOND (0.0%) (b)
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.0%) (b)
At Home Corp.
4.75%, due 12/15/06 (h)(i) $ 177,810 $ 24,983
------------
Total Convertible Bond
(Cost $102,918) 24,983
------------
CORPORATE BONDS (37.2%)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.0%)
General Dynamics Corp.
4.50%, due 8/15/10 874,000 874,567
Honeywell, Inc.
7.00%, due 3/15/07 2,376,000 2,498,900
7.13%, due 4/15/08 131,000 141,584
7.50%, due 3/1/10 3,485,000 3,940,942
United Technologies Corp.
6.50%, due 6/1/09 5,628,000 6,078,510
7.13%, due 11/15/10 2,180,000 2,464,215
------------
15,998,718
------------
AUTO COMPONENTS (0.1%)
Johnson Controls, Inc.
6.30%, due 2/1/08 865,000 908,774
------------
BEVERAGES (1.3%)
Anheuser-Busch Cos., Inc.
5.38%, due 9/15/08 900,000 932,829
5.63%, due 10/1/10 1,500,000 1,580,808
5.65%, due 9/15/08 454,000 473,714
5.75%, due 4/1/10 655,000 692,145
6.00%, due 4/15/11 1,500,000 1,621,251
7.50%, due 3/15/12 2,200,000 2,584,063
Coca-Cola Co. (The)
4.00%, due 6/1/05 437,000 437,246
PepsiCo, Inc.
5.75%, due 1/15/08 1,747,000 1,822,741
------------
10,144,797
------------
CAPITAL MARKETS (6.0%)
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08 1,092,000 1,083,523
7.63%, due 12/7/09 3,250,000 3,657,878
7.80%, due 8/15/07 2,000,000 2,155,977
Credit Suisse FirstBoston USA, Inc.
6.13%, due 11/15/11 2,500,000 2,701,453
Donaldson, Lufkin & Jenrette, Inc.
6.50%, due 6/1/08 4,500,000 4,773,998
Goldman Sachs Group, Inc. (The)
5.70%, due 9/1/12 874,000 916,297
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CAPITAL MARKETS (CONTINUED)
6.65%, due 5/15/09 $ 2,430,000 $ 2,620,584
7.35%, due 10/1/09 3,400,000 3,778,022
J.P. Morgan & Co., Inc.
6.25%, due 2/15/11 262,000 283,014
JPMorgan Chase & Co.
5.35%, due 3/1/07 1,048,000 1,070,664
Lehman Brothers Holdings, Inc.
4.17%, due 9/28/07 2,000,000 1,990,760
6.63%, due 2/5/06 501,000 511,468
7.00%, due 2/1/08 2,000,000 2,144,224
8.25%, due 6/15/07 1,000,000 1,083,663
Lehman Brothers, Inc.
6.50%, due 4/15/08 1,600,000 1,694,126
6.63%, due 1/18/12 1,311,000 1,448,398
7.63%, due 6/1/06 306,000 317,472
Merrill Lynch & Co., Inc.
3.81%, due 3/12/07 1,000,000 994,600
4.42%, due 3/2/09 437,000 436,296
6.00%, due 2/17/09 3,182,000 3,354,382
6.38%, due 10/15/08 1,112,000 1,184,503
7.00%, due 1/15/07 1,757,000 1,842,580
Morgan Stanley
5.80%, due 4/1/07 874,000 898,708
6.75%, due 4/15/11 2,811,000 3,104,135
6.88%, due 3/1/07 3,600,000 3,778,514
Salomon, Smith Barney Holdings, Inc.
6.50%, due 2/15/08 500,000 531,242
------------
48,356,481
------------
CHEMICALS (0.9%)
E.I. du Pont de Nemours & Co.
3.38%, due 11/15/07 805,000 791,323
4.75%, due 11/15/12 2,000,000 2,029,800
6.75%, due 9/1/07 2,000,000 2,118,814
Praxair, Inc.
6.50%, due 3/1/08 2,536,000 2,675,384
------------
7,615,321
------------
COMMERCIAL BANKS (4.8%)
Bank of America Corp.
6.38%, due 3/25/08 1,000,000 1,057,767
7.13%, due 3/1/09 1,660,000 1,814,657
7.40%, due 1/15/11 1,000,000 1,137,616
7.80%, due 2/15/10 1,500,000 1,709,400
Bank One Corp.
6.00%, due 8/1/08 2,747,000 2,883,790
7.88%, due 8/1/10 500,000 575,106
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, excluding short-term investments. 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. www.mainstayfunds.com 219
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (CONTINUED)
Bank One Texas N.A.
6.25%, due 2/15/08 $ 1,800,000 $ 1,895,720
Citicorp
6.38%, due 11/15/08 1,500,000 1,597,354
7.20%, due 6/15/07 1,000,000 1,065,404
Deutsche Bank Financial
6.70%, due 12/13/06 1,311,000 1,365,451
FleetBoston Financial Corp.
6.38%, due 5/15/08 1,000,000 1,058,334
7.38%, due 12/1/09 1,200,000 1,339,678
Mellon Bank NA
7.63%, due 9/15/07 1,311,000 1,414,956
SunTrust Banks, Inc.
6.25%, due 6/1/08 2,000,000 2,118,118
U.S. Bancorp
3.13%, due 3/15/08 437,000 424,546
6.88%, due 9/15/07 3,000,000 3,180,204
Union Bank of Switzerland
7.25%, due 7/15/06 1,000,000 1,034,377
US Bank NA
5.70%, due 12/15/08 1,747,000 1,824,581
Wachovia Corp.
4.95%, due 11/1/06 437,000 442,941
6.15%, due 3/15/09 1,020,000 1,088,309
6.25%, due 8/4/08 2,317,000 2,454,760
6.38%, due 1/15/09 1,311,000 1,395,603
Wells Fargo & Co.
3.50%, due 4/4/08 437,000 428,896
6.45%, due 2/1/11 1,747,000 1,910,725
7.55%, due 6/21/10 3,500,000 3,995,915
------------
39,214,208
------------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Pitney Bowes, Inc.
5.88%, due 5/1/06 1,131,000 1,153,310
------------
COMPUTERS & PERIPHERALS (1.2%)
Hewlett-Packard Co.
5.50%, due 7/1/07 1,200,000 1,233,623
5.75%, due 12/15/06 1,311,000 1,345,495
International Business Machines Corp.
4.75%, due 11/29/12 1,500,000 1,510,243
4.88%, due 10/1/06 437,000 442,853
5.38%, due 2/1/09 958,000 996,280
5.50%, due 1/15/09 467,000 486,510
6.45%, due 8/1/07 3,664,000 3,836,047
------------
9,851,051
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CONSUMER FINANCE (2.8%)
American Express Co.
5.50%, due 9/12/06 $ 1,000,000 $ 1,020,246
American Express Credit Corp.
3.00%, due 5/16/08 874,000 844,242
Caterpillar Financial Services Corp.
4.88%, due 6/15/07 1,725,000 1,748,591
Deere (John) BV
5.88%, due 4/6/06 1,500,000 1,527,836
Deere (John) Capital Corp.
3.13%, due 12/15/05 437,000 435,667
3.90%, due 1/15/08 218,000 215,737
4.50%, due 8/22/07 437,000 439,795
6.00%, due 2/15/09 2,000,000 2,105,908
HSBC Finance Corp.
5.88%, due 2/1/09 437,000 457,825
6.38%, due 8/1/10 437,000 472,952
6.40%, due 6/17/08 600,000 635,138
6.50%, due 11/15/08 3,000,000 3,196,177
6.75%, due 5/15/11 2,374,000 2,626,533
SLM Corp.
3.63%, due 3/17/08 437,000 429,265
4.00%, due 1/15/09 437,000 431,675
4.46%, due 3/2/09 1,311,000 1,314,553
5.38%, due 1/31/14 874,000 885,825
5.63%, due 4/10/07 2,000,000 2,053,448
Toyota Motor Credit Corp.
5.50%, due 12/15/08 1,477,000 1,539,725
------------
22,381,138
------------
DIVERSIFIED FINANCIAL SERVICES (2.5%)
Associates Corp. of North America
6.25%, due 11/1/08 1,800,000 1,917,272
Boeing Capital Corp.
5.75%, due 2/15/07 859,000 882,438
CIT Group, Inc.
4.75%, due 12/15/10 655,000 655,478
5.50%, due 11/30/07 1,000,000 1,027,844
5.88%, due 10/15/08 1,800,000 1,880,629
6.88%, due 11/1/09 2,500,000 2,729,951
7.38%, due 4/2/07 2,000,000 2,114,798
Citigroup, Inc.
5.00%, due 3/6/07 655,000 665,834
6.50%, due 1/18/11 874,000 958,213
Heller Financial, Inc.
6.38%, due 3/15/06 218,000 222,853
Mellon Funding Corp.
6.38%, due 2/15/10 1,500,000 1,606,196
6.70%, due 3/1/08 2,026,000 2,161,373
</Table>
220 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Pitney Bowes Credit Corp.
5.75%, due 8/15/08 $ 874,000 $ 920,536
Wells Fargo Financial, Inc.
5.88%, due 8/15/08 2,316,000 2,433,132
6.85%, due 7/15/09 109,000 120,490
------------
20,297,037
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.8%)
ALLTEL Corp.
7.00%, due 7/1/12 3,000,000 3,408,627
Ameritech Capital Funding
6.15%, due 1/15/08 1,916,000 2,011,062
BellSouth Capital Funding Corp.
7.75%, due 2/15/10 1,000,000 1,134,802
BellSouth Corp.
6.00%, due 10/15/11 2,000,000 2,142,768
BellSouth Telecommunications, Inc.
5.88%, due 1/15/09 262,000 274,070
GTE North, Inc.
6.38%, due 2/15/10 437,000 462,305
New York Telephone
6.13%, due 1/15/10 874,000 914,783
Pacific Bell
6.88%, due 8/15/06 437,000 452,507
Southwestern Bell Telephone Co.
6.38%, due 11/15/07 87,000 90,980
6.63%, due 7/15/07 1,100,000 1,153,504
Verizon New England, Inc.
6.50%, due 9/15/11 2,000,000 2,161,314
------------
14,206,722
------------
ELECTRICAL EQUIPMENT (0.9%)
Emerson Electric Co.
5.00%, due 10/15/08 262,000 268,313
5.85%, due 3/15/09 2,386,000 2,511,637
7.13%, due 8/15/10 4,000,000 4,503,779
------------
7,283,729
------------
FOOD & STAPLES RETAILING (1.3%)
Sysco Corp.
6.10%, due 6/1/12 3,060,000 3,344,219
6.50%, due 6/15/05 437,000 438,455
Wal-Mart Stores, Inc.
6.88%, due 8/10/09 6,088,000 6,679,930
7.25%, due 6/1/13 349,000 409,586
------------
10,872,190
------------
FOOD PRODUCTS (1.9%)
Campbell Soup Co.
5.50%, due 3/15/07 3,405,000 3,475,705
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOOD PRODUCTS (CONTINUED)
General Mills, Inc.
5.13%, due 2/15/07 $ 437,000 $ 445,012
Kellogg Co.
4.88%, due 10/15/05 564,000 567,471
Nabisco, Inc.
7.05%, due 7/15/07 2,028,000 2,134,060
Sara Lee Corp.
6.00%, due 1/15/08 1,048,000 1,092,304
Unilever Capital Corp.
6.88%, due 11/1/05 961,000 976,672
7.13%, due 11/1/10 5,700,000 6,437,769
------------
15,128,993
------------
HOUSEHOLD PRODUCTS (1.0%)
Kimberly-Clark Corp.
7.10%, due 8/1/07 3,245,000 3,463,459
Procter & Gamble Co. (The)
4.00%, due 4/30/05 437,000 437,000
4.75%, due 6/15/07 218,000 221,682
6.88%, due 9/15/09 3,877,000 4,286,538
------------
8,408,679
------------
INDUSTRIAL CONGLOMERATES (0.1%)
3M Co.
4.15%, due 6/30/05 437,000 437,281
------------
INSURANCE (0.7%)
Allstate Corp. (The)
7.20%, due 12/1/09 1,900,000 2,117,584
John Hancock Financial Services, Inc.
5.63%, due 12/1/08 2,640,000 2,754,358
Loews Corp.
6.75%, due 12/15/06 437,000 454,283
------------
5,326,225
------------
IT SERVICES (0.7%)
Computer Sciences Corp.
6.25%, due 3/15/09 1,012,000 1,071,789
First Data Corp.
5.63%, due 11/1/11 661,000 705,243
5.80%, due 12/15/08 1,725,000 1,824,191
6.38%, due 12/15/07 2,133,000 2,250,187
------------
5,851,410
------------
MACHINERY (1.6%)
Caterpillar, Inc.
6.55%, due 5/1/11 4,347,000 4,824,622
7.25%, due 9/15/09 815,000 898,757
Deere & Co.
7.85%, due 5/15/10 3,258,000 3,748,798
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 221
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
MACHINERY (CONTINUED)
Illinois Tool Works, Inc.
5.75%, due 3/1/09 $ 3,090,000 $ 3,265,367
------------
12,737,544
------------
MARINE (0.0%) (b)
Navigator Gas Transport PLC
10.50%, due 6/30/07 89,000 75,650
------------
MEDIA (0.0%) (b)
Gannett Co., Inc.
5.50%, due 4/1/07 437,000 448,199
------------
MULTILINE RETAIL (1.2%)
Kohl's Corp.
6.30%, due 3/1/11 612,000 658,380
Target Corp.
5.38%, due 6/15/09 2,706,000 2,821,008
5.40%, due 10/1/08 1,700,000 1,765,700
5.50%, due 4/1/07 2,179,000 2,234,033
5.95%, due 5/15/06 306,000 312,255
7.50%, due 8/15/10 1,500,000 1,718,315
------------
9,509,691
------------
MULTI-UTILITIES & UNREGULATED POWER (0.2%)
IES Utilities, Inc.
6.63%, due 8/1/09 1,311,000 1,404,516
------------
OIL & GAS (1.0%)
Atlantic Richfield Co.
5.90%, due 4/15/09 1,000,000 1,062,280
ChevronTexaco Capital Co.
3.50%, due 9/17/07 706,000 698,132
Conoco, Inc.
6.35%, due 4/15/09 3,000,000 3,221,948
Texaco Capital, Inc.
5.50%, due 1/15/09 2,000,000 2,096,482
Tosco Corp.
7.25%, due 1/1/07 874,000 915,643
------------
7,994,485
------------
PERSONAL PRODUCTS (0.2%)
Gillette Co. (The)
2.88%, due 3/15/08 437,000 423,637
3.50%, due 10/15/07 1,311,000 1,304,419
------------
1,728,056
------------
PHARMACEUTICALS (1.1%)
Abbott Laboratories
5.63%, due 7/1/06 874,000 890,250
6.40%, due 12/1/06 1,500,000 1,556,100
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
PHARMACEUTICALS (CONTINUED)
Bristol-Myers Squibb Co.
4.75%, due 10/1/06 $ 437,000 $ 443,144
Johnson & Johnson
6.63%, due 9/1/09 2,371,000 2,591,162
Lilly (Eli) & Co.
5.50%, due 7/15/06 655,000 667,379
Pharmacia Corp.
5.88%, due 12/1/08 437,000 461,638
Warner-Lambert Co.
6.00%, due 1/15/08 2,218,000 2,324,908
------------
8,934,581
------------
SPECIALTY RETAIL (0.5%)
Home Depot, Inc. (The)
5.38%, due 4/1/06 1,118,000 1,132,698
Sherwin-Williams Co. (The)
6.85%, due 2/1/07 2,649,000 2,764,848
------------
3,897,546
------------
TEXTILES, APPAREL & LUXURY GOODS (0.4%)
Cintas Corp. No. 2
6.00%, due 6/1/12 3,095,000 3,348,212
------------
THRIFTS & MORTGAGE FINANCE (0.5%)
General Electric Capital Corp.
4.25%, due 1/15/08 437,000 437,673
5.38%, due 3/15/07 874,000 894,462
6.50%, due 12/10/07 2,000,000 2,112,467
6.88%, due 11/15/10 750,000 832,743
------------
4,277,345
------------
TRANSPORTATION INFRASTRUCTURE (0.4%)
International Lease Finance Corp.
4.50%, due 5/1/08 437,000 436,016
5.63%, due 6/1/07 655,000 672,625
6.38%, due 3/15/09 2,000,000 2,125,878
------------
3,234,519
------------
Total Corporate Bonds
(Cost $303,610,430) 301,026,408
------------
FEDERAL AGENCIES (2.0%)
- ------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (0.3%)
2.25%, due 9/1/06 437,000 428,527
3.25%, due 3/14/05 437,000 425,784
3.47%, due 10/3/07 437,000 431,798
3.80%, due 10/3/07 655,000 643,361
3.875%, due 5/7/10 437,000 435,253
------------
2,364,723
------------
</Table>
222 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL AGENCIES (CONTINUED)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (0.4%)
2.50%, due 3/15/06 $ 875,000 $ 866,920
3.38%, due 2/15/08 440,000 432,392
3.50%, due 2/11/08 875,000 858,535
3.75%, due 4/1/10 655,000 641,383
3.88%, due 2/12/10 220,000 216,464
6.21%, due 12/3/07 440,000 463,963
------------
3,479,657
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.6%)
Series 2734 Class JC
3.50%, due 11/15/23 1,311,000 1,288,856
Series 2579 Class PG
4.00%, due 3/15/27 426,260 423,825
Series 2719 Class WB
4.50%, due 8/15/21 1,030,211 992,274
Series 2003-17 Class QT
5.00%, due 8/25/27 1,031,000 1,037,938
Series 2589 Class GD
5.00%, due 9/15/28 437,000 442,452
Series 2600 Class MJ
5.00%, due 9/15/29 437,000 439,302
Series 1982 Class VC
6.50%, due 1/15/12 235,242 235,081
------------
4,859,728
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.5%)
2.50%, due 6/30/06 2,184,000 2,180,215
4.40%, due 2/17/09 874,000 876,351
5.75%, due 6/15/05 874,000 876,643
------------
3,933,209
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.0%) (b)
Series 2003-32 Class PG
5.00%, due 10/25/27 437,000 439,141
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.2%)
Series 2003-19 Class BE
4.50%, due 11/20/28 437,000 436,909
Series 2003-50 Class PC
5.50%, due 3/16/32 874,000 889,857
------------
1,326,766
------------
Total Federal Agencies
(Cost $16,640,764) 16,403,224
------------
Total Long-Term Bonds
(Cost $320,354,112) 317,454,615
------------
<Caption>
SHARES VALUE
COMMON STOCKS (59.1%)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.1%)
Northrop Grumman Corp. 19,900 $ 1,091,316
------------
AUTO COMPONENTS (0.4%)
Goodyear Tire & Rubber Co. (The) (a) 267,200 3,171,664
TRW Automotive Holdings Corp. (a) 12,100 215,501
------------
3,387,165
------------
BUILDING PRODUCTS (0.0%) (B)
Masco Corp. 8,400 264,516
------------
CAPITAL MARKETS (1.5%)
Affiliated Managers Group, Inc. (a) 66,900 4,183,257
V Nuveen Investments Class A 238,600 8,110,014
------------
12,293,271
------------
COMMERCIAL BANKS (4.5%)
Associated Banc-Corp 8,000 247,360
V Bank of America Corp. 170,700 7,688,328
Comerica, Inc. 4,900 280,574
Commerce Bancshares, Inc. 5,100 245,769
Compass Bancshares, Inc. 5,700 245,214
Fifth Third Bancorp 5,800 252,300
First BanCorp. Puerto Rico 139,300 5,051,018
Hibernia Corp. Class A 7,800 243,594
KeyCorp 202,200 6,704,952
North Fork Bancorp., Inc. 9,800 275,870
Popular, Inc. 223,123 5,163,066
Regions Financial Corp. 148,600 4,976,614
TCF Financial Corp. 186,400 4,714,056
Wachovia Corp. 10,600 542,508
------------
36,631,223
------------
COMMERCIAL SERVICES & SUPPLIES (2.0%)
Brink's Co. (The) 185,700 5,990,682
Cendant Corp. 14,200 282,722
Copart, Inc. (a) 176,800 3,833,024
Deluxe Corp. 28,700 1,145,991
IKON Office Solutions, Inc. 355,900 3,078,535
Kelly Services, Inc. Class A 52,877 1,388,550
Republic Services, Inc. 7,500 259,500
------------
15,979,004
------------
COMPUTERS & PERIPHERALS (1.8%)
Apple Computer, Inc. (a) 149,100 5,376,546
Hewlett-Packard Co. 22,000 450,340
Imation Corp. 90,000 3,138,300
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 223
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (CONTINUED)
InFocus Corp. (a) 486,900 $ 1,752,840
Storage Technology Corp. (a) 125,850 3,498,630
------------
14,216,656
------------
CONSUMER FINANCE (1.0%)
AmeriCredit Corp. (a) 218,100 5,103,540
Student Loan Corp. (The) 3,600 697,500
WFS Financial, Inc. (a) 46,500 2,090,175
------------
7,891,215
------------
DIVERSIFIED FINANCIAL SERVICES (1.8%)
CIT Group, Inc. 114,100 4,595,948
V Citigroup, Inc. 198,900 9,340,344
PHH Corp. (a) 11,000 245,850
------------
14,182,142
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.2%)
BellSouth Corp. 26,200 694,038
V CenturyTel, Inc. 270,300 8,295,507
Sprint Corp. 14,600 324,996
------------
9,314,541
------------
ELECTRIC UTILITIES (2.4%)
V DPL, Inc. 362,900 9,232,176
V Edison International 278,600 10,113,180
------------
19,345,356
------------
ELECTRICAL EQUIPMENT (0.0%) (b)
Rockwell Automation, Inc. 2,800 129,444
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
Tektronix, Inc. 51,300 1,111,158
------------
FOOD & STAPLES RETAILING (0.1%)
Albertson's, Inc. 43,900 868,781
------------
FOOD PRODUCTS (2.0%)
Hershey Foods Co. (The) 38,800 2,479,320
Hormel Foods Corp. 92,600 2,883,564
McCormick & Co., Inc. 57,300 1,982,007
Pilgrim's Pride Corp. 188,000 6,784,920
Tyson Foods, Inc. Class A 137,300 2,318,997
------------
16,448,808
------------
GAS UTILITIES (0.5%)
Southern Union Co. (a) 159,100 3,808,854
------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.3%)
Bausch & Lomb, Inc. 40,100 3,007,500
Cytyc Corp. (a) 334,800 7,134,588
------------
10,142,088
------------
</Table>
<Table>
<Caption>
SHARES VALUE
HEALTH CARE PROVIDERS & SERVICES (0.7%)
Humana, Inc. (a) 46,300 $ 1,604,295
Laboratory Corp. of America Holdings (a) 5,000 247,500
PacifiCare Health Systems, Inc. (a) 51,700 3,089,592
Skilled Healthcare Group, Inc. (a)(e)(f)(g) 27 432
WellPoint, Inc. (a) 2,300 293,825
------------
5,235,644
------------
HOTELS, RESTAURANTS & LEISURE (0.9%)
Choice Hotels International, Inc. 44,900 2,717,348
Darden Restaurants, Inc. 117,200 3,516,000
Marriott International, Inc. Class A 3,700 232,175
McDonald's Corp. 12,100 354,651
MGM MIRAGE (a) 3,500 244,335
------------
7,064,509
------------
HOUSEHOLD DURABLES (2.0%)
Black & Decker Corp. (The) 40,900 3,420,467
Fortune Brands, Inc. 29,800 2,520,484
KB HOME 4,200 239,400
NVR, Inc. (a) 2,400 1,724,040
Ryland Group, Inc. (The) 72,105 4,427,247
Stanley Works (The) 85,100 3,661,853
------------
15,993,491
------------
HOUSEHOLD PRODUCTS (1.6%)
Clorox Co. (The) 110,200 6,975,660
Energizer Holdings, Inc. (a) 111,800 6,369,246
------------
13,344,906
------------
INDUSTRIAL CONGLOMERATES (0.2%)
Alleghany Corp. (a) 5,202 1,404,540
------------
INSURANCE (0.7%)
Jefferson-Pilot Corp. 5,300 266,113
MBIA, Inc. 22,500 1,178,550
Old Republic International Corp. 10,600 250,160
Prudential Financial, Inc. 16,100 920,115
Torchmark Corp. 59,300 3,168,399
------------
5,783,337
------------
INTERNET SOFTWARE & SERVICES (0.0%) (b)
Globix Corp. (a)(e)(f)(g) 5,126 12,879
------------
IT SERVICES (0.6%)
Sabre Holdings Corp. Class A 247,300 4,837,188
------------
</Table>
224 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (1.3%)
Eastman Kodak Co. 195,600 $ 4,890,000
Mattel, Inc. 314,100 5,669,505
------------
10,559,505
------------
MACHINERY (0.7%)
Cummins, Inc. 25,128 1,708,704
Morris Material Handling, Inc. (a)(e)(f)(g) 197 1,044
Terex Corp. (a) 110,100 4,115,538
------------
5,825,286
------------
MEDIA (0.1%)
Comcast Corp. (a) 13,200 423,852
Walt Disney Co. (The) 13,700 361,680
------------
785,532
------------
METALS & MINING (2.1%)
Commercial Metals Co. 136,604 3,484,768
Nucor Corp. 132,100 6,750,310
Steel Dynamics, Inc. 194,900 5,297,382
United States Steel Corp. 29,800 1,274,248
------------
16,806,708
------------
MULTILINE RETAIL (1.3%)
Dillard's, Inc. Class A 285,300 6,638,931
Federated Department Stores, Inc. 4,400 253,000
Sears Holdings Corp. (a) 26,195 3,542,612
------------
10,434,543
------------
MULTI-UTILITIES & UNREGULATED POWER (1.8%)
Equitable Resources, Inc. 120,000 6,916,800
Reliant Energy, Inc. (a) 417,100 4,241,907
Williams Cos., Inc. (The) 178,200 3,032,964
------------
14,191,671
------------
OIL & GAS (9.2%)
V Amerada Hess Corp. 82,300 7,707,395
Anadarko Petroleum Corp. 62,600 4,572,304
Apache Corp. 132,000 7,430,280
V Burlington Resources, Inc. 183,600 8,924,796
Chevron Corp. 103,300 5,371,600
ConocoPhillips 4,800 503,280
V ExxonMobil Corp. 228,712 13,043,446
Marathon Oil Corp. 6,400 298,048
Overseas Shipholding Group, Inc. 64,000 3,611,520
Premcor, Inc. (a) 89,700 5,933,655
V Sunoco, Inc. 92,400 9,171,624
Tesoro Corp. 170,000 6,449,800
Valero Energy Corp. 20,079 1,376,014
------------
74,393,762
------------
</Table>
<Table>
<Caption>
SHARES VALUE
PAPER & FOREST PRODUCTS (0.4%)
Louisiana-Pacific Corp. 147,900 $ 3,638,340
------------
PERSONAL PRODUCTS (0.4%)
Estee Lauder Cos., Inc. (The) Class A 81,700 3,138,097
Gillette Co. (The) 4,900 253,036
------------
3,391,133
------------
PHARMACEUTICALS (0.0%) (b)
Merck & Co., Inc. 11,800 400,020
------------
REAL ESTATE (1.4%)
Cousins Properties, Inc. 52,700 1,422,900
Equity Office Properties Trust 242,500 7,631,475
Impac Mortgage Holdings, Inc. 113,600 2,081,152
------------
11,135,527
------------
ROAD & RAIL (1.7%)
Burlington Northern Santa Fe Corp. 132,900 6,412,425
CSX Corp. 6,400 256,832
Laidlaw International, Inc. (a) 313,200 7,012,548
Norfolk Southern Corp. 7,800 244,920
------------
13,926,725
------------
SOFTWARE (1.6%)
Activision, Inc. (a) 362,800 5,246,088
Autodesk, Inc. 129,000 4,106,070
McAfee, Inc. (a) 157,200 3,287,052
Oracle Corp. (a) 20,100 232,356
------------
12,871,566
------------
SPECIALTY RETAIL (2.4%)
Abercrombie & Fitch Co. Class A 33,300 1,796,535
AutoNation, Inc. (a) 311,400 5,689,278
Circuit City Stores, Inc. 284,100 4,488,780
Home Depot, Inc. (The) 6,800 240,516
Limited Brands, Inc. 11,000 238,590
Sherwin-Williams Co. (The) 80,000 3,565,600
Toys "R" Us, Inc. (a) 144,000 3,650,400
------------
19,669,699
------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
Reebok International Ltd. 69,292 2,813,948
------------
THRIFTS & MORTGAGE FINANCE (3.7%)
Astoria Financial Corp. 249,100 6,603,641
Countrywide Financial Corp. 64,000 2,316,160
Doral Financial Corp. 15,700 220,585
Fannie Mae 25,900 1,397,305
Freddie Mac 50,700 3,119,064
Fremont General Corp. 86,900 1,884,861
Golden West Financial Corp. 4,500 280,485
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 225
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (CONTINUED)
MGIC Investment Corp. 91,900 $ 5,422,100
New Century Financial Corp. 39,000 1,772,550
PMI Group, Inc. (The) 63,100 2,218,596
R&G Financial Corp. Class B 43,000 611,030
Radian Group, Inc. 90,400 4,016,472
Washington Mutual, Inc. 9,200 380,144
------------
30,242,993
------------
TOBACCO (2.6%)
Altria Group, Inc. 96,400 6,265,036
North Atlantic Trading Co., Inc. (a)(e)(f)(g) 130 1
Reynolds American, Inc. 90,600 7,064,082
UST, Inc. 163,000 7,465,400
------------
20,794,519
------------
TRADING COMPANIES & DISTRIBUTORS (0.7%)
Grainger (W.W.), Inc. 105,000 5,805,450
------------
Total Common Stocks
(Cost $448,003,541) 478,468,959
------------
INVESTMENT COMPANIES (2.2%)
- ------------------------------------------------------------------------------
CAPITAL MARKETS (2.2%)
iShares 500/Barra Value Fund (c) 37,200 2,218,236
iShares Russell 1000 Index Fund (c) 35,600 2,217,880
iShares Russell 1000 Value Index Fund (c) 34,300 2,218,181
iShares Russell Midcap Index Fund (c) 29,100 2,218,875
iShares Russell Midcap Value Index Fund (c) 20,200 2,224,020
iShares S&P MidCap 400/BARRA Value Index Fund (c) 18,100 2,221,775
S&P 500 Index-SPDR Trust Series 1 (c) 19,200 2,222,400
S&P MidCap 400 Index-MidCap SPDR Trust, Series 1
(c) 19,100 2,214,263
------------
Total Investment Companies
(Cost $17,704,610) 17,755,630
------------
CONVERTIBLE PREFERRED STOCK (0.0%) (b)
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%) (b)
NEON Communications, Inc. 438 4,928
------------
Total Convertible Preferred Stock
(Cost $4,882) 4,928
------------
</Table>
<Table>
<Caption>
SHARES VALUE
WARRANTS (0.0%) (b)
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%) (b)
NEON Communications, Inc.
