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, New Jersey 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: 11/1/04-10/31/05
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
MAINSTAY(R) FUNDS
Annual Report
October 31, 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 46
- --------------------------------------------------------------------------------
MainStay Small Cap Opportunity Fund 64
- --------------------------------------------------------------------------------
INCOME FUNDS
MainStay Cash Reserves Fund 80
- --------------------------------------------------------------------------------
MainStay Floating Rate Fund 92
- --------------------------------------------------------------------------------
MainStay Indexed Bond Fund 112
- --------------------------------------------------------------------------------
MainStay Intermediate Term Bond Fund 135
- --------------------------------------------------------------------------------
MainStay Short Term Bond Fund 154
BLENDED FUNDS
MainStay Asset Manager Fund 165
- --------------------------------------------------------------------------------
MainStay Balanced Fund 204
- --------------------------------------------------------------------------------
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund 227
- --------------------------------------------------------------------------------
MainStay Growth Allocation Fund 239
- --------------------------------------------------------------------------------
MainStay Moderate Allocation Fund 251
- --------------------------------------------------------------------------------
MainStay Moderate Growth Allocation Fund 263
- --------------------------------------------------------------------------------
Notes to Financial Statements 275
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm 295
- --------------------------------------------------------------------------------
Board Members and Officers 296
- --------------------------------------------------------------------------------
Federal Income Tax Information 299
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures 299
- --------------------------------------------------------------------------------
Shareholder Reports and Quarterly Portfolio Disclosure 299
</Table>
www.MAINSTAYfunds.com 1
This page intentionally left blank
2
MESSAGE FROM
THE PRESIDENT
During the 12 months ended October 31, 2005, most domestic and international
stock markets provided positive overall returns. In the United States, mid-
capitalization stocks outperformed small- and large-cap issues, and investors
tended to prefer value stocks over growth stocks at all capitalization levels.
The U.S. economy continued to advance throughout the reporting period, with
positive growth in gross domestic product and gradually improving labor-market
conditions. In August and September 2005, devastating hurricanes pummeled the
Gulf region, destroying homes, flooding coastal cities, and taking hundreds of
lives. At MainStay, we wish to express our heartfelt concern for the millions of
people who were adversely affected by these natural disasters.
At the end of August, crude-oil prices rose to record levels when rigs and
refineries in the Gulf region faced hurricane-related setbacks. Higher oil and
natural gas prices benefited stocks in the energy sector, but raised concerns
about inflation. To keep the economy on track and inflation at bay, the Federal
Open Market Committee raised the targeted federal funds rate eight times during
the reporting period, with a 25-basis-point increase on each occasion. At the
end of October 2005, the federal funds target rate stood at 3.75%, its highest
level in more than four years.
Since the economy and the markets are constantly changing, managing investments
is a complex task. Fortunately, each MainStay Fund pursues its objective with
the help of a well-defined investment approach that the portfolio managers seek
to apply with discipline, care, and consistency.
At MainStay, we take pride in offering a wide range of Funds suited to the needs
of different types of investors. During the reporting period, MainStay
introduced four new Asset Allocation Funds, each with a distinct risk/reward
profile.
The reports that follow take a closer look at the specific securities and
decisions that affected your MainStay Fund investments during the 12 months
ended October 31, 2005. We hope that you will review the report carefully to
gain greater insight into your Fund's performance, holdings, and management
style.
Sincerely,
/s/ CHRISTOPHER O. BLUNT
Christopher O. Blunt
President
www.MAINSTAYfunds.com 3
MAINSTAY ALL CAP GROWTH FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 12.66% -8.16% 5.76%
Excluding sales charges 19.21 -7.12 6.36
</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
---------------- ------------- ------------------- -------------------
10/31/95 9450 10000 10000 10000
11455 12410 12205 12114
14235 16394 15924 15705
17097 20000 19848 18907
22584 25134 26646 25317
25322 26665 29132 27800
15616 20024 17495 16864
12529 16999 14063 13537
14557 20535 17131 16700
14686 22470 17710 17291
10/31/05 17507 24429 19271 18845
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 13.29% -8.19% 5.42%
Excluding sales charges 18.29 -7.87 5.42
</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
---------------- ------------- ------------------- -------------------
10/31/95 10000 10000 10000 10000
12032 12410 12205 12114
14811 16394 15924 15705
17597 20000 19848 18907
23008 25134 26646 25317
25544 26665 29132 27800
15583 20024 17495 16864
12411 16999 14063 13537
14308 20535 17131 16700
14331 22470 17710 17291
10/31/05 16952 24429 19271 18845
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 17.33% -7.86% 5.43%
Excluding sales charges 18.33 -7.86 5.43
</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
---------------- ------------- ------------------- -------------------
10/31/95 10000 10000 10000 10000
12032 12410 12205 12114
14811 16394 15924 15705
17597 20000 19848 18907
23008 25134 26646 25317
25544 26665 29132 27800
15583 20024 17495 16864
12411 16999 14063 13537
14308 20535 17131 16700
14339 22470 17710 17291
10/31/05 16968 24429 19271 18845
</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 1.00% 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 contractual and
may be modified or terminated only with the approval of the Board of Directors/
Trustees. 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>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
19.89% -6.85% 6.60%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH
GROWTH FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------- -------------------
10/31/95 10000 10000 10000 10000
12150 12410 12205 12114
15131 16394 15924 15705
18202 20000 19848 18907
24079 25134 26646 25317
27026 26665 29132 27800
16665 20024 17495 16864
13402 16999 14063 13537
15610 20535 17131 16700
15811 22470 17710 17291
10/31/05 18957 24429 19271 18845
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- ---------------------------------------------------------------
S&P 500(R) Index(1) 8.72% -1.74% 9.34%
Russell 1000(R) Growth Index(2) 8.81 -7.93 6.78
Russell 3000(R) Growth Index(3) 8.99 -7.48 6.54
Average Lipper large-cap growth
fund(4) 10.06 -7.15 6.48
</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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,153.45 $ 8.41 $1,017.25 $ 7.88
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,149.70 $12.46 $1,013.50 $11.67
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,150.80 $12.47 $1,013.50 $11.67
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,157.55 $ 5.06 $1,020.35 $ 4.74
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.55% for Class A, 2.30% 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 184 (to reflect the one-half year period).
6 MainStay All Cap Growth Fund
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 97.6
Short-Term Investments (collateral from securities lending 15.5
is 13.2%)
Liabilities in Excess of Cash and Other Assets (13.1)
</Table>
See Portfolio of Investments on page 10 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. UnitedHealth Group, Inc.
2. Peabody Energy Corp.
3. PacifiCare Health Systems, Inc.
4. WellPoint, Inc.
5. Arch Coal, Inc.
6. Caremark Rx, Inc.
7. Chico's FAS, Inc.
8. Praxair, Inc.
9. FedEx Corp.
10. Lowe's Cos., 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, investing 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 12 MONTHS ENDED OCTOBER
31, 2005?
Arguably the biggest factor influencing the equity market during the reporting
period was the 15% rise in the price of crude oil, which came on the heels of a
78% increase in crude-oil prices in the previous year. The price of crude oil
rose as high as $69.81 per barrel on August 30, 2005, before falling off
somewhat. This energy inflation was among the factors that prompted the Federal
Open Market Committee to raise the federal funds target rate at a "measured
pace" throughout the reporting period. To keep inflation in check, the Federal
Open Market Committee raised the federal funds target rate eight times during
the reporting period, with a 25-basis-point increase on each occasion. (A basis
point is one-hundredth of a percentage point.) Since high energy prices act as a
silent tax on consumers and can weigh on consumer spending, energy costs were a
continuing concern for equity investors. On the geopolitical front, negative
headlines about progress in Iraq also weighed heavily on investors' minds
throughout the reporting period.
WHAT DECISIONS HAD THE BIGGEST INFLUENCE ON THE FUND'S PERFORMANCE?
Excluding all sales charges, all of the Fund's share classes outperformed the
Fund's primary benchmark, the Russell 3000(R) Growth Index, during the reporting
period. Individual stock selection added significant value, and some holdings
more than doubled in value in the 12 months ended October 31, 2005. Sector
allocation also added significant value, and overweighted positions in HMOs, oil
services, coal, homebuilders, and retail allowed the Fund to gain relative
ground.
Although the Fund was underweighted in health care stocks, the Fund's health
care holdings outperformed health care stocks in the Russell 3000(R) Growth
Index. HMOs were solid performers because of strong enrollment gains and medical
cost containment. The Fund's biotechnology stocks also performed well. High oil
and gas prices increased the demand for oil services and drove up the price of
alternative fuels such as coal. The Fund's energy holdings contributed to the
Fund's relative strength by gaining more during the reporting period than energy
stocks in the Russell 3000(R) Growth Index.
In our view, homebuilders and specialty retailers looked undervalued relative to
their growth rates. During the reporting period, these consumer cyclical stocks
benefited from strong consumer-spending trends.
WHICH INDIVIDUAL SECURITIES HAD THE GREATEST POSITIVE IMPACT ON THE FUND'S
PERFORMANCE DURING THE REPORTING PERIOD?
Peabody Energy and Arch Coal were top perform-
ers. Each benefited from rising coal prices, strong demand, and higher shipments
that led to higher earnings. PacifiCare Health Systems is an HMO that advanced
because of strong fundamentals. The company's share price rose with the
announcement of a takeover by larger rival United Health Group. UnitedHealth
Group benefited from solid enrollments and medical cost containment that led to
strong sales and earnings. Chico's FAS, a specialty retailer of women's apparel,
benefited from good merchandising and solid execution, which led, in turn, to
strong sales gains and positive earnings performance.
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. The
principal risk of growth stocks is that investors expect growth companies to
increase their earnings at a certain rate that is generally higher than the rate
expected for non-growth companies. If these expectations are not met, the market
price of the stock may decline significantly, even if earnings showed an
absolute increase.
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.
8 MainStay All Cap Growth Fund
WHICH STOCKS DETRACTED FROM PERFORMANCE?
Symantec, an antivirus-software provider, declined substantially when increased
competition weakened the company's sales to consumers. Boston Scientific, a
medical instruments manufacturer, saw its share price decline on slowing
earnings growth when the company lost some market share in its drug-coated stent
business. There was also concern that a weak product pipeline may impede the
company's future growth potential. Internet-auction service company eBay
declined because of weak economic growth in Europe and decelerating growth in
U.S. transactions. Motorcycle manufacturer Harley-Davidson cut its motorcycle
production because of weaker sales and increased inventory at its dealerships.
In a similar move, Brunswick Corp., a leading manufacturer of recreational
products, cut its boat production to reduce inventories at its U.S. dealers.
Harley-Davidson and Brunswick both provided lower earnings guidance, and the
stocks declined sharply.
WERE THERE ANY SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD?
The Fund purchased shares of Legg Mason, an asset management and financial
services provider. Strong performance by Legg Mason's asset management group
allowed the company to increase assets, which drove solid earnings gains. In
addition, an announced swap of the company's retail operation for Citigroup's
asset management group should allow Legg Mason to focus on its core asset
management division. The Fund added WESCO International, a distributor of
industrial and electrical supplies. WESCO has transformed itself into a
top-notch distributor through manufacturing initiatives, increasing sales
growth, and finding opportunities in late-cycle construction markets. We
initiated a Fund position in Corning, a manufacturer of fiber-optic cable and
LCD glass displays. Corning's leading position in flat-panel displays has
allowed the company to benefit from growth trends among laptop computers,
flat-panel TVs, portable devices, and cell phones. The Fund purchased shares of
Apple Computer, a company that has recently reinvented itself through its
popular iPods and computer systems. We added medical-care provider Aetna to the
Fund to take advantage of cost containment and strong earnings growth following
the company's operational restructuring. All of these holdings provided positive
results during the portion of the reporting period they were held in the Fund.
WERE THERE ANY SIGNIFICANT SALES DURING THE REPORTING PERIOD?
Puerto Rican financial services company Doral Financial 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 dropped
substantially. Early in the reporting period, we sold the Fund's position in
entertainment software developer Electronic Arts because the company was in a
transition stage, awaiting new gameplayers by Microsoft, Sony, and Nintendo. The
Fund's position in data-processing and electronic-commerce solutions provider
First Data was reduced, then eliminated, after the company reported a decline in
its core payment-services business. We sold the Fund's position in medical
equipment manufacturer Boston Scientific because the company saw its market
share for drug-coated stents decline after a product recall. We also eliminated
the Fund's position in consumer-and business-services provider Cendant. Weak
performance across some of Cendant's business lines put pressure on the
company's earnings. The price of each of these stocks' continued to decline
after the sales.
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
The Fund's exposure to the energy sector rose from the beginning of the
reporting period to the end, which benefited results significantly. Energy was
the Fund's top-performing sector during the reporting period. An increase in the
health care sector also enhanced results. We also reduced the Fund's weighting
in the financials sector. The reduction had a positive impact on performance
because the financials sector underperformed the market as a whole. We also
decreased the Fund's exposure to industrials. The shift had a modestly positive
impact on performance.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of October 31, 2005, the Fund held overweighted positions relative to the
Russell 3000(R) Growth Index in the consumer discretionary, energy, and health
care sectors. On the same date, the Fund was underweighted relative to the Index
in consumer staples, technology, and financials. The Fund's weighting in
industrials was similar to that of the Index.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
INFORMATION ABOUT MAINSTAY ALL CAP GROWTH FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 9
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (97.6%)+
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.9%)
L-3 Communications Holdings, Inc. (a) 49,500 $ 3,852,090
United Technologies Corp. 99,800 5,117,744
------------
8,969,834
------------
AIR FREIGHT & LOGISTICS (1.8%)
V FedEx Corp. 59,800 5,497,414
------------
AUTOMOBILES (1.4%)
Harley-Davidson, Inc. (a) 88,700 4,393,311
------------
BIOTECHNOLOGY (3.4%)
Amgen, Inc. (b) 43,000 3,257,680
Genentech, Inc. (b) 41,800 3,787,080
Gilead Sciences, Inc. (b) 79,600 3,761,100
------------
10,805,860
------------
BUILDING PRODUCTS (0.6%)
Builders FirstSource, Inc. (b) 89,500 1,749,725
------------
CAPITAL MARKETS (0.5%)
Ameriprise Financial, Inc. (b) 8,200 305,204
Legg Mason, Inc. 12,400 1,330,644
------------
1,635,848
------------
CHEMICALS (1.9%)
V Praxair, Inc. 120,400 5,948,964
------------
COMMUNICATIONS EQUIPMENT (4.0%)
Corning, Inc. (b) 249,200 5,006,428
Motorola, Inc. 228,200 5,056,912
QUALCOMM, Inc. (a) 44,000 1,749,440
Research In Motion Ltd. (b) 11,100 682,539
------------
12,495,319
------------
COMPUTERS & PERIPHERALS (3.2%)
Apple Computer, Inc. (b) 89,700 5,165,823
Dell, Inc. (b) 63,500 2,024,380
EMC Corp. (b) 211,000 2,945,560
------------
10,135,763
------------
CONSTRUCTION MATERIALS (1.1%)
Eagle Materials, Inc. (a) 33,742 3,593,186
------------
CONSUMER FINANCE (2.3%)
American Express Co. 41,000 2,040,570
Capital One Financial Corp. 69,600 5,313,960
------------
7,354,530
------------
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRICAL EQUIPMENT (0.9%)
Roper Industries, Inc. 76,200 $ 2,872,740
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.3%)
Amphenol Corp. Class A 101,100 4,040,967
------------
ENERGY EQUIPMENT & SERVICES (6.2%)
Baker Hughes, Inc. 75,400 4,143,984
BJ Services Co. 124,000 4,309,000
ENSCO International, Inc. 71,100 3,241,449
Transocean, Inc. (b) 61,300 3,524,137
Weatherford International Ltd. (b) 69,200 4,331,920
------------
19,550,490
------------
FOOD & STAPLES RETAILING (0.5%)
Walgreen Co. (a) 37,400 1,699,082
------------
HEALTH CARE EQUIPMENT & SUPPLIES (3.0%)
Cooper Cos., Inc. (The) 42,600 2,932,584
Fisher Scientific International, Inc. (b) 78,600 4,440,900
Varian Medical Systems, Inc. (b) 45,200 2,059,312
------------
9,432,796
------------
HEALTH CARE PROVIDERS & SERVICES (12.9%)
Aetna, Inc. 32,800 2,904,768
V Caremark Rx, Inc. (b) 126,700 6,639,080
V PacifiCare Health Systems, Inc. (b) 95,000 7,824,200
V UnitedHealth Group, Inc. (a) 183,904 10,646,203
WellChoice, Inc. (b) 66,200 5,008,030
V WellPoint, Inc. (b) 103,000 7,692,040
------------
40,714,321
------------
HOTELS, RESTAURANTS & LEISURE (0.9%)
Carnival Corp. 56,200 2,791,454
------------
HOUSEHOLD DURABLES (9.2%)
Centex Corp. 82,500 5,308,875
D.R. Horton, Inc. 160,000 4,910,400
Harman International Industries, Inc. 22,900 2,286,794
Hovnanian Enterprises, Inc. Class A (b) 84,600 3,806,154
Lennar Corp. Class A 89,600 4,979,968
</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)
Mohawk Industries, Inc. (b) 42,800 $ 3,340,540
WCI Communities, Inc. (a)(b) 169,000 4,228,380
------------
28,861,111
------------
INTERNET & CATALOG RETAIL (0.6%)
eBay, Inc. (a)(b) 50,600 2,003,760
------------
INTERNET SOFTWARE & SERVICES (0.5%)
VeriSign, Inc. (b) 66,600 1,573,758
------------
LEISURE EQUIPMENT & PRODUCTS (0.9%)
Brunswick Corp. 70,600 2,691,978
------------
MACHINERY (5.7%)
Danaher Corp. (a) 98,400 5,126,640
Eaton Corp. 27,300 1,606,059
Illinois Tool Works, Inc. (a) 58,600 4,966,936
Terex Corp. (a)(b) 63,300 3,479,601
Toro Co. (The) 79,400 2,898,894
------------
18,078,130
------------
MEDIA (1.4%)
McGraw-Hill Cos., Inc. (The) 36,600 1,791,204
Omnicom Group, Inc. 32,400 2,687,904
------------
4,479,108
------------
MULTILINE RETAIL (2.7%)
Kohl's Corp. (b) 99,500 4,788,935
Target Corp. (a) 67,300 3,747,937
------------
8,536,872
------------
OIL, GAS & CONSUMABLE FUELS (8.5%)
V Arch Coal, Inc. (a) 98,700 7,606,809
Giant Industries, Inc. (b) 25,000 1,429,750
Newfield Exploration Co. (b) 90,000 4,079,700
V Peabody Energy Corp. 117,200 9,160,352
Tesoro Corp. 75,000 4,586,250
------------
26,862,861
------------
PHARMACEUTICALS (0.4%)
Teva Pharmaceutical
Industries Ltd. ADR (a)(c) 33,900 1,292,268
------------
REAL ESTATE (1.0%)
St. Joe Co. (The) 45,000 2,967,750
------------
ROAD & RAIL (0.8%)
Norfolk Southern Corp. 63,400 2,548,680
------------
</Table>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.8%)
Analog Devices, Inc. 48,500 $ 1,686,830
Intel Corp. 157,600 3,703,600
Linear Technology Corp. 98,600 3,274,506
Maxim Integrated Products, Inc. 36,200 1,255,416
National Semiconductor Corp. 94,600 2,140,798
------------
12,061,150
------------
SOFTWARE (2.3%)
Autodesk, Inc. 52,300 2,360,299
FactSet Research Systems, Inc. (a) 98,550 3,456,148
Oracle Corp. (a)(b) 109,900 1,393,532
------------
7,209,979
------------
SPECIALTY RETAIL (7.0%)
Advance Auto Parts, Inc. (b) 69,300 2,598,750
Bed Bath & Beyond, Inc. (b) 102,000 4,133,040
Best Buy Co., Inc. 88,650 3,923,649
V Chico's FAS, Inc. (b) 153,000 6,049,620
V Lowe's Cos., Inc. 89,300 5,426,761
------------
22,131,820
------------
TEXTILES, APPAREL & LUXURY GOODS (2.2%)
Coach, Inc. (b) 153,400 4,936,412
Nike, Inc. Class B 23,900 2,008,795
------------
6,945,207
------------
THRIFTS & MORTGAGE FINANCE (0.8%)
IndyMac Bancorp, Inc. 65,400 2,441,382
------------
TRADING COMPANIES & DISTRIBUTORS (1.0%)
Wesco International, Inc. (b) 81,200 3,227,700
------------
Total Common Stocks
(Cost $224,551,024) 307,595,118
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (15.5%)
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.8%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (d)(e) $ 2,394,274 2,394,274
------------
Total Certificate of Deposit
(Cost $2,394,274) 2,394,274
------------
COMMERCIAL PAPER (2.6%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (d) 798,091 798,091
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
UBS Finance Delaware LLC
4.00%, due 11/1/05 $ 7,440,000 $ 7,440,000
------------
Total Commercial Paper
(Cost $8,238,091) 8,238,091
------------
<Caption>
SHARES
INVESTMENT COMPANY (3.8%)
BGI Institutional Money
Market Fund (d) 11,950,562 11,950,562
------------
Total Investment Company
(Cost $11,950,562) 11,950,562
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (8.3%)
Bank of the West (The)
4.02%, due 12/8/05 (d) $ 3,192,365 3,192,365
Barclays
3.92%, due 12/5/05 (d) 1,596,183 1,596,183
3.94%, due 11/28/05 (d) 2,394,274 2,394,274
Credit Suisse First Boston, Inc.
3.74%, due 11/1/05 (d) 2,394,274 2,394,274
Deutsche Bank
3.95%, due 12/2/05 (d) 1,596,183 1,596,183
First Tennessee National Corp.
3.88%, due 11/14/05 (d) 2,394,274 2,394,274
Fortis Bank
4.00%, due 12/12/05 (d) 2,394,274 2,394,274
Halifax Bank of Scotland
3.75%, due 11/1/05 (d) 2,394,274 2,394,274
Marshall & Ilsley Bank
3.97%, due 12/29/05 (d) 1,596,183 1,596,183
Societe Generale
3.77%, due 11/1/05 (d) 2,394,274 2,394,274
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (CONTINUED)
UBS AG
4.01%, due 12/13/05 (d) $ 1,596,183 $ 1,596,183
Wells Fargo & Co.
4.00%, due 11/25/05 (d) 2,394,271 2,394,271
------------
Total Time Deposits
(Cost $26,337,012) 26,337,012
------------
Total Short-Term Investments
(Cost $48,919,939) 48,919,939
------------
Total Investments
(Cost $273,470,963) (f) 113.1% 356,515,057(g)
Liabilities in Excess of
Cash and Other Assets (13.1) (41,332,876)
----------- ------------
Net Assets 100.0% $315,182,181
=========== ============
</Table>
<Table>
(a) Represents security, or a portion thereof, which is out on loan.
(b) Non-income producing security.
(c) ADR--American Depositary Receipt.
(d) Represents security, or a portion thereof, purchased with cash collateral
received for securities on loan.
(e) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(f) The cost for federal income tax purposes is $273,951,345.
(g) At October 31, 2005 net unrealized appreciation was $82,563,712, 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 $87,026,304 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $4,462,592.
</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.
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 OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $273,470,963) including
$40,391,438 market value of securities
loaned $356,515,057
Cash 3,301
Receivables:
Fund shares sold 475,538
Dividends and interest 31,805
Other assets 22,988
-------------
Total assets 357,048,689
-------------
LIABILITIES:
Securities lending collateral 41,479,939
Payables:
Manager 228,729
Professional 47,122
Transfer agent 46,628
Shareholder communication 27,708
Fund shares redeemed 14,351
NYLIFE Distributors 12,274
Custodian 3,149
Accrued expenses 6,608
-------------
Total liabilities 41,866,508
-------------
Net assets $315,182,181
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 656
Class B 441
Class C 106
Class I 12,757
Additional paid-in capital 275,282,929
Accumulated net realized loss on investments
and written option transactions (43,158,802)
Net unrealized appreciation on investments 83,044,094
-------------
Net assets $315,182,181
=============
CLASS A
Net assets applicable to outstanding shares $ 14,333,352
=============
Shares of capital stock outstanding 656,294
=============
Net asset value per share outstanding $ 21.84
Maximum sales charge (5.50% of offering price) 1.27
-------------
Maximum offering price per share outstanding $ 23.11
=============
CLASS B
Net assets applicable to outstanding shares $ 9,499,008
=============
Shares of capital stock outstanding 440,899
=============
Net asset value and offering price per share
outstanding $ 21.54
=============
CLASS C
Net assets applicable to outstanding shares $ 2,291,986
=============
Shares of capital stock outstanding 106,311
=============
Net asset value and offering price per share
outstanding $ 21.56
=============
CLASS I
Net assets applicable to outstanding shares $289,057,835
=============
Shares of capital stock outstanding 12,757,401
=============
Net asset value and offering price per share
outstanding $ 22.66
=============
</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 YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 1,640,815
Interest 69,124
Income from securities loaned--net 29,525
------------
Total income 1,739,464
------------
EXPENSES:
Manager 2,471,271
Professional 93,467
Transfer agent--Classes A, B and C 85,216
Transfer agent--Class I 92,592
Registration 49,105
Distribution--Class B 44,019
Distribution--Class C 8,389
Distribution/Service--Class A 35,423
Service--Class B 14,673
Service--Class C 2,796
Shareholder communication 34,738
Custodian 29,018
Directors 24,859
Miscellaneous 25,266
------------
Total expenses before reimbursement 3,010,832
Expense reimbursement from Manager (123,402)
------------
Net expenses 2,887,430
------------
Net investment loss (1,147,966)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND WRITTEN
OPTION TRANSACTIONS:
Net realized gain on:
Security transactions 10,356,338
Written option transactions 9,696
------------
Net realized gain on investments and written
option transactions 10,366,034
------------
Net change in unrealized appreciation on
investments 42,365,342
------------
Net realized and unrealized gain on investments
and written option transactions 52,731,376
------------
Net increase in net assets resulting from
operations $51,583,410
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$4,494.
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 YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss $ (1,147,966) $ (792,555)
Net realized gain (loss) on
investments and written option
transactions 10,366,034 (8,874,030)
Net change in unrealized
appreciation on investments 42,365,342 16,270,396
----------------------------
Net increase in net assets
resulting from operations 51,583,410 6,603,811
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 8,592,648 14,849,376
Class B 6,221,885 3,689,513
Class C 1,877,856 581,639
Class I 39,266,620 33,439,885
Service Class -- 375,349
----------------------------
55,959,009 52,935,762
Cost of shares redeemed:
Class A (9,402,569) (1,698,238)
Class B (1,003,591) (159,295)
Class C (249,258) (37,859)
Class I (52,373,137) (128,896,797)
Service Class -- (11,412,859)
----------------------------
(63,028,555) (142,205,048)
Decrease in net assets derived
from capital share
transactions (7,069,546) (89,269,286)
----------------------------
Net increase (decrease) in net
assets 44,513,864 (82,665,475)
NET ASSETS:
Beginning of year 270,668,317 353,333,792
----------------------------
End of year $ 315,182,181 $270,668,317
============================
</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,
YEAR 2004* YEAR 2004* YEAR 2004*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 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) (0.19)(d) (0.10) (0.36)(d) (0.22) (0.36)(d) (0.23)
Net realized and unrealized
gain (loss) on investments 3.71 (0.57) 3.69 (0.56) 3.70 (0.54)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 3.52 (0.67) 3.33 (0.78) 3.34 (0.77)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions
In excess of net investment
income -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value at end of
period $ 21.84 $ 18.32 $21.54 $18.21 $21.56 $18.22
=========== =========== =========== =========== =========== ===========
Total investment return (b) 19.21% (3.53%)(c) 18.29% (4.11%)(c) 18.33% (4.05%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment loss (0.95%)(d) (0.61%)+ (1.70%)(d) (1.36%)+ (1.70%)(d) (1.36%)+
Net expenses 1.55% 1.31% + 2.30% 2.06% + 2.30% 2.06% +
Expenses (before
reimbursement) 1.59% 1.37% + 2.34% 2.12% + 2.34% 2.12% +
Portfolio turnover rate 31% 44% 31% 44% 31% 44%
Net assets at end of period
(in 000's) $14,333 $12,716 $9,499 $3,453 $2,292 $ 532
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charge. Class I is not subject to sales
charges.