Strike Price $0.01
Expire 12/2/12 (a)(e)(f)(g) 4,021 $ 40
Class A
Strike Price $0.01
Expire 12/2/12 (a)(e)(f)(g) 2,192 2,740
Redeemable Preferred
Strike Price $0.01
Expire 12/2/12 (a)(e)(f)(g) 2,630 26
Ubiquitel Operating Co., Inc.
Strike Price $22.74
Expire 4/15/10 (a)(d)(e) 65 1
------------
Total Warrants
(Cost $7,185) 2,807
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (1.9%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
Bank of New York (The)
2.70%, dated 4/29/05 due 5/2/05
Proceeds at Maturity $11,002,475
(Collateralized by Federal National Mortgage
Association 3.285%, due 8/1/33
with a Principal Amount of $20,716,710 and a
Market Value
of $20,725,436 including accrued interest) $11,000,000 11,000,000
------------
Total Repurchase Agreement
(Cost $11,000,000) 11,000,000
------------
</Table>
226 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
TIME DEPOSIT (0.5%)
Cayman Bank of New York
1.88%, due 5/2/05 $ 3,981,000 $ 3,981,000
------------
Total Time Deposit
(Cost $3,981,000) 3,981,000
------------
Total Short-Term Investments
(Cost $14,981,000) 14,981,000
------------
Total Investments
(Cost $801,055,330) (j) 102.4% 828,667,939(k)
Liabilities in Excess of
Cash and Other Assets (2.4) (19,536,942)
----------- ------------
Net Assets 100.0% $809,130,997
=========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Exchange Traded Fund -- represents a basket of securities that are traded
on an exchange.
(d) May be sold to institutional investors only.
(e) Illiquid security.
(f) Fair valued security. The total market value of these securities at April
30, 2005 is $17,162, which reflects 0.002% of the Fund's net assets.
(g) Restricted security.
(h) Issue in default.
(i) Issuer in bankruptcy.
(j) The cost for federal income tax purposes is $801,158,075.
(k) At April 30, 2005 net unrealized appreciation was $27,509,864, based on
cost for federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $52,535,600 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $25,025,736.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 227
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $801,055,330) $828,667,939
Cash 858
Receivable:
Investment securities sold 38,798,051
Fund shares sold 5,831,741
Dividends and interest 5,174,289
Other assets 121,814
------------
Total assets 878,594,692
------------
LIABILITIES:
Payables:
Investment securities purchased 67,873,532
Fund shares redeemed 531,850
Manager 489,579
NYLIFE Distributors 249,058
Transfer agent 204,893
Custodian 1,608
Accrued expenses 113,175
------------
Total liabilities 69,463,695
------------
Net assets $809,130,997
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized:
Class A $ 85,054
Class B 64,790
Class C 31,565
Class I 92,629
Class R1 22,939
Class R2 15,332
Additional paid-in capital 767,449,928
Accumulated undistributed net investment
income 575,318
Accumulated undistributed net realized gain on
investments 13,180,833
Net unrealized appreciation on investments 27,612,609
------------
Net assets $809,130,997
============
CLASS A
Net assets applicable to outstanding shares $220,426,222
============
Shares of capital stock outstanding 8,505,372
============
Net asset value per share outstanding $ 25.92
Maximum sales change (5.50% of offering price) 1.51
------------
Maximum offering price per share outstanding $ 27.43
============
CLASS B
Net assets applicable to outstanding shares $167,551,611
============
Shares of capital stock outstanding 6,479,004
============
Net asset value and offering price per share
outstanding $ 25.86
============
CLASS C
Net assets applicable to outstanding shares $ 81,593,115
============
Shares of capital stock outstanding 3,156,539
============
Net asset value and offering price per share
outstanding $ 25.85
============
CLASS I
Net assets applicable to outstanding shares $240,340,761
============
Shares of capital stock outstanding 9,262,893
============
Net asset value and offering price per share
outstanding $ 25.95
============
CLASS R1
Net assets applicable to outstanding shares $ 59,489,351
============
Shares of capital stock outstanding 2,293,875
============
Net asset value and offering price per share
outstanding $ 25.93
============
CLASS R2
Net assets applicable to outstanding shares $ 39,729,937
============
Shares of capital stock outstanding 1,533,189
============
Net asset value and offering price per share
outstanding $ 25.91
============
</Table>
228 MainStay Balanced 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, 2005 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 4,962,220
Dividends (a) 2,849,109
-----------
Total income 7,811,329
-----------
EXPENSES:
Manager 2,332,398
Distribution -- Class B 417,135
Distribution -- Class C 195,471
Transfer agent -- Classes A, B and C 281,580
Transfer agent -- Classes I, R1 and R2 40,297
Service -- Class A 203,577
Service -- Class B 139,045
Service -- Class C 65,157
Service -- Class R2 42,119
Professional 67,302
Registration 56,399
Shareholder communication 32,297
Custodian 25,351
Shareholder Service Fee -- Class R1 23,597
Shareholder Service Fee -- Class R2 16,792
Trustees 22,766
Portfolio pricing 11,317
Miscellaneous 22,988
-----------
Total expenses 3,995,588
-----------
Net investment income 3,815,741
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 13,253,853
Net change in unrealized appreciation on
investments (6,469,193)
-----------
Net realized and unrealized gain on investments 6,784,660
-----------
Net increase in net assets resulting from
operations $10,600,401
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$2,236.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 229
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 3,815,741 $ 3,066,558
Net realized gain on investments 13,253,853 8,778,292
Net change in unrealized
appreciation on investments (6,469,193) 6,424,053
---------------------------
Net increase in net assets
resulting from operations 10,600,401 18,268,903
---------------------------
Dividends and distributions to shareholders:
From net investment income:
Class A (864,928) (495,967)
Class B (250,201) (103,798)
Class C (116,778) (48,808)
Class I (1,494,879) (2,238,037)
Class R1 (335,596) (89,919)
Class R2 (172,268) (49,362)
Service Class -- (75,512)
From net realized gain on investments:
Class A (2,279,721) --
Class B (1,382,400) --
Class C (683,366) (5,621)
Class I (3,562,351) (2,044,047)
Class R1 (760,703) (294,664)
Class R2 (418,441) --
---------------------------
Total dividends and
distributions to shareholders (12,321,632) (5,445,735)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 107,360,060 119,218,441
Class B 69,301,823 64,952,107
Class C 53,558,710 29,648,295
Class I 80,018,365 102,363,134
Class R1 32,195,934 31,166,617
Class R2 31,429,476 23,330,209
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued in connection
with acquisition of MainStay Strategic Value
Fund:
Class A $ 15,888,219 $ --
Class B 37,464,604 --
Class C 1,601,141 --
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Class A 2,704,018 447,244
Class B 1,485,559 93,737
Class C 614,717 44,557
Class I 4,983,575 4,254,868
Class R1 1,096,299 89,919
Class R2 490,149 49,362
Service Class -- 369,947
---------------------------
440,192,649 381,430,906
Cost of shares redeemed:
Class A (15,752,165) (13,522,006)
Class B (6,227,761) (2,986,885)
Class C (3,230,314) (1,162,214)
Class I (27,074,413) (82,099,674)
Class R1 (3,778,527) (1,588,939)
Class R2 (3,693,078) (4,378,134)
Service Class -- (25,174,517)
---------------------------
(59,756,258) (130,912,369)
---------------------------
Increase in net assets derived
from capital share
transactions 380,436,391 250,518,537
---------------------------
Net increase in net assets 378,715,160 263,341,705
NET ASSETS:
Beginning of period 430,415,837 167,074,132
---------------------------
End of period $809,130,997 $430,415,837
===========================
Accumulated undistributed net
investment income (loss) at end of
period $ 575,318 $ (5,773)
===========================
</Table>
230 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
This page intentionally left blank
231
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
------------------------ ------------------------ ---------------------------------------
JANUARY 2, JANUARY 2, DECEMBER 30,
SIX MONTHS 2004** SIX MONTHS 2004** SIX MONTHS 2002**
ENDED THROUGH ENDED THROUGH ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31,
2005*** 2004 2005*** 2004 2005*** 2004 2003
Net asset value at beginning
of period $ 25.41 $ 24.45 $ 25.37 $ 24.46 $ 25.37 $ 24.08 $20.27
-------- -------- -------- ------- ------- ------- ------
Net investment income 0.26 0.19 0.16 0.08 0.16 0.13 0.15(f)
Net realized and unrealized
gain (loss) on investments 0.85 0.96 0.85 0.93 0.84 1.62 3.76
-------- -------- -------- ------- ------- ------- ------
Total from investment
operations 1.11 1.15 1.01 1.01 1.00 1.75 3.91
-------- -------- -------- ------- ------- ------- ------
Less dividends and
distributions:
From net investment income (0.14) (0.19) (0.06) (0.10) (0.06) (0.14) (0.10)
From net realized gain on
investments (0.46) -- (0.46) -- (0.46) (0.32) --
-------- -------- -------- ------- ------- ------- ------
Total dividends and
distributions (0.60) (0.19) (0.52) (0.10) (0.52) (0.46) (0.10)
-------- -------- -------- ------- ------- ------- ------
Net asset value at end of
period $ 25.92 $ 25.41 $ 25.86 $ 25.37 $ 25.85 $ 25.37 $24.08
======== ======== ======== ======= ======= ======= ======
Total investment return (a) 4.32%(b) 4.70%(b) 3.93%(b) 4.13%(b) 3.89%(b) 7.30% 19.32%(b)
Ratios (to average net
assets)/ Supplemental
Data:
Net investment income 1.33%+ 0.99%+ 0.58%+ 0.24%+ 0.58%+ 0.24% 0.78%+
Net expenses 1.25%+ 1.34%+# 2.00%+ 2.09%+# 2.00%+ 2.09%# 1.98%+#
Expenses (before
reimbursement) 1.25%+ 1.34%+# 2.00%+ 2.09%+# 2.00%+ 2.09%# 2.03%+#
Portfolio turnover rate 22% 42% 22% 42% 22% 42% 51%
Net assets at end of period
(in 000's) $220,426 $108,204 $167,552 $62,931 $81,593 $29,301 $ 372
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of Operations.
*** Unaudited.
# Includes transfer agent fees paid indirectly which amounted to 0.02%, 0.05%, 0.02% and
0.09% of average net assets for the years or periods ended October 31, 2004, October 31,
2003, October 31, 2002 and October 31, 2001, respectively, and custodian fees and other
expenses paid indirectly which amounted to 0.01% of average net assets for the year ended
December 31, 2000.
+ Annualized.
(a) Total return is calculated exclusive of sales charges. Class I, Class R1 and Class R2 are
not subject to sales charges.
(b) Total return is not annualized.
(c) Less than one cent per share.
(d) Restated.
(e) As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing premium on debt
securities. The effect of this change for the ten months ended October 31, 2001 is shown
below. Per share ratios and supplemental data for periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
</Table>
<Table>
<Caption>
CLASS I
Decrease net investment income $(0.02)
Increase net realized and unrealized gains and losses 0.02
Decrease ratio of net investment income (0.09%)
</Table>
<Table>
(f) Per share data based on average share outstanding during the period.
</Table>
232 MainStay Balanced 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
<Table>
<Caption>
CLASS I CLASS R1
---------------------------------------------------------------------------------------------- -------------
JANUARY 1,
SIX MONTHS 2001 SIX MONTHS
ENDED THROUGH YEAR ENDED ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, APRIL 30,
2005*** 2004 2003 2002 2001* 2000 1999 2005***
25.43
$ $ 24.07 $ 20.41 $ 20.78 $ 20.82 $ 19.53 $ 21.37 $ 25.43
-------- -------- -------- ------- ------- ------- ------- -------
0.28 0.34 0.38(f) 0.48 0.45(e) 0.55 0.58 0.29
0.88 1.68 3.67 0.00(c) (0.08)(e) 1.29 (0.68) 0.84
-------- -------- -------- ------- ------- ------- ------- -------
1.16 2.02 4.05 0.48 0.37 1.84 (0.10) 1.13
-------- -------- -------- ------- ------- ------- ------- -------
(0.18) (0.34) (0.39) (0.44) (0.41) (0.55) (0.58) (0.17)
)
(0.46 (0.32) -- (0.41) -- -- (1.16) (0.46)
-------- -------- -------- ------- ------- ------- ------- -------
(0.64) (0.66) (0.39) (0.85) (0.41) (0.55) (1.74) (0.63)
-------- -------- -------- ------- ------- ------- ------- -------
$ 25.95 $ 25.43 $ 24.07 $ 20.41 $ 20.78 $ 20.82 $ 19.53 $ 25.93
======== ======== ======== ======= ======= ======= ======= =======
4.54%(b) 8.45% 20.13% 2.18% 1.80%(b) 9.64% (0.36%) 4.42%(b)
1.58%+ 1.42% 1.78% 2.30% 2.59%+(e) 2.77% 2.61% 1.48%+
0.85%+ 0.91%# 0.99%# 0.96%# 1.03%+#(d) 0.95%# 0.94% 0.95%+
%+
0.85 0.91%# 1.03%# 1.02%# 1.05%+#(d) 0.95%# 0.94% 0.95%+
22% 42% 51% 62% 48% 73% 33% 22%
240,341
$ $180,262 $147,519 $83,906 $64,086 $65,309 $77,169 $59,489
<Caption>
CLASS R1 CLASS R2
----------- ---------------------------
JANUARY 2, JANUARY 2,
2004** SIX MONTHS 2004**
THROUGH ENDED THROUGH
OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2005*** 2004
$ 24.45 $ 25.41 $ 24.45
------- ------- -------
0.23 0.28 0.18
0.98 0.83 0.97
------- ------- -------
1.21 1.11 1.15
------- ------- -------
(0.23) (0.15) (0.19)
-- (0.46) --
------- ------- -------
(0.23) (0.61) (0.19)
------- ------- -------
$ 25.43 $ 25.91 $ 25.41
======= ======= =======
4.96%(b) 4.31%(b) 4.71%(b)
1.32%+ 1.23%+ 1.07%+
1.01%+# 1.20%+ 1.26%+#
1.01%+# 1.20%+ 1.26%+#
42% 22% 42%
$30,394 $39,730 $19,324
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 233
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
SERVICE CLASS++
---------------------------------------
NOVEMBER 1, JULY 1,
2003 2002*
THROUGH YEAR ENDED THROUGH
JANUARY 9 OCTOBER 31, OCTOBER 31,
2004 2003 2002
Net asset value at beginning of period $ 24.09 $ 20.41 $21.41
------- ------- ------
Net investment income 0.03 0.34(c) 0.11
Net realized and unrealized gain (loss) on
investments 1.00 3.68 (1.03)
------- ------- ------
Total from investment operations 1.03 4.02 (0.92)
------- ------- ------
Less dividends and distributions:
From net investment income (0.08) (0.34) (0.08)
From net realized gain on investments (0.32) -- --
------- ------- ------
Total dividends and distributions (0.40) (0.34) (0.08)
------- ------- ------
Net asset value at end of period $ 24.72 $ 24.09 $20.41
======= ======= ======
Total investment return (a) 4.28%(b) 19.93% (4.30%)(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.94%+ 1.53% 2.05%+
Net expenses 1.18%+# 1.24%# 1.21%+#
Expenses (before reimbursement) 1.18%+# 1.28%# 1.27%+#
Portfolio turnover rate 42% 51% 62%
Net assets at end of period (in 000's) $ 0 $19,183 $ 5
</Table>
<Table>
* Commencement of Operations.
# Includes transfer agent fees paid indirectly which amounted
to 0.02%, 0.05% and 0.02% of average net assets for the
years or periods ended January 9, 2004, October 31, 2003 and
October 31, 2002, respectively.
+ Annualized.
++ Service Class shares ceased operations on January 9, 2004.
(a) Total return is calculated exclusive of sales charges.
Service Class is not subject to sales charges.
(b) Total return is not annualized.
(c) Per share data based on average shares outstanding during
the period.
</Table>
234 MainStay Balanced Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY CONSERVATIVE ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -6.45%
Excluding sales charges -1.00
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -6.05%
Excluding sales charges -1.10
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -2.09%
Excluding sales charges -1.10
</Table>
Performance tables do not reflect the deduction of taxes that a shareholder
would pay on distributions or Fund-share redemptions. Total returns reflect
change in share price, reinvestment of dividend and capital-gain distributions,
and maximum applicable sales charges explained in this paragraph. Class A shares
are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of
..25%. Class B shares are sold with no initial sales charge, are subject to a
contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first
six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are
sold with no initial sales charge, are subject to a CDSC of 1% if redeemed
within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I
shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee,
and are generally available to corporate and institutional investors with a
minimum initial investment of $5 million. Performance figures reflect certain
fee waivers and/or expense limitations, without which total returns may have
been lower. The Manager has contractually agreed to limit the Fund's total fund
operating expenses through October 31, 2005. There is no guarantee that the
contractual waiver will continue after that date.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 235
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
-1.00%
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- ------------------------------------------------
Conservative Allocation Benchmark(1) 0.09%
S&P 500(R) Index(2) -1.54
MSCI EAFE(R) Index(3) -1.21
Lehman Brothers(R) Aggregate Bond
Index(4) 1.14
</Table>
1. The Conservative Allocation Benchmark was built using different weightings
from three well-known indices that represent three asset classes. U.S. stocks
(35% weighted) are represented by the S&P 500(R) Index, international stocks
(5% weighted) are represented by Morgan Stanley Capital International Europe,
Australasia, and Far East Index--the MSCI EAFE(R) Index--and U.S. bonds (60%
weighted) are represented by the Lehman Brothers(R) Aggregate Bond Index.
Results for all indices assume that all income and capital gains are
reinvested in the index or indices that produce them. An investment cannot be
made directly into an index or benchmark.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE(R) Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. The Lehman Brothers(R) Aggregate Bond Index includes fixed-rate debt issues
rated investment grade or higher by Moody's, S&P, or Fitch. All issues must
have at least one year left to maturity and have an outstanding par value of
at least $150 million. The Index is comprised of the Lehman Brothers(R)
Government/Corporate, the Mortgage-Back Securities, and the Asset-Backed
Securities Indices. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly into an index.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
236 MainStay Conservative Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY CONSERVATIVE ALLOCATION FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 4/4/05(1) 4/30/05 PERIOD(2,3) 4/30/05 PERIOD(2,3)
CLASS A SHARES $1,000.00 $989.98 $0.37 $1,024.58 $0.37
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $988.86 $0.92 $1,023.96 $0.94
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $988.86 $0.92 $1,023.96 $0.94
- -------------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $989.99 $0.18 $1,024.79 $0.19
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
1. Commencement of Operations.
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Class A, 1.25% for Class B and Class C, and 0.25% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 27 (to reflect the since-inception period).
3. Shares were first offered on April 4, 2005. Expenses paid during the period
reflect ongoing costs for the since-inception period ending April 30, 2005.
Had these shares been offered for the six months ended April 30, 2005, based
on a hypothetical 5% annualized return, expenses paid during the period would
be $2.51, $6.26, $6.26, and $1.25 for Class A, Class B, Class C, and Class I,
respectively, and the ending account value would be $1,022.50, $1,018.75,
$1,018.75, and $1,023.75 for Class A, Class B, Class C, and Class I,
respectively.
www.mainstayfunds.com 237
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Investment Companies 75.1%
Cash and Other Assets (less liabilities) 24.9%
</Table>
See Portfolio of Investments on page 241 for specific holdings within these
categories.
238 MainStay Conservative Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Devon McCormick, CFA,
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
MainStay Conservative Allocation Fund seeks to achieve its investment objective
by investing in a variety of other MainStay Funds, known as underlying Funds. A
two-stage asset-allocation process includes deciding how much to invest in broad
asset classes and how much to invest in specific underlying Funds. Normally the
Fund invests approximately 60% (within a range of 50% to 70%) of its assets in
underlying fixed-income Funds and approximately 40% (within a range of 30% to
50%) of its assets in underlying equity Funds. The Fund's fixed-income component
may include a money-market component. For cash management purposes, the Fund may
hold a portion of its assets directly in U.S. government securities,
money-market funds, cash, or cash equivalents. The underlying Funds use a broad
array of investment styles; may invest in a wide variety of equity securities,
fixed-income securities, or both; and carry different types and degrees of risk.
Some underlying Funds may invest in foreign securities. The Fund uses a
proprietary model to determine asset allocations.
The Fund commenced operations on April 4, 2005.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD FROM
APRIL 4 THROUGH APRIL 30, 2005?
Equity markets provided weak performance during the last four weeks of April
2005. Although all capitalization levels provided negative returns, large-cap
stocks declined the least, followed by mid-caps then small-caps. Bond markets
generally rose during the same four-week period. Fluctuating oil prices,
uncertainty in world markets, and continuing tensions in the Middle East all
contributed to equity-market weakness.
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE FOUR-WEEK REPORTING PERIOD?
All of the underlying Funds except MainStay MAP Fund underperformed their
respective benchmarks during the last four weeks of April 2005. All of the
Fund's underlying fixed-income Funds had positive returns for the four-week
reporting period. The Fund had greater allocations to some of the stronger-
performing underlying equity Funds, which also helped the Fund's performance in
a difficult since-inception period.