(c) Total return is not annualized.
(d) Net investment loss and the ratio of net investment loss include $0.01 per share and
0.06%, respectively, as a result of a special one time dividend from Microsoft Corp.
</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
- ---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2005 2004 2003 2002 2001
$ 18.90 $ 18.66 $ 16.02 $ 19.92 $ 37.50
-------- -------- -------- -------- --------
(0.07)(d) (0.04) (0.01) (0.04) (0.09)
3.83 0.28 2.65 (3.86) (12.79)
-------- -------- -------- -------- --------
3.76 0.24 2.64 (3.90) (12.88)
-------- -------- -------- -------- --------
-- -- -- -- (4.70)
-------- -------- -------- -------- --------
$ 22.66 $ 18.90 $ 18.66 $ 16.02 $ 19.92
======== ======== ======== ======== ========
19.89% 1.29% 16.48% (19.58%) (38.34%)
(0.33%)(d) (0.23%) (0.04%) (0.22%) (0.32%)
0.93% 0.93% 0.93% 0.93% 0.93%
0.97% 0.99% 1.02% 1.02% 0.98%
31% 44% 35% 63% 35%
$289,058 $253,968 $342,761 $320,059 $436,898
</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 (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 2.70% 1.36% 6.51%
Excluding sales charges 8.67 2.51 7.11
</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
---------------- ------------- ------------------ ------------------
10/31/95 9450 10000 10000 10000
11574 12410 12374 12328
14264 16394 16480 16468
14079 20000 18923 18542
14951 25134 22051 21375
16598 26665 23267 22724
15350 20024 20508 20318
12794 16999 18453 18399
15496 20535 22674 22825
17289 22470 26178 26395
10/31/05 18789 24429 29283 29553
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 2.85% 1.42% 6.36%
Excluding sales charges 7.85 1.78 6.36
</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
---------------- ------------- ------------------ ------------------
10/31/95 10000 10000 10000 10000
12151 12410 12374 12328
14881 16394 16480 16468
14588 20000 18923 18542
15390 25134 22051 21375
16964 26665 23267 22724
15572 20024 20508 20318
12893 16999 18453 18399
15499 20535 22674 22825
17178 22470 26178 26395
10/31/05 18527 24429 29283 29553
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 6.85% 1.78% 6.36%
Excluding sales charges 7.85 1.78 6.36
</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
---------------- ------------- ------------------ ------------------
10/31/95 10000 10000 10000 10000
12151 12410 12374 12328
14881 16394 16480 16468
14588 20000 18923 18542
15390 25134 22051 21375
16964 26665 23267 22724
15572 20024 20508 20318
12893 16999 18453 18399
15499 20535 22674 22825
17178 22470 26178 26395
10/31/05 18527 24429 29283 29553
</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 1.00% 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 contractual and
may be modified or terminated only with the approval of the Board of Directors/
Trustees. 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>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
9.48% 2.88% 7.43%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE
VALUE FUND S&P 500 INDEX INDEX INDEX
---------------- ------------- ------------------ ------------------
10/31/95 10000 10000 10000 10000
12273 12410 12374 12328
15165 16394 16480 16468
15000 20000 18923 18542
15958 25134 22051 21375
17763 26665 23267 22724
16468 20024 20508 20318
13757 16999 18453 18399
16705 20535 22674 22825
18704 22470 26178 26395
10/31/05 20477 24429 29283 29553
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
S&P 500(R) Index(1) 8.72% -1.74% 9.34%
Russell 1000(R) Value Index(2) 11.86 4.71 11.34
Russell 3000(R) Value Index(3) 11.96 5.40 11.44
Average Lipper multi-cap value fund(4) 11.02 4.83 9.80
</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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,047.35 $ 8.51 $1,016.75 $ 8.39
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,043.90 $12.36 $1,013.00 $12.18
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,043.90 $12.36 $1,013.00 $12.18
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,052.50 $ 4.86 $1,020.30 $ 4.79
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.65% for Class A, 2.40% for Class B and Class C, and 0.94% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 184 (to reflect the one-half year period).
20 MainStay All Cap Value Fund
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 96.7
Short-Term Investments (collateral from securities lending 12.7
is 10.4%)
Purchased Put Options 0.8
Liabilities in Excess of Cash and Other Assets (10.2)
</Table>
See Portfolio of Investments on page 24 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Citigroup, Inc.
2. Pfizer, Inc.
3. Computer Sciences Corp.
4. Rowan Cos., Inc.
5. Transocean, Inc.
6. Sprint Nextel Corp.
7. International Business Machines Corp.
8. Merrill Lynch & Co., Inc.
9. JPMorgan Chase & Co.
10. Nokia Corp. ADR
</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 with value characteristics across the
entire range of market capitalizations as described by 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 intrinsic 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" criterion. 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 12 MONTHS ENDED
OCTOBER 31, 2005?
Political events and energy price fluctuations added volatility to the stock
market, but equity indices moved higher across the board during the 12-month
period, with all styles and capitalization ranges posting gains. Value stocks
generally outperformed growth stocks at all capitalization levels.
Crude-oil prices rallied to $69.81 per barrel and natural-gas prices broke $14
per million Btu before backing off somewhat. Major hurricanes affected
supply-and-demand dynamics by damaging oil rigs and petrochemical plants. The
price of gasoline rose to more than $3 a gallon, which threatened to slow
consumer spending. Although hurricane-related stocks--including retailers,
insurers, and companies on the Gulf Coast--were weakened, the long-term economic
impact appeared to be manageable.
During the reporting period, 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?
Many of the Fund's strongest contributors to performance were energy-related
stocks. Transocean Energy, ENSCO International, Rowan, and Pride International
are all offshore contract drillers that benefited from higher energy prices.
These companies also benefited from the perception that day rates may rise if
damage to the Gulf of Mexico's drilling infrastructure continues to tighten
drilling-rig supply.
Shares of Motorola benefited from good handset sales, increased market share,
and enthusiasm over a new product line-up. The company strengthened its balance
sheet under the leadership of a new CEO. We pared back the Fund's position as
the stock approached our price target. Life insurance company Prudential
Financial posted strong results. The company shed noncore insurance operations
and made cost effective acquisitions in Asia to help improve its return on
equity.
WHICH STOCKS DETRACTED FROM THE FUND'S RESULTS?
Shares of clothing retailer The Gap declined during the reporting period. The
company hit a weak spot in its sales recovery when the fall season got off to a
slower-than-expected start. Higher gasoline prices and slipping consumer
confidence also hurt the stock. We are optimistic about better sales trends
during the holiday season, and we believe that low valuations, a share
repurchase program, and a strong balance sheet make the stock attractive.
Pending generic-drug litigation and weaker-than-expected guidance for 2006 took
a toll on pharmaceutical giant Pfizer. Nevertheless, we like the stock for its
upside potential, all-time low valuation, sizable free cash flow, and attractive
yield. We used weakness in the shares to add to the Fund's position late in the
reporting period. We have hedged nearly all of the Fund's position using
protective put contracts to limit downside exposure.
We initiated a position in graphite electrode manufacturer GrafTech
International in November 2004. The stock declined on weaker-than-expected
results,
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. The
principal risk of investing in value stocks is that they may never reach what
the portfolio manager believes is their full value or that they may even go down
in value.
1. See footnote on page 19 for more information on the Russell 3000(R) Value
Index.
22 MainStay All Cap Value Fund
partly because of higher energy costs. After meeting with senior management to
review the company's recent results and future strategy, we added to the Fund's
position in the stock.
We initiated a position in printer manufacturer Lexmark International in early
August 2005, after the stock had declined to a level that we felt was
attractive. Unfortunately, Lexmark International continued to report operating
problems and inventory issues. After further review, we concluded that the
company's downside risk outweighed its upside potential, and we sold the Fund's
entire position in late October 2005.
Alcoa reported that its margins were contracting because of higher energy prices
and weakness in some end markets. Because we believe that the company could
eventually correct the situation, we continued to hold the stock, which we felt
was attractively valued. We initiated a position in Canadian newsprint
manufacturer Abitibi-Consolidated in March 2005, and its shares slid through
October because of weaker-than-expected demand and higher energy costs. We
continued to hold the stock because we felt that Abitibi-Consolidated shares
were attractively priced. The company is focusing on shareholder value by
monetizing some noncore operations and cutting excess capacity.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
At the end of October 2005, the Fund held overweighted positions relative to the
Russell 3000(R) Value Index in information technology, consumer staples, and
telecommunication services. Despite the negative impact of higher oil and gas
prices on consumers, we have recently found value among consumer staples names
that have finally reached attractive valuations.
After selling many energy stocks that had reached our price targets, by October
31, 2005, the Fund was slightly underweighted relative to the Russell 3000(R)
Value Index in the energy sector. As of the same date, the Fund was also
underweighted relative to the Index in financials and industrials. With
consumers beginning to suffer the effects of the recent spike in gasoline
prices, we have underweighted consumer discretionary stocks. We have yet to find
much value in the utility sector or in REITS, and Fund's under-
weighted positions in these areas detracted from the Fund's performance during
the reporting period.
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.
INFORMATION ABOUT MAINSTAY ALL CAP VALUE FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 23
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (96.7%)+
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.5%)
Northrop Grumman Corp. 53,300 $ 2,859,545
Raytheon Co. 18,800 694,660
------------
3,554,205
------------
AUTO COMPONENTS (1.8%)
TRW Automotive Holdings Corp. (a) 92,700 2,507,535
------------
BIOTECHNOLOGY (0.7%)
Cambrex Corp. 49,500 944,460
------------
BUILDING PRODUCTS (1.0%)
American Standard Cos., Inc. 37,200 1,415,088
------------
CAPITAL MARKETS (6.2%)
Goldman Sachs Group, Inc. 14,900 1,882,913
V Merrill Lynch & Co., Inc. 51,800 3,353,531
Morgan Stanley 27,500 1,496,275
State Street Corp. 35,100 1,938,573
------------
8,671,292
------------
COMMERCIAL BANKS (6.3%)
Bank of America Corp. (b) 67,854 2,967,934
PNC Financial Services Group, Inc. 13,000 789,230
U.S. Bancorp 80,400 2,378,232
Wachovia Corp. (b) 27,000 1,364,040
Wells Fargo & Co. 22,600 1,360,520
------------
8,859,956
------------
COMMERCIAL SERVICES & SUPPLIES (0.4%)
Learning Tree International, Inc. (a) 37,700 511,212
------------
COMMUNICATIONS EQUIPMENT (5.2%)
Lucent Technologies, Inc. (a) 499,900 1,424,715
Motorola, Inc. 128,300 2,843,128
V Nokia OYJ ADR (c) 183,700 3,089,834
------------
7,357,677
------------
COMPUTERS & PERIPHERALS (2.5%)
V International Business Machines Corp. 43,600 3,569,967
------------
</Table>
<Table>
<Caption>
SHARES VALUE
CONSTRUCTION & ENGINEERING (0.7%)
Insituform Technologies, Inc. Class A (a)(b) 53,600 $ 962,656
------------
CONSUMER FINANCE (0.6%)
MBNA Corp. 33,100 846,367
------------
CONTAINERS & PACKAGING (0.8%)
Owens-Illinois, Inc. (a) 59,500 1,132,880
------------
DIVERSIFIED FINANCIAL SERVICES (6.5%)
V Citigroup, Inc. 129,433 5,925,445
V JPMorgan Chase & Co. 88,456 3,239,258
------------
9,164,703
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (4.4%)
BellSouth Corp. (b) 51,900 1,350,438
Iowa Telecommunications Services, Inc. 54,400 897,600
SBC Communications, Inc. 61,700 1,471,545
Verizon Communications, Inc. 79,700 2,511,347
------------
6,230,930
------------
ELECTRIC UTILITIES (0.8%)
FirstEnergy Corp. 23,800 1,130,500
------------
ELECTRICAL EQUIPMENT (0.9%)
GrafTech International Ltd. (a) 253,600 1,242,640
------------
ENERGY EQUIPMENT & SERVICES (9.1%)
ENSCO International, Inc. 53,500 2,439,065
Pride International, Inc. (a) 103,200 2,896,824
V Rowan Cos., Inc. 114,700 3,783,953
V Transocean, Inc. (a) 63,700 3,662,113
------------
12,781,955
------------
FOOD & STAPLES RETAILING (2.7%)
CVS Corp. 49,900 1,218,059
Kroger Co. (The) (a) 128,900 2,565,110
------------
3,783,169
------------
FOOD PRODUCTS (3.9%)
Cadbury Schweppes PLC ADR (c) 51,700 2,051,973
General Mills, Inc. (b) 46,300 2,234,438
Kraft Foods, Inc. Class A (b) 40,100 1,134,830
------------
5,421,241
------------
HEALTH CARE PROVIDERS & SERVICES (0.8%)
HCA, Inc. (b) 22,300 1,074,637
------------
</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)
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (1.7%)
Kimberly-Clark Corp. 42,400 $ 2,410,016
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.0%)
Duke Energy Corp. 51,700 1,369,016
------------
INSURANCE (7.5%)
AFLAC, Inc. 46,700 2,231,326
Allstate Corp. (The) 38,600 2,037,694
Hartford Financial Services Group, Inc. (The) 33,700 2,687,575
Prudential Financial, Inc. 25,300 1,841,587
St. Paul Travelers Cos., Inc. (The) 39,234 1,766,707
------------
10,564,889
------------
IT SERVICES (2.8%)
V Computer Sciences Corp. (a) 77,500 3,971,875
------------
LEISURE EQUIPMENT & PRODUCTS (0.4%)
Mattel, Inc. 36,200 533,950
------------
MACHINERY (0.4%)
Kadant, Inc. (a) 34,700 582,960
------------
MEDIA (2.2%)
Gannett Co., Inc. 15,300 958,698
Time Warner, Inc. (b) 119,800 2,136,034
------------
3,094,732
------------
METALS & MINING (1.5%)
Alcoa, Inc. 88,572 2,151,414
------------
OIL, GAS & CONSUMABLE FUELS (2.4%)
Chevron Corp. 23,642 1,349,249
ConocoPhillips 31,200 2,039,856
------------
3,389,105
------------
PAPER & FOREST PRODUCTS (1.2%)
Abitibi-Consolidated, Inc. (b) 305,300 952,536
Bowater, Inc. (b) 28,700 760,550
------------
1,713,086
------------
PHARMACEUTICALS (5.5%)
Bristol-Myers Squibb Co. 85,500 1,810,035
Forest Laboratories, Inc. (a)(b) 18,500 701,335
</Table>
<Table>
<Caption>
SHARES VALUE
PHARMACEUTICALS (CONTINUED)
V Pfizer, Inc. 208,600 $ 4,534,964
Wyeth 16,000 712,960
------------
7,759,294
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.9%)
Texas Instruments, Inc. 46,000 1,313,300
------------
SOFTWARE (0.5%)
BMC Software, Inc. (a)(b) 35,600 697,404
------------
SPECIALTY RETAIL (4.6%)
Christopher & Banks Corp. 50,300 672,511
Cost Plus, Inc. (a) 20,800 319,488
Gap, Inc. (The) 170,400 2,944,512
Home Depot, Inc. (The) 26,200 1,075,248
Wal-Mart Stores, Inc. 31,600 1,494,996
------------
6,506,755
------------
THRIFTS & MORTGAGE FINANCE (3.0%)
PMI Group, Inc. (The) 74,500 2,971,060
W Holding Co., Inc. 64,700 498,837
Washington Mutual, Inc. 17,100 677,160
------------
4,147,057
------------
WIRELESS TELECOMMUNICATION SERVICES (3.3%)
ALLTEL Corp. 18,400 1,138,224
V Sprint Nextel Corp. 153,200 3,571,092
------------
4,709,316
------------
Total Common Stocks
(Cost $119,406,121) 136,077,239
------------
<Caption>
NUMBER OF
CONTRACTS (e)
PURCHASED PUT OPTIONS (0.8%)
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (0.3%)
ENSCO International, Inc. Strike Price $40.00
Expire 12/17/05 535 45,475
Pride International, Inc. Strike Price $25.00
Expire 1/21/06 650 84,500
Rowan Cos., Inc. Strike Price $35.00
Expire 1/21/06 742 267,120
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
NUMBER OF
CONTRACTS (E) VALUE
PURCHASED PUT OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (CONTINUED)
Transocean, Inc. Strike Price $55.00
Expire 11/19/05 400 $ 46,000
------------
443,095
------------
PHARMACEUTICALS (0.5%)
Pfizer, Inc., Strike Price $25.00
Expire 12/17/05 1,381 483,350
Expire 1/21/06 436 165,680
------------
649,030
------------
Total Purchased Put Options
(Premium $867,032) 1,092,125
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (12.7%)
- --------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.6%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (d)(f) $ 842,147 842,147
------------
Total Certificate of Deposit
(Cost $842,147) 842,147
------------
COMMERCIAL PAPER (2.5%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (d) 280,716 280,716
UBS Finance Delaware LLC
4.00%, due 11/1/05 3,280,000 3,280,000
------------
Total Commercial Paper
(Cost $3,560,716) 3,560,716
------------
<Caption>
SHARES
INVESTMENT COMPANY (3.0%)
BGI Institutional Money Market Fund (d) 4,203,419 4,203,419
------------
Total Investment Company
(Cost $4,203,419) 4,203,419
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (6.6%)
Bank of the West (The)
4.02%, due 12/8/05 (d) $ 1,122,863 $ 1,122,863
Barclays
3.92%, due 12/5/05 (d) 561,432 561,432
3.94%, due 11/28/05 (d) 842,148 842,148
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (CONTINUED)
Credit Suisse First Boston, Inc.
3.74%, due 11/1/05 (d) $ 842,148 $ 842,148
Deutsche Bank
3.95%, due 12/2/05 (d) 561,432 561,432
First Tennessee National Corp.
3.88%, due 11/14/05 (d) 842,147 842,147
Fortis Bank
4.00%, due 12/12/05 (d) 842,147 842,147
Halifax Bank of Scotland
3.75%, due 11/1/05 (d) 842,147 842,147
Marshall & Ilsley Bank
3.97%, due 12/29/05 (d) 561,432 561,432
Societe Generale
3.77%, due 11/1/05 (d) 842,147 842,147
UBS AG
4.01%, due 12/13/05 (d) 561,432 561,432
Wells Fargo & Co.
4.00%, due 11/25/05 (d) 842,147 842,147
------------
Total Time Deposits
(Cost $9,263,622) 9,263,622
------------
Total Short-Term Investments
(Cost $17,869,904) 17,869,904
------------
Total Investments
(Cost $138,143,057) (g) 110.2% 155,039,268(h)
Liabilities in Excess of
Cash and Other Assets (10.2) (14,385,192)
------------- ------------
Net Assets 100.0% $140,654,076
============= ============
</Table>
<Table>
(a) Non-income producing security.
(b) Represents security, or a portion thereof, which is out
on loan.
(c) ADR--American Depositary Receipt.
(d) Represents security, or a portion thereof, purchased
with cash collateral received for securities on loan.
(e) One contract relates to 100 shares.
(f) Floating rate. Rate shown is the rate in effect at
October 31, 2005.
(g) The cost for federal income tax purposes is
$138,749,181.
(h) At October 31, 2005 net unrealized appreciation was
$16,290,087, 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 $22,631,074 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $6,340,987.
</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 OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $138,143,057) including
$13,874,697 market value of securities
loaned $155,039,268
Cash 1,397
Receivables:
Investment securities sold 291,464
Dividends and interest 127,067
Fund shares sold 96,045
Other assets 18,196
-------------
Total assets 155,573,437
-------------
LIABILITIES:
Securities lending collateral 14,589,904
Payables:
Manager 139,037
Fund shares redeemed 72,031
Transfer agent 47,100
Professional 35,721
NYLIFE Distributors 10,366
Custodian 4,604
Accrued expenses 20,598
-------------
Total liabilities 14,919,361
-------------
Net assets $140,654,076
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1
billion shares authorized:
Class A $ 946
Class B 579
Class C 124
Class I 8,808
Additional paid-in capital 131,016,963
Accumulated undistributed net investment
income 1,123,798
Accumulated net realized loss on investments
and option transactions (8,393,353)
Net unrealized appreciation on investments 16,896,211
-------------
Net assets $140,654,076
=============
CLASS A
Net assets applicable to outstanding shares $ 12,640,505
=============
Shares of capital stock outstanding 945,791
=============
Net asset value per share outstanding $ 13.37
Maximum sales charge (5.50% of offering price) 0.78
-------------
Maximum offering price per share outstanding $ 14.15
=============
CLASS B
Net assets applicable to outstanding shares $ 7,669,745
=============
Shares of capital stock outstanding 579,272
=============
Net asset value and offering price per share
outstanding $ 13.24
=============
CLASS C
Net assets applicable to outstanding shares $ 1,642,573
=============
Shares of capital stock outstanding 124,044
=============
Net asset value and offering price per share
outstanding $ 13.24
=============
CLASS I
Net assets applicable to outstanding shares $118,701,253
=============
Shares of capital stock outstanding 8,808,124
=============
Net asset value and offering price per share
outstanding $ 13.48
=============
</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 27
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 2,552,614
Interest 127,251
Income from securities loaned--net 10,775
------------
Total income 2,690,640
------------
EXPENSES:
Manager 1,201,853
Transfer agent--Classes A, B and C 101,412
Transfer agent--Class I 90,288
Professional 59,206
Registration 48,608
Distribution--Class B 47,317
Distribution--Class C 9,457
Distribution/Service--Class A 28,453
Service--Class B 15,772
Service--Class C 3,152
Custodian 20,995
Shareholder communication 19,397
Directors 13,598
Miscellaneous 17,438
------------
Total expenses before reimbursement 1,676,946
Expense reimbursement from Manager (156,248)
------------
Net expenses 1,520,698
------------
Net investment income 1,169,942
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND WRITTEN
OPTION TRANSACTIONS:
Net realized gain on:
Security transactions 11,314,121
Written option transactions 12,525
------------
Net realized gain on investment and written
option transactions 11,326,646
------------
Net change in unrealized appreciation on
investments (207,866)
------------
Net realized and unrealized gain on investments
and written option transactions 11,118,780
------------
Net increase in net assets resulting from
operations $12,288,722
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$12,503.
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 YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income $ 1,169,942 $ 1,545,931
Net realized gain on
investments 11,326,646 14,464,552
Net change in unrealized
appreciation on investments (207,866) 1,615,665
---------------------------
Net increase in net assets
resulting from operations 12,288,722 17,626,148
---------------------------
Dividends to shareholders:
From net investment income:
Class A (78,908) --
Class B (21,359) --
Class C (4,742) --
Class I (1,286,172) (2,046,476)
Service Class -- (65,067)
---------------------------
Total dividends to
shareholders (1,391,181) (2,111,543)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 5,058,982 10,262,130
Class B 4,516,376 3,852,520
Class C 952,904 1,014,648
Class I 17,479,448 23,435,990
Service Class -- 429,948
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued to
shareholders in reinvestment of dividends:
Class A $ 75,411 $ --
Class B 19,671 --
Class C 4,117 --
Class I 1,285,964 2,043,233
Service Class -- 52,463
---------------------------
29,392,873 41,090,932
Cost of shares redeemed:
Class A (2,458,086) (1,210,034)
Class B (961,401) (104,583)
Class C (264,386) (139,405)
Class I (27,968,359) (85,783,397)
Service Class -- (6,291,284)
---------------------------
(31,652,232) (93,528,703)
Decrease in net assets
derived from capital share
transactions (2,259,359) (52,437,771)
---------------------------
Net increase (decrease) in
net assets 8,638,182 (36,923,166)
NET ASSETS:
Beginning of year 132,015,894 168,939,060
---------------------------
End of year $140,654,076 $132,015,894
===========================
Accumulated undistributed net
investment income at end of
year $ 1,123,798 $ 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,
YEAR 2004* YEAR 2004* YEAR
ENDED THROUGH ENDED THROUGH ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
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 (a) 0.03 0.06 (0.07) (0.01) (0.07)
Net realized and unrealized gain on
investments 1.04 0.26 1.04 0.26 1.04
----------- ----------- ----------- ----------- -----------
Total from investment operations 1.07 0.32 0.97 0.25 0.97
----------- ----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.10) -- (0.06) -- (0.06)
From net realized gain on investments -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total dividends and distributions -- -- -- -- --
=========== =========== =========== =========== ===========
Net asset value at end of period $ 13.37 $12.40 $13.24 $12.33 $13.24
=========== =========== =========== =========== ===========
Total investment return (b) 8.67% 2.65%(c) 7.85% 2.07%(c) 7.85%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.24% 0.65%+ (0.51%) (0.10%)+ (0.51%)
Net expenses 1.65% 1.33%+ 2.40% 2.08% + 2.40%
Expenses (before reimbursement) 1.76% 1.45%+ 2.51% 2.20% + 2.51%
Portfolio turnover rate 39% 48% 39% 48% 39%
Net assets at end of period (in 000's) $12,641 $9,206 $7,670 $3,776 $1,643
<Caption>
CLASS C
-----------
JANUARY 2,
2004*
THROUGH
OCTOBER 31,
2004
Net asset value at beginning of period $12.08
-----------
Net investment income (a) (0.01)
Net realized and unrealized gain on
investments 0.26
-----------
Total from investment operations 0.25
-----------
Less dividends:
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 (b) 2.07%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (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>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charge. Class I is not subject to sales
charges.
(c) Total return in not annualized.