AT THE END OF THE REPORTING PERIOD, HOW WAS THE FUND ALLOCATED AMONG THE
UNDERLYING FUNDS?
Since inception, the Fund has invested in 11 underlying Funds. Because of the
short reporting period, allocations have not been shifted, except by market
movements.
As of April 30, 2005, all allocations of invested assets were close to the
Fund's targets. On that date, the Fund held its greatest single allocation
(38.21%) in MainStay Indexed Bond Fund. At the same time, the Fund allocated
8.00% of its invested assets to MainStay Floating Rate Fund, 7.93% to MainStay
High Yield Corporate Bond Fund, and 6.03% to MainStay Intermediate Term Bond
Fund.
Among underlying equity Funds, the Fund's greatest allocation (20.99%) was to
MainStay Common Stock Fund. The Fund allocated 6.00% of its assets to MainStay
Large Cap Growth Fund, 4.95% to MainStay International Equity Fund, 2.98% to
MainStay All Cap Growth Fund, 1.99% to MainStay MAP Fund, 1.94% to MainStay
Small Cap Opportunity Fund, and 0.98% to MainStay Small Cap Value Fund.
LOOKING AHEAD, WHAT DO YOU SEE FOR THE FUND?
While a variety of factors could influence the markets, we will continue to rely
on our proprietary model to assess overall target allocations and determine
which specific Funds may provide the greatest potential for the Fund. Wherever
the markets may move, we will continue to invest in a variety of underlying
Funds using the allocation targets and constraints set forth in the prospectus.
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.
THE DISCLOSURE AND FOOTNOTES ON THE FOLLOWING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
www.mainstayfunds.com 239
The Fund's performance depends on the advisor's skill in determining the
asset-class allocations, the mix of underlying MainStay Funds, as well as the
performance of those underlying Funds. The underlying Funds' performance may be
lower than the performance of the asset class the underlying Funds were selected
to represent. The Fund is indirectly subject to the investment risks of each
underlying Fund held. Principal risks of the underlying Funds are described
below.
MainStay Conservative Allocation Fund is a "fund of funds" that invests in other
MainStay Funds. The cost of investing in the Fund may be higher than the cost of
investing in a mutual fund that invests directly in individual stocks and bonds.
By investing in the Fund, clients will indirectly bear fees and expenses charged
by the underlying Funds in which the Fund invests in addition to the Fund's
direct fees and expenses. In addition, the use of a fund-of-funds structure
could affect the timing, amount, and character of distributions to the client
and may increase taxes payable by the client.
The Fund may invest more than 25% of its assets in one underlying Fund which may
significantly affect the net asset value of the Fund.
- - Stocks and bonds can decline because of adverse issuer, market, regulatory, or
economic developments. High-yield securities carry higher risks, and some of
the underlying Funds' investments have speculative characteristics and present
a greater risk of loss than higher-quality debt securities. These securities
can also be subject to greater price volatility.
- - There are additional risks associated with investing in small-cap securities.
Stocks of small companies may be subject to higher price volatility,
significantly lower trading volume, and greater spreads between bid and ask
prices than stocks of larger companies. Furthermore, small-cap companies may
be more vulnerable to adverse business or market developments and may have
more limited product lines than larger-capitalization stocks.
- - There are additional risks associated with investing in mid-cap securities.
Stocks of mid-cap companies may be more volatile and less liquid than the
securities of larger companies.
- - Foreign securities may be subject to greater risk than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy.
- - When interest rates rise, the prices of fixed-income securities in the
underlying Funds' portfolios will generally fall. On the other hand, when
interest rates fall, the prices of fixed-income securities in the underlying
Funds' portfolios will generally rise.
- - Underlying floating-rate Funds are generally considered to have speculative
characteristics. These Funds may involve risk of default on principal and
interest and risks associated with collateral impairment, nondiversification,
borrower industry concentration, and limited liquidity.
- - AN INVESTMENT IN A MONEY-MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE UNDERLYING FUND SEEKS TO MAINTAIN
A VALUE OF $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY.
Before making an investment in the Fund, you should consider all the risks
associated with it.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
240 MainStay Conservative Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
INVESTMENT COMPANIES (75.1%)+
- -----------------------------------------------------------------------
MainStay All Cap Growth Fund (a) 2,354 $ 46,115
MainStay Common Stock Fund (a) 27,445 324,671
MainStay Floating Rate Fund 12,353 123,782
MainStay High Yield Corporate Bond Fund 19,795 122,727
MainStay Indexed Bond Fund 54,229 591,094
MainStay Intermediate Bond Fund 9,425 93,213
MainStay International Equity Fund 5,822 76,613
MainStay Large Cap Growth Fund (a) 19,606 92,736
MainStay MAP Fund (a) 939 30,731
MainStay Small Cap Opportunity Fund (a) 1,729 29,987
MainStay Small Cap Value Fund (a) 1,173 15,157
----------
Total Investments
(Cost $1,552,638) (b) 75.1% 1,546,826(c)
Cash and Other Assets,
Less Liabilities 24.9 512,870
------ ----------
Net Assets 100.0% $2,059,696
====== ==========
</Table>
<Table>
(a) Non-income producing security.
(b) The cost stated also represents the aggregate cost for
federal income tax purposes.
(c) At April 30, 2005 net unrealized depreciation was
$5,812, based on cost for federal income tax purposes.
This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $359 and aggregate
gross unrealized depreciation for all investments on
which there was an excess of cost over market value of
$6,171.
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 241
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,552,638) $1,546,826
Receivables:
Fund shares sold 508,255
Manager 12,177
Unamortized offering costs 63,593
Other Assets 4,045
----------
Total assets 2,134,896
----------
LIABILITIES:
Payables:
Offering Costs 68,657
Transfer agent 1,065
Custodian 666
NYLIFE Distributors 222
Directors 81
Accrued expenses 4,509
----------
Total liabilities 75,200
----------
Net assets $2,059,696
==========
COMPOSITION OF NET ASSETS:
Capital stock (par value of .001 per share) 1
billion shares authorized:
Class A $ 147
Class B 52
Class C 8
Class I 1
Additional paid-in capital 2,062,732
Accumulated undistributed net investment income 2,568
Net unrealized depreciation on investments (5,812)
----------
Net assets $2,059,696
==========
CLASS A
Net assets applicable to outstanding shares $1,455,456
==========
Shares of capital stock outstanding 146,981
==========
Net asset value per share outstanding $ 9.90
Maximum sales charge (3.00% of offering price) 0.58
----------
Maximum offering price per share outstanding $ 10.48
==========
CLASS B
Net assets applicable to outstanding shares $ 517,489
==========
Shares of capital stock outstanding 52,323
==========
Net asset value per share outstanding $ 9.89
==========
CLASS C
Net assets applicable to outstanding shares $ 76,856
==========
Shares of capital stock outstanding 7,772
==========
Net asset value per share outstanding $ 9.89
==========
CLASS I
Net assets applicable to outstanding shares $ 9,895
==========
Shares of capital stock outstanding 1,000
==========
Net asset value per share outstanding $ 9.90
==========
</Table>
242 MainStay Conservative Allocation 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 PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005
UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 2,914
--------
Total Income 2,914
--------
EXPENSES:
Offering 5,065
Shareholder communication 2,239
Professional 2,112
Transfer agent 1,065
Custodian 666
Registration 297
Service -- Class A 90
Service -- Class B 26
Service -- Class C 7
Directors 81
Distribution -- Class B 79
Distribution -- Class C 19
Miscellaneous 777
--------
Total expenses before reimbursement 12,523
Expenses reimbursement from Manager (12,177)
--------
Net expenses 346
--------
Net investment income 2,568
--------
UNREALIZED LOSS ON INVESTMENTS:
Net unrealized depreciation on investments (5,812)
--------
Net unrealized loss on investments (5,812)
--------
Net decrease in net assets resulting from
operations $ (3,244)
========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 243
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 2,568
Net unrealized depreciation on investments (5,812)
----------
Net decrease in net assets resulting from
operations (3,244)
----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 1,457,367
Class B 518,541
Class C 77,250
Class I 10,078
----------
2,063,236
Cost of shares redeemed:
Class A (74)
Class B (74)
Class C (74)
Class I (74)
----------
(296)
----------
Increase in net assets derived from capital
share transactions 2,062,940
----------
Net increase in net assets 2,059,696
NET ASSETS:
Beginning of year 0
----------
End of year $2,059,696
==========
Accumulated undistributed net investment income $ 2,568
==========
</Table>
244 MainStay Conservative Allocation 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
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I
--------- --------- --------- ---------
APRIL 4, APRIL 4, APRIL 4, APRIL 4,
2005* 2005* 2005* 2005*
THROUGH THROUGH THROUGH THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2005** 2005** 2005** 2005**
Net asset value at beginning
of period $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income 0.00 (a) 0.00(a) 0.00(a) 0.00(a)
Net unrealized loss on
investments (0.10) (0.11) (0.11) (0.10)
------ ------ ------ ------
Total from investment
operations (0.10) (0.11) (0.11) (0.10)
------ ------ ------ ------
Net asset value at end of
period $ 9.90 $ 9.89 $ 9.89 $ 9.90
====== ====== ====== ======
Total investment return (b) (1.00%)(c) (1.10%)(c) (1.10%)(c) (1.00%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 5.33%+ 4.58%+ 4.58%+ 5.58%+
Net expenses 0.50%+ 1.25%+ 1.25%+ 0.25%+
Expenses (before
reimbursement) 24.85%+ 25.60%+ 25.60%+ 24.60%+
Portfolio turnover rate 0% 0% 0% 0%
Net assets at end of period
(in 000's) $1,455 $ 517 $ 77 $ 10
</Table>
<Table>
* Commencement of Operations
** Unaudited
+ Annualized.
(a) Less than one cent per share
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 245
MAINSTAY GROWTH ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -7.86%
Excluding sales charges -2.50
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -7.38%
Excluding sales charges -2.50
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -3.48%
Excluding sales charges -2.50
</Table>
Performance tables do not reflect the deduction of taxes that a shareholder
would pay on distributions or Fund-share redemptions. Total returns reflect
change in share price, reinvestment of dividend and capital-gain distributions,
and maximum applicable sales charges explained in this paragraph. Class A shares
are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of
..25%. Class B shares are sold with no initial sales charge, are subject to a
contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first
six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are
sold with no initial sales charge, are subject to a CDSC of 1% if redeemed
within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I
shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee,
and are generally available to corporate and institutional investors with a
minimum initial investment of $5 million. Performance figures reflect certain
fee waivers and/or expense limitations, without which total returns may have
been lower. The Manager has contractually agreed to limit the Fund's total fund
operating expenses through October 31, 2005. There is no guarantee that the
contractual waiver will continue after that date.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
246 MainStay Growth Allocation Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
-2.50%
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- ------------------------------------------------
Growth Allocation Benchmark(1) -1.47%
S&P 500(R) Index(2) -1.54
MSCI EAFE(R) Index(3) -1.21
</Table>
1. The Growth Allocation Benchmark was built using different weightings from two
well-known indices that represent two asset classes. U.S. stocks (80%
weighted) are represented by the S&P 500(R) Index and international stocks
(20% weighted) are represented by the Morgan Stanley Capital International
Europe, Australasia, and Far East Index--the MSCI EAFE(R) Index. Results for
all indices assume that all income and capital gains are reinvested in the
index that produced them. An investment cannot be made directly into an index
or benchmark.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE(R) Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 247
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY GROWTH ALLOCATION FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 4/4/05(1) 4/30/05 PERIOD(2,3) 4/30/05 PERIOD(2,3)
CLASS A SHARES $1,000.00 $974.88 $0.37 $1,024.58 $0.37
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $974.86 $0.91 $1,023.96 $0.94
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $974.86 $0.91 $1,023.96 $0.94
- -------------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $974.99 $0.18 $1,024.79 $0.19
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
1. Commencement of Operations.
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Class A, 1.25% for Class B and Class C, and 0.25% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 27 (to reflect the since-inception period).
3. Shares were first offered on April 4, 2005. Expenses paid during the period
reflect ongoing costs for the since-inception period ending April 30, 2005.
Had these shares been offered for the six months ended April 30, 2005, based
on a hypothetical 5% annualized return, expenses paid during the period would
be $2.51, $6.26, $6.26, and $1.25 for Class A, Class B, Class C, and Class I,
respectively, and the ending account value would be $1,022.50, $1,018.75,
$1,018.75, and $1,023.75 for Class A, Class B, Class C, and Class I,
respectively.
248 MainStay Growth Allocation Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Investment Companies 92.6%
Cash and Other Assets (less liabilities) 7.4%
</Table>
See Portfolio of Investments on page 252 for specific holdings within these
categories.
www.mainstayfunds.com 249
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Devon McCormick, CFA,
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
MainStay Growth Allocation Fund seeks to achieve its investment objective by
investing in a variety of other MainStay Funds, known as underlying Funds. A
two-stage asset-allocation process includes deciding how much to invest in broad
asset classes and how much to invest in specific underlying Funds. Normally the
Fund invests substantially all of its assets in underlying equity Funds
(normally within a range of 85% to 100%). For cash management purposes, the Fund
may hold a portion of its assets directly in U.S. government securities,
money-market funds, cash, or cash equivalents. The underlying Funds use a broad
array of investment styles, may invest in a wide variety of equity securities,
and carry different types and degrees of risk. Some underlying Funds may invest
in foreign securities. The Fund uses a proprietary model to determine asset
allocations.
The Fund commenced operations on April 4, 2005.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD FROM
APRIL 4 THROUGH APRIL 30, 2005?
Equity markets provided weak performance during the last four weeks of April
2005. Although all capitalization levels provided negative returns, large-cap
stocks declined the least, followed by mid-caps then small-caps. Fluctuating oil
prices, uncertainty in world markets, and continuing tensions in the Middle East
all contributed to equity-market weakness.
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE FOUR-WEEK REPORTING PERIOD?
All of the underlying Funds except MainStay MAP Fund underperformed their
respective benchmarks during the last four weeks of April 2005. The Fund had
greater allocations to some of the stronger-performing underlying equity Funds,
which helped the Fund's performance in a difficult since-inception period.
AT THE END OF THE REPORTING PERIOD, HOW WAS THE FUND ALLOCATED AMONG THE
UNDERLYING FUNDS?
Since inception, the Fund has invested in seven underlying Funds. Because of the
short reporting period, allocations have not been shifted, except by market
movements.
As of April 30, 2005, all allocations of invested assets were close to the
Fund's targets. On that date, the Fund held its greatest single allocation
(38.17%) in MainStay Common Stock Fund. At the same time, the Fund allocated
21.89% of its invested assets to MainStay International Equity Fund, 19.13% to
MainStay Large Cap Growth Fund, 5.99% to MainStay MAP Fund, 6.00% to MainStay
All Cap Growth Fund, 4.88% to MainStay Small Cap Opportunity Fund, and 3.94% to
MainStay Small Cap Value Fund. The Fund had no allocation to underlying
fixed-income Funds.
LOOKING AHEAD, WHAT DO YOU SEE FOR THE FUND?
While a variety of factors could influence the markets, we will continue to rely
on our proprietary model to assess overall target allocations and determine
which specific Funds may provide the greatest potential for the Fund. Wherever
the markets may move, we will continue to invest in a variety of underlying
Funds using the allocation targets and constraints set forth in the prospectus.
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.
The Fund's performance depends on the advisor's skill in determining the
asset-class allocations, the mix of underlying MainStay Funds, as well as the
performance of those underlying Funds. The underlying Funds' performance may be
lower than the performance of the asset class the underlying Funds were selected
to represent. The Fund is indirectly subject to the investment risks of each
underlying Fund held. Principal risks of the underlying Funds are described on
this page and the following page.
MainStay Growth Allocation Fund is a "fund of funds" that invests in other
MainStay Funds. The cost of investing in the Fund may be higher than the cost of
investing in a mutual fund that invests directly in individual stocks and bonds.
By investing in the Fund, clients will indirectly bear fees and expenses charged
by the underlying Funds in which the Fund invests in addition to the Fund's
direct fees and expenses. In addition, the use of a fund-of-funds structure
could affect the timing, amount, and character of distributions to the client
and may increase taxes payable by the client.
THE DISCLOSURE AND FOOTNOTES ON THE FOLLOWING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
250 MainStay Growth Allocation Fund
The Fund may invest more than 25% of its assets in one underlying Fund which may
significantly affect the net asset value of the Fund.
- - Stocks and bonds can decline because of adverse issuer, market, regulatory, or
economic developments. High-yield securities carry higher risks, and some of
the underlying Funds' investments have speculative characteristics and present
a greater risk of loss than higher-quality debt securities. These securities
can also be subject to greater price volatility.
- - There are additional risks associated with investing in small-cap securities.
Stocks of small companies may be subject to higher price volatility,
significantly lower trading volume, and greater spreads between bid and ask
prices than stocks of larger companies. Furthermore, small-cap companies may
be more vulnerable to adverse business or market developments and may have
more limited product lines than larger-capitalization stocks.
- - There are additional risks associated with investing in mid-cap securities.
Stocks of mid-cap companies may be more volatile and less liquid than the
securities of larger companies.
- - Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy.
- - AN INVESTMENT IN A MONEY-MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE UNDERLYING FUND SEEKS TO MAINTAIN
A VALUE OF $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY.
Before making an investment in the Fund, you should consider all the risks
associated with it.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
www.mainstayfunds.com 251
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
INVESTMENT COMPANIES (92.6%)+
- -----------------------------------------------------------------------
MainStay All Cap Growth Fund (a) 5,760 $ 112,838
MainStay Common Stock Fund (a) 60,688 717,936
MainStay International Equity Fund 31,291 411,793
MainStay Large Cap Growth Fund (a) 76,066 359,790
MainStay MAP Fund (a) 3,445 112,711
MainStay Small Cap Opportunity Fund (a) 5,289 91,721
MainStay Small Cap Value Fund (a) 5,732 74,057
----------
Total Investments
(Cost $1,899,435) (b) 92.6% 1,880,846(c)
Cash and Other Assets,
Less Liabilities 7.4 149,651
------ ----------
Net Assets 100.0% $2,030,497
====== ==========
</Table>
<Table>
(a) Non-income producing security.
(b) The cost stated also represents the aggregate cost for
federal income tax purposes.
(c) At April 30, 2005 net unrealized depreciation was
$18,589, based on cost for federal income tax purposes.
This consisted of aggregate gross unrealized
depreciation for all investments on which there was an
excess of cost over market value of $18,589.
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
</Table>
252 MainStay Growth Allocation 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,899,435) $ 1,880,846
Receivables:
Fund shares sold 145,261
Manager 12,120
Unamortized offering costs 63,592
Other assets 4,045
------------
Total assets 2,105,864
------------
LIABILITIES:
Payables:
Offering costs 68,657
Transfer agent 1,065
Custodian 666
NYLIFE Distributors 390
Directors 81
Accrued expenses 4,508
------------
Total liabilities 75,367
------------
Net assets $ 2,030,497
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of .001 per share)
1 billion shares authorized:
Class A $ 116
Class B 86
Class C 6
Class I 1
Additional paid-in capital 2,049,449
Accumulated net investment loss (572)
Net unrealized depreciation on investments (18,589)
------------
Net assets $ 2,030,497
============
CLASS A
Net assets applicable to outstanding shares $ 1,132,657
============
Shares of capital stock outstanding 116,115
============
Net asset value per share outstanding $ 9.75
Maximum sales charge (3.00% of offering price) 0.57
------------
Maximum offering price per share outstanding $ 10.32
============
CLASS B
Net assets applicable to outstanding shares $ 834,197
============
Shares of capital stock outstanding 85,568
============
Net asset value per share outstanding $ 9.75
============
CLASS C
Net assets applicable to outstanding shares $ 53,890
============
Shares of capital stock outstanding 5,528
============
Net asset value per share outstanding $ 9.75
============
CLASS I
Net assets applicable to outstanding shares $ 9,753
============
Shares of capital stock outstanding 1,000
============
Net asset value per share outstanding $ 9.75
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 253
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005
UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ --
--------
Total income --
--------
EXPENSES:
Offering 5,065
Shareholder communication 2,239
Professional 2,112
Transfer agent 1,065
Custodian 666
Registration 297
Distribution -- Class B 197
Distribution -- Class C 12
Service -- Class A 111
Service -- Class B 66
Service -- Class C 4
Directors 81
Miscellaneous 777
--------
Total expenses before reimbursement 12,692
Expenses reimbursement from Manager (12,120)
--------
Net expenses 572
--------
Net investment loss (572)
--------
UNREALIZED LOSS ON INVESTMENTS:
Net unrealized depreciation on investments (18,589)
--------
Net unrealized loss on investments (18,589)
--------
Net decrease in net assets resulting from
operations $(19,161)
========
</Table>
254 MainStay Growth Allocation Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment loss $ (572)
Net unrealized depreciation on investments (18,589)
----------
Net decrease in net assets resulting from
operations (19,161)
----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 1,143,152
Class B 848,796
Class C 54,509
Class I 10,080
----------
2,056,537
Cost of shares redeemed:
Class A (73)
Class B (6,660)
Class C (73)
Class I (73)
----------
(6,879)
----------
Increase in net assets derived from capital
share transactions 2,049,658
----------
Net increase in net assets 2,030,497
NET ASSETS:
Beginning of year 0
----------
End of year $2,030,497
==========
Accumulated net investment loss $ (572)
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 255
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I
--------- --------- --------- ---------
APRIL 4, APRIL 4, APRIL 4, APRIL 4,
2005* 2005* 2005* 2005*
THROUGH THROUGH THROUGH THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2005** 2005** 2005** 2005**
Net asset value at beginning of period $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment loss 0.00(a) 0.00(a) 0.00(a) 0.00(a)
Net unrealized loss on investments (0.25) (0.25) (0.25) (0.25)
------ ------ ------ ------
Total from investment operations (0.25) (0.25) (0.25) (0.25)
------ ------ ------ ------
Net asset value at end of period $ 9.75 $ 9.75 $ 9.75 $ 9.75
====== ====== ====== ======
Total investment return (b) (2.50%)(c) (2.50%)(c) (2.50%)(c) (2.50%)(c)
Ratios (to average net assets)/Supplemental Data:
Net investment income (0.50%)+ (1.25%)+ (1.25%)+ (0.25%)+
Net expenses 0.50% + 1.25% + 1.25% + 0.25% +
Expenses (before reimbursement) 17.09% + 17.84% + 17.84% + 16.84% +
Portfolio turnover rate 0% 0% 0% 0%
Net assets at end of period (in 000's) $1,133 $ 834 $ 54 $ 10
</Table>
<Table>
* Commencement of Operations
** Unaudited
+ Annualized.
(a) Less than one cent per share
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
</Table>
256 MainStay Growth Allocation Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY MODERATE ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -6.54%
Excluding sales charges -1.10
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -6.05%
Excluding sales charges -1.10
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -2.09%
Excluding sales charges -1.10
</Table>
Performance tables do not reflect the deduction of taxes that a shareholder
would pay on distributions or Fund-share redemptions. Total returns reflect
change in share price, reinvestment of dividend and capital-gain distributions,
and maximum applicable sales charges explained in this paragraph. Class A shares
are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of
..25%. Class B shares are sold with no initial sales charge, are subject to a
contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first
six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are
sold with no initial sales charge, are subject to a CDSC of 1% if redeemed
within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I
shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee,
and are generally available to corporate and institutional investors with a
minimum initial investment of $5 million. Performance figures reflect certain
fee waivers and/or expense limitations, without which total returns may have
been lower. The Manager has contractually agreed to limit the Fund's total fund
operating expenses through October 31, 2005. There is no guarantee that the
contractual waiver will continue after that date.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 257
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
-1.00%
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- -------------------------------------------------
Moderate Allocation Benchmark(1) -0.43%
S&P 500(R) Index(2) -1.54
MSCI EAFE(R) Index(3) -1.21
Lehman Brothers(R) Aggregate Bond
Index(4) 1.14
</Table>
1. The Moderate Allocation Benchmark was built using different weightings from
three well-known indices that represent three asset classes. U.S. stocks (50%
weighted) are represented by the S&P 500(R) Index, international stocks (10%
weighted) are represented by the Morgan Stanley Capital International Europe,
Australasia, and Far East--the MSCI EAFE(R) Index--and U.S. bonds (40%
weighted) are represented by the Lehman Brothers(R) Aggregate Bond Index.
Results for all indices assume that all income and capital gains are
reinvested in the index or indices that produce them. An investment cannot be
made directly into an index or benchmark.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE(R) Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. The Lehman Brothers(R) Aggregate Bond Index is an unmanaged index that
includes fixed-rate debt issues rated investment grade or higher by Moody's,
S&P, or Fitch. All issues must have at least one year left to maturity and
have an outstanding par value of at least $150 million. The Index is
comprised of the Lehman Brothers(R) Government/Corporate, the Mortgage-Back
Securities, and the Asset-Backed Securities Indices. Results assume
reinvestment of all income and capital gains. An investment cannot be made
directly into an index.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
258 MainStay Moderate Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY MODERATE ALLOCATION FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 4/4/05(1) 4/30/05 PERIOD(2,3) 4/30/05 PERIOD(2,3)
CLASS A SHARES $1,000.00 $988.98 $0.37 $1,024.58 $0.37
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $988.86 $0.92 $1,023.96 $0.94
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $988.86 $0.92 $1,023.96 $0.94
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $989.99 $0.18 $1,024.79 $0.19
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
1. Commencement of Operations.
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Class A, 1.25% for Class B and Class C, and 0.25% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 27 (to reflect the since-inception period).
3. Shares were first offered on April 4, 2005. Expenses paid during the period
reflect ongoing costs for the since-inception period ending April 30, 2005.
Had these shares been offered for the six months ended April 30, 2005, based
on a hypothetical 5% annualized return, expenses paid during the period would
be $2.51, $6.26, $6.26, and $1.25 for Class A, Class B, Class C, and Class I,
respectively, and the ending account value would be $1,022.50, $1,018.75,
$1,018.75, and $1,023.75 for Class A, Class B, Class C, and Class I,
respectively.
www.mainstayfunds.com 259
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Investment Companies 85.5%
Cash and Other Assets (less liabilities) 14.5%
</Table>
See Portfolio of Investments on page 263 for specific holdings within these
categories.
260 MainStay Moderate Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Devon McCormick, CFA,
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
MainStay Moderate Allocation Fund seeks to achieve its investment objective by
investing in a variety of other MainStay Funds, known as underlying Funds. A
two-stage asset-allocation process includes deciding how much to invest in broad
asset classes and how much to invest in specific underlying Funds. Normally the
Fund invests approximately 60% (within a range of 50% to 70%) of its assets in
underlying equity Funds and approximately 40% (within a range of 30% to 50%) of
its assets in underlying fixed-income Funds. The Fund's fixed-income component
may include a money-market component. For cash management purposes, the Fund may
hold a portion of its assets directly in U.S. government securities,
money-market funds, cash, or cash equivalents. The underlying Funds use a broad
array of investment styles; may invest in a wide variety of equity securities,
fixed-income securities, or both; and carry different types and degrees of risk.
Some underlying Funds may invest in foreign securities. The Fund uses a
proprietary model to determine asset allocations.
The Fund commenced operations on April 4, 2005.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD FROM
APRIL 4 THROUGH APRIL 30, 2005?
Equity markets provided weak performance during the last four weeks of April
2005. Although all capitalization levels provided negative returns, large-cap
stocks declined the least, followed by mid-caps then small-caps. Bond markets
generally rose during the same four-week period. Fluctuating oil prices,
uncertainty in world markets, and continuing tensions in the Middle East all
contributed to equity-market weakness.
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE FOUR-WEEK REPORTING PERIOD?
All of the underlying Funds except MainStay MAP Fund underperformed their
respective benchmarks during the last four weeks of April 2005. All of the
Fund's underlying fixed-income Funds had positive returns for the four-week
reporting period. The Fund had greater allocations to some of the stronger-
performing underlying equity Funds, which also helped the Fund's performance in
a difficult since-inception period.
AT THE END OF THE REPORTING PERIOD, HOW WAS THE FUND ALLOCATED AMONG THE
UNDERLYING FUNDS?
Since inception, the Fund has invested in 11 underlying Funds. Because of the
short reporting period, allocations have not been shifted, except by market
movements.
As of April 30, 2005, all allocations of invested assets were close to the
Fund's targets. On that date, the Fund held its greatest single allocation
(27.24%) in MainStay Indexed Bond Fund. At the same time, the Fund allocated
5.02% of its invested assets to MainStay Floating Rate Fund, 4.97% to MainStay
High Yield Corporate Bond Fund, and 3.02% to MainStay Intermediate Term Bond
Fund.
Among underlying equity Funds, the Fund's greatest allocation (25.99%) was to
MainStay Common Stock Fund. The Fund allocated 11.89% of its invested assets to
MainStay International Equity Fund, 9.03% to MainStay Large Cap Growth Fund,
3.99% to MainStay MAP Fund, 3.98% to MainStay All Cap Growth Fund, 3.89% to
MainStay Small Cap Opportunity Fund, and 0.98% to MainStay Small Cap Value Fund.
LOOKING AHEAD, WHAT DO YOU SEE FOR THE FUND?
While a variety of factors could influence the markets, we will continue to rely
on our proprietary model to assess overall target allocations and determine
which specific Funds may provide the greatest potential for the Fund. Wherever
the markets may move, we will continue to invest in a variety of underlying
Funds using the allocation targets and constraints set forth in the prospectus.
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.
The Fund's performance depends on the advisor's skill in determining the
asset-class allocations, the mix of underlying MainStay Funds, as well as the
performance of those underlying Funds. The underlying Funds' performance may be
lower than the performance of the asset class the underlying Funds were selected
to represent. The Fund is indirectly subject to the investment risks of each
underlying Fund held. Principal risks of the underlying Funds are described on
the following page.
THE DISCLOSURE AND FOOTNOTES ON THE FOLLOWING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
www.mainstayfunds.com 261
MainStay Moderate Allocation Fund is a "fund of funds" that invests in other
MainStay Funds. The cost of investing in the Fund may be higher than the cost of
investing in a mutual fund that invests directly in individual stocks and bonds.
By investing in the Fund, clients will indirectly bear fees and expenses charged
by the underlying Funds in which the Fund invests in addition to the Fund's
direct fees and expenses. In addition, the use of a fund-of-funds structure
could affect the timing, amount, and character of distributions to the client
and may increase taxes payable by the client.
The Fund may invest more than 25% of its assets in one underlying Fund which may
significantly affect the net asset value of the Fund.
- - Stocks and bonds can decline because of adverse issuer, market, regulatory, or
economic developments. High-yield securities carry higher risks, and some of
the underlying Funds' investments have speculative characteristics and present
a greater risk of loss than higher-quality debt securities. These securities
can also be subject to greater price volatility.
- - There are additional risks associated with investing in small-cap securities.
Stocks of small companies may be subject to higher price volatility,
significantly lower trading volume, and greater spreads between bid and ask
prices than stocks of larger companies. Furthermore, small-cap companies may
be more vulnerable to adverse business or market developments and may have
more limited product lines than larger-capitalization stocks.
- - There are additional risks associated with investing in mid-cap securities.
Stocks of mid-cap companies may be more volatile and less liquid than the
securities of larger companies.
- - Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy.
- - When interest rates rise, the prices of fixed-income securities in the
underlying Funds' portfolios will generally fall. Conversely, when interest
rates fall, the prices of fixed-income securities in the underlying Funds'
portfolios will generally rise.
- - Underlying floating-rate Funds are generally considered to have speculative
characteristics. These Funds may involve risk of default on principal and
interest and risks associated with collateral impairment, nondiversification,
borrower industry concentration, and limited liquidity.
- - AN INVESTMENT IN A MONEY-MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE UNDERLYING FUND SEEKS TO MAINTAIN
A VALUE OF $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY.
Before making an investment in the Fund, you should consider all the risks
associated with it.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
262 MainStay Moderate Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
INVESTMENT COMPANIES (85.5%)+
- -----------------------------------------------------------------------
MainStay All Cap Growth Fund (a) 6,195 $ 121,365
MainStay Common Stock Fund (a) 66,928 791,755
MainStay Floating Rate Fund 15,245 152,753
MainStay High Yield Corporate Bond Fund 24,415 151,375
MainStay Indexed Bond Fund 76,130 829,814
MainStay Intermediate Bond Fund 9,311 92,084
MainStay International Equity Fund 27,508 362,003
MainStay Large Cap Growth Fund (a) 58,162 275,107
MainStay MAP Fund (a) 3,706 121,248
MainStay Small Cap Opportunity Fund (a) 6,832 118,477
MainStay Small Cap Value Fund (a) 2,315 29,917
----------
Total Investments
(Cost $3,064,746) (b) 85.5% 3,045,898(c)
Cash and Other Assets,
Less Liabilities 14.5 518,451
------ ----------
Net Assets 100.0% $3,564,349
====== ==========
</Table>
<Table>
(a) Non-income producing security.
(b) The cost stated also represents the aggregate cost for
federal income tax purposes.
(c) At April 30, 2005 net unrealized depreciation was
$18,848, based on cost for federal income tax purposes.
This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $913 and aggregate
gross unrealized depreciation for all investments on
which there was an excess of cost over market value of
$19,761.
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 263
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $3,064,746) $3,045,898
Receivables:
Fund shares sold 514,286
Manager 12,043
Unamortized offering costs 63,593
Other assets 4,045
----------
Total assets 3,639,865
----------
LIABILITIES:
Payables:
Offering Costs 68,657
Transfer agent 1,065
Custodian 666
NYLIFE Distributors 538
Directors 81
Accrued expenses 4,509
----------
Total liabilities 75,516
----------
Net assets $3,564,349
==========
COMPOSITION OF NET ASSETS:
Capital stock (par value of .001 per share)
1 billion shares authorized:
Class A $ 224
Class B 124
Class C 11
Class I 1
Additional paid-in capital 3,580,115
Accumulated undistributed net investment income 2,722
Net unrealized depreciation on investments (18,848)
----------
Net assets $3,564,349
==========
CLASS A
Net assets applicable to outstanding shares $2,217,056
==========
Shares of capital stock outstanding 224,099
==========
Net asset value per share outstanding $ 9.89
Maximum sales charge (3.00% of offering price) 0.58
----------
Maximum offering price per share outstanding $ 10.47
==========
CLASS B
Net assets applicable to outstanding shares $1,226,493
==========
Shares of capital stock outstanding 124,054
==========
Net asset value per share outstanding $ 9.89
==========
CLASS C
Net assets applicable to outstanding shares $ 110,905
==========
Shares of capital stock outstanding 11,218
==========
Net asset value per share outstanding $ 9.89
==========
CLASS I
Net assets applicable to outstanding shares $ 9,895
==========
Shares of capital stock outstanding 1,000
==========
Net asset value per share outstanding $ 9.90
==========
</Table>
264 MainStay Moderate Allocation 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 PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005
UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 3,519
--------
Total income 3,519
--------
EXPENSES:
Offering 5,065
Shareholder communication 2,239
Professional 2,112
Transfer agent 1,065
Custodian 666
Registration 297
Distribution -- Class B 253
Distribution -- Class C 27
Service -- Class A 164
Service -- Class B 85
Service -- Class C 9
Directors 81
Miscellaneous 777
--------
Total expenses before reimbursement 12,840
--------
Expenses reimbursement from Manager (12,043)
--------
Net expenses 797
--------
Net investment income 2,722
--------
UNREALIZED LOSS ON INVESTMENTS:
Net unrealized depreciation on investments (18,848)
--------
Net unrealized loss on investments (18,848)
--------
Net decrease in net assets resulting from
operations $(16,126)
========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 265
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
2005
INCREASE
IN NET ASSETS:
Operations:
Net investment income $ 2,722
Net unrealized depreciation on
investments (18,848)
----------
Net decrease in net assets resulting
from operations (16,126)
----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 2,228,021
Class B 1,235,056
Class C 111,103
Class I 10,084
----------
3,584,264
Cost of shares redeemed:
Class A (74)
Class B (3,567)
Class C (74)
Class I (74)
----------
(3,789)
----------
Increase in net assets derived from
capital share transactions 3,580,475
----------
Net increase in net assets 3,564,349
NET ASSETS:
Beginning of year 0
----------
End of year $3,564,349
==========
Accumulated undistributed net
investment income $ 2,722
==========
</Table>
266 MainStay Moderate Allocation 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
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I
--------- --------- --------- ---------
APRIL 4, APRIL 4, APRIL 4, APRIL 4,
2005* 2005* 2005* 2005*
THROUGH THROUGH THROUGH THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2005** 2005** 2005** 2005**
Net asset value at beginning
of period $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income 0.00 (a) 0.00 (a) 0.00 (a) 0.00 (a)
Net unrealized loss on
investments (0.11) (0.11) (0.11) (0.10)
------ ------ ------ ------
Total from investment
operations (0.11) (0.11) (0.11) (0.10)
------ ------ ------ ------
Net asset value at end of
period $ 9.89 $ 9.89 $ 9.89 $ 9.90
====== ====== ====== ======
Total investment return (b) (1.10%)(c) (1.10%)(c) (1.10%)(c) (1.00%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.89% + 2.14% + 2.14% + 3.14% +
Net expenses 0.50% + 1.25% + 1.25% + 0.25% +
Expenses (before
reimbursement) 12.10% + 12.85% + 12.85% + 11.85% +
Portfolio turnover rate 0% 0% 0% 0%
Net assets at end of period
(in 000's) $2,217 $1,226 $ 111 $ 10
</Table>
<Table>
* Commencement of Operations
** Unaudited
+ Annualized.
(a) Less than one cent per share
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 267
MAINSTAY MODERATE GROWTH ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY
BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE
INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -7.20%
Excluding sales charges -1.80
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -6.71%
Excluding sales charges -1.80%
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -2.78%
Excluding sales charges -1.80
</Table>
Performance tables do not reflect the deduction of taxes that a shareholder
would pay on distributions or Fund-share redemptions. Total returns reflect
change in share price, reinvestment of dividend and capital-gain distributions,
and maximum applicable sales charges explained in this paragraph. Class A shares
are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of
..25%. Class B shares are sold with no initial sales charge, are subject to a
contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first
six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are
sold with no initial sales charge, are subject to a CDSC of 1% if redeemed
within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I
shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee,
and are generally available to corporate and institutional investors with a
minimum initial investment of $5 million. Performance figures reflect certain
fee waivers and/or expense limitations, without which total returns may have
been lower. The Manager has contractually agreed to limit the Fund's total fund
operating expenses through October 31, 2005. There is no guarantee that the
contractual waiver will continue after that date.
THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
268 MainStay Moderate Growth Allocation Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
-1.80%
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- -------------------------------------------------
Moderate Growth Allocation
Benchmark(1) -0.95%
S&P 500(R) Index(2) -1.54
MSCI EAFE(R) Index(3) -1.21
Lehman Brothers(R) Aggregate Bond
Index(4) 1.14
</Table>
1. The Moderate Growth Allocation Benchmark was built using different weightings
from three well-known indices that represent three asset classes. U.S. stocks
(65% weighted) are represented by the S&P 500(R) Index, international stocks
(15% weighted) are represented by the Morgan Stanley Capital International
Europe, Australasia, and Far East Index--the MSCI EAFE(R) Index--and U.S.
bonds (20% weighted) are represented by the Lehman Brothers(R) Aggregate Bond
Index. Results for all indices assume that all income and capital gains are
reinvested in the index or indices that produce them. An investment cannot be
made directly into an index or benchmark.
2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock-market performance. Results assume reinvestment of all
income and capital gains. An investment cannot be made directly into an
index.
3. The Morgan Stanley Capital International Europe, Australasia, and Far East
Index--the MSCI EAFE(R) Index--is an unmanaged index that is considered to be
representative of the international stock market. Results assume reinvestment
of all income and capital gains. An investment cannot be made directly into
an index.
4. The Lehman Brothers(R) Aggregate Bond Index includes fixed-rate debt issues
rated investment grade or higher by Moody's, S&P, or Fitch. All issues must
have at least one year left to maturity and have an outstanding par value of
at least $150 million. The Index is comprised of the Lehman Brothers(R)
Government/Corporate, the Mortgage-Back Securities, and the Asset-Backed
Securities Indices. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly into an index.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
www.mainstayfunds.com 269
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY MODERATE GROWTH ALLOCATION
FUND
The example below is intended to describe the fees and expenses borne by
shareholders during the reporting period 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 redemption fees, if applicable, exchange fees, and sales
charges (loads) on purchase payments, and (2) ongoing costs, including
management fees, distribution and/or service (12b-1) fees, and other Fund
expenses. 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 period and held for the entire period
from November 1, 2004, to April 30, 2005.
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 over the period. 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 balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Fund and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees, if applicable, 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.
<Table>
<Caption>
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 4/4/05(1) 4/30/05 PERIOD(2,3) 4/30/05 PERIOD(2,3)
CLASS A SHARES $1,000.00 $981.98 $0.37 $1,024.58 $0.37
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $981.86 $0.92 $1,023.96 $0.94
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $981.86 $0.92 $1,023.96 $0.94
- -----------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $981.99 $0.18 $1,024.79 $0.19
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
1. Commencement of Operations.
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Class A, 1.25% for Class B and Class C, and 0.25% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 27 (to reflect the since-inception period).
3. Shares were first offered on April 4, 2005. Expenses paid during the period
reflect ongoing costs for the since-inception period ending April 30, 2005.
Had these shares been offered for the six months ended April 30, 2005, based
on a hypothetical 5% annualized return, expenses paid during the period would
be $2.51, $6.26, $6.26, and $1.25 for Class A, Class B, Class C, and Class I,
respectively, and the ending account value would be $1,022.50, $1,018.75,
$1,018.75, and $1,023.75 for Class A, Class B, Class C, and Class I,
respectively.
270 MainStay Moderate Growth Allocation Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2005
(COMPOSITION PIE CHART)
<Table>
Investment Companies 82.3%
Cash and Other Assets (less liabilities) 17.7%
</Table>
See Portfolio of Investments on page 274 for specific holdings within these
categories.
www.mainstayfunds.com 271
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Tony Elavia and Devon McCormick, CFA,
of New York Life Investment Management LLC
CAN YOU BRIEFLY DESCRIBE THE FUND'S INVESTMENT APPROACH?
MainStay Moderate Growth Allocation Fund seeks to achieve its investment
objective by investing in a variety of other MainStay Funds, known as underlying
Funds. A two-stage asset-allocation process includes deciding how much to invest
in broad asset classes and how much to invest in specific underlying Funds.
Normally the Fund invests approximately 80% (within a range of 70% to 90%) of
its assets in underlying equity Funds and approximately 20% (within a range of
10% to 30%) of its assets in underlying fixed-income Funds. The Fund's fixed-
income component may include a money-market component. For cash management
purposes, the Fund may hold a portion of its assets directly in U.S. government
securities, money-market funds, cash, or cash equivalents. The underlying Funds
use a broad array of investment styles; may invest in a wide variety of equity
securities, fixed-income securities, or both; and carry different types and
degrees of risk. Some underlying Funds may invest in foreign securities. The
Fund uses a proprietary model to determine asset allocations.
The Fund commenced operations on April 4, 2005.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD FROM
APRIL 4 THROUGH APRIL 30, 2005?
Equity markets provided weak performance during the last four weeks of April
2005. Although all capitalization levels provided negative returns, large-cap
stocks declined the least, followed by mid-caps then small-caps. Bond markets
generally rose during the same four-week period. Fluctuating oil prices,
uncertainty in world markets, and continuing tensions in the Middle East all
contributed to equity-market weakness.
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE FOUR-WEEK REPORTING PERIOD?
All of the underlying Funds except MainStay MAP Fund underperformed their
respective benchmarks during the last four weeks of April 2005. All of the
Fund's underlying fixed-income Funds had positive returns for the four-week
reporting period. The Fund had greater allocations to some of the stronger-
performing underlying equity Funds, which also helped the Fund's performance in
a difficult since-inception period.
AT THE END OF THE REPORTING PERIOD, HOW WAS THE FUND ALLOCATED AMONG THE
UNDERLYING FUNDS?
Since inception, the Fund has invested in 10 underlying Funds. Because of the
short reporting period, allocations have not been shifted, except by market
movements.
As of April 30, 2005, all allocations of invested assets were close to the
Fund's targets. On that date, the Fund held its greatest single allocation
(27.09%) in MainStay Common Stock Fund. At the same time, the Fund allocated
17.10% of its invested assets to MainStay Large Cap Growth Fund, 16.88% to
MainStay International Equity Fund, 6.00% to MainStay All Cap Growth Fund, 4.99%
to MainStay MAP Fund, 4.88% to MainStay Small Cap Opportunity Fund, and 2.96% to
MainStay Small Cap Value Fund.
Among underlying fixed-income Funds, the Fund's greatest allocation (10.10%) was
to MainStay Indexed Bond Fund. The Fund allocated 5.02% of its invested assets
to MainStay Floating Rate Fund, and 4.98% to MainStay High Yield Corporate Bond
Fund.
LOOKING AHEAD, WHAT DO YOU SEE FOR THE FUND?
While a variety of factors could influence the markets, we will continue to rely
on our proprietary model to assess overall target allocations and determine
which specific Funds may provide the greatest potential for the Fund. Wherever
the markets may move, we will continue to invest in a variety of underlying
Funds using the allocation targets and constraints set forth in the prospectus.
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.
The Fund's performance depends on the advisor's skill in determining the
asset-class allocations, the mix of underlying MainStay Funds, as well as the
performance of those underlying Funds. The underlying Funds' performance may be
lower than the performance of the asset class the underlying Funds were selected
to represent. The Fund is indirectly subject to the investment risks of each
underlying Fund held. Principal risks of the underlying Funds are described on
the following page.
THE DISCLOSURE AND FOOTNOTES ON THE FOLLOWING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
272 MainStay Moderate Growth Allocation Fund
MainStay Moderate Growth Allocation Fund is a "fund-of-funds" that invests in
other MainStay Funds. The cost of investing in the Fund may be higher than the
cost of investing in a mutual fund that invests directly in individual stocks
and bonds. By investing in the Fund, clients will indirectly bear fees and
expenses charged by the underlying Funds in which the Fund invests in addition
to the Fund's direct fees and expenses. In addition, the use of a fund-of-funds
structure could affect the timing, amount, and character of distributions to the
client and may increase taxes payable by the client.
The Fund may invest more than 25% of its assets in one underlying Fund which may
significantly affect the net asset value of the Fund.
- - Stocks and bonds can decline because of adverse issuer, market, regulatory, or
economic developments. High-yield securities carry higher risks, and some of
the underlying Funds' investments have speculative characteristics and present
a greater risk of loss than higher-quality debt securities. These securities
can also be subject to greater price volatility.
- - There are additional risks associated with investing in small-cap securities.
Stocks of small companies may be subject to higher price volatility,
significantly lower trading volume, and greater spreads between bid and ask
prices than stocks of larger companies. Furthermore, small-cap companies may
be more vulnerable to adverse business or market developments and may have
more limited product lines than larger-capitalization stocks.
- - There are additional risks associated with investing in mid-cap securities.
Stocks of mid-cap companies may be more volatile and less liquid than the
securities of larger companies.
- - Foreign securities may be subject to greater risks than U.S. investments,
including currency fluctuations, less-liquid trading markets, greater price
volatility, political and economic instability, less publicly available
information, and changes in tax or currency laws or monetary policy.
- - When interest rates rise, the prices of fixed-income securities in the
underlying Funds' portfolios will generally fall. Conversely, when interest
rates fall, the prices of fixed-income securities in the underlying Funds'
portfolios will generally rise.
- - Underlying floating-rate Funds are generally considered to have speculative
characteristics. These Funds may involve risk of default on principal and
interest and risks associated with collateral impairment, nondiversification,
borrower industry concentration, and limited liquidity.
- - AN INVESTMENT IN A MONEY-MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE UNDERLYING FUND SEEKS TO MAINTAIN
A VALUE OF $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY.
Before making an investment in the Fund, you should consider all the risks
associated with it.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN
CONJUNCTION WITH IT.
www.mainstayfunds.com 273
PORTFOLIO OF INVESTMENTS APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
SHARES VALUE
INVESTMENT COMPANIES (82.3%)+
- -----------------------------------------------------------------------
MainStay All Cap Growth Fund (a) 5,678 $ 111,242
MainStay Common Stock Fund (a) 42,462 502,325
MainStay Floating Rate Fund 9,288 93,062
MainStay High Yield Corporate Bond Fund 14,880 92,258
MainStay Indexed Bond Fund 17,176 187,223
MainStay International Equity Fund 23,777 312,909
MainStay Large Cap Growth Fund (a) 67,020 317,003
MainStay MAP Fund (a) 2,828 92,519
MainStay Small Cap Opportunity Fund (a) 5,219 90,491
MainStay Small Cap Value Fund (a) 4,243 54,822
----------
Total Investments
(Cost $1,865,875) (b) 82.3% 1,853,854(c)
Cash and Other Assets,
Less Liabilities 17.7 400,030
------ ----------
Net Assets 100.0% $2,253,884
====== ==========
</Table>
<Table>
(a) Non-income producing security.
(b) The cost stated also represents the aggregate cost for
federal income tax purposes.
(c) At April 30, 2005 net unrealized depreciation was
$12,021, based on cost for federal income tax purposes.
This consisted of aggregate gross unrealized
appreciation for all investments on which there was an
excess of market value over cost of $196 and aggregate
gross unrealized depreciation for all investments on
which there was an excess of cost over market value of
$12,217.
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
</Table>
274 MainStay Moderate Growth Allocation 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, 2005 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,865,875) $1,853,854
Receivables:
Fund shares sold 395,558
Manager 12,139
Unamortized offering costs 63,593
Other assets 4,045
----------
Total assets 2,329,189
----------
LIABILITIES:
Payables:
Offering Costs 68,657
Transfer agent 1,065
Custodian 666
NYLIFE Distributors 327
Directors 81
Accrued expenses 4,509
----------
Total liabilities 75,305
----------
Net assets $2,253,884
==========
COMPOSITION OF NET ASSETS:
Capital stock (par value of .001 per share)
1 billion shares authorized:
Class A $ 141
Class B 77
Class C 10
Class I 1
Additional paid-in capital 2,265,059
Accumulated undistributed net investment income 617
Net unrealized depreciation on investments (12,021)
----------
Net assets $2,253,884
==========
CLASS A
Net assets applicable to outstanding shares $1,386,540
==========
Shares of capital stock outstanding 141,182
==========
Net asset value per share outstanding $ 9.82
Maximum sales charge (3.00% of offering price) 0.57
----------
Maximum offering price per share outstanding $ 10.39
==========
CLASS B
Net assets applicable to outstanding shares $ 755,427
==========
Shares of capital stock outstanding 76,940
==========
Net asset value per share outstanding $ 9.82
==========
CLASS C
Net assets applicable to outstanding shares $ 102,095
==========
Shares of capital stock outstanding 10,398
==========
Net asset value per share outstanding $ 9.82
==========
CLASS I
Net assets applicable to outstanding shares $ 9,822
==========
Shares of capital stock outstanding 1,000
==========
Net asset value per share outstanding $ 9.82
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 275
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005
UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 1,107
--------
Total Income 1,107
--------
EXPENSES:
Offering 5,065
Shareholder communication 2,239
Professional 2,112
Transfer agent 1,065
Custodian 666
Registration 297
Distribution -- Class B 142
Distribution -- Class C 24
Service -- Class A 106
Service -- Class B 47
Service -- Class C 8
Directors 81
Miscellaneous 777
--------
Total expenses before reimbursement 12,629
Expenses reimbursement from Manager (12,139)
--------
Net expenses 490
--------
Net investment income 617
--------
UNREALIZED LOSS ON INVESTMENTS:
Net unrealized depreciation on investments (12,021)
--------
Net unrealized loss on investments (12,021)
--------
Net decrease in net assets resulting from
operations $(11,404)
========
</Table>
276 MainStay Moderate Growth Allocation Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH APRIL 30, 2005 UNAUDITED
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 617
Net unrealized depreciation on investments (12,021)
----------
Net decrease in net assets resulting from
operations (11,404)
----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 1,394,875
Class B 757,929
Class C 102,692
Class I 10,086
----------
2,265,582
Cost of shares redeemed:
Class A (74)
Class B (73)
Class C (73)
Class I (74)
----------
(294)
----------
Increase in net assets derived from capital
share transactions 2,265,288
----------
Net increase in net assets 2,253,884
NET ASSETS:
Beginning of year 0
----------
End of year $2,253,884
----------
Accumulated undistributed net investment income $ 617
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.mainstayfunds.com 277
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I
----------- ----------- ----------- -----------
APRIL 4, APRIL 4, APRIL 4, APRIL 4,
2005* 2005* 2005* 2005*
THROUGH THROUGH THROUGH THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2005** 2005** 2005** 2005**
Net asset value at beginning of period $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income 0.00(a) 0.00(a) 0.00(a) 0.00(a)
Net unrealized loss on investments (0.18) (0.18) (0.18) (0.18)
------ ------ ------ ------
Total from investment operations (0.18) (0.18) (0.18) (0.18)
------ ------ ------ ------
Net asset value at end of period $ 9.82 $ 9.82 $ 9.82 $ 9.82
====== ====== ====== ======
Total investment return (b) (1.80%)(c) (1.80%)(c) (1.80%)(c) (1.80%)(c)
Ratios (to average net assets)/Supplemental Data:
Net investment income 1.20% + 0.45% + 0.45% + 1.45% +
Net expenses 0.50% + 1.25% + 1.25% + 0.25% +
Expenses (before reimbursement) 19.09% + 19.84% + 19.84% + 18.84% +
Portfolio turnover rate 0% 0% 0% 0%
Net assets at end of period (in 000's) $1,387 $ 755 $ 102 $ 10
</Table>
<Table>
* Commencement of Operations
** Unaudited
+ Annualized.