</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
- --------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2005 2004 2003 2002 2001
$ 12.44 $ 11.26 $ 9.38 $ 12.55 $ 14.00
-------- -------- -------- -------- --------
0.13 0.11 0.14 0.13 0.16
1.05 1.23 1.85 (1.86) (1.15)
-------- -------- -------- -------- --------
1.18 1.34 1.99 (1.73) (0.99)
-------- -------- -------- -------- --------
(0.14) (0.16) (0.11) (0.31) (0.15)
-- -- -- (1.13) (0.31)
-------- -------- -------- -------- --------
(0.14) (0.16) (0.11) (1.44) (0.46)
======== ======== ======== ======== ========
$ 13.48 $ 12.44 $ 11.26 $ 9.38 $ 12.55
======== ======== ======== ======== ========
9.48% 11.97% 21.43% (16.46%) (7.29%)
0.95% 1.04% 1.37% 1.12% 1.28%
0.94% 0.94% 0.94% 0.94% 0.94%
1.05% 1.06% 1.11% 1.12% 1.00%
39% 48% 64% 65% 94%
$118,701 $118,150 $163,551 $137,069 $140,919
</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 (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 8.29% 9.00% 11.32%
Excluding sales charges 14.59 10.24 11.95
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
10/31/95 9450 10000 10000 10000
10954 12116 11965 12410
14980 16053 15408 16394
16344 16975 16095 20000
16337 17942 18851 25134
17953 20068 23323 26665
17488 19792 19121 20024
17381 19204 17586 16999
22639 25632 23897 20535
25506 30692 27502 22470
10/31/05 29228 36678 32476 24429
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 8.81% 9.14% 11.05%
Excluding sales charges 13.81 9.42 11.05
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
10/31/95 10000 10000 10000 10000
11496 12116 11965 12410
15563 16053 15408 16394
16851 16975 16095 20000
16690 17942 18851 25134
18190 20068 23323 26665
17586 19792 19121 20024
17350 19204 17586 16999
22426 25632 23897 20535
25066 30692 27502 22470
10/31/05 28526 36678 32476 24429
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 12.76% 9.43% 11.06%
Excluding sales charges 13.76 9.43 11.06
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
10/31/95 10000 10000 10000 10000
11498 12116 11965 12410
15560 16053 15408 16394
16858 16975 16095 20000
16687 17942 18851 25134
18188 20068 23323 26665
17594 19792 19121 20024
17346 19204 17586 16999
22461 25632 23897 20535
25092 30692 27502 22470
10/31/05 28545 36678 32476 24429
</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 1.00% 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 contractual and
may be modified or terminated only with the
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>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
15.11% 10.56% 12.25%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP
OPPORTUNITY FUND VALUE INDEX INDEX S&P 500 INDEX
---------------- -------------- -------------- -------------
10/31/95 10000 10000 10000 10000
11624 12116 11965 12410
15925 16053 15408 16394
17423 16975 16095 20000
17451 17942 18851 25134
19227 20068 23323 26665
18773 19792 19121 20024
18702 19204 17586 16999
24424 25632 23897 20535
27592 30692 27502 22470
10/31/05 31761 36678 32476 24429
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- -------------------------------------------------------------------------------
Russell Midcap(R) Value Index(1) 19.50% 12.82% 13.88%
Russell Midcap(R) Index(2) 18.09 6.85 12.50
S&P 500(R) Index(3) 8.72 -1.74 9.34
Average Lipper mid-cap value fund(4) 14.51 10.66 12.14
</Table>
approval of the Board of Directors/Trustees. 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 B
shares. Prior to 1/2/04, the Fund offered Class L shares, which were subject to
a 1.00% sales charge and a 1.00% 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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,078.00 $ 7.86 $1,017.50 $ 7.63
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,074.05 $11.76 $1,013.75 $11.42
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,074.05 $11.76 $1,013.75 $11.42
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,080.40 $ 5.45 $1,019.80 $ 5.29
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.50% for Class A, 2.25% 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 184 (to reflect the one-half year period).
34 MainStay Mid Cap Opportunity Fund
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 99.4
Short-Term Investments (collateral from securities lending 12.4
is 12.4%)
Liabilities in Excess of Cash and Other Assets (11.8)
</Table>
See Portfolio of Investments on page 38 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Edison International
2. Federated Department Stores, Inc.
3. American Electric Power Co., Inc.
4. CIGNA Corp.
5. Principal Financial Group, Inc.
6. Bear Stearns Cos., Inc. (The)
7. KeyCorp
8. CSX Corp.
9. Equity Office Properties Trust
10. Freescale Semiconductor, Inc. Class B
</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 AND BOND MARKETS DURING THE 12 MONTHS
ENDED OCTOBER 31, 2005?
During the 12-month reporting period, all broadly watched equity indices
provided positive performance. Mid- and small-capitalization stocks generally
outperformed their large-cap counterparts. The market favored value stocks over
growth stocks at all capitalization levels. Despite wide fluctuations in
crude-oil prices, instability in many regions of the world, and the devastation
caused by hurricanes Katrina and Rita, the U.S. stock market posted significant
gains during the 12-month period ended October 31, 2005.
The Federal Open Market Committee continued to raise its target for the federal
funds rate, with eight 25-basis-point increases during the reporting period. (A
basis point is one-hundredth of a percentage point.) At the end of October 2005,
the target rate stood at 3.75%, its highest level in more than four years. Among
the considerations that influenced the gradual tightening policy were mounting
inflationary pressures, low unemployment, an upward path of record energy
prices, and growing labor costs.
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 12 months ended October 31, 2005. Fund
holdings in the financials and utilities sectors underperformed related stocks
in the Index. Although stocks in the utilities sector generated solid
performance during the reporting period, the Fund's underweighted position
relative to the Index detracted from the Fund's relative performance.
WHICH SECTORS AND INDIVIDUAL STOCKS PROVIDED THE STRONGEST PERFORMANCE FOR THE
FUND DURING THE 12-MONTH REPORTING PERIOD?
For the 12 months ended October 31, 2005, the Fund's five strongest-performing
sectors were energy, health care, financials, utilities, and consumer
discretionary. Among the strongest contributors to the Fund's performance were
petroleum refiners Premcor and Sunoco, entertainment software company
Activision, a public-utility holding company Edison International, and
health-benefits provider Humana.
WHICH SECTORS AND INDIVIDUAL STOCKS DETRACTED FROM THE FUND'S PERFORMANCE?
The Fund's five weakest-performing sectors during the 12-month reporting period
were telecommunication services, information technology, consumer staples,
materials, and industrials. The greatest individual negative contribution to the
Fund's performance came from telecommunications equipment and services company
UTStarcom. The second-greatest negative contribution came from R&G Financial, a
Puerto Rico bank holding company. Next was holding company UST, with interests
in smokeless tobacco and wine & spirits. The next-weakest contributor was
single-family home designer and builder Meritage Homes, followed by imaging
products, services, and solutions company Eastman Kodak.
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. The Fund's
use of securities lending presents the risk of default by the borrower, which
may result in a loss to the Fund.
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. The Index 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.
36 MainStay Mid Cap Opportunity Fund
WERE THERE ANY SIGNIFICANT EQUITY PURCHASES OR SALES DURING THE REPORTING
PERIOD?
The Fund uses a 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 USG, which sells building materials for new residential and nonresidential
construction. The
Fund initially purchased the stock in July 2005. We established a position in
Health Net, a managed care company in June 2005. The Fund established a posi-
tion in AmerUs Group, an individual life insurance and annuity products holding
company, in July 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. The Fund sold its entire position in PacifiCare
Health Systems, a health-insurance and managed-care company, in July 2005. Our
proprietary quantitative model indicated that the stock had become overvalued.
Entertainment software company Activision was sold for a similar reason in July
2005. The Fund also sold its entire position in petroleum refiner Premcor in
June and July 2005 because the company was acquired by Valero Energy.
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. At
the beginning of the reporting period, the Fund held a substantial portion of
its net assets in the financials sector. By October 31, 2005, this weighting had
increased. The Fund's weighting in the energy sector, on the other hand, closed
the reporting period at less than half the weighting on October 31, 2004.
HOW DID THE FUND'S WEIGHTINGS DIFFER FROM THOSE OF THE RUSSELL MIDCAP(R) VALUE
INDEX AT THE END OF THE REPORTING PERIOD?
As of October 31, 2005, the Fund was overweighted relative to the Russell
Midcap(R) Value Index in the consumer discretionary, health care, and financials
sectors. The Fund benefited from its overweighted position in health care
because the sector provided solid performance and the Fund's stock selection was
strong. The Fund's overweighted positions in the consumer discretionary and
financials sectors, on the other hand, hurt relative results because the stocks
selected by the Fund were not as strong as related stocks in the Index. As of
October 31, 2005, the Fund was underweighted relative to the Russell Midcap(R)
Value Index in the information technology, materials, and utilities sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
INFORMATION ABOUT MAINSTAY MID CAP OPPORTUNITY FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 37
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (99.4%) +
- -----------------------------------------------------------------------------
AUTO COMPONENTS (3.1%)
Autoliv, Inc. 29,955 $ 1,286,867
Goodyear Tire & Rubber Co. (The) (a)(b) 67,631 1,057,749
Lear Corp. (b) 38,200 1,163,572
------------
3,508,188
------------
BEVERAGES (1.1%)
PepsiAmericas, Inc. 52,562 1,225,746
------------
BUILDING PRODUCTS (1.1%)
USG Corp. (a)(b) 21,237 1,255,531
------------
CAPITAL MARKETS (2.8%)
A.G. Edwards, Inc. 31,236 1,321,908
V Bear Stearns Cos., Inc. (The) 17,249 1,824,944
------------
3,146,852
------------
COMMERCIAL BANKS (6.3%)
Comerica, Inc. 27,863 1,609,924
Commerce Bancshares, Inc. 24,098 1,280,327
First Citizens BancShares, Inc. Class A 759 126,753
V KeyCorp 55,121 1,777,101
M&T Bank Corp. 14,886 1,601,436
TCF Financial Corp. 30,215 818,827
------------
7,214,368
------------
COMMERCIAL SERVICES & SUPPLIES (2.2%)
Equifax, Inc. 33,101 1,140,992
Republic Services, Inc. 40,234 1,422,272
------------
2,563,264
------------
CONSTRUCTION MATERIALS (1.7%)
Lafarge North America, Inc. 12,896 780,337
Martin Marietta Materials, Inc. 14,770 1,165,501
------------
1,945,838
------------
CONSUMER FINANCE (1.1%)
AmeriCredit Corp. (a) 55,045 1,230,256
------------
DIVERSIFIED FINANCIAL SERVICES (2.7%)
CIT Group, Inc. 24,255 1,109,181
V Principal Financial Group, Inc. 38,637 1,917,554
------------
3,026,735
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.9%)
CenturyTel, Inc. (b) 41,970 1,373,678
PanAmSat Holding Corp. 34,952 834,304
------------
2,207,982
------------
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRIC UTILITIES (5.8%)
V American Electric Power Co., Inc. 53,477 $ 2,029,987
DPL, Inc. 51,887 1,337,128
V Edison International 47,346 2,071,861
Reliant Energy, Inc. (a)(b) 86,946 1,104,214
------------
6,543,190
------------
FOOD PRODUCTS (1.8%)
Hershey Co. (The) 20,240 1,150,239
Tyson Foods, Inc. Class A 48,265 859,117
------------
2,009,356
------------
GAS UTILITIES (1.9%)
Equitable Resources, Inc. 30,742 1,188,178
Southern Union Co. (a) 39,956 939,765
------------
2,127,943
------------
HEALTH CARE PROVIDERS & SERVICES (7.3%)
AmerisourceBergen Corp. 20,515 1,564,679
V CIGNA Corp. 17,043 1,974,772
Community Health Systems, Inc. (a) 30,127 1,118,013
Health Net, Inc. (a) 26,796 1,255,125
Humana, Inc. (a) 27,216 1,208,118
Sierra Health Services, Inc. (a) 15,497 1,162,275
------------
8,282,982
------------
HOTELS, RESTAURANTS & LEISURE (1.1%)
Wendy's International, Inc. 26,354 1,231,259
------------
HOUSEHOLD DURABLES (3.2%)
Meritage Homes Corp. (a) 19,849 1,235,997
Ryland Group, Inc. 15,744 1,059,571
Standard Pacific Corp. 34,158 1,317,816
------------
3,613,384
------------
HOUSEHOLD PRODUCTS (1.0%)
Energizer Holdings, Inc. (a) 22,696 1,145,921
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.2%)
NRG Energy, Inc. (a)(b) 31,106 1,337,869
------------
INSURANCE (12.6%)
Alleghany Corp. (a) 399 120,099
Allmerica Financial Corp. (a) 31,280 1,191,768
American National Insurance Co. 5,752 678,333
AmerUs Group Co. 21,842 1,291,299
Jefferson-Pilot Corp. (b) 27,424 1,505,029
Lincoln National Corp. 32,035 1,621,291
</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)
- -----------------------------------------------------------------------------
INSURANCE (CONTINUED)
MBIA, Inc. (b) 7,402 $ 431,093
Nationwide Financial Services, Inc. Class A 15,987 645,715
Old Republic International Corp. 54,098 1,401,679
SAFECO Corp. 27,073 1,507,966
StanCorp Financial Group, Inc. 14,731 1,356,725
Torchmark Corp. 19,656 1,038,427
UnumProvident Corp. 72,213 1,465,202
------------
14,254,626
------------
IT SERVICES (1.7%)
Convergys Corp. (a) 57,572 935,545
Sabre Holdings Corp. Class A 50,091 978,277
------------
1,913,822
------------
LEISURE EQUIPMENT & PRODUCTS (2.3%)
Eastman Kodak Co. (b) 54,196 1,186,892
Mattel, Inc. 95,124 1,403,079
------------
2,589,971
------------
METALS & MINING (1.3%)
Nucor Corp. 25,125 1,503,731
------------
MULTILINE RETAIL (5.3%)
Dillard's, Inc. Class A 56,693 1,174,112
V Federated Department Stores, Inc. 33,683 2,067,126
J.C. Penney Co., Inc. 29,758 1,523,610
Sears Holdings Corp. (a)(b) 10,670 1,283,068
------------
6,047,916
------------
MULTI-UTILITIES (3.7%)
KeySpan Corp. 41,066 1,419,652
PNM Resources, Inc. 48,805 1,237,207
Wisconsin Energy Corp. 35,923 1,358,967
Xcel Energy, Inc. (b) 9,661 177,086
------------
4,192,912
------------
OIL, GAS & CONSUMABLE FUELS (4.6%)
Amerada Hess Corp. 12,828 1,604,783
Kinder Morgan, Inc. 12,716 1,155,884
Overseas Shipholding Group, Inc. 6,463 307,639
Sunoco, Inc. 18,085 1,347,333
Williams Cos., Inc. (The) 36,523 814,463
------------
5,230,102
------------
PAPER & FOREST PRODUCTS (0.8%)
Louisiana-Pacific Corp. 34,968 871,752
------------
</Table>
<Table>
<Caption>
SHARES VALUE
REAL ESTATE (5.3%)
AMB Property Corp. 2,789 $ 123,218
Annaly Mortgage Management, Inc. (b) 100,014 1,148,161
Apartment Investment & Management Co. Class A (b) 24,751 950,438
Crescent Real Estate Equities Co. 56,334 1,123,863
V Equity Office Properties Trust 55,024 1,694,739
New Century Financial Corp. (b) 31,540 973,640
------------
6,014,059
------------
ROAD & RAIL (3.7%)
V CSX Corp. 38,219 1,750,812
Laidlaw International, Inc. 55,076 1,252,428
Norfolk Southern Corp. 2,112 84,902
Swift Transportation Co., Inc. (a) 63,881 1,165,828
------------
4,253,970
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.4%)
V Freescale Semiconductor, Inc. Class B (a) 68,493 1,635,613
------------
SPECIALTY RETAIL (2.3%)
AutoNation, Inc. (a) 68,701 1,365,776
Circuit City Stores, Inc. 70,765 1,258,909
------------
2,624,685
------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
Reebok International Ltd. 5,371 306,416
------------
THRIFTS & MORTGAGE FINANCE (3.2%)
Astoria Financial Corp. 46,854 1,309,569
IndyMac Bancorp, Inc. 11,265 420,522
MGIC Investment Corp. (b) 22,268 1,319,156
PMI Group, Inc. (The) 7,910 315,451
Radian Group, Inc. 6,166 321,249
------------
3,685,947
------------
TOBACCO (2.5%)
Reynolds American, Inc. (b) 17,940 1,524,900
UST, Inc. 30,676 1,269,680
------------
2,794,580
------------
TRADING COMPANIES & DISTRIBUTORS (1.1%)
GATX Corp. 33,126 1,237,919
------------
Total Common Stocks
(Cost $108,693,252) 112,774,685
------------
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (12.4%)
- -----------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (1.0%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (c)(d) $1,153,345 $ 1,153,345
------------
Total Certificate of Deposit
(Cost $1,153,345) 1,153,345
------------
COMMERCIAL PAPER (0.7%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (c) 753,480 753,480
------------
Total Commercial Paper
(Cost $753,480) 753,480
------------
<Caption>
SHARES
INVESTMENT COMPANY (1.9%)
BGI Institutional Money Market Fund (c) 2,125,259 2,125,259
------------
Total Investment Company
(Cost $2,125,259) 2,125,259
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (8.8%)
Bank of the West (The)
4.02%, due 12/8/05 (c) $1,537,793 1,537,793
Barclays
3.92%, due 12/5/05 (c) 768,897 768,897
3.94%, due 11/28/05 (c) 768,897 768,897
Credit Suisse First Boston, Inc.