(a) Less than one cent per share
(b) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(c) Total return is not annualized.
</Table>
278 MainStay Moderate Growth Allocation 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:
Eclipse Funds Inc. (the "Company"), was incorporated in the state of Maryland on
September 21, 1990. Eclipse Funds (the "Trust"), a Massachusetts business trust,
was established on July 30, 1986. The Company and the Trust (collectively the
"Funds") are registered as open-end management investment companies under the
Investment Company Act of 1940, as amended, ("Investment Company Act") and are
comprised of sixteen separate investment portfolios (individually referred to as
a "Fund").
The Funds commenced operations on the dates indicated below:
<Table>
<Caption>
COMMENCEMENT
OF OPERATIONS FUNDS (THE COMPANY)
January 2, 1991 All Cap Growth, All Cap Value, S&P 500
Index, Cash Reserves, Indexed Bond,
Intermediate Term Bond, Short Term
Bond and Asset Manager Funds
- ----------------------------------------------------------
May 3, 2004 Floating Rate Fund
- ----------------------------------------------------------
April 4, 2005 Conservative Allocation, Growth
Allocation, Moderate Allocation and
Moderate Growth Allocation Funds
- ----------------------------------------------------------
</Table>
<Table>
<Caption>
COMMENCEMENT
OF OPERATIONS FUNDS (THE TRUST)
January 12, 1987 Small Cap Opportunity Fund
- ----------------------------------------------------------
May 1, 1989 Balanced Fund
- ----------------------------------------------------------
December 27, 1994 Mid Cap Opportunity Fund
- ----------------------------------------------------------
</Table>
On October 28, 2003, the Tax Free Bond Fund ceased operations. On December 30,
2003, the Tax-Managed Equity Fund ceased operations. On January 29, 2004, the
International Broad Market and the International Equity Funds ceased operations.
On October 29, 2004, the Mid Cap Core Fund ceased operations. These Funds were
formerly portfolios of the Company.
Effective January 1, 2004, each series of Eclipse Funds Inc. and Eclipse Funds
are now marketed as "MainStay Funds".
Each Fund offers one or more of the following six classes of shares as
indicated: Class A, Class B, Class C, Class I, Class R1 and Class R2 shares. The
Cash Reserves Fund also offers another class of shares, the Sweep Shares Class.
<Table>
<Caption>
FUNDS CLASSES OFFERED
Balanced Fund Class A, Class B, Class C,
Class I, Class R1 and Class
R2 shares
- -----------------------------------------------------------
</Table>
<Table>
<Caption>
FUNDS CLASSES OFFERED
All Cap Growth, All Cap Class A, Class B, Class C
Value, Mid Cap Opportunity, and Class I shares
Small Cap Opportunity,
Floating Rate, Intermediate
Term Bond, Asset Manager,
Conservative Allocation,
Growth Allocation, Moderate
Allocation and Moderate
Growth Allocation Funds
- -----------------------------------------------------------
S&P 500 Index, Indexed Bond Class A and Class I shares
and Short Term Bond Funds
- -----------------------------------------------------------
Cash Reserves Fund Class I and Sweep Shares
Class shares
- -----------------------------------------------------------
</Table>
Class A shares are offered at net asset value per share plus an initial sales
charge. No sales charge applies on investments of $1 million or more (and
certain other qualified purchases) in Class A shares, but a contingent deferred
sales charge is imposed on certain redemptions of such shares within one year of
the date of purchase. Class B shares and Class C shares are offered without an
initial sales charge, although a declining contingent deferred sales charge may
be imposed on redemptions made within six years of purchase of Class B shares
and a 1% contingent deferred sales charge may be imposed on redemptions made
within one year of purchase of Class C shares. The Class I, Class R1 and Class
R2 shares and the Sweep Shares Class are offered at net asset value without
imposition of a front-end sales charge or a contingent deferred sales charge.
Distribution of Class A, Class B, Class C, Class R1 and Class R2 shares each
commenced on January 2, 2004, except with respect to the Class C shares of Mid
Cap Opportunity Fund, Small Cap Opportunity Fund and Balanced Fund, the L Class
shares of which commenced operations on December 30, 2002 and were redesignated
as the Class C shares on January 1, 2004. Each Fund's No-Load Class shares were
redesignated as the Class I shares on January 1, 2004. Each Fund's (except the
Floating Rate, Conservative Allocation, Growth Allocation, Moderate Allocation
and Moderate Growth Allocation Funds, which were not in existence) Service Class
shares ceased operations on January 9, 2004.
Each class of shares bears similar voting (except for issues that relate solely
to one class), dividend, liquidation and other rights and conditions except that
the classes are subject to different distribution fee rates. Class A, Class B,
Class C and Class R2 shares and the Sweep Shares Class each bear distribution
and/or service fee payments under distribution and service plans pursuant to
Rule 12b-1 under the Investment Company Act. In addition, the Class R1 and R2
shares and the Sweep Shares Class each bear service fee payments under
shareholder service plans.
www.mainstayfunds.com 279
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
The investment objectives for each of the Funds are as follows:
The ALL CAP GROWTH FUND seeks long-term growth of capital. Dividend income, if
any, is a consideration incidental to the Fund's objective of growth of capital.
The ALL CAP VALUE FUND seeks maximum long-term total return from a combination
of capital growth and income.
The MID CAP OPPORTUNITY FUND seeks high total return.
The S&P 500 INDEX FUND seeks to provide investment results that correspond to
the total return performance (reflecting reinvestment of dividends) of common
stocks in the aggregate, as represented by the S&P 500(R) Index.
The SMALL CAP OPPORTUNITY FUND seeks high total return.
The CASH RESERVES FUND seeks a high level of current income while preserving
capital and maintaining liquidity.
The FLOATING RATE FUND seeks to provide high current income.
The INDEXED BOND FUND seeks to provide investment results that correspond to the
total return performance of fixed income securities in the aggregate, as
represented by the Citigroup Broad Investment Grade ("BIG") Bond Index.
The INTERMEDIATE TERM BOND FUND seeks to maximize total return, consistent with
liquidity, low risk to principal and investment in debt securities.
The SHORT TERM BOND FUND seeks to maximize total return, consistent with
liquidity, preservation of capital and investment in short-term debt securities.
The ASSET MANAGER FUND seeks to maximize total return, consistent with certain
percentage constraints on amounts allocated to each asset class, from a
combination of common stocks, fixed income securities, and money market
investments.
The BALANCED FUND seeks high total return.
The CONSERVATIVE ALLOCATION FUND seeks current income and, secondarily,
long-term growth of capital.
The GROWTH ALLOCATION FUND seeks long-term growth of capital.
The MODERATE ALLOCATION FUND seeks long-term growth of capital and, secondarily,
current income.
The MODERATE GROWTH ALLOCATION FUND seeks long-term growth of capital and,
secondarily, current income.
The ability of issuers of debt securities held by the Funds to meet their
obligations may be affected by economic developments in a specific industry or
region.
There are certain risks involved in investing in foreign securities that are in
addition to the usual risks inherent in domestic instruments. These risks
include those resulting from future adverse political and economic developments
and possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions. Foreign securities may also be less liquid
and more volatile than U.S. securities. There may also be difficulty in invoking
legal protections across borders. In addition, investment in emerging market
countries presents risks in greater degree than those presented by investment in
foreign issuers in countries with developed securities markets and more advanced
regulatory systems.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES:
The Funds prepare their financial statements in accordance with U.S. generally
accepted accounting principles and follow the significant accounting policies
described below:
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time) on the valuation date; such securities not
traded on the valuation date are valued at the mean of the latest quoted bid and
asked prices. Prices are taken from the primary market in which each security
trades. Debt securities are valued at prices supplied by a pricing agent or
brokers selected by the Fund's Manager, whose prices reflect broker/dealer
supplied valuations and/or electronic data processing techniques if such prices
are deemed by the Funds' Manager to be representative of market values at the
regular close of business of the Exchange. Loans are valued at the average of
bid quotations obtained from a pricing service. Options and futures contracts
are valued at the last sale price on the market where such options or futures
contracts are principally traded. Temporary cash investments acquired with over
60 days to maturity are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Pursuant to Rule 2a-7 of the Investment Company Act,
portfolio securities of Cash Reserves Fund are valued at their amortized cost,
which approximates market value in order to maintain a net asset value of $1.00
per share, although there is no assurance that it will be able to do so.
Securities for which market quotations are not readily available are valued by
methods deemed by the Board of Directors and/or the Board of Trustees to
represent fair value. Reasons for which securities may be valued in this manner
include, but are not limited to, trading for a security has been halted or
suspended, a security has been de-listed from a national exchange, or trading on
a security's primary market is temporarily closed at a time when under normal
conditions it would be open. As of April 30, 2005, the Balanced Fund held
securities with a value of $17,162 that were valued in such manner. Foreign
currency forward contracts are valued at their fair market values determined
280 MainStay Funds
on the basis of the mean between the last bid and asked prices based on dealer
or exchange quotations.
Certain events, which may occur in the U.S. or abroad, and which may include but
are not limited to natural disasters, armed conflicts, governmental actions or
other developments not tied directly to the securities markets, may occur
between the time that foreign markets close, on which securities held by the
Funds principally trade, and the time at which the Funds' NAVs are calculated.
Should the Funds conclude that such events may have affected the fair value of
securities since the last price reported on the local foreign market, the Funds
may, pursuant to procedures adopted by the Company's Board of Directors and/or
the Trust's Board of Trustees, adjust the value of the local price to reflect
the impact on the price of such securities as a result of such events.
(B) FEDERAL INCOME TAXES. Each of the Funds is treated as a separate entity for
federal income tax purposes. The Funds' policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Fund within the allowable time limits. Therefore, no federal income or
excise tax provision is required.
Investment income received by a Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are withheld at the source.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. For the Cash Reserves and Floating Rate Funds,
dividends are declared daily and paid monthly and capital gain distributions, if
any, are declared and paid annually. For the Indexed Bond, Intermediate Term
Bond and Short Term Bond Funds, income dividends are declared and paid monthly
and capital gain distributions, if any, are declared and paid annually. For the
Balanced Fund, income dividends are declared and paid quarterly and capital gain
distributions, if any, are declared and paid annually. Each of the other Funds
intends to declare and pay, as a dividend, substantially all of its net
investment income at least once a year and net realized capital gains no more
than once a year. Income dividends and capital gain distributions are determined
in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. These "book/tax differences" are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require reclassification.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Funds record security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned.
Discounts and premiums on securities, other than short-term securities,
purchased for all Funds are accreted and amortized, respectively, on the
constant yield method over the life of the respective securities or, in the case
of a callable security, over the period to the first date of call. Discounts and
premiums on short-term securities are accreted and amortized, respectively, on
the straight line method.
Investment income and realized and unrealized gains and losses on investments of
a Fund are allocated to 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 with respect to the Funds 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 expenses incurred under the Shareholder Services
Plans and the Distribution Plans) are allocated to separate classes of shares
based upon their relative net assets on the date the expenses are incurred. The
expenses borne by each Fund, including those of related parties to the Funds,
are shown on each Fund's Statement of Operations.
New York Life Investment Management LLC ("NYLIM") had directed certain portfolio
trades to brokers who agreed to pay a portion of the expenses for the Mid Cap
Opportunity, Small Cap Opportunity and Balanced Funds. This arrangement ended on
April 8, 2004. For the year ended October 31, 2004, each of these Fund's
expenses (transfer agent fees and expenses) were reduced by $3,310, $42,247 and
$39,765, respectively, under these arrangements. The credit balances remaining
as of April 8, 2004 were $2,877, $63,486 and $772 for the Mid Cap Opportunity,
Small Cap Opportunity and Balanced Funds, respectively, and are included on the
Statement of Operations under net realized and unrealized gain (loss) on
investments.
(F) USE OF ESTIMATES. The preparation of financial statements in accordance
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
(G) PURCHASED AND WRITTEN OPTIONS. Certain Funds may write covered call and put
options on their portfolio securities or foreign currencies. Premiums are
received and are recorded as liabilities. The liabilities are subsequently
adjusted to reflect the current value of the options written. Premiums received
from writing options which expire are treated as realized gains. Premiums
received from writing options which are exercised or are canceled in closing
purchase transactions are added to the proceeds or netted against the amount
paid on the
www.mainstayfunds.com 281
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
transaction to determine the realized gain or loss. By writing a covered call
option, in exchange for the premium, a Fund foregoes the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security or foreign currency increase. By writing a covered put option, a Fund,
in exchange for the premium, accepts the risk of a decline in the market value
of the underlying security or foreign currency below the exercise price. A call
option may be covered by the call writer's owning the underlying security
throughout the option period. A call option may also be covered by the call
writer's maintaining liquid assets valued at greater than the exercise price of
the call written, in a segregated account with its custodian. When writing a
covered call option, the Funds, in return for the premium on the option, give up
the opportunity to profit from a price increase in the underlying securities
above the exercise price, but, as long as the obligation as a writer continues,
have retained the risk of loss should the price of the underlying security
decline. After writing a put option, a Fund may incur a loss equal to the
difference between the exercise price of the option and the sum of the market
value of the underlying security plus the premium received from the sale of the
option.
Certain Funds may purchase call and put options on their portfolio securities or
foreign currencies. A Fund may purchase call options to protect against an
increase in the price of the security or foreign currency it anticipates
purchasing. A Fund may purchase put options on its securities or foreign
currencies to protect against a decline in the value of the security or foreign
currency or to close out covered written put positions. A Fund may also purchase
options to seek to enhance returns. Risks may arise from an imperfect
correlation between the change in market value of the securities or foreign
currencies held by the Fund and the prices of options relating to the securities
or foreign currencies purchased or sold by the Fund and from the possible lack
of a liquid secondary market for an option. The maximum exposure to loss for any
purchased option is limited to the premium initially paid for the option (see
Note 7).
(H) LOANS AND COMMITMENTS. The Floating Rate Fund makes loans and loan
assignments ("loans"), which are agreements to make money available (a
"commitment") to a borrower in a specified amount, at a specified rate and
within a specified time. Such loans are typically senior, secured and
collateralized in nature. The Fund records an investment when the borrower
withdraws money and records interest as earned. These loans pay interest at
rates which 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 London InterBank Offered Rate (LIBOR).
The loans made by the Fund are generally readily marketable, but may be subject
to some restrictions on resale. The Fund may be contractually obligated to
receive approval from the agent bank and/or borrower prior to sale.
The Fund assumes the credit risk of the borrower. In the event that the borrower
becomes insolvent or enters into bankruptcy, the Fund may incur certain costs
and delays in realizing payment, or may suffer a loss of principal and/or
interest.
The Fund also makes subordinated loans. The primary risk arising from such loans
is the potential loss in the event of default by the borrower. As of April 30,
2005, the Fund held 1.92% of its net assets in subordinated loans.
Unfunded commitments represent the remaining obligation of the Fund to the
borrower. At any point in time, up to the maturity date of the issue, the
borrower may demand the unfunded portion. These unfunded amounts are recorded in
memorandum accounts (see Note 6).
(I) FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward contract is
an agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. During the period the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. 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 Intermediate Term Bond Fund may enter into
foreign currency forward contracts primarily to hedge its foreign currency
denominated investments and receivables and payables against adverse movements
in future foreign exchange rates or to try to enhance the Fund's returns.
The use of foreign currency forward contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The contract amount reflects the extent of the Fund's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. The
unrealized appreciation on forward contracts reflects the Fund's exposure at
period end to credit loss in the event of a counterparty's failure to perform
its obligations (see Note 7).
(J) FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an
282 MainStay Funds
underlying instrument at a specified future date and price, or to make or
receive a cash payment based on the value of a securities index, foreign
currency or interest rate. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. A Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin". When the futures contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Fund's basis in the contract. Futures
contracts are used for hedging purposes or to seek to enhance returns (see Note
5).
(K) REPURCHASE AGREEMENTS. The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to determine that the
value, including accrued interest, exceeds the repurchase price. In the event of
the seller's default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
(L) FOREIGN CURRENCY TRANSACTIONS. The books and records of the Funds are kept
in U.S. dollars. 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,
(ii) purchases and sales of investment securities, income and expenses -- at the
date of such transactions.
The assets and liabilities of each Fund are presented at the exchange rates and
market values at the end 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 recorded on
each Fund's books and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing foreign currency denominated
assets and liabilities, other than investments, at valuation date exchange rates
are reflected in unrealized foreign exchange gains or losses.
(M) MORTGAGE DOLLAR ROLLS. A mortgage dollar roll ("MDR") is a transaction in
which a Fund sells mortgage-backed securities ("MBS") from its portfolio to a
counterparty from whom it simultaneously agrees to buy a similar security on a
delayed delivery basis. The MDR transactions of a Fund are classified as
purchase and sale transactions. The securities sold in connection with the MDRs
are removed from the portfolio and a realized gain or loss is recognized. The
securities the Funds have 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. The Fund maintains a segregated
account with its custodian containing securities from its portfolio having a
value not less than the repurchase price, including accrued interest. MDR
transactions involve certain risks, including the risk that the MBS returned to
the Fund at the end of the roll, while substantially similar, could be inferior
to what was initially sold to the counterparty.
(N) SECURITIES LENDING. Each Fund may lend its securities to broker-dealers and
financial institutions. The loans are collateralized by cash or 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 receives compensation for lending its securities in the form of fees or
it retains a portion of interest on the investment of any cash received as
collateral. The Fund also continues 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 (see Note 7).
(O) REDEMPTION FEE. Effective May 3, 2004, the Floating Rate Fund imposed a
2.00% redemption fee on redemptions (including exchanges) of the Fund's shares
made within 60 days of their date of purchase. The redemption fee is designed to
offset brokerage commissions and other costs to the Fund associated with short-
term trading and is not assessed on shares acquired through the reinvestment of
dividends or distributions paid by the Fund. The redemption fee may not apply to
redemptions of certain benefit plan accounts such as 401(k) plans, section 529
qualified tuition plans, accounts held in omnibus accounts on the books of
certain financial intermediary firms, wrap program accounts, redemptions
effected through the systematic withdrawal/Exchange Plan or on redemptions of
shares held at the time of death or the initial determination of a permanent
disability of a shareholder. The redemption fees are included in the Statement
of Changes in Net Assets' shares redeemed amount and also as part of additional
paid-in capital on the Statement of Assets and Liabilities. The redemption fees
paid to the Fund for the six months ended April 30, 2005 totaled $43,747.
www.mainstayfunds.com 283
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 3 -- FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. NYLIM (or the "Manager"), an indirect wholly-owned
subsidiary of New York Life, serves as manager and provides management,
administrative and fund accounting services to the Funds under Management
Agreements. MacKay Shields LLC ("MacKay Shields"), a registered investment
adviser and an indirect wholly-owned subsidiary of New York Life, serves as
subadvisor to the All Cap Growth, All Cap Value, Intermediate Term Bond and
Short Term Bond Funds under a Sub-Advisory Agreement with the Manager. The Mid
Cap Opportunity, S&P 500 Index, Small Cap Opportunity, Cash Reserves, Floating
Rate, Indexed Bond, Asset Manager, Balanced, Conservative Allocation, Growth
Allocation, Moderate Allocation and Moderate Growth Allocation Funds are advised
by NYLIM directly, without a subadvisor.
The Funds pay the Manager a monthly fee for the services performed and
facilities furnished at an annual rate of average daily net assets of that Fund
as follows:
<Table>
All Cap Growth Fund .85%
- --------------------------------------------------------------
All Cap Value Fund .85%
- --------------------------------------------------------------
Mid Cap Opportunity Fund .90%
- --------------------------------------------------------------
S&P 500 Index Fund .50%
- --------------------------------------------------------------
Small Cap Opportunity Fund 1.00%
- --------------------------------------------------------------
Cash Reserves Fund .50%
- --------------------------------------------------------------
Floating Rate Fund .60%
- --------------------------------------------------------------
Indexed Bond Fund .40%
- --------------------------------------------------------------
Intermediate Term Bond Fund .75%
- --------------------------------------------------------------
Short Term Bond Fund .60%
- --------------------------------------------------------------
Asset Manager Fund .65%
- --------------------------------------------------------------
Balanced Fund .75%
- --------------------------------------------------------------
Conservative Allocation Fund .00%
- --------------------------------------------------------------
Growth Allocation Fund .00%
- --------------------------------------------------------------
Moderate Allocation Fund .00%
- --------------------------------------------------------------
Moderate Growth Allocation Fund .00%
- --------------------------------------------------------------
</Table>
The Manager has contractually agreed for the Indexed Bond Fund to reduce the
Fund's management fee to .40% from .50% through October 31, 2005. In connection
with this contractual waiver, the Manager waived $136,644 of management fees for
the six months ended April 30, 2005.
Pursuant to the terms of the Sub-Advisory Agreement between the Manager and the
Subadvisor, the Manager pays the Subadvisor a monthly fee at an annual rate of
average daily net assets of the Company's Funds as follows:
<Table>
All Cap Growth Fund .25%
- --------------------------------------------------------------
All Cap Value Fund .25%
- --------------------------------------------------------------
Intermediate Term Bond Fund .20%
- --------------------------------------------------------------
Short Term Bond Fund .15%
- --------------------------------------------------------------
</Table>
The Manager voluntarily agreed (contractually agreed for the S&P 500 Index,
Conservative Allocation, Growth Allocation, Moderate Allocation and Moderate
Growth Allocation Funds) to assume a portion of the Fund's operating expenses
for the following Funds to the extent the total expenses (excluding service fees
and distribution fees) on an annualized basis exceed the indicated percentages:
<Table>
All Cap Growth Fund .93%
- --------------------------------------------------------------
All Cap Value Fund .94%
- --------------------------------------------------------------
Mid Cap Opportunity Fund 1.04%
- --------------------------------------------------------------
S&P 500 Index Fund .30%
- --------------------------------------------------------------
Small Cap Opportunity Fund 1.19%
- --------------------------------------------------------------
Cash Reserves Fund .50%
- --------------------------------------------------------------
Floating Rate Fund .90%
- --------------------------------------------------------------
Indexed Bond Fund .50%
- --------------------------------------------------------------
Intermediate Term Bond Fund .75%
- --------------------------------------------------------------
Short Term Bond Fund .60%
- --------------------------------------------------------------
Asset Manager Fund .83%
- --------------------------------------------------------------
Balanced Fund .94%
- --------------------------------------------------------------
Conservative Allocation Fund .25%
- --------------------------------------------------------------
Growth Allocation Fund .25%
- --------------------------------------------------------------
Moderate Allocation Fund .25%
- --------------------------------------------------------------
Moderate Growth Allocation Fund .25%
- --------------------------------------------------------------
</Table>
In connection with these voluntary expense limitations and contractual waiver,
the Manager assumed the following expenses, which are shown on each Fund's
Statement of Operations, for the six months ended April 30, 2005:
<Table>
All Cap Growth Fund $ 87,699
- -------------------------------------------------------------
All Cap Value Fund 112,442
- -------------------------------------------------------------
Mid Cap Opportunity Fund 71,040
- -------------------------------------------------------------
S&P 500 Index Fund 1,845,583
- -------------------------------------------------------------
Small Cap Opportunity Fund 0
- -------------------------------------------------------------
Cash Reserves Fund 245,857
- -------------------------------------------------------------
Floating Rate Fund 0
- -------------------------------------------------------------
Indexed Bond Fund 66,458
- -------------------------------------------------------------
Intermediate Term Bond Fund 155,371
- -------------------------------------------------------------
Short Term Bond Fund 87,597
- -------------------------------------------------------------
</Table>
284 MainStay Funds
<Table>
Asset Manager Fund $ 265,558
- -------------------------------------------------------------
Balanced Fund 0
- -------------------------------------------------------------
Conservative Allocation Fund 12,177
- -------------------------------------------------------------
Growth Allocation Fund 12,120
- -------------------------------------------------------------
Moderate Allocation Fund 12,043
- -------------------------------------------------------------
Moderate Growth Allocation Fund 12,139
- -------------------------------------------------------------
</Table>
It was not necessary for the Manager to reimburse the Small Cap Opportunity,
Floating Rate and Balanced Funds for expenses for the six months ended April 30,
2005.
These voluntary expense limitations may be terminated or revised at any time.
The contractual expense waiver for the S&P 500 Index Fund is in effect through
December 31, 2005. The contractual expense waivers for the Conservative
Allocation, Growth Allocation, Moderate Allocation and Moderate Growth
Allocation Funds is in effect through October 31, 2005. There is no guarantee
that these waivers will continue after these dates.
(B) DISTRIBUTOR. NYLIFE Distributors serves as the Funds' distributor and
principal underwriter (the "Distributor") to the Class A, Class B, Class C,
Class R2 and the Sweep Shares Class of all Funds offering such shares, pursuant
to a Distribution Agreement.
(C) SALES CHARGES. The Funds were advised by the Distributor that the amount of
sales charges retained on sales of Class A shares was $509,734 for the six
months ended April 30, 2005. The Funds were also advised that the Distributor
retained contingent deferred sales charges on redemptions of Class A, Class B
and Class C shares of $121,864, $161,008 and $101,848, respectively, for the six
months ended April 30, 2005.
(D) DISTRIBUTION AND SERVICE FEES. The Company and the Trust, on behalf of the
Funds, each has a Distribution Agreement with the Distributor. The Funds, with
respect to Class A, Class B, Class C and Class R2 shares and the Sweep Shares
Class shares of the Cash Reserves Fund have adopted distribution and service
plans (the "Plans") in accordance with the provisions of Rule 12b-1 under the
Investment Company Act. The Plans provide that distribution and service fees
payable thereunder are payable to the Distributor regardless of the amounts
actually expended by the Distributor for distribution of the Funds' shares and
service activities.
Pursuant to the Class A Plan and Class R2 Plan, the Distributor receives a
monthly fee from each applicable Fund at an annual rate of 0.25% of the average
daily net assets of the Fund's Class A and Class R2 shares, respectively, which
is an expense of the Class A and Class R2 shares of the Fund for distribution or
service activities as designated by the Distributor. Pursuant to the Class B and
Class C Plans, each applicable Fund pays the Distributor a monthly fee, which is
an expense of the Class B and Class C shares of the Fund, for distribution
activities as designated by the Distributor, at the annual rate of 0.75% of the
average daily net assets of the Fund's Class B and Class C shares, respectively.
The Class B and Class C Plans provide that the Class B and Class C shares of the
Funds also incur a monthly fee, which is an expense of the Class B and Class C
shares of the Funds for service activities as designated by the Distributor, at
the annual rate of 0.25% of the average daily net asset value of the Class B or
Class C shares of the Funds, respectively. Pursuant to the Sweep Shares Class
Plan for the Cash Reserves Fund, the Distributor, NYLIFE Securities Inc., an
indirect wholly-owned subsidiary of New York Life, or any other broker-dealer or
other financial institution, is entitled to receive a monthly fee, which is an
expense of the Sweep Shares Class Plan of the Cash Reserves Fund for
distribution or service activities as designated by the Distributor, at an
annual rate of 0.25% of the average daily net assets of the Fund's Sweep Shares
Class for account sweep and other distribution-related and shareholder services.
In accordance with the Shareholder Services Plans for the Class R1 and Class R2
shares and the Sweep Shares Class 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 and Class R2
shares and the Sweep Shares Class shares. For its services, the Manager is
entitled to a Shareholder Service Fee accrued daily and paid monthly at an
annual rate of 0.10% of the average daily net assets attributable to the Class
R1 and R2 shares and at an annual rate of 0.25% of the average daily net assets
attributable to the Sweep Shares Class shares of the Cash Reserves Fund.
(E) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC ("NYLIM Service"), an affiliate of NYLIM, is the Funds'
transfer, dividend disbursing and shareholder servicing agent. NYLIM Service has
entered into an agreement with Boston Financial Data Services ("BFDS"), pursuant
to which BFDS will perform certain of the services for which NYLIM Service is
responsible. Transfer agent expenses accrued to NYLIM Service, for the six
months ended April 30, 2005 were as follows:
<Table>
All Cap Growth Fund $ 78,675
- -------------------------------------------------------------
All Cap Value Fund 82,394
- -------------------------------------------------------------
Mid Cap Opportunity Fund 65,571
- -------------------------------------------------------------
S&P 500 Index Fund 252,277
- -------------------------------------------------------------
Small Cap Opportunity Fund 140,569
- -------------------------------------------------------------
Cash Reserves Fund 23,742
- -------------------------------------------------------------
Floating Rate Fund 140,832
- -------------------------------------------------------------
Indexed Bond Fund 34,232
- -------------------------------------------------------------
Intermediate Term Bond Fund 50,537
- -------------------------------------------------------------
Short Term Bond Fund 21,188
- -------------------------------------------------------------
</Table>
www.mainstayfunds.com 285
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
Asset Manager Fund $305,534
- -------------------------------------------------------------
Balanced Fund 321,877
- -------------------------------------------------------------
Conservative Allocation Fund 1,065
- -------------------------------------------------------------
Growth Allocation Fund 1,065
- -------------------------------------------------------------
Moderate Allocation Fund 1,065
- -------------------------------------------------------------
Moderate Growth Allocation Fund 1,065
- -------------------------------------------------------------
</Table>
(F) INDEPENDENT DIRECTORS AND TRUSTEES FEES. Effective January 1, 2004,
non-interested Directors and Trustees are paid an annual retainer of $62,000
plus reimbursement for travel and out-of-pocket expenses. The Lead Independent
Director/Trustee and the Audit Committee Chair each receive an additional annual
retainer of $10,000. The retainers are paid in the aggregate for the Company and
the Trust.
(G) CAPITAL. At April 30, 2005 affiliates and employees of New York Life owned
a significant number of shares of the Funds with the following values and
percentages of net assets as follows:
<Table>
All Cap Growth Fund $ 217,186,264 82.4%
- ---------------------------------------------------------------
All Cap Value Fund 88,670,607 64.9
- ---------------------------------------------------------------
Mid Cap Opportunity Fund 127,852 0.2
- ---------------------------------------------------------------
S&P 500 Index Fund 1,288,864,262 87.1
- ---------------------------------------------------------------
Small Cap Opportunity Fund 100,607,794 28.6
- ---------------------------------------------------------------
Cash Reserves Fund 146,481,936 28.5
- ---------------------------------------------------------------
Floating Rate Fund 100,484,331 15.4
- ---------------------------------------------------------------
Indexed Bond Fund 254,206,222 87.1
- ---------------------------------------------------------------
Intermediate Term Bond Fund 103,716,126 77.3
- ---------------------------------------------------------------
Short Term Bond Fund 73,021,765 77.2
- ---------------------------------------------------------------
Asset Manager Fund 219,407,978 64.6
- ---------------------------------------------------------------
Balanced Fund 211,891,969 26.2
- ---------------------------------------------------------------
Conservative Allocation Fund 247,480 12.0
- ---------------------------------------------------------------
Growth Allocation Fund 243,750 12.0
- ---------------------------------------------------------------
Moderate Allocation Fund 247,260 6.9
- ---------------------------------------------------------------
Moderate Growth Allocation Fund 245,500 10.9
- ---------------------------------------------------------------
</Table>
From time to time, a Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund.
(H) OTHER. Pursuant to a Management Agreement between the Funds and the Office
of the General Counsel of NYLIM ("OGC"), the cost of legal services provided to
the Funds by OGC are charged to the Funds. For the six months ended April 30,
2005, these fees, which are included in Professional fees shown on the Statement
of Operations, were as follows:
<Table>
All Cap Growth Fund $ 11,787
- -------------------------------------------------------------
All Cap Value Fund 5,975
- -------------------------------------------------------------
Mid Cap Opportunity Fund 2,701
- -------------------------------------------------------------
S&P 500 Index Fund 59,713
- -------------------------------------------------------------
Small Cap Opportunity Fund 13,544
- -------------------------------------------------------------
Cash Reserves Fund 22,054
- -------------------------------------------------------------
Floating Rate Fund 22,898
- -------------------------------------------------------------
Indexed Bond Fund 11,701
- -------------------------------------------------------------
Intermediate Term Bond Fund 6,131
- -------------------------------------------------------------
Short Term Bond Fund 4,079
- -------------------------------------------------------------
Asset Manager Fund 14,336
- -------------------------------------------------------------
Balanced Fund 29,475
- -------------------------------------------------------------
Conservative Allocation Fund 0
- -------------------------------------------------------------
Growth Allocation Fund 0
- -------------------------------------------------------------
Moderate Allocation Fund 0
- -------------------------------------------------------------
Moderate Growth Allocation Fund 0
- -------------------------------------------------------------
</Table>
NOTE 4 -- FEDERAL INCOME TAX:
At October 31, 2004, for federal income tax purposes, capital loss
carryforwards, as shown in the table below, were available to the extent
provided by regulations to offset future realized gains of each respective Fund
through the years indicated. To the extent that these loss carryforwards are
used to offset future capital gains, it is probable that the capital gains so
offset will not be distributed to shareholders.
<Table>
<Caption>
CAPITAL LOSS
AVAILABLE AMOUNT
THROUGH (000'S)
All Cap Growth Fund 2009 $24,144
2010 17,488
2011 2,904
2012 8,299
- -----------------------------------------------------------
$52,835
- -----------------------------------------------------------
All Cap Value Fund 2010 $11,887
2011 6,872
- -----------------------------------------------------------
$18,759
- -----------------------------------------------------------
S&P 500 Index Fund 2010 $26,156
- -----------------------------------------------------------
Cash Reserves Fund 2012 $ 3
- -----------------------------------------------------------
Floating Rate Fund 2012 $ 229
- -----------------------------------------------------------
Indexed Bond Fund 2007 $ 1,620
2008 1,793
2009 105
- -----------------------------------------------------------
$ 3,518
- -----------------------------------------------------------
Intermediate Term Bond Fund 2007 $ 4,927
2008 3,661
2010 898
- -----------------------------------------------------------
$ 9,486
- -----------------------------------------------------------
</Table>
286 MainStay Funds
<Table>
<Caption>
CAPITAL LOSS
AVAILABLE AMOUNT
THROUGH (000'S)
Short Term Bond Fund 2005 $ 192
2006 63
2007 572
2008 758
2009 159
2010 35
2012 297
- -----------------------------------------------------------
$ 2,076
- -----------------------------------------------------------
Asset Manager Fund 2010 $ 9,702
2011 44,514
- -----------------------------------------------------------
$54,216
- -----------------------------------------------------------
</Table>
The All Cap Value, S&P 500 Index, Indexed Bond, Intermediate Term Bond and Asset
Manager Funds utilized $14,119,554, $11,390,033, $283,342, $1,361,903 and
$30,703,508, respectively, of capital loss carryforwards during the year ended
October 31, 2004. In addition, the Short Term Bond Fund had $515,836 of capital
loss carryforwards that expired.
The MainStay Short Term Bond Fund (formerly the Eclipse Short Term Bond Fund)
acquired $420,163 in capital loss carryforwards as a result of the acquisition
of the Eclipse Ultra Short Duration Fund. There were no capital loss
carryforwards acquired by the MainStay Intermediate Term Bond Fund (formerly the
Eclipse Bond Fund) as a result of the acquisition of the Eclipse Core Bond Plus
Fund (see Note 8).
Dividends to shareholders from net investment income and distributions to
shareholders from net realized gains shown in the Statement of Changes in Net
Assets for the year ended October 31, 2004 represents tax-based distributions of
ordinary income and net long-term capital gain, respectively, except for the
Funds for which the tax components of the distributions are shown below.
<Table>
<Caption>
2004
-----------------------------
TAX-BASED TAX-BASED
DISTRIBUTIONS DISTRIBUTIONS
FROM FROM
ORDINARY LONG-TERM
INCOME GAINS
Small Cap Opportunity Fund $ 422,312 $ 8,952,827
- -------------------------------------------------------------
Cash Reserves Fund 2,455,778 0
- -------------------------------------------------------------
Balanced Fund 3,948,204 1,497,531
- -------------------------------------------------------------
</Table>
NOTE 5 -- FINANCIAL INVESTMENTS:
The S&P 500 Index Fund's, Indexed Bond Fund's and Asset Manager Fund's use of
futures contracts involves, to varying degrees, elements of market risk in
excess of the amount recognized in the Statement of Assets and Liabilities. The
contract or notional amounts and variation margin reflect the extent of the
Fund's involvement in open futures positions. Risks arise from the possible
imperfect correlation in movements in the price of futures contracts, interest
rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Fund's
activities in futures contracts are conducted through regulated exchanges which
minimize counterparty credit risks.
The S&P 500 Index Fund invests in stock index futures contracts to maintain cash
reserves while remaining fully invested, to facilitate trading, or to reduce
transaction costs. The Indexed Bond Fund invests in contracts for the future
delivery of debt securities in order to attempt to maintain cash reserves while
remaining fully invested, to facilitate trading, or to reduce transaction costs.
The Asset Manager Fund has entered into contracts for the future delivery of
debt securities and invests in stock index futures contracts to rebalance the
Fund's portfolio composition and risk profile to meet asset class constraints.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES:
As of April 30, 2005, the Floating Rate Fund had unfunded loan commitments
pursuant to the following loan agreement:
<Table>
<Caption>
UNFUNDED
BORROWER COMMITMENT
Venetian Casino Resort, LLC, due 6/15/11 $ 341,880
- ------------------------------------------------------------------------------
</Table>
This commitment is available until the maturity date of the security.
NOTE 7 -- FUND SECURITIES LOANED, FOREIGN CURRENCY FORWARD CONTRACTS AND WRITTEN
OPTIONS:
As of April 30, 2005, the following Funds had securities on loan and received
collateral as follows:
<Table>
<Caption>
MARKET
VALUE OF
SECURITIES
ON LOAN COLLATERAL
All Cap Growth Fund $ 17,458,400 $17,464,438
- -------------------------------------------------------------------------------
All Cap Value Fund 0 6,288
- -------------------------------------------------------------------------------
S&P 500 Index Fund 29,467,396 31,079,544
- -------------------------------------------------------------------------------
Indexed Bond Fund 74,903,994 74,904,056
- -------------------------------------------------------------------------------
Intermediate Term Bond Fund 14,691,495 15,242,455
- -------------------------------------------------------------------------------
Short Term Bond Fund 18,441,468 18,920,000
- -------------------------------------------------------------------------------
Asset Manager Fund 11,910,653 12,080,183
- -------------------------------------------------------------------------------
</Table>
The cash collateral received for securities on loan was used to purchase highly
liquid short-term investments in accordance with the lending procedures of the
Funds. Securities purchased with collateral received are valued at amortized
cost, which approximates market value.
www.mainstayfunds.com 287
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
As of April 30, 2005, the Intermediate Term Bond Fund had foreign currency
forward contracts:
<Table>
<Caption>
CONTRACT CONTRACT
INTERMEDIATE AMOUNT AMOUNT UNREALIZED
TERM BOND FUND SOLD PURCHASED DEPRECIATION
Foreign Currency Sale Contracts
- ----------------------------------------------------------------------------------------------
Euro vs. U.S. Dollar, expiring 7/6/05 E 171,048 $ 220,100 $ (1,153)
- ----------------------------------------------------------------------------------------------
Net unrealized depreciation on foreign currency forward contracts:
$ (1,153)
- ----------------------------------------------------------------------------------------------
</Table>
During the six months ended April 30, 2005, the All Cap Value Fund had the
following transactions in Written Options:
<Table>
<Caption>
NUMBER OF
ALL CAP VALUE FUND CONTRACTS PREMIUM
Options outstanding at October 31, 2004 0 $ 0
- --------------------------------------------------------------------------
Options -- written (75) (12,525)
- --------------------------------------------------------------------------
Options -- expired 75 12,525
- --------------------------------------------------------------------------
Options outstanding at April 30, 2005 0 $ 0
- --------------------------------------------------------------------------
</Table>
NOTE 8 -- FUND ACQUISITIONS:
(A) On February 11, 2005, MainStay Balanced Fund acquired the assets, including
the investments, and assumed the identified liabilities of MainStay Strategic
Value Fund.
This reorganization was completed after shareholders approved the plan on
February 2, 2005. The aggregate net assets of MainStay Balanced Fund immediately
before the acquisition was $639,429,462 and the combined net assets after the
acquisition was $694,383,426.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
MainStay Strategic Value Fund
- ------------------------------------------------------------------------------
Class A 1,380,980 $15,888,219
- ------------------------------------------------------------------------------
Class B 3,260,303 37,464,604
- ------------------------------------------------------------------------------
Class C 139,338 1,601,141
- ------------------------------------------------------------------------------
</Table>
In exchange for the MainStay Strategic Value Fund shares and net assets,
MainStay Balanced Fund issued the following number of shares:
<Table>
<Caption>
SHARES
Class A 592,705
- ---------------------------------------------------------------
Class B 1,400,861
- ---------------------------------------------------------------
Class C 59,858
- ---------------------------------------------------------------
</Table>
(B) On December 11, 2003, MainStay Short Term Bond Fund (formerly Eclipse Short
Term Bond Fund) acquired the assets, including the investments, and assumed the
identified liabilities of Eclipse Ultra Short Duration Fund.
This reorganization was completed after shareholders approved the plan on
September 24, 2003. The aggregate net assets of MainStay Short Term Bond Fund
immediately before the acquisition was $35,809,687 and the combined net assets
after the acquisition was $110,548,775.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
Eclipse Ultra Short Duration Fund
- ------------------------------------------------------------------------------
No-Load Class 7,456,363 $74,520,760
- ------------------------------------------------------------------------------
Service Class 21,691 218,328
- ------------------------------------------------------------------------------
</Table>
In exchange for the Eclipse Ultra Short Duration Fund shares and net assets,
MainStay Short Term Bond Fund issued the following number of shares:
<Table>
<Caption>
SHARES
No-Load Class 7,983,823
- ---------------------------------------------------------------
Service Class 23,275
- ---------------------------------------------------------------
</Table>
288 MainStay Funds
Eclipse Ultra Short Duration Fund's net assets after adjustments for any
permanent book-to-tax differences at the acquisition date were as follows, which
include the following amounts of capital stock, unrealized appreciation,
accumulated net realized loss and temporary book-to-tax differences:
<Table>
<Caption>
TEMPORARY
TOTAL NET CAPITAL UNREALIZED ACCUMULATED NET BOOK-TO-TAX
ASSETS STOCK APPRECIATION REALIZED LOSS DIFFERENCES
Eclipse Ultra Short
Duration Fund $74,739,088 $75,334,518 $ 78,654 $ (420,163) $ (253,921)
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(C) On December 11, 2003, MainStay Intermediate Term Bond Fund (formerly Eclipse
Bond Fund) acquired the assets, including the investments, and assumed the
identified liabilities of Eclipse Core Bond Plus Fund.
This reorganization was completed after shareholders approved the plan on
September 24, 2003. The aggregate net assets of MainStay Intermediate Term Bond
Fund immediately before the acquisition was $123,809,905 and the combined net
assets after the acquisition was $150,603,301.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
Eclipse Core Bond Plus Fund 2,614,400 $26,793,396
- ------------------------------------------------------------------------------
</Table>
In exchange for the Eclipse Core Bond Plus Fund shares and net assets, MainStay
Intermediate Term Bond Fund issued the following number of shares:
<Table>
<Caption>
SHARES
No-Load Class 2,713,657
- ---------------------------------------------------------------
</Table>
Eclipse Core Bond Plus Fund's net assets after adjustments for any permanent
book-to-tax differences at the acquisition date were as follows, which include
the following amounts of capital stock, unrealized appreciation and temporary
book-to-tax differences:
<Table>
<Caption>
TEMPORARY
TOTAL NET CAPITAL UNREALIZED BOOK-TO-TAX
ASSETS STOCK APPRECIATION DIFFERENCES
Eclipse Core Bond
Plus Fund $26,793,396 $26,387,302 $ 312,011 $ 94,083
- --------------------------------------------------------------------------------------------------------
</Table>
NOTE 9 -- CUSTODIAN:
The Bank of New York is custodian of cash and securities of each Fund of the
Company and Trust. Custodial fees are charged to each Fund based on the market
value of securities in each Fund and the number of certain cash transactions
incurred by each Fund.
NOTE 10 -- LINE OF CREDIT:
The Funds, and certain affiliated funds, with the exception of the Cash Reserves
Fund, maintain a line of credit of $160,000,000 with a syndicate of banks in
order to secure a source of funds for temporary purposes to meet unanticipated
or excessive shareholder redemption requests. The Funds pay a commitment fee, at
an annual rate of .075% of the average commitment amount, regardless of usage,
to The Bank of New York, which acts as agent to the syndicate. Such commitment
fees are allocated among the Funds based upon net assets and other factors.
Interest on any revolving credit loan is charged based upon the Federal Funds
Advances rate. There were no borrowings on the line of credit during the six
months ended April 30, 2005.
www.mainstayfunds.com 289
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 11 -- PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six months ended April 30, 2005, purchases and sales of securities,
other than securities subject to repurchase transactions and short-term
securities, were as follows:
<Table>
<Caption>
ALL CAP ALL CAP MID CAP
GROWTH FUND VALUE FUND OPPORTUNITY FUND
------------------- ------------------- -------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government securities $ -- $ -- $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------------------
All others 58,594 64,311 34,304 29,108 56,701 18,886
- -------------------------------------------------------------------------------------------
Total $58,594 $64,311 $34,304 $29,108 $56,701 $18,886
- -------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INTERMEDIATE TERM SHORT TERM ASSET MANAGER
BOND FUND BOND FUND FUND
-------------------- ------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government securities $117,840 $129,617 $64,354 $55,091 $ 52,904 $ 48,845
- ---------------------------------------------------------------------------------------------
All others 22,026 35,985 -- 11,690 112,879 108,343
- ---------------------------------------------------------------------------------------------
Total $139,866 $165,602 $64,354 $66,781 $165,783 $157,188
- ---------------------------------------------------------------------------------------------
</Table>
NOTE 12 -- CAPITAL SHARE TRANSACTIONS (IN 000'S):
Transactions in capital shares were as follows:
<Table>
<Caption>
ALL CAP GROWTH FUND
----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ------- ------- ------- ----------- ----------------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH OCTOBER 31, THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 2004 JANUARY 9, 2004
Shares sold 139 113 19 535 786 198 31 1,736 20
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of dividends
and distributions -- -- -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
139 113 19 535 786 198 31 1,736 20
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (153) (26) (4) (1,494) (92) (8) (2) (6,663) (602)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (14) 87 15 (959) 694 190 29 (4,927) (582)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MID CAP OPPORTUNITY FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ------- ------- ------- ------- ----------------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH OCTOBER 31, THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 2004 JANUARY 9, 2004
Shares sold 783 564 293 193 298 259 220 398 1
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends and distributions 10 9 7 22 -- -- --(a) 5 --(a)
- ---------------------------------------------------------------------------------------------------------------------------------
793 573 300 215 298 259 220 403 1
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (46) (35) (36) (239) (18) (10) (6) (266) (1)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 747 538 264 (24) 280 249 214 137 --(a)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SMALL CAP OPPORTUNITY FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ------- ------- ------- ------- ----------------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH OCTOBER 31, THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 2004 JANUARY 9, 2004
Shares sold 2,330 1,030 670 4,029 1,473 874 311 6,894 9
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends and distributions 206 164 49 1,634 --(a) -- --(a) 538 4
- ---------------------------------------------------------------------------------------------------------------------------------
2,536 1,194 719 5,663 1,473 874 311 7,432 13
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (426) (86) (63) (2,008) (148) (63) (11) (7,065) (79)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 2,110 1,108 656 3,655 1,325 811 300 367 (66)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
* Commencement of Operations.
+ Service Class ceased operations on January 9, 2004.
(a) Less than one thousand shares.