3.74%, due 11/1/05 (c) 1,153,345 1,153,345
Deutsche Bank
3.95%, due 12/2/05 (c) 768,897 768,897
First Tennessee National Corp.
3.88%, due 11/14/05 (c) 768,897 768,897
Halifax Bank of Scotland
3.75%, due 11/1/05 (c) 768,897 768,897
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (CONTINUED)
Marshall & Ilsley Bank
3.97%, due 12/29/05 (c) $ 768,897 $ 768,897
Societe Generale
3.77%, due 11/1/05 (c) 1,153,345 1,153,345
UBS AG
4.01%, due 12/13/05 (c) 768,897 768,897
Wells Fargo & Co.
4.00%, due 11/25/05 (c) 768,897 768,897
------------
Total Time Deposits
(Cost $9,995,659) 9,995,659
------------
Total Short-Term Investments
(Cost $14,027,743) 14,027,743
------------
Total Investments
(Cost $122,720,995) (e) 111.8% 126,802,428(f)
Liabilities in Excess of
Cash and Other Assets (11.8) (13,429,900)
---------- ------------
Net Assets 100.0% $113,372,528
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Represents security, or a portion thereof, which is out
on loan.
(c) Represents security, or a portion thereof, purchased
with cash collateral received for securities on loan.
(d) Floating rate. Rate shown is the rate in effect at
October 31, 2005.
(e) The cost for federal income tax purposes is
$122,831,134.
(f) At October 31, 2005 net unrealized appreciation was
$3,971,294, 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 $8,057,131 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $4,085,837.
</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 OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $122,720,995) including
$13,565,335 market value of securities
loaned $126,802,428
Cash 802,252
Receivables:
Investment securities sold 586,606
Fund shares sold 502,540
Dividends and interest 117,183
Other assets 23,105
-------------
Total assets 128,834,114
-------------
LIABILITIES:
Securities lending collateral 14,027,743
Payables:
Investment securities purchased 1,125,485
Fund shares redeemed 83,416
Transfer agent 79,168
NYLIFE Distributors 47,866
Manager 37,687
Professional 34,767
Shareholder communication 14,058
Accrued expenses 11,396
-------------
Total liabilities 15,461,586
-------------
Net assets $113,372,528
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share) 1
billion shares authorized:
Class A $ 16,186
Class B 9,792
Class C 8,865
Class I 8,877
Additional paid-in capital 103,195,776
Accumulated net investment income 45,644
Accumulated net realized gain on investments 6,005,955
Net unrealized appreciation on investments 4,081,433
-------------
Net assets $113,372,528
=============
CLASS A
Net assets applicable to outstanding shares $ 42,238,619
=============
Shares of capital stock outstanding 1,618,624
=============
Net asset value per share outstanding $ 26.10
Maximum sales charge (5.50% of offering price) 1.52
-------------
Maximum offering price per share outstanding $ 27.62
=============
CLASS B
Net assets applicable to outstanding shares $ 25,068,338
=============
Shares of capital stock outstanding 979,249
=============
Net asset value and offering price per share
outstanding $ 25.60
=============
CLASS C
Net assets applicable to outstanding shares $ 22,686,646
=============
Shares of capital stock outstanding 886,526
=============
Net asset value and offering price per share
outstanding $ 25.59
=============
CLASS I
Net assets applicable to outstanding shares $ 23,378,925
=============
Shares of capital stock outstanding 887,717
=============
Net asset value and offering price per share
outstanding $ 26.34
=============
</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 YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $1,351,092
Interest 44,564
Income from securities loaned--net 7,678
-----------
Total income 1,403,334
-----------
EXPENSES:
Manager 687,213
Transfer agent--Classes A, B and C 229,930
Transfer agent--Class I 30,828
Distribution--Class B 132,319
Distribution--Class C 98,257
Distribution/Service--Class A 63,627
Service--Class B 44,106
Service--Class C 32,752
Registration 54,860
Professional 43,054
Custodian 29,231
Shareholder communication 25,916
Directors 6,541
Miscellaneous 10,571
-----------
Total expenses before reimbursement 1,489,205
Expense reimbursement from Manager (206,679)
-----------
Net expenses 1,282,526
-----------
Net investment income 120,808
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 5,994,612
Net change in unrealized appreciation on
investments 227,190
-----------
Net realized and unrealized gain on investments 6,221,802
-----------
Net increase in net assets resulting from
operations $6,342,610
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $4,355.
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 YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income (loss) $ 120,808 $ (19)
Net realized gain on investments 5,994,612 1,340,083
Net change in unrealized
appreciation on investments 227,190 1,004,716
--------------------------
Net increase in net assets
resulting from operations 6,342,610 2,344,780
--------------------------
Dividends to shareholders:
From net investment income:
Class A (62,192) --
Class B (34,360) --
Class C (26,620) --
Class I (112,421) --
From net realized gain on investments:
Class A (295,736) --
Class B (216,488) --
Class C (168,408) (11)
Class I (475,783) (109,405)
Service Class -- (167)
--------------------------
Total dividends to shareholders (1,392,008) (109,583)
--------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 37,697,250 6,832,118
Class B 20,610,724 5,871,147
Class C 18,560,407 4,954,042
Class I 10,490,303 8,968,490
Service Class -- 21,108
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Class A $ 259,475 $ --
Class B 246,626 --
Class C 180,288 10
Class I 569,097 109,130
Service Class -- 167
--------------------------
88,614,170 26,756,212
Cost of shares redeemed:
Class A (3,594,035) (408,728)
Class B (2,519,349) (218,504)
Class C (1,692,031) (132,476)
Class I (8,156,299) (6,057,924)
Service Class -- (24,327)
--------------------------
(15,961,714) (6,841,959)
Increase in net assets derived
from capital share transactions 72,652,456 19,914,253
--------------------------
Net increase in net assets 77,603,058 22,149,450
NET ASSETS:
Beginning of year 35,769,470 13,620,020
--------------------------
End of year $113,372,528 $35,769,470
==========================
Accumulated undistributed net
investment income at end of year $ 45,644 $ --
==========================
</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,
YEAR 2004** YEAR 2004** YEAR YEAR
ENDED THROUGH ENDED THROUGH ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 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) 0.06 (0.01) (0.10) (0.07) (0.08) (0.07)
Net realized and unrealized
gain (loss) on investments 3.34 1.53 3.28 1.42 3.25 2.50
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 3.40 1.52 3.18 1.35 3.17 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 $ 26.10 $23.45 $ 25.60 $23.14 $ 25.59 $23.14
=========== =========== =========== =========== =========== ===========
Total investment return (b) 14.59% 6.93%(c) 13.81% 6.20%(c) 13.76% 11.71%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) 0.32% (0.21%)+ (0.43%) (0.96%)+ (0.43%) (0.96%)
Net expenses 1.50% 1.53% +# 2.25% 2.28% +# 2.25% 2.28% #
Expenses (before
reimbursements) 1.78% 2.13% +# 2.53% 2.88% +# 2.53% 2.88% #
Portfolio turnover rate 153% 43% 153% 43% 153% 43%
Net assets at end of period
(in 000's) $42,239 $6,554 $25,068 $5,756 $22,687 $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
reimbursements) 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.
+ 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,
2001* YEAR
THROUGH ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
$ 23.57 $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06
-------- -------- -------- -------- ----------- ------------
0.12 0.05 0.08(a) 0.09 0.06 0.06
3.42 2.66 4.84 (0.14) (0.69) 0.88
-------- -------- -------- -------- ----------- ------------
3.54 2.71 4.92 (0.05) (0.63) 0.94
-------- -------- -------- -------- ----------- ------------
(0.06) -- (0.07) (0.09) -- (0.06)
)
(0.71 (0.15) -- -- -- (0.01)
-------- -------- -------- -------- ----------- ------------
(0.77) (0.15) (0.07) (0.09) -- (0.07)
-------- -------- -------- -------- ----------- ------------
$ 26.34 $ 23.57 $ 21.01 $ 16.16 $ 16.30 $ 16.93
======== ======== ======== ======== =========== ============
15.11% 12.97% 30.59% (0.38%) (3.72%)(c) 5.83%
0.78% 0.26% 0.47% 0.46% 0.41%+ 0.35%
1.04% 1.06%# 1.13%# 1.17%# 1.19%+#(d) 1.06%#
1.27% 1.66%# 1.37%# 1.29%# 1.22%+#(d) 1.06%#
153% 43% 90% 75% 69% 114%
$23,379 $18,508 $13,617 $51,231 $56,907 $67,401
</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
MAINSTAY S&P 500 INDEX FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 4.73% -2.77% 8.53%
Excluding sales charges 7.97 -2.17 8.86
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX
--------------------------- -------------
10/31/95 9700 10000
11959 12410
15723 16394
19086 20000
23928 25134
25306 26665
18975 20024
16054 16999
19308 20535
21001 22470
10/31/05 22675 24429
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
8.42% -1.91% 9.13%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX
--------------------------- -------------
10/31/95 10000 10000
12355 12410
16278 16394
19807 20000
24884 25134
26373 26665
19807 20024
16790 16999
20247 20535
22089 22470
10/31/05 23949 24429
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- -----------------------------------------------------------------------------
S&P 500(R) Index(1) 8.72% -1.74% 9.34%
Average Lipper S&P 500 Index objective fund(2) 8.14 -2.28 8.88
</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 3.00% 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
contractual and may be modified or terminated only with the approval of the
Board of Directors/Trustees. 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.
46 MainStay S&P 500 Index Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,048.65 $3.77 $1,021.35 $3.72
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,051.40 $1.55 $1,023.50 $1.53
- ------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.73% for Class A, and 0.30% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 184 (to reflect the
one-half year period).
www.MAINSTAYfunds.com 47
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 99.6
Short Term Investments (collateral from securities lending 8.0
is 7.7%)
Liabilities in Excess of Cash and Other Assets (7.6)
</Table>
See Portfolio of Investments on page 51 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. General Electric Co.
2. ExxonMobil Corp.
3. Microsoft Corp.
4. Citigroup, Inc.
5. Procter & Gamble Co. (The)
6. Johnson & Johnson
7. Bank of America Corp.
8. American International Group, Inc.
9. Pfizer, Inc.
10. Altria Group, Inc.
</Table>
48 MainStay S&P 500 Index Fund
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. The Fund's investments
also include S&P 500(R) Index futures that are used for cash management
purposes.
WHAT WERE THE MAJOR FACTORS THAT AFFECTED THE STOCK MARKET DURING THE 12 MONTHS
ENDED OCTOBER 31, 2005?
For the 12 months ended October 31, 2005, all broadly watched equity indices
provided positive performance. Mid- and small-capitalization stocks generally
outperformed their large-cap counterparts, and the market favored value stocks
over growth stocks at all capitalization levels. Despite wide fluctuations in
crude-oil prices, instability in many regions of the world, and the devastation
caused by hurricanes Katrina and Rita, the U.S. stock market posted significant
gains during the 12 months ended October 31, 2005.