290 MainStay Funds
<Table>
<Caption>
S&P 500 SMALL CAP FLOATING RATE INDEXED BOND
INDEX FUND OPPORTUNITY FUND FUND FUND
------------------- -------------------- ------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
$ -- $ -- $ -- $ -- $ -- $ -- $271,606 $216,666
- -------------------------------------------------------------------------------------------
127,647 31,455 284,568 179,732 382,541 18,913 12,136 2,581
- -------------------------------------------------------------------------------------------
$127,647 $31,455 $284,568 $179,732 $382,541 $18,913 $283,742 $219,247
- -------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
BALANCED CONSERVATIVE GROWTH MODERATE MODERATE GROWTH
FUND ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
-------------------- ------------------ ------------------ ------------------ ------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
$ -- $ 875 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------
517,002 133,432 1,553 -- 1,899 -- 3,065 -- 1,866 --
- ------------------------------------------------------------------------------------------------------------
$517,002 $134,307 $1,553 $ -- $1,899 $ -- $3,065 $ -- $1,866 $ --
- ------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
ALL CAP VALUE FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ------- ------- ------- ---------------- -----------------
JANUARY 2, 2004* NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 JANUARY 9, 2004
207 234 36 660 842 315 83 1,925 37
- --------------------------------------------------------------------------------------------------------------
6 1 -- 97 -- -- -- 172 4
- --------------------------------------------------------------------------------------------------------------
213 235 36 757 842 315 83 2,097 41
- --------------------------------------------------------------------------------------------------------------
(98) (25) (12) (1,047) (99) (9) (11) (7,122) (521)
- --------------------------------------------------------------------------------------------------------------
115 210 24 (290) 743 306 72 (5,025) (480)
- --------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
S&P 500 INDEX FUND
---------------------------------------------------------------------------
CLASS A CLASS I CLASS A CLASS I SERVICE CLASS+
------- ------- ---------------- ---------------- -----------------
JANUARY 2, 2004* NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 JANUARY 9, 2004
3,114 11,010 13,266 12,887 652
- -------------------------------------------------------------------------------
124 588 -- 382 81
- -------------------------------------------------------------------------------
3,238 11,598 13,266 13,269 733
- -------------------------------------------------------------------------------
(2,858) (4,683) (2,530) (7,821) (8,845)
- -------------------------------------------------------------------------------
380 6,915 10,736 5,448 (8,111)
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CASH RESERVES FUND
---------------------------------------------------------------------
SWEEP SHARES SWEEP SHARES
CLASS I CLASS CLASS I CLASS SERVICE CLASS+
-------- ------------ -------- ------------ -----------------
NOVEMBER 1, 2003
SIX MONTHS ENDED YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 JANUARY 9, 2004
330,981 152,233 506,073 136,262 2,796
- -------------------------------------------------------------------------
2,309 1,980 1,742 544 6
- -------------------------------------------------------------------------
333,290 154,213 507,815 136,806 2,802
- -------------------------------------------------------------------------
(328,219) (152,269) (482,326) (148,842) (20,300)
- -------------------------------------------------------------------------
5,071 1,944 25,489 (12,036) (17,498)
- -------------------------------------------------------------------------
</Table>
www.mainstayfunds.com 291
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 12 -- CAPITAL SHARE TRANSACTIONS (IN 000'S) (CONTINUED):
<Table>
<Caption>
FLOATING RATE FUND
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I
------- ------- ------- ------- ------- ------- ------- -------
MAY 3, 2004*
SIX MONTHS ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004
Shares sold 24,480 2,493 7,260 84 26,911 4,259 8,981 228
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends and
distributions 315 49 95 5 130 27 38 2
- ---------------------------------------------------------------------------------------------------------------------------------
24,795 2,542 7,355 89 27,041 4,286 9,019 230
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (5,165) (799) (1,722) (6) (1,615) (475) (467) (1)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 19,630 1,743 5,633 83 25,426 3,811 8,552 229
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INTERMEDIATE TERM BOND FUND
--------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------- -------
JANUARY 2, 2004*
SIX MONTHS ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004
Shares sold 176 150 79 935 948 313 114
- ----------------------------------------------------------------------------------------------------------------------
Shares issued in connection with
acquisition of Core Bond Plus or Ultra
Short Duration Fund (b) -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions 12 3 1 213 15 3 1
- ----------------------------------------------------------------------------------------------------------------------
188 153 80 1,148 963 316 115
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed (327) (40) (25) (4,252) (153) (42) (21)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (139) 113 55 (3,104) 810 274 94
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
INTERMEDIATE TERM BOND FUND
-------------------------------
CLASS I SERVICE CLASS+
----------- ----------------
YEAR ENDED NOVEMBER 1, 2003
OCTOBER 31, THROUGH
2004 JANUARY 9, 2004
Shares sold 4,199 12
- ----------------------------------------
Shares issued in connection with
acquisition of Core Bond Plus or Ultra
Short Duration Fund (b) 2,714 --
- ----------------------------------------
Shares issued in reinvestment of
dividends and distributions 469 4
- ----------------------------------------
7,382 16
- ----------------------------------------
Shares redeemed (5,453) (603)
- ----------------------------------------
Net increase (decrease) 1,929 (587)
- ----------------------------------------
</Table>
<Table>
<Caption>
ASSET MANAGER FUND
--------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B
------- ------- ------- ------- ------- -------
JANUARY 2, 2004*
SIX MONTHS ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004
Shares sold 1,243 927 162 1,232 5,079 1,655
- --------------------------------------------------------------------------------------------------------------
Shares issued in connection with acquisition
of Strategic Value Fund (b) -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends
and distributions 65 20 3 267 -- --
- --------------------------------------------------------------------------------------------------------------
1,308 947 165 1,499 5,079 1,655
- --------------------------------------------------------------------------------------------------------------
Shares redeemed (478) (106) (54) (1,443) (676) (53)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) 830 841 111 56 4,403 1,602
- --------------------------------------------------------------------------------------------------------------
<Caption>
ASSET MANAGER FUND
---------------------------------------
CLASS C CLASS I SERVICE CLASS+
------- ------- -----------------
YEAR ENDED NOVEMBER 1, 2003
OCTOBER 31, THROUGH
2004 JANUARY 9, 2004
Shares sold 268 2,819 72
- --------------------------------------------
Shares issued in connection with acquisition
of Strategic Value Fund (b) -- -- --
- --------------------------------------------
Shares issued in reinvestment of dividends
and distributions --(a) 437 53
- --------------------------------------------
268 3,256 125
- --------------------------------------------
Shares redeemed (15) (6,750) (3,132)
- --------------------------------------------
Net increase (decrease) 253 (3,494) (3,007)
- --------------------------------------------
</Table>
<Table>
<Caption>
CONSERVATIVE ALLOCATION FUND
----------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
APRIL 4, 2005*
THROUGH
APRIL 30, 2005
Shares sold 147 52 8 1
- --------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends and distributions -- -- -- --
- --------------------------------------------------------------------------------------------------------
147 52 8 1
- --------------------------------------------------------------------------------------------------------
Shares redeemed (--)(a) (--)(a) (--)(a) (--)(a)
- --------------------------------------------------------------------------------------------------------
Net increase 147 52 8 1
- --------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MODERATE ALLOCATION FUND
----------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
APRIL 4, 2005*
THROUGH
APRIL 30, 2005
Shares sold 224 124 11 1
- --------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends and distributions -- -- -- --
- --------------------------------------------------------------------------------------------------------
224 124 11 1
- --------------------------------------------------------------------------------------------------------
Shares redeemed (--)(a) (--)(a) (--)(a) (--)(a)
- --------------------------------------------------------------------------------------------------------
Net increase 224 124 11 1
- --------------------------------------------------------------------------------------------------------
</Table>
* Commencement of Operations.
+ Service Class ceased operations on January 9, 2004.
(a) Less than one thousand shares.
(b) On February 11, 2005 and pursuant to shareholder approval, the assets and
liabilities of the MainStay Strategic Value Fund were acquired by the
MainStay Balanced Fund. On December 11, 2003 and pursuant to shareholder
approval, the assets and liabilities of the Eclipse Core Bond Plus Fund were
acquired by the Eclipse Bond Fund which was subsequently renamed MainStay
Intermediate Term Bond Fund. Also on December 11, 2003 and pursuant to
shareholder approval, the assets and liabilities of the Eclipse Ultra Short
Duration Fund were acquired by the Eclipse Short Term Bond Fund which was
subsequently renamed MainStay Short Term Bond Fund.
292 MainStay Funds
<Table>
<Caption>
INDEXED BOND FUND
---------------------------------------------------------------------------
CLASS A CLASS I CLASS A CLASS I SERVICE CLASS+
------- ------- ---------------- ---------------- -----------------
JANUARY 2, 2004* NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 JANUARY 9, 2004
1,888 4,640 6,085 5,664 466
- -------------------------------------------------------------------------------
103 468 98 577 14
- -------------------------------------------------------------------------------
1,991 5,108 6,183 6,241 480
- -------------------------------------------------------------------------------
(963) (2,493) (1,840) (4,342) (3,312)
- -------------------------------------------------------------------------------
1,028 2,615 4,343 1,899 (2,832)
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SHORT TERM BOND FUND
--------------------------------------------------------------------------
CLASS A CLASS I CLASS A CLASS I SERVICE CLASS+
------- ------- ---------------- ---------------- ----------------
JANUARY 2, 2004* NOVEMBER 1, 2003
SIX MONTHS ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 JANUARY 9, 2004
246 458 2,158 2,000 25
- ------------------------------------------------------------------------------
-- -- 23 7,984 --
- ------------------------------------------------------------------------------
5 51 10 100 --(a)
- ------------------------------------------------------------------------------
251 509 2,191 10,084 25
- ------------------------------------------------------------------------------
(81) (1,198) (1,628) (3,598) (84)
- ------------------------------------------------------------------------------
170 (689) 563 6,486 (59)
- ------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
BALANCED FUND
-------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS R1 CLASS R2 CLASS A CLASS B CLASS C CLASS I CLASS R1 CLASS R2
------- ------- ------- ------- -------- -------- ------- ------- ------- ------- -------- --------
JANUARY 2, 2004* JANUARY 2, 2004*
SIX MONTHS ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 OCTOBER 31, 2004
4,146 2,776 2,041 3,007 1,200 1,367 4,783 2,597 1,184 4,080 1,255 933
- -----------------------------------------------------------------------------------------------------------------------------
593 1,401 60 -- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
102 56 23 187 41 22 18 4 2 172 4 2
- -----------------------------------------------------------------------------------------------------------------------------
4,841 4,233 2,124 3,194 1,241 1,389 4,801 2,601 1,186 4,252 1,259 935
- -----------------------------------------------------------------------------------------------------------------------------
(594) (235) (122) (1,018) (142) (617) (543) (120) (46) (3,293) (64) (174)
- -----------------------------------------------------------------------------------------------------------------------------
4,247 3,998 2,002 2,176 1,099 772 4,258 2,481 1,140 959 1,195 761
- -----------------------------------------------------------------------------------------------------------------------------
<Caption>
BALANCED FUND
-----------------
SERVICE CLASS+
-----------------
NOVEMBER 1, 2003
THROUGH
JANUARY 9, 2004
222
- ---
--
- ---
15
- ---
237
- ---
(1,033)
- ---
(796)
- ---
</Table>
<Table>
<Caption>
GROWTH ALLOCATION FUND
-------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
APRIL 4, 2005*
THROUGH
APRIL 30, 2005
116 86 6 1
- -----------------------------------------
-- -- -- --
- -----------------------------------------
116 86 6 1
- -----------------------------------------
(--)(a) (--)(a) (--)(a) (--)(a)
- -----------------------------------------
116 86 6 1
- -----------------------------------------
</Table>
<Table>
<Caption>
MODERATE GROWTH ALLOCATION FUND
-------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
APRIL 4, 2005*
THROUGH
APRIL 30, 2005
141 77 10 1
- -----------------------------------------
-- -- -- --
- -----------------------------------------
141 77 10 1
- -----------------------------------------
(--)(a) (--)(a) (--)(a) (--)(a)
- -----------------------------------------
141 77 10 1
- -----------------------------------------
</Table>
www.mainstayfunds.com 293
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 13 -- OTHER MATTERS:
NYLIM and mutual funds that NYLIM advises have received requests for information
from various government authorities and regulatory bodies regarding market
timing, late trading, operations, fees, expenses, and other matters. NYLIM and
the funds it advises are cooperating fully in responding to these requests. To
date, substantially all of the costs associated with these and other regulatory
matters have been borne by NYLIM. Except as described below, neither NYLIM nor
the funds advised by it have any reason to believe that they have been targeted
as the subject of any governmental or regulatory enforcement action.
The SEC Staff has raised concerns relating to a guarantee provided to
shareholders of the MainStay Equity Index Fund and the fees and expenses of that
Fund, as well as the related guarantee disclosure to Fund shareholders.
Discussions have been held with the SEC concerning a possible resolution of this
matter. There can be no assurance at this time as to the outcome of these
efforts. The MainStay Equity Index Fund is not a portfolio of the Eclipse Funds
Inc. or the Eclipse Funds.
294 MainStay Funds
BOARD MEMBERS AND OFFICERS
The Board Members oversee the Funds, the Manager and the Subadvisor. Information
pertaining to the Board Members and officers is set forth below. Each Board
Member serves until his or her successor is elected and qualified or until his
or her resignation, death, or removal. Officers serve a term of one year and are
elected annually by the Board Members. The business address of each Board Member
and officer listed below is 51 Madison Avenue, New York, New York 10010.
<Table>
<Caption>
NUMBER OF FUNDS OTHER
POSITION(S) HELD IN FUND COMPLEX DIRECTORSHIPS
NAME AND WITH FUND AND PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY
DATE OF BIRTH LENGTH OF SERVICE DURING PAST 5 YEARS BOARD MEMBER BOARD MEMBER
---------------------------------------------------------------------------------------------------------------------
LAWRENCE GLACKEN Director since Retired. 16 None
10/22/27 1991 and Trustee
since 2000
---------------------------------------------------------------------------------------------------------------------
PETER MEENAN(1) Director since Consultant; President and Chief Executive 16 Trustee, The
12/5/41 2002 and Trustee Officer of Babson-United, Inc. (2000 to 2004); Vantagepoint
since 2000 Head of Global Funds, Citicorp (1995 to 1999). Funds.
---------------------------------------------------------------------------------------------------------------------
ROBERT P. Director since Retired. 16 None
MULHEARN 1991 and Trustee
3/11/47 since 2000
---------------------------------------------------------------------------------------------------------------------
SUSAN B. Director since President, Strategic Management Advisors LLC. 16 Director,
KERLEY(2) 1991 and Trustee SSB/Citi
8/12/51 since 2000 Mutual Funds.
---------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
POSITION(S) HELD NUMBER OF FUNDS OTHER
NAME AND WITH FUND AND PRINCIPAL OCCUPATION(S) IN FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH LENGTH OF SERVICE DURING PAST 5 YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
ROBERT A. Chief Legal Senior Managing Director, General Counsel and 57 None
ANSELMI Officer since Secretary, New York Life Investment Management
10/19/46 2003 LLC (including predecessor advisory
organizations); General Counsel and Secretary,
New York Life Investment Management Holdings
LLC; Senior Vice President, New York Life
Insurance Company; Vice President and
Secretary, McMorgan & Company LLC; Secretary,
NYLIM Service Company LLC, NYLCAP Manager LLC,
and Madison Capital Funding LLC; Chief Legal
Officer, The MainStay Funds and MainStay VP
Series Fund, Inc.; Managing Director and
Senior Counsel, Lehman Brothers Inc. (October
1998 to December 1999); General Counsel and
Managing Director, JP Morgan Investment
Management Inc. (1986 to September 1998).
-------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER O. President since Executive Vice President, New York Life 36 None
BLUNT 2005 Investment Management LLC and New York Life
5/13/61 Investment Management Holdings LLC (since July
2004); Manager and Executive Vice President,
NYLIM Product Distribution, NYLIFE
Distributors LLC (since January 2005);
Chairman, NYLIM Service Company LLC (since
March 2005); Chairman and Class C Director,
New York Life Trust Company, FSB (since
December 2004); Chairman, New York Life Trust
Company (since February 2005); President, The
MainStay Funds (since May 2005); Chairman and
Chief Executive Officer, Giving Capital, Inc.
(2001 to June 2004); Chief Marketing
Officer--Americas, Merrill Lynch Investment
Managers and President, Mercury Funds
Distributors (1999 to 2001).
-------------------------------------------------------------------------------------------------------------------------
</Table>
1. Mr. Meenan has been appointed Chairman of the Audit Committee.
2. Ms. Kerley has been designated the Lead Independent Trustee/Director.
www.mainstayfunds.com 295
<Table>
<Caption>
POSITION(S) HELD NUMBER OF FUNDS OTHER
NAME AND WITH FUND AND PRINCIPAL OCCUPATION(S) IN FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH LENGTH OF SERVICE DURING PAST 5 YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
PATRICK G. BOYLE Executive Vice Executive Vice President, Eclipse Funds (2001 16 New York Life
11/24/53 President since to present); Senior Managing Director, New Trust Company;
2003 York Life Investment Management LLC, Madison Capital
(including predecessor advisory organizations) Funding LLC.
(2000 to 2002); Senior Vice President, Pension
Department, New York Life Insurance Company
(1991 to 2000); Director, Eclipse Funds Inc.
(1990 to 2003); Trustee, New York Life
Investment Management Institutional Funds
(2002 to 2003).
-------------------------------------------------------------------------------------------------------------------------
TONY ELAVIA Senior Vice Senior Managing Director, New York Life 16 None
1/11/56 President since Investment Management LLC; Chief Investment
2005 Officer of NYLIM Equity Investors Group;
Managing Director and Senior Portfolio Manager
of the Large Cap Growth team of Putnam
Investments (1998 to 2004).
-------------------------------------------------------------------------------------------------------------------------
JEFFREY J. Vice President, Managing Director of Fund Accounting and 63 None
GABOURY Treasurer, and Administration, New York Life Investment
10/23/68 Chief Financial Management LLC (since December 2004); Manager,
Officer since NYLIM Service Company LLC (since March 2005);
2005 Executive Vice President, New York Life Trust
Company (since February 2005); Vice President,
Treasurer, and Chief Financial Officer, The
MainStay Funds (since May 2005); and MainStay
VP Series Fund, Inc. (since June 2005);
Treasurer and Principal Financial Officer,
McMorgan Funds; Director of Fund
Administration, Investors Bank & Trust Company
(1995 to 2004).
-------------------------------------------------------------------------------------------------------------------------
SCOTT T. Vice President-- Director, New York Life Investment Management 57 None
HARRINGTON Administration LLC (including predecessor advisory
2/8/59 since 2005 organizations); Vice
President--Administration, MainStay VP Series
Fund, Inc. and The MainStay Funds (since June
2005).
-------------------------------------------------------------------------------------------------------------------------
ALISON H. Vice President-- Managing Director and Chief Compliance 57 None
MICUCCI Compliance since Officer, New York Life Investment Management
12/16/65 2004 LLC (June 2003 to present); Chief Compliance
Officer, New York Life Investment Management
Holdings LLC (June 2003 to present); Managing
Director, Compliance, NYLIFE Distributors LLC;
Vice President--Compliance, The MainStay Funds
and MainStay VP Series Fund, Inc.; Deputy
Chief Compliance Officer, New York Life
Investment Management LLC (September 2002 to
June 2003); Vice President and Compliance
Officer, Goldman Sachs Asset Management
(November 1999 to August 2002).
-------------------------------------------------------------------------------------------------------------------------
MARGUERITE E. H. Secretary since Managing Director and Associate General 57 None
MORRISON 2004 Counsel, New York Life Investment Management
3/26/56 LLC (since June 2004); Secretary, The MainStay
Funds and MainStay VP Series Fund, Inc.;
Managing Director and Secretary, NYLIFE
Distributors LLC; Chief Legal Officer--Mutual
Funds and Vice President and Corporate
Counsel, The Prudential Insurance Company of
America (2000 to June 2004).
-------------------------------------------------------------------------------------------------------------------------
</Table>
296 MainStay Funds
<Table>
<Caption>
POSITION(S) HELD NUMBER OF FUNDS OTHER
NAME AND WITH FUND AND PRINCIPAL OCCUPATION(S) IN FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH LENGTH OF SERVICE DURING PAST 5 YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
GARY E. Chief Executive Chief Executive Officer, Chairman, and 57 None
WENDLANDT Officer since Manager, New York Life Investment Management
10/8/50 2005 LLC (including predecessor advisory
organizations) and New York Life Investment
Management Holdings LLC; Executive Vice
President, New York Life Insurance Company;
Director, NYLIFE Distributors LLC; Executive
Vice President and Manager, NYLIFE LLC;
Chairman, McMorgan & Company LLC, Madison
Capital Funding LLC, NYLCAP Manager LLC;
Manager, MacKay Shields LLC; Executive Vice
President, New York Life Insurance and Annuity
Corporation; Chairman, Chief Executive
Officer, and Director, MainStay VP Series
Fund, Inc.; President, Eclipse Funds;
Chairman, Chief Executive Officer, and
Trustee, The MainStay Funds (20 portfolios);
Executive Vice President and Chief Investment
Officer, MassMutual Life Insurance Company
(1993 to 1999).
-------------------------------------------------------------------------------------------------------------------------
RICHARD W. Vice President-- Vice President, New York Life Insurance 57 None
ZUCCARO Tax since 1993 Company; Vice President, New York Life
12/12/49 Insurance and Annuity Corporation, New York
Life Trust Company, FSB, NYLIFE Insurance
Company of Arizona, NYLIFE LLC, and NYLIFE
Securities, Inc.; Vice President, Tax, NYLIFE
Distributors LLC; Tax Vice President, New York
Life International, LLC; New York Life Trust
Company, and NYLIM Service Company LLC; Vice
President--Tax, The MainStay Funds and
MainStay VP Series Fund, Inc.
-------------------------------------------------------------------------------------------------------------------------
</Table>
www.mainstayfunds.com 297
BOARD CONSIDERATION AND APPROVAL OF MANAGEMENT AND SUBADVISORY AGREEMENTS
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940 Act")
requires that each fund's board of directors or trustees, including a majority
of directors or trustees who are not "interested persons" of the fund, as
defined in the 1940 Act ("Independent Directors"), annually review and approve
the fund's investment advisory agreements.
At various meetings held between December 2004 and March 2005, the Board of
Directors/Trustees of the Funds (the "Board"), which is comprised solely of
Independent Directors, considered the approval or renewal of the Funds'
Management and Subadvisory Agreements, as appropriate (the "Agreements"). In
reaching its decision to approve the Agreements, the Board, which was advised by
independent legal counsel, considered the following factors and reached the
conclusions described below.
The Board examined the nature, extent and quality of the services that NYLIM
provides to the Funds. The Board evaluated NYLIM's experience in serving as
manager of the Funds, noting that NYLIM manages other mutual funds, serves a
variety of other investment advisory clients, including other pooled investment
vehicles, and has experience with overseeing MacKay Shields, its affiliate, as a
Subadviser to the All Cap Growth, All Cap Value, Intermediate Term Bond and
Short Term Bond Funds (collectively, the "Subadvised Funds"). The Board
considered the experience of senior personnel at NYLIM in providing investment
management and administrative services to the Funds as well as NYLIM's
reputation and financial condition. The Board noted recent staff additions in
NYLIM's senior management and other personnel responsible for mutual fund
operations, and resource enhancements supporting its delivery of services to the
Funds. The Board also considered NYLIM's performance in fulfilling its
responsibilities for overseeing the Funds' legal and compliance environment, and
overseeing MacKay Shields' compliance with the Funds' policies and investment
objectives, and in implementing Board directives as they relate to the Funds. In
addition, the Board noted that NYLIM also is responsible for paying the salaries
and expenses for each of the Funds' officers. The Board considered the scope and
quality of NYLIM's services provided to the Funds' shareholders (through its
affiliate NYLIM Service Company LLC), including the more extensive requirements
of New York Life agents and reputation as a high-quality provider of shareholder
services, which has been recognized by independent third-parties on multiple
occasions. The Board further considered NYLIM's track record and experience in
providing investment advisory services to those Funds that are not Subadvised
Funds. Based on these considerations, the Board concluded that each Fund is
likely to benefit from the nature, extent and quality of these services as a
result of NYLIM's experience, personnel, operations and resources.
The Board also examined the nature, extent and quality of the services that
MacKay Shields provides to the Subadvised Funds. It examined MacKay Shields'
track record and experience in providing investment advisory services to the
Subadvised Funds, the experience of senior personnel at MacKay Shields, and
MacKay Shields' overall legal and compliance environment. The Board also
reviewed MacKay Shields' willingness to invest in personnel and product
enhancements designed to benefit the Funds, including strengthened portfolio
management teams and additions to MacKay Shields' legal and compliance
departments. Based on these considerations, the Board concluded that each of the
Subadvised Funds is likely to benefit from the nature, extent and quality of
these services as a result of MacKay Shields' experience, personnel, operations
and resources.
In evaluating the investment performance for each of the Funds, the Board
considered information provided by NYLIM and MacKay Shields on each Fund's
performance track record as compared to its benchmark. The Board also considered
comparative data provided by Lipper, an independent third-party service
provider, on the performance of similar mutual funds managed by other investment
advisers.
In evaluating the Funds' management and subadvisory fees, the Board considered
information provided by NYLIM and MacKay Shields on the fees that NYLIM and
MacKay Shields charge to other investment advisory clients. The Board also
considered comparative data provided by Lipper, an independent third-party
service provider, on the fees and expense ratios charged by similar mutual funds
managed by other investment advisers. This comparative information assisted the
Board in evaluating the reasonableness of each Fund's management fees, discussed
in greater detail below, when compared to similar fees charged by NYLIM and
MacKay Shields to other investment advisory clients, and fees charged by other
investment advisers to mutual funds in each Fund's Lipper expense group.
The Board considered that, in addition to fees earned by NYLIM and MacKay
Shields for managing the Funds, NYLIM affiliates also earn revenues from serving
the Funds in various other capacities, including as transfer agent and
distributor. The Board reviewed information from NYLIM regarding the estimated
profitability realized by NYLIM and its affiliates due to their overall
relationship with the Funds, and with respect to each Fund individually. The
Board also reviewed information from NYLIM illustrating the expenses allocated
by NYLIM to each of the Funds. In
298 MainStay Funds
addition, the Board recognized the benefits to NYLIM and MacKay Shields from
legally permitted "soft dollar" arrangements by which brokers provide research
and other services to NYLIM and MacKay Shields in exchange for commissions paid
by the Funds with respect to trades on the Funds' portfolio securities.
In addition, the Board also considered the following factors for each Fund:
MAINSTAY ALL CAP GROWTH FUND
The Board noted that this Fund's performance track record appears to be below
that of its Lipper performance universe in recent years, but observed that,
based on information provided to the Board by NYLIM and MacKay Shields, the
Fund's performance has improved since it began investing in issuers representing
a broader range of market capitalizations. In addition, the Board considered the
investment MacKay Shields has made in recent personnel enhancements to this
Fund's portfolio management team. The Board concluded that it was appropriate to
continue monitoring the performance of this Fund as it develops a performance
track record in the all-capitalization universe and is impacted by the recent
enhancements to its portfolio management team.
The Board considered that this Fund's overall management fee appeared to be just
above its Lipper expense group median, but that the Fund's net total operating
expenses, after factoring the impact of expense limitations voluntarily
instituted by NYLIM, appear to be among the lowest in its Lipper expense group.
The Board also considered that, at the Board's request, NYLIM has now agreed to
obtain the Board's approval before raising or removing the expense limitation it
has placed on the Fund. Based on these considerations, the Board concluded that
the management fee was reasonable and compared favorably in relation to similar
portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board reviewed
information from NYLIM and Lipper showing that the Fund's management fee remains
competitive within its Lipper expense group as the Fund's assets hypothetically
increase over time. Based on this information, the Board concluded that the
Fund's current expense structure reflects reasonable economies of scale for the
benefit of Fund investors. The Board noted, however, that it would continue to
evaluate the reasonableness of the Fund's expense structure as the Fund
continues to grow.
In addition, the Board considered information provided by NYLIM and MacKay
Shields on the costs associated with managing the Fund and the anticipated
profitability of the Fund to NYLIM and MacKay Shields. It considered NYLIM's and
MacKay Shields' investments in personnel, systems and equipment necessary to
manage the Fund, and the fact that NYLIM is responsible for paying MacKay
Shields' subadvisory fee. In light of these considerations, the Board concluded
that the anticipated profits to be realized by NYLIM and MacKay Shields were
reasonable.
MAINSTAY ALL CAP VALUE FUND
The Board noted that, in recent years, the Fund's performance appears to be
below the median of its Lipper performance universe. The Board considered
ongoing efforts by MacKay Shields, as described to the Board, to evaluate this
Fund's investment process. In addition, the Board noted the recent investment
MacKay Shields' has made in personnel enhancements to this Fund's portfolio
management team. The Board concluded that it would continue to actively monitor
this Fund's performance over the coming year, as MacKay Shields continues to
evaluate the Fund's investment strategies and processes, and the Fund is
impacted by the recent enhancements to its portfolio management team.
The Board also noted that, although this Fund's overall management fee appears
to be above its Lipper expense group median, the Fund's net management fee,
after factoring the impact of expense limitations voluntarily put in place by
NYLIM, appears to be at the lower end of its Lipper expense group. In addition,
the Fund's net total operating expenses also appear to be at the lower end of
its Lipper expense group. The Board considered that, at the Board's request,
NYLIM has now agreed to obtain the Board's approval before raising or removing
the expense limitation it has placed on the Fund. Based on these considerations,
the Board concluded that the management fee was reasonable and compared
favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
within a reasonable range of the Lipper expense median as assets hypothetically
increase over time. Based on this information, the Board concluded that the
Fund's current expense structure appropriately reflects economies of scale for
the benefit of Fund investors. The Board noted, however, that it would continue
to evaluate the reasonableness of the Fund's expense structure as the Fund
continues to grow.
In addition, the Board considered information provided by NYLIM and MacKay
Shields on the costs associated with managing the Fund and the anticipated
profitability of the Fund. It considered NYLIM's and MacKay Shields' investments
in personnel, systems and equipment necessary to manage the Fund, and the fact
that NYLIM is responsible
www.mainstayfunds.com 299
for paying MacKay Shields' subadvisory fee. In light of these considerations,
the Board concluded that the anticipated profits to be realized by NYLIM and
MacKay Shields were reasonable.
MAINSTAY ASSET MANAGER FUND
The Board noted that this Fund's performance track record appears to be near the
median of its Lipper performance universe. The Board considered NYLIM's addition
of a new portfolio manager to this Fund's management team, and the time and
effort recently expended by NYLIM personnel, as described to the Board, in
evaluating this Fund's investment process and positioning within the fund
family. The Board also considered recent personnel enhancements to NYLIM Equity
Investors, the division of NYLIM that manages the Fund. The Board concluded that
the Fund has an acceptable performance record, although the Board would continue
to monitor NYLIM's enhancements to this Fund and its positioning within the fund
family.
In addition, the Board considered that this Fund's contractual management fee
appears to be among the lowest in its Lipper expense group, and that the Fund's
net management fee, after factoring the impact of expense limitations
voluntarily instituted by NYLIM, also appears to be among the lowest in its
Lipper expense group. In addition, the Fund's net total operating expenses also
appear to be at the lower end of its Lipper expense group. The Board carefully
evaluated NYLIM's proposal to reduce its voluntary expense limitation by 11
basis points, with the result that the Fund's annual expense ratio would
increase by the same amount to a level where, based on information provided to
the Board by NYLIM and Lipper, the Fund's net total operating expenses would
continue to be competitive with other mutual funds in its Lipper expense group.
In considering this proposal, the Board evaluated, among other things, NYLIM's
costs associated with managing this Fund, information provided by NYLIM showing
that the Fund is not profitable to NYLIM under its previous expense structure,
and NYLIM's history of supporting this Fund through voluntary expense
limitations. The Board also acknowledged that, at the Board's request, NYLIM has
now agreed to obtain the Board's approval before raising or removing the expense
limitation it has placed on the Fund. Based on these considerations, the Board
concluded that the management fee was reasonable and compared favorably in
relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board reviewed
information from NYLIM and Lipper showing that the Fund's management fee remains
below its Lipper expense group median as assets hypothetically increase over
time. Based on this information, the Board concluded that the Fund's current
expense structure appropriately reflects economies of scale for the benefit of
Fund investors. The Board noted, however, that it would continue to evaluate the
reasonableness of the Fund's expense structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at its previous expense structure and current
asset levels. The Board also considered NYLIM's investments in personnel,
systems and equipment necessary to manage the Fund. In light of these
considerations, the Board concluded that the anticipated profits, if any, to be
realized by NYLIM were reasonable.
MAINSTAY BALANCED FUND
The Board considered NYLIM's addition of a new portfolio manager to this Fund's
management team, and the time and effort recently expended by NYLIM personnel in
evaluating this Fund's investment process and position within the fund family.
The Board also considered recent enhancements to NYLIM Equity Investors, the
division of NYLIM that manages the Fund. The Board concluded that these efforts
were reasonably likely to benefit Fund shareholders.
In addition, the Board noted that this Fund's performance track record has been
favorable over both the short term and long term, and is generally in the top
two quartiles in its Lipper performance universe. The Board concluded that the
Fund's performance is satisfactory.
The Board also noted that, although this Fund's overall contractual and net
management fee was above its Lipper expense group median, the Fund's net total
operating expenses are at the lower end of its Lipper expense group. Although
NYLIM has agreed to voluntarily limit this Fund's total operating expenses, this
expense limitation was not triggered. Nonetheless, the Board considered that, at
the Board's request, NYLIM has now agreed to obtain the Board's approval before
raising or removing the expense limitation it has placed on the Fund. Based on
these considerations, the Board concluded that the management fee was reasonable
and compared favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
within a reasonable range of the Lipper expense median as assets hypothetically
increase over time. The Board also noted the recent growth in the Fund's assets,
and accepted NYLIM's proposal to enter into a
300 MainStay Funds
contractual breakpoint on assets in excess of $1 billion. Based on this
information, the Board concluded that the Fund's current expense structure
appropriately reflects economies of scale for the benefit of Fund investors. The
Board noted, however, that it would continue to evaluate the reasonableness of
the Fund's expense structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at its current expense structure and asset
levels. The Board also considered NYLIM's investments in personnel, systems and
equipment necessary to manage the Fund. In light of these considerations, the
Board concluded that the anticipated profits, if any, to be realized by were
reasonable.
MAINSTAY CASH RESERVES FUND
The Board considered the Fund's performance track record and concluded that the
Fund's performance is satisfactory and consistent with that of other money
market funds in its Lipper performance universe.
The Board considered, and accepted, NYLIM's proposal to lower the Fund's
contractual management fee to within range of the Lipper expense group median.
In addition, the Board also considered that the Fund's total operating expenses
are below the Lipper expense group median, primarily because of the voluntary
expense limitation NYLIM has placed on the Fund. The Board noted that, at the
Board's request, NYLIM has now agreed to obtain the Board's approval before
raising or removing this expense limitation. Based on these considerations, the
Board concluded that the management fee was reasonable and compared favorably in
relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered, and
accepted, NYLIM's proposal to institute a breakpoint on this Fund's management
fee on assets in excess of $500 million. Based on this information, the Board
concluded that the Fund's current expense structure appropriately reflects
economies of scale for the benefit of Fund investors. The Board noted, however,
that it would continue to evaluate the reasonableness of the Fund's expense
structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. It considered NYLIM's investments in personnel, systems and equipment
necessary to manage the Fund. In light of these considerations, the Board
concluded that the anticipated profits to be realized by NYLIM were reasonable.
MAINSTAY FLOATING RATE FUND
The Board considered that this Fund was launched within the previous year, and
concluded that there was insufficient data to reasonably evaluate the Fund's
performance. The Board noted, however, that the Fund's initial performance
outlook is positive, and that the portfolio management teams' performance track
record in managing similar accounts and portfolios appears to be favorable.
The Board noted that the Fund's contractual management fee is below its Lipper
expense group median, and that the Fund's net total operating expenses are
within range of the median. Although NYLIM has voluntarily agreed to limit this
Fund's total operating expenses, this expense limitation was not triggered.
Nonetheless, the Board considered that, at the Board's request, NYLIM has now
agreed to obtain the Board's approval before raising or removing the expense
limitation it has placed on the Fund. Based on these considerations, the Board
concluded that the management fee was reasonable and compared favorably in
relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
below the Lipper expense median as assets hypothetically increase over time.
Based on this information, the Board concluded that the Fund's current expense
structure appropriately reflects economies of scale for the benefit of Fund
investors. The Board noted, however, that it would continue to evaluate the
reasonableness of the Fund's expense structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at this time, although given the Fund likely
would become profitable to NYLIM in the near future. The Board also considered
NYLIM's investments in personnel, systems and equipment necessary to manage the
Fund. In light of these considerations, the Board concluded that the anticipated
profits, if any, to be realized by NYLIM were reasonable.
MAINSTAY INDEXED BOND FUND
The Board considered this Fund's performance record, noting that the Fund
consistently appears to be in the top quartile of its Lipper performance
universe for one, three, five and ten year periods. The Board concluded that the
Fund's performance is satisfactory.
www.mainstayfunds.com 301
The Board observed that the Fund's total operating expenses appear to be higher
than those of peer funds in its Lipper expense group. It considered, and
accepted, NYLIM's proposal to lower the Fund's contractual management fee to
within range of the Lipper expense group median. The Board also accepted NYLIM's
proposal to reduce the Fund's expense limitation from 50 basis points to 43
basis points, which places the Fund's net total operating expenses within a
reasonable tolerance of its Lipper expense group median. The Board noted that,
at the Board's request, NYLIM has now agreed to obtain the Board's approval
before raising or removing this expense limitation. In evaluating the overall
reasonableness of the Fund's current expense structure, the Board also
considered the Fund's successful performance track record, and information
provided by NYLIM showing that this Fund is not profitable even under its
previous higher expense structure at current asset levels. Based on these
considerations, the Board concluded that the management fee was reasonable and
compared favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered, and
accepted, NYLIM's proposal to institute a breakpoint on this Fund's management
fee on assets in excess of $1 billion. Based on this information, the Board
concluded that the Fund's current expense structure appropriately reflects
economies of scale for the benefit of Fund investors. The Board noted, however,
that it would continue to evaluate the reasonableness of the Fund's expense
structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at its current expense structure and asset
levels. The Board also considered NYLIM's investments in personnel, systems and
equipment necessary to manage the Fund. In light of these considerations, the
Board concluded that the anticipated profits, if any, to be realized by were
reasonable.
MAINSTAY INTERMEDIATE TERM BOND FUND
The Board noted that the Fund's performance in early 2002 has detracted from its
long-term performance record. The Board considered MacKay Shields' explanation
that the reasons for the Fund's poor performance in early 2002 was attributable
to its exposure to several underperforming sectors, and the Fund's overweight
position in several poorly performing issuers. The Board considered steps that
MacKay Shields has taken to reposition this Fund in recent years, and the fact
that the Fund now appears to be in the top half of its Lipper performance
universe over the previous year. Based on these considerations, the Board
concluded that the Fund appeared to be positioned for better future performance,
and that the Board would continue to carefully monitor the performance of this
Fund over the coming year.
The Board considered and accepted NYLIM's proposal to lower the Fund's
contractual management fee. Although the contractual management fee proposed by
NYLIM appears to be above the contractual management fee for other portfolios in
the Fund's Lipper expense group, NYLIM's agreement to limit this Fund's total
operating expenses should result in both a net management fee and net total
operating expenses that are each within range of the Fund's Lipper expense group
median. In addition, the Board accepted NYLIM's proposal to further limit the
total operating expenses of the Class A, Class B and Class C shares of the Fund
in an effort to reduce the impact of higher-than-average "other expenses" on the
retail classes of this Fund. The Board also noted that, at the Board's request,
NYLIM has now agreed to obtain the Board's approval before raising or removing
these expense limitations. Based on these considerations, the Board concluded
that the management fee was reasonable.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's net management fee
remains within the a reasonable tolerance of the Lipper expense median as assets
hypothetically increase over time. Based on this information, the Board
concluded that the Fund's current expense structure reflects reasonable
economies of scale for the benefit of Fund investors. The Board noted, however,
that it would continue to evaluate the reasonableness of the Fund's expense
structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM and MacKay
Shields on the costs associated with managing the Fund and the anticipated
profitability of the Fund to NYLIM and MacKay Shields. It noted that, based on
information provided to the Board by NYLIM, NYLIM realized a modest profit on
this Fund over the previous year, but that the Fund was not profitable to NYLIM
in previous years. It considered NYLIM's and MacKay Shields' investments in
personnel, systems and equipment necessary to manage the Fund, and the fact that
NYLIM is responsible for paying MacKay Shields' subadvisory fee. In light of
these considerations, the Board concluded that the anticipated profits to be
realized by NYLIM and MacKay Shields were reasonable.
302 MainStay Funds
MAINSTAY MID CAP OPPORTUNITY FUND
The Board noted that this Fund's performance record appears to be favorable over
both the short term and long term, and is generally in the top two quartiles in
its Lipper performance universe. In addition, the Board considered NYLIM's
addition of a new portfolio manager to this Fund's management team, and the time
and effort recently expended by NYLIM personnel, as described to the Board, in
evaluating this Fund's investment process and positioning within the fund
family. The Board also considered recent personnel enhancements to NYLIM Equity
Investors, the division of NYLIM that manages the Fund. The Board concluded that
the Fund's performance is satisfactory.
The Board also noted that this Fund's contractual and net management fee (after
factoring NYLIM's voluntary expense limitation on the Fund) appears to be below
the median of its Lipper expense group. Moreover, the Fund's total operating
expenses also appear to be below the median of the Fund's Lipper expense group.
In addition, the Board accepted NYLIM's proposal to further limit the total
operating expenses of the Class A, Class B and Class C shares of the Fund in an
effort to reduce the impact of higher-than-average "other expenses" on the
retail classes of this Fund. The Board considered that, at the Board's request,
NYLIM has now agreed to obtain the Board's approval before raising or removing
these expense limitations. Based on these considerations, the Board concluded
that the management fee was reasonable and compared favorably in relation to
similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
below its Lipper expense group median as assets hypothetically increase over
time. Based on this information, the Board concluded that the Fund's current
expense structure appropriately reflects economies of scale for the benefit of
Fund investors. The Board noted, however, that it would continue to evaluate the
reasonableness of the Fund's expense structure as the Fund continues to grow.
In addition, the Board acknowledged information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at its current expense structure. The Board also
considered NYLIM's investments in personnel, systems and equipment necessary to
manage the Fund. In light of these considerations, the Board concluded that the
anticipated profits, if any, to be realized by were reasonable.
MAINSTAY S&P 500 INDEX FUND
The Board considered this Fund's performance track record, noting that the Fund
consistently has been in the top two quartiles of its Lipper performance
universe for one, three, five and ten year periods. The Board concluded that the
Fund's performance is satisfactory.
The Board considered and accepted NYLIM's proposal to lower the Fund's
contractual management fee to within range of the Lipper expense group median.
It observed that, based on information provided to the Board by NYLIM and
Lipper, the Fund's net management fee and total operating expenses also would
remain within range of the Lipper expense group median, primarily due to the
voluntary expense limitation that NYLIM has placed on the Fund. The Board noted
that, at the Board's request, NYLIM has now agreed to obtain the Board's
approval before raising or removing this expense limitation. Based on these
considerations, the Board concluded that the management fee was reasonable and
compared favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board accepted NYLIM's
proposal to institute breakpoints on this Fund's management fee on assets over
$1 billion. Based on this information, the Board concluded that the Fund's
current expense structure appropriately reflects economies of scale for the
benefit of Fund investors. The Board noted, however, that it would continue to
evaluate the reasonableness of the Fund's expense structure as the Fund
continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. The Board noted that, based on information provided by NYLIM, this
Fund is not profitable to NYLIM at its current expense structure. The Board also
considered NYLIM's investments in personnel, systems and equipment necessary to
manage the Fund. In light of these considerations, the Board concluded that the
anticipated profits, if any, to be realized by were reasonable.
MAINSTAY SHORT TERM BOND FUND
The Board considered that this Fund's performance track record has been within
range of the Lipper performance universe median over short-term and long-term
periods. The Board concluded that this Fund's performance was reasonably
satisfactory, and that it would continue to actively monitor this Fund's
performance over the coming year.
The Board also noted that, although this Fund's contractual management fee
appeared to be moderately above its Lipper expense group median, the Fund's net
management
www.mainstayfunds.com 303
fee and net total operating expenses appear to be within range of the Lipper
expense group median, primarily because of NYLIM's voluntary agreement to limit
this Fund's total operating expenses. In addition, the Board accepted NYLIM's
proposal to further limit the total operating expenses of the Class A, Class B
and Class C shares of the Fund in an effort to reduce the impact of
higher-than-average "other expenses" on the retail classes of this Fund. The
Board also noted that, at the Board's request, NYLIM has now agreed to obtain
the Board's approval before raising or removing these expense limitations. Based
on these considerations, the Board concluded that the management fee was
reasonable and compared favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
within a reasonable range of the Lipper expense median as assets hypothetically
increase over time. Based on this information, the Board concluded that the
Fund's current expense structure appropriately reflects economies of scale for
the benefit of Fund investors. The Board noted, however, that it would continue
to evaluate the reasonableness of the Fund's expense structure as the Fund
continues to grow.
In addition, the Board considered information provided by NYLIM and MacKay
Shields on the costs associated with managing the Fund and the anticipated
profitability of the Fund to NYLIM and MacKay Shields. It noted that, based on
information provided to the Board by NYLIM, the Fund was not profitable to NYLIM
under its existing expense structure and asset levels. It considered NYLIM's and
MacKay Shields' investments in personnel, systems and equipment necessary to
manage the Fund, and the fact that NYLIM is responsible for paying MacKay
Shields' subadvisory fee. In light of these considerations, the Board concluded
that the anticipated profits, if any, to be realized by NYLIM and MacKay Shields
were reasonable.
MAINSTAY SMALL CAP OPPORTUNITY FUND
The Board noted NYLIM's explanation that the Fund's underperformance in 2000 has
detracted from its 5-year performance record. Nonetheless, based on the data
provided by NYLIM and Lipper, it appears that this Fund's one, three and
ten-year performance track records were in the top two quartiles of its Lipper
performance universe. In addition, the Board considered NYLIM's addition of a
new portfolio manager to this Fund's management team, and the time and effort
recently expended by NYLIM personnel, as described to the Board, in evaluating
this Fund's investment process and positioning within the fund family. The Board
also considered recent personnel enhancements to NYLIM Equity Investors, the
division of NYLIM that manages the Fund. Based on these considerations, the
Board concluded that the Fund's performance was satisfactory.
The Board also noted that, although this Fund's contractual and net management
fee were moderately above its Lipper expense group median, the Fund's net total
operating expenses are within range of the Lipper expense group median. Although
NYLIM has previously voluntarily agreed to limit this Fund's total operating
expenses, this expense limitation was not triggered. However, the Board accepted
NYLIM's proposal to further limit the total operating expenses of the Class A,
Class B and Class C shares of the Fund in an effort to reduce the impact of
higher-than-average "other expenses" on the retail classes of this Fund. The
Board also noted that, at the Board's request, NYLIM has now agreed to obtain
the Board's approval before raising or removing these expense limitations. Based
on these considerations, the Board concluded that the management fee was
reasonable and compared favorably in relation to similar portfolios.
The Board also considered whether the Fund's expense structure permitted
economies of scale to be shared with Fund investors. The Board considered
information from NYLIM and Lipper showing that the Fund's management fee remains
above the Lipper expense median as assets hypothetically increase over time. The
Board agreed that it would continue to evaluate the reasonableness of the Fund's
expense structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the costs
associated with managing the Fund and the anticipated profitability of the Fund
to NYLIM. It considered NYLIM's investments in personnel, systems and equipment
necessary to manage the Fund. In light of these considerations, the Board
concluded that the anticipated profits to be realized by NYLIM were reasonable.
MAINSTAY CONSERVATIVE ALLOCATION FUND, MAINSTAY MODERATE ALLOCATION FUND,
MAINSTAY MODERATE GROWTH ALLOCATION FUND, AND MAINSTAY GROWTH ALLOCATION FUND
In considering the initial approval of the Management Agreement for these new
Funds (the "Asset Allocation Funds"), the Board noted that the Asset Allocation
Funds had no performance track record, since the Asset Allocation Funds were not
offered to shareholders until April 4, 2005. The Board considered the nature and
scope of the investment management services expected to be provided to the Asset
Allocation Funds by NYLIM. The Board also considered the rationale for selecting
the underlying funds in which the Asset Allocation Funds invest, including the
performance record of those funds.
304 MainStay Funds
The Board considered the expenses projected to be borne by the Asset Allocation
Funds. In this regard, the Board noted that the Asset Allocation Funds do not
pay a management fee to NYLIM, but that shareholders of the Asset Allocation
Funds indirectly pay the management fees of the underlying funds in which the
Asset Allocation Funds invest. The Board considered NYLIM's process for
monitoring and disclosing potential conflicts in its selection of underlying
funds for the Asset Allocation Funds. The Board also reviewed information
provided to the Board by NYLIM on the fees and expenses of existing funds
similar to the Asset Allocation Funds. In addition, the Board considered NYLIM's
agreement to contractually limit the Asset Allocation Funds' total operating
expenses through October 31, 2005. Based on these considerations, the Board
concluded that the management fees were reasonable and compared favorably in
relation to similar portfolios.
The Board also considered whether each Asset Allocation Fund's expense structure
permitted economies of scale to be shared with investors. The Board reviewed
information from NYLIM showing that each Asset Allocation Fund's management fee
and other expenses are anticipated to remain competitive as each Fund's assets
hypothetically increase over time. Based on this information, the Board
concluded that each Asset Allocation Fund's current expense structure currently
reflects reasonable economies of scale for the benefit of investors. The Board
noted, however, that it would continue to evaluate the reasonableness of each
Asset Allocation Fund's expense structure as the Fund continues to grow.
In addition, the Board considered information provided by NYLIM on the projected
costs associated with managing each Asset Allocation Fund and the anticipated
profitability of the Fund to NYLIM. It considered NYLIM's investments in
personnel, systems and equipment necessary to manage each Asset Allocation Fund.
In light of these considerations, the Board concluded that the anticipated
profits to be realized by NYLIM, if any, were reasonable.
On the basis of the information provided to it and its evaluation of that
information, the Board, which consists entirely of Independent Directors,
concluded that the Agreements were fair and in the best interests of each Fund's
shareholders.
www.mainstayfunds.com 305
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that New York Life Investment
Management LLC (NYLIM) uses to vote proxies related to the Funds' securities is
available without charge, upon request, (i) by calling 1-800-MAINSTAY
(1-800-624-6782); (ii) by visiting the Funds' website at www.mainstayfunds.com;
and (iii) on the Securities and Exchange Commission's ("SEC") website at
www.sec.gov.
The Funds are required to file with the SEC their proxy voting records for each
Portfolio for the 12-month period ending June 30 on Form N-PX. The most recent
Form N-PX or relevant Portfolio proxy voting record is available free of charge
upon request by calling 1-800-MAINSTAY (1-800-624-6782), visiting the Funds'
website at www.mainstayfunds.com, or on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
Each 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 Funds' Form N-Q
is available without charge, on the SEC's website at www.sec.gov and may be
available by calling NYLIM at 1-800-MAINSTAY (1-800-624-6782). You can obtain
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating
fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii)
sending your request electronically to publicinfo@sec.gov.
306 MainStay Funds
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MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay All Cap Growth Fund
MainStay All Cap Value Fund
MainStay Blue Chip Growth Fund
MainStay Capital Appreciation Fund
MainStay Common Stock Fund
MainStay Equity Index Fund(1)
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay Mid Cap Growth Fund
MainStay Mid Cap Opportunity Fund
MainStay Mid Cap Value Fund
MainStay S&P 500 Index Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Opportunity Fund
MainStay Small Cap Value Fund
MainStay Value Fund
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Asset Manager Fund
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Total Return Fund
INTERNATIONAL FUNDS
MainStay Global High Income Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey
SUBADVISORS
MACKAY SHIELDS LLC(2)
New York, New York
GABELLI ASSET MANAGEMENT COMPANY
Rye, New York
JENNISON ASSOCIATES LLC
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL OR CALL 1-800-MAINSTAY
(1-800-624-6782) FOR A FREE PROSPECTUS. INVESTORS ARE ASKED TO CONSIDER THE
INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES OF THE INVESTMENT
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT THE INVESTMENT COMPANY. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
1. Closed to new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
(NEW YORK LIFE INVESTMENT MANAGEMENT LLC LOGO)
- ------------------------------------------------
/Not FDIC insured. / No bank guarantee. / May lose value.
NYLIFE DISTRIBUTORS LLC, 169 LACKAWANNA AVENUE,
PARSIPPANY, NEW JERSEY 07054
This report may only be distributed when preceded or accompanied
by a current Fund prospectus.
www.mainstayfunds.com SEC File Number: 811-04847 (Eclipse Funds)
(C) 2005 by NYLIFE Distributors LLC. All rights reserved.
SEC File Number: 811-06175 (Eclipse Funds Inc.)
NYLIM-AO7309 (RECYCLE LOGO) MS223-05 MS10g-06/05
FORM N-CSR
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. SCHEDULE OF INVESTMENTS
The Schedule of Investments is included as part of Item 1 of this report.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the 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,
-2-
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)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(a) (1) Not applicable.
(a) (3) Not applicable.
(b) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 202.
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.
ECLIPSE FUNDS
By: /s/ Gary E. Wendlandt
-----------------------
GARY E. WENDLANDT
Chief Executive Officer
Date: June 29, 2005
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/ Gary E. Wendlandt
-----------------------
GARY E. WENDLANDT
Chief Executive Officer
Date: June 29, 2005
By: /s/ Jeffrey J. Gaboury
-----------------------
JEFFREY J. GABOURY
Vice President, Treasurer and Chief Financial Officer
Date: June 29, 2005
EXHIBIT INDEX
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(b) Certification of principal executive officer and principal financial officer
as required by Section 906 of the Sarbanes-Oxley Act of 2002.