The Federal Open Market Committee continued to raise its target for the federal
funds rate, with eight 25-basis-point increases during the reporting period. (A
basis point is one-hundredth of a percentage point.) At the end of October 2005,
the federal funds target rate stood at 3.75%, its highest level in more than
four years. Among the considerations that influenced the gradual tightening
policy were mounting inflationary pressures, low unemployment, an upward path of
record energy prices, and growing labor costs.
WHAT WERE THE BEST-PERFORMING INDUSTRIES IN THE S&P 500(R) INDEX DURING THE
REPORTING PERIOD?
From a total return perspective, tobacco was the best-performing industry for
the 12 months ended October 31, 2005. Other top-performing industries from a
total-return perspective included health care providers & services, energy
equipment & services, construction & engineering, and independent power
producers & energy traders.
On the basis of impact, which takes weightings and total returns both into
account, the industry that made the strongest contribution to the performance of
the Index was oil, gas & consumable fuels. The second-strongest contributor was
health care providers & services, followed by insurance, capital markets, and
tobacco.
WHICH INDUSTRIES WERE THE WORST PERFORMERS?
On the basis of total returns alone, the worst-performing industry in the Index
for the 12-month reporting period was automobiles. The second-worst total return
came from Internet & catalog retail, followed by leisure equipment & products,
auto components, and thrifts & mortgage finance.
For the 12 months ended October 31, 2005, media was the industry with the
greatest negative impact on Index performance when weightings and total returns
were both considered. Pharmaceuticals was next, followed by thrifts & mortgage
finance, automobiles, and Internet & catalog retail.
WHICH INDIVIDUAL STOCKS WERE THE BEST PERFORMERS DURING THE REPORTING PERIOD?
For the 12 months ended October 31, 2005, the S&P 500(R) Index stock with the
highest total return was Valero Energy. Express Scripts had the second-best
total return, followed by NVIDIA, Humana, and Apple Computer. Each of these top
performers more than doubled in price during the reporting period.
The five stocks with the greatest positive impact on 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 12-month
reporting period was Altria Group. The second-best contributor was ExxonMobil,
followed by ConocoPhillips, UnitedHealth Group, and Hewlett-Packard.
WHICH STOCKS WERE THE WEAKEST PERFORMERS DURING THE REPORTING PERIOD?
For the 12-months ended October 31, 2005, the S&P 500(R) Index stock with the
worst total return was Sanmina-SCI Corp. Other particularly weak performers
included Unisys, Gateway, Lexmark International, and Dana.
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 46 for more information on the S&P 500 Index.
www.MAINSTAYfunds.com 49
On the basis of impact, which takes weightings and total returns both into
account, Pfizer made the greatest negative contribution to the performance of
the Index for the 12-month reporting period. Wal-Mart Stores was next, followed
by Fannie Mae, Verizon Communications, and International Business Machines.
WERE ANY CHANGES MADE TO THE FUND OR TO THE INDEX DURING THE 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 12 months ended October 31, 2005, there
were 20 additions to the Index and 20 deletions from it.
Among the additions were well-known companies such as Compass Bancshares,
Vornado Realty Trust, Tyson Foods, Public Storage, and Lennar. Among the
deletions were familiar names such as Deluxe, Winn-Dixie Stores, Delta Air
Lines, Unocal, and Delphi. When Sears, Roebuck merged with Kmart, the stock 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. Peoplesoft was deleted from the Index because the company was
acquired by Oracle; Nextel Communications was deleted when the company was
acquired by Sprint; and Wellpoint Health Networks was deleted when it was
acquired by Anthem.
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.
INFORMATION ABOUT MAINSTAY S&P 500 INDEX FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
50 MainStay S&P 500 Index Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (99.6%)+
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.2%)
Boeing Co. (The) 116,654 $ 7,540,515
General Dynamics Corp. 28,543 3,319,551
Goodrich Corp. 16,805 606,156
Honeywell International, Inc. 121,622 4,159,472
L-3 Communications Holdings, Inc. (a) 16,903 1,315,391
Lockheed Martin Corp. 51,737 3,133,193
Northrop Grumman Corp. 50,636 2,716,621
Raytheon Co. 63,414 2,343,147
Rockwell Collins, Inc. 24,933 1,142,430
United Technologies Corp. 145,652 7,469,035
--------------
33,745,511
--------------
AIR FREIGHT & LOGISTICS (1.0%)
FedEx Corp. 43,098 3,961,999
Ryder System, Inc. 8,983 356,356
United Parcel Service, Inc. Class B 157,133 11,461,281
--------------
15,779,636
--------------
AIRLINES (0.1%)
Southwest Airlines Co. 98,500 1,576,985
--------------
AUTO COMPONENTS (0.2%)
Cooper Tire & Rubber Co. 8,934 122,038
Dana Corp. 21,059 158,153
Goodyear Tire &
Rubber Co. (The) (a)(b) 24,608 384,869
Johnson Controls, Inc. 27,349 1,861,099
Visteon Corp. (b) 18,090 150,690
--------------
2,676,849
--------------
AUTOMOBILES (0.4%)
Ford Motor Co. 263,439 2,191,812
General Motors Corp. (a) 80,375 2,202,275
Harley-Davidson, Inc. 39,059 1,934,592
--------------
6,328,679
--------------
BEVERAGES (2.2%)
Anheuser-Busch Cos., Inc. 110,452 4,557,250
Brown-Forman Corp. Class B 11,844 750,199
Coca-Cola Co. (The) (c) 295,168 12,627,287
Coca-Cola Enterprises, Inc. 42,850 809,865
Constellation Brands, Inc. Class A (a)(b) 27,387 644,690
Molson Coors Brewing Co. Class B 8,164 503,719
</Table>
<Table>
<Caption>
SHARES VALUE
BEVERAGES (CONTINUED)
Pepsi Bottling
Group, Inc. (The) (a) 19,740 $ 561,208
PepsiCo, Inc. 237,349 14,022,579
--------------
34,476,797
--------------
BIOTECHNOLOGY (1.5%)
Amgen, Inc. (b) 175,672 13,308,911
Applera Corp.-Applied BioSystems Group 27,462 666,503
Biogen Idec, Inc. (a)(b) 48,327 1,963,526
Chiron Corp. (b) 15,487 683,596
Genzyme Corp. (b) 36,442 2,634,757
Gilead Sciences, Inc. (b) 64,805 3,062,036
MedImmune, Inc. (b) 34,808 1,217,584
--------------
23,536,913
--------------
BUILDING PRODUCTS (0.2%)
American Standard Cos., Inc. 25,198 958,532
Masco Corp. 61,223 1,744,856
--------------
2,703,388
--------------
CAPITAL MARKETS (3.2%)
Ameriprise Financial, Inc. (b) 35,286 1,313,352
Bank of New York Co., Inc. (The) 110,699 3,463,772
Bear Stearns Cos., Inc. (The) 15,878 1,679,892
Charles Schwab Corp. (The) 147,723 2,245,390
E*TRADE Financial Corp. (b) 51,895 962,652
Federated Investors, Inc. Class B 12,049 421,836
Franklin Resources, Inc. 21,141 1,868,230
Goldman Sachs Group, Inc. (The) (a) 66,156 8,360,134
Janus Capital Group, Inc. (a) 32,935 578,009
Lehman Brothers Holdings, Inc. (a) 38,711 4,632,545
Mellon Financial Corp. 59,268 1,878,203
Merrill Lynch & Co., Inc. 132,250 8,561,865
Morgan Stanley 154,365 8,399,000
Northern Trust Corp. 26,421 1,416,166
State Street Corp. 46,645 2,576,203
T. Rowe Price Group, Inc. 18,428 1,207,403
--------------
49,564,652
--------------
CHEMICALS (1.6%)
Air Products & Chemicals, Inc. 31,454 1,800,427
Ashland, Inc. 10,514 562,604
Dow Chemical Co. (The) 137,177 6,290,937
E.I. du Pont de Nemours & Co. 141,424 5,895,967
Eastman Chemical Co. 10,911 575,664
Ecolab, Inc. 26,176 865,902
Engelhard Corp. 17,046 463,651
Hercules, Inc. (b) 15,709 174,998
</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 51
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
International Flavors & Fragrances, Inc. 12,388 $ 408,680
Monsanto Co. 38,169 2,405,029
PPG Industries, Inc. 24,219 1,452,413
Praxair, Inc. 45,941 2,269,945
Rohm & Haas Co. 20,630 898,024
Sigma-Aldrich Corp. 9,686 616,998
--------------
24,681,239
--------------
COMMERCIAL BANKS (5.7%)
AmSouth Bancorporation 49,662 1,252,972
V Bank of America Corp. 571,248 24,986,388
BB&T Corp. (a) 77,674 3,288,717
Comerica, Inc. 23,827 1,376,724
Compass Bancshares, Inc. 17,306 843,841
Fifth Third Bancorp 79,083 3,176,764
First Horizon National Corp. (a) 17,243 666,959
Huntington Bancshares, Inc. (a) 32,508 756,136
KeyCorp 58,167 1,875,304
M&T Bank Corp. 11,461 1,232,974
Marshall & IIsley Corp. 29,111 1,250,609
National City Corp. (a) 80,882 2,606,827
North Fork Bancorp., Inc. 68,012 1,723,424
PNC Financial Services Group, Inc. 41,375 2,511,876
Regions Financial Corp. 65,071 2,118,061
SunTrust Banks, Inc. 51,563 3,737,286
Synovus Financial Corp. 43,544 1,196,154
U.S. Bancorp 259,833 7,685,860
Wachovia Corp. 224,109 11,321,987
Wells Fargo & Co. 239,952 14,445,110
Zions Bancorporation 12,542 921,461
--------------
88,975,434
--------------
COMMERCIAL SERVICES & SUPPLIES (0.7%)
Allied Waste Industries, Inc. (a)(b) 31,060 252,828
Avery Dennison Corp. (a) 15,710 889,972
Cendant Corp. 147,667 2,572,359
Cintas Corp. (a) 19,646 797,038
Equifax, Inc. 18,811 648,415
Monster Worldwide, Inc. (a)(b) 16,882 553,898
Pitney Bowes, Inc. 32,281 1,358,384
R.R. Donnelley & Sons Co. 30,149 1,055,818
Robert Half International, Inc. 24,069 887,665
Waste Management, Inc. 79,524 2,346,753
--------------
11,363,130
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
COMMUNICATIONS EQUIPMENT (2.8%)
ADC
Telecommunications, Inc. (b) 16,218 $ 283,004
Andrew Corp. (b) 22,547 239,449
Avaya, Inc. (b) 60,323 694,921
CIENA Corp. (b) 80,195 190,062
Cisco Systems, Inc. (b) 908,599 15,855,053
Comverse Technology, Inc. (b) 27,683 694,843
Corning, Inc. (b) 209,307 4,204,978
JDS Uniphase Corp. (b) 234,291 492,011
Lucent Technologies, Inc. (b) 620,204 1,767,581
Motorola, Inc. 350,983 7,777,783
QUALCOMM, Inc. 231,394 9,200,225
Scientific-Atlanta, Inc. 21,337 756,183
Tellabs, Inc. (b) 64,461 616,247
--------------
42,772,340
--------------
COMPUTERS & PERIPHERALS (3.7%)
Apple Computer, Inc. (b) 117,937 6,791,992
Dell, Inc. (b) 340,878 10,867,191
EMC Corp. (b) 342,697 4,784,050
Gateway, Inc. (b) 41,806 119,147
Hewlett-Packard Co. 407,463 11,425,263
International Business Machines Corp. 226,899 18,578,490
Lexmark International, Inc. (b) 16,906 701,937
NCR Corp. (b) 26,106 788,923
Network Appliance, Inc. (b) 51,264 1,402,583
QLogic Corp. (b) 12,878 388,400
Sun Microsystems, Inc. (b) 484,837 1,939,348
--------------
57,787,324
--------------
CONSTRUCTION & ENGINEERING (0.1%)
Fluor Corp. (a) 11,981 761,992
--------------
CONSTRUCTION MATERIALS (0.1%)
Vulcan Materials Co. (a) 14,533 944,645
--------------
CONSUMER FINANCE (1.3%)
American Express Co. 176,431 8,780,971
Capital One Financial Corp. 41,030 3,132,641
MBNA Corp. 178,716 4,569,768
SLM Corp. 59,286 3,292,152
--------------
19,775,532
--------------
CONTAINERS & PACKAGING (0.2%)
Ball Corp. (a) 15,413 606,810
Bemis Co., Inc. (a) 14,998 396,247
Pactiv Corp. (b) 20,791 409,583
Sealed Air Corp. (a)(b) 11,694 588,325
Temple-Inland, Inc. 16,106 593,184
--------------
2,594,149
--------------
</Table>
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)
- --------------------------------------------------------------------------------
DISTRIBUTORS (0.1%)
Genuine Parts Co. 24,463 $ 1,085,423
--------------
DIVERSIFIED CONSUMER SERVICES (0.2%)
Apollo Group, Inc. Class A (a)(b) 20,762 1,308,421
H&R Block, Inc. 46,169 1,147,761
--------------
2,456,182
--------------
DIVERSIFIED FINANCIAL SERVICES (3.7%)
CIT Group, Inc. 29,550 1,351,322
V Citigroup, Inc. 735,058 33,650,955
JPMorgan Chase & Co. 499,403 18,288,138
Moody's Corp. 35,933 1,913,792
Principal Financial Group, Inc. 39,805 1,975,522
--------------
57,179,729
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.2%)
AT&T Corp. 113,842 2,251,795
BellSouth Corp. (a) 260,488 6,777,898
CenturyTel, Inc. 18,790 614,997
Citizens
Communications Co. (a) 46,994 575,207
Qwest Communications International, Inc. (a)(b) 216,817 945,322
SBC Communications, Inc. (a) 469,752 11,203,585
Verizon Communications, Inc. 393,163 12,388,566
--------------
34,757,370
--------------
ELECTRIC UTILITIES (1.6%)
Allegheny Energy, Inc. (a)(b) 22,643 639,891
American Electric
Power Co., Inc. 55,850 2,120,066
Cinergy Corp. 28,276 1,128,212
Edison International 45,644 1,997,381
Entergy Corp. 29,847 2,110,780
Exelon Corp. 95,314 4,959,187
FirstEnergy Corp. 46,217 2,195,308
FPL Group, Inc. 55,987 2,410,800
Pinnacle West Capital Corp. 13,545 565,639
PPL Corp. 53,831 1,687,064
Progress Energy, Inc. 35,748 1,558,255
Southern Co. (The) (a) 106,141 3,713,874
--------------
25,086,457
--------------
ELECTRICAL EQUIPMENT (0.4%)
American Power Conversion Corp. 25,225 539,563
Cooper Industries Ltd. Class A 12,995 921,216
Emerson Electric Co. 58,602 4,075,769
Rockwell Automation, Inc. 25,849 1,373,874
--------------
6,910,422
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%)
Agilent Technologies, Inc. (b) 70,226 $ 2,247,934
Jabil Circuit, Inc. (b) 25,679 766,518
Molex, Inc. 20,554 520,222
Sanmina-SCI Corp. (b) 73,265 267,417
Solectron Corp. (a)(b) 135,987 480,034
Symbol Technologies, Inc. 34,864 289,371
Tektronix, Inc. 12,538 288,123
--------------
4,859,619
--------------
ENERGY EQUIPMENT & SERVICES (1.6%)
Baker Hughes, Inc. 48,415 2,660,888
BJ Services Co. 45,489 1,580,743
Halliburton Co. 72,721 4,297,811
Nabors Industries Ltd. (b) 22,365 1,534,910
National-Oilwell Varco, Inc. (b) 24,641 1,539,323
Noble Corp. 19,424 1,250,517
Rowan Cos., Inc. 14,990 494,520
Schlumberger Ltd. (a) 83,670 7,594,726
Transocean, Inc. (b) 46,787 2,689,785
Weatherford
International Ltd. (b) 19,723 1,234,660
--------------
24,877,883
--------------
FOOD & STAPLES RETAILING (1.4%)
Albertson's, Inc. (a) 51,569 1,294,898
Costco Wholesale Corp. 68,154 3,295,927
CVS Corp. 115,558 2,820,771
Kroger Co. (The) (b) 102,485 2,039,452
Safeway, Inc. (a) 62,657 1,457,402
SUPERVALU, Inc. 18,963 596,007
Sysco Corp. 89,125 2,843,979
Walgreen Co. 145,352 6,603,341
--------------
20,951,777
--------------
FOOD PRODUCTS (1.1%)
Archer-Daniels-Midland Co. 92,463 2,253,323
Campbell Soup Co. 26,249 763,846
ConAgra Foods, Inc. 72,189 1,679,838
General Mills, Inc. (a) 51,155 2,468,740
H.J. Heinz Co. 48,998 1,739,429
Hershey Co. (The) 26,133 1,485,138
Kellogg Co. 36,372 1,606,551
McCormick & Co., Inc. 18,955 574,147
Sara Lee Corp. 110,412 1,970,854
Tyson Foods, Inc. Class A 35,119 625,118
Wm. Wrigley Jr. Co. 25,578 1,777,671
--------------
16,944,655
--------------
GAS UTILITIES (0.0%)++
Nicor, Inc. 6,182 242,334
Peoples Energy Corp. 5,341 198,685
--------------
441,019
--------------
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (2.1%)
Bausch & Lomb, Inc. 7,487 $ 555,461
Baxter International, Inc. 88,529 3,384,464
Becton, Dickinson & Co. 35,352 1,794,114
Biomet, Inc. 35,366 1,231,798
Boston Scientific Corp. (b) 84,005 2,110,206
C.R. Bard, Inc. 14,696 916,736
Fisher Scientific International, Inc. (b) 17,322 978,693
Guidant Corp. 46,970 2,959,110
Hospira, Inc. (b) 21,867 871,400
Medtronic, Inc. (a) 172,174 9,755,379
Millipore Corp. (b) 6,984 427,560
PerkinElmer, Inc. 18,105 399,577
St. Jude Medical, Inc. (b) 51,807 2,490,363
Stryker Corp. 41,331 1,697,464
Thermo Electron Corp. (a)(b) 22,445 677,615
Waters Corp.(b) 16,886 611,273
Zimmer Holdings, Inc. (b) 35,178 2,243,301
--------------
33,104,514
--------------
HEALTH CARE PROVIDERS & SERVICES (3.0%)
Aetna, Inc. 41,184 3,647,255
AmerisourceBergen Corp. (a) 14,732 1,123,610
Cardinal Health, Inc. 60,664 3,792,107
Caremark Rx, Inc. (b) 63,940 3,350,456
CIGNA Corp. 18,393 2,131,197
Coventry Health Care, Inc. (b) 22,528 1,216,287
Express Scripts, Inc. (b) 16,682 1,257,990
HCA, Inc. (a) 64,281 3,097,701
Health Management
Associates, Inc. Class A (a) 34,153 731,216
Humana, Inc. (b) 22,541 1,000,595
IMS Health, Inc. 32,421 753,140
Laboratory Corp. of
America Holdings (b) 18,946 914,145
Manor Care, Inc. 11,969 445,845
McKesson Corp. 43,852 1,992,196
Medco Health Solutions, Inc. (b) 43,276 2,445,094
Patterson Cos., Inc. (b) 19,600 811,048
Quest Diagnostics, Inc. 23,623 1,103,430
Tenet Healthcare Corp. (b) 65,570 552,099
UnitedHealth Group, Inc. 179,318 10,380,719
WellPoint, Inc. (b) 87,072 6,502,537
--------------
47,248,667
--------------
HOTELS, RESTAURANTS & LEISURE (1.4%)
Carnival Corp. 61,378 3,048,645
Darden Restaurants, Inc. 19,063 618,022
Harrah's Entertainment, Inc. 26,116 1,579,496
</Table>
<Table>
<Caption>
SHARES VALUE
HOTELS, RESTAURANTS & LEISURE (CONTINUED)
Hilton Hotels Corp. 46,557 $ 905,534
International Game Technology (a) 48,246 1,278,037
Marriott International, Inc. Class A 24,387 1,453,953
McDonald's Corp. 177,953 5,623,315
Starbucks Corp. (b) 109,062 3,084,273
Starwood Hotels & Resorts Worldwide, Inc. 30,906 1,805,838
Wendy's International, Inc. 15,943 744,857
Yum! Brands, Inc. 40,794 2,075,191
--------------
22,217,161
--------------
HOUSEHOLD DURABLES (0.7%)
Black & Decker Corp. (The) 11,431 938,828
Centex Corp. 18,174 1,169,497
D.R. Horton, Inc. 37,991 1,165,944
Fortune Brands, Inc. 20,781 1,578,733
KB HOME (a) 11,001 718,915
Leggett & Platt, Inc. 26,745 535,970
Lennar Corp. Class A 19,000 1,056,020
Maytag Corp. 11,158 192,141
Newell Rubbermaid, Inc. 38,519 885,552
Pulte Homes, Inc. (a) 30,541 1,154,144
Snap-on, Inc. (a) 8,126 292,699
Stanley Works (The) 10,565 506,380
Whirlpool Corp. (a) 9,448 741,668
--------------
10,936,491
--------------
HOUSEHOLD PRODUCTS (2.3%)
Clorox Co. (The) 21,534 1,165,420
Colgate-Palmolive Co. 73,498 3,892,454
Kimberly-Clark Corp. 67,634 3,844,317
V Procter & Gamble Co. (The) 487,614 27,301,508
--------------
36,203,699
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.7%)
AES Corp. (The) (b) 90,882 1,444,115
Calpine Corp. (a)(b) 75,269 179,140
Constellation Energy Group, Inc. 25,224 1,382,275
Duke Energy Corp. 131,526 3,482,808
Dynegy, Inc. Class A (a)(b) 46,359 205,834
TXU Corp. 34,126 3,438,195
--------------
10,132,367
--------------
INDUSTRIAL CONGLOMERATES (4.4%)
3M Co. 108,796 8,266,320
V General Electric Co. (c) 1,504,719 51,025,021
Textron, Inc. 18,988 1,367,896
Tyco International Ltd. 287,757 7,593,907
--------------
68,253,144
--------------
</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)
- --------------------------------------------------------------------------------
INSURANCE (4.7%)
ACE Ltd. 44,930 $ 2,340,853
AFLAC, Inc. 71,362 3,409,676
Allstate Corp. (The) 93,425 4,931,906
Ambac Financial Group, Inc. 15,205 1,077,882
V American International Group, Inc. 368,898 23,904,590
Aon Corp. 44,361 1,501,620
Chubb Corp. (The) 28,245 2,625,938
Cincinnati Financial Corp. 24,857 1,057,665
Hartford Financial Services Group, Inc. (The) (a) 42,609 3,398,068
Jefferson-Pilot Corp. 19,150 1,050,952
Lincoln National Corp. 24,399 1,234,833
Loews Corp. 19,273 1,792,004
Marsh & McLennan Cos., Inc. (a) 76,147 2,219,685
MBIA, Inc. (a) 19,001 1,106,618
MetLife, Inc. 107,513 5,312,217
Progressive Corp. (The) 27,828 3,222,761
Prudential Financial, Inc. 73,274 5,333,614
SAFECO Corp. 17,756 989,009
St. Paul Travelers
Cos., Inc. (The) 96,079 4,326,437
Torchmark Corp. 15,058 795,514
UnumProvident Corp. (a) 41,624 844,551
XL Capital Ltd. Class A 19,957 1,278,445
--------------
73,754,838
--------------
INTERNET & CATALOG RETAIL (0.4%)
eBay, Inc. (b) 157,860 6,251,256
--------------
INTERNET SOFTWARE & SERVICES (0.4%)
Yahoo!, Inc. (b) 179,265 6,627,427
--------------
IT SERVICES (1.0%)
Affiliated Computer Services, Inc. Class A (b) 17,682 956,773
Automatic Data Processing, Inc. 82,525 3,850,617
Computer Sciences Corp. (b) 26,650 1,365,813
Convergys Corp. (b) 19,905 323,456
Electronic Data Systems Corp. 72,484 1,689,602
First Data Corp. (a) 109,273 4,420,093
Fiserv, Inc. (b) 27,071 1,182,461
Paychex, Inc. 47,368 1,835,984
Sabre Holdings Corp. Class A 18,373 358,825
Unisys Corp. (b) 47,206 241,223
--------------
16,224,847
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Brunswick Corp. 13,539 $ 516,242
Eastman Kodak Co. (a) 40,100 878,190
Hasbro, Inc. 25,429 479,082
Mattel, Inc. 58,257 859,291
--------------
2,732,805
--------------
MACHINERY (1.4%)
Caterpillar, Inc. 96,102 5,054,004
Cummins, Inc. (a) 6,586 562,247
Danaher Corp. (a) 33,739 1,757,802
Deere & Co. (a) 34,508 2,093,945
Dover Corp. 28,511 1,111,359
Eaton Corp. 21,384 1,258,021
Illinois Tool Works, Inc. (a) 29,673 2,515,083
Ingersoll-Rand Co. Class A 48,458 1,831,228
ITT Industries, Inc. 13,160 1,337,056
Navistar International Corp. (b) 9,177 252,551
PACCAR, Inc. 24,356 1,705,407
Pall Corp. 17,390 454,922
Parker-Hannifin Corp. 16,843 1,055,719
--------------
20,989,344
--------------
MEDIA (3.4%)
Clear Channel Communications, Inc. 77,181 2,347,846
Comcast Corp. Class A (b) 312,016 8,683,405
Dow Jones & Co., Inc. (a) 8,371 283,861
Gannett Co., Inc. 35,132 2,201,371
Interpublic Group of
Cos., Inc. (The) (b) 59,220 611,743
Knight-Ridder, Inc. (a) 9,859 526,273
McGraw-Hill Cos., Inc. (The) 53,156 2,601,455
Meredith Corp. 6,319 315,318
New York Times Co. (The) Class A (a) 20,384 555,260
News Corp. Class A 348,274 4,962,905
Omnicom Group, Inc. 25,992 2,156,296
Time Warner, Inc. 667,388 11,899,528
Tribune Co. (a) 37,727 1,188,778
Univision Communications, Inc. Class A (a)(b) 32,750 856,085
Viacom, Inc. Class B 225,544 6,985,098
Walt Disney Co. (The) 286,358 6,978,544
--------------
53,153,766
--------------
METALS & MINING (0.7%)
Alcoa, Inc. 123,993 3,011,790
Allegheny Technologies, Inc. 12,511 359,191
Freeport-McMoRan Copper & Gold, Inc. Class B 25,063 1,238,613
Newmont Mining Corp. 63,485 2,704,461
Nucor Corp. 22,370 1,338,845
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
METALS & MINING (CONTINUED)
Phelps Dodge Corp. 13,772 $ 1,659,113
United States Steel Corp. (a) 15,996 584,334
--------------
10,896,347
--------------
MULTILINE RETAIL (1.2%)
Big Lots, Inc. (b) 15,833 183,188
Dillard's, Inc. Class A 9,932 205,692
Dollar General Corp. 45,621 886,872
Family Dollar Stores, Inc. (a) 23,444 519,050
Federated Department
Stores, Inc. 37,653 2,310,765
J.C. Penney Co., Inc. 35,552 1,820,262
Kohl's Corp. (b) 48,987 2,357,744
Nordstrom, Inc. 31,441 1,089,431
Sears Holdings Corp. (a)(b) 14,529 1,747,112
Target Corp. 125,746 7,002,795
--------------
18,122,911
--------------
MULTI-UTILITIES (1.1%)
Ameren Corp. (a) 28,965 1,523,559
Centerpoint Energy, Inc. (a) 43,997 582,520
CMS Energy Corp. (b) 30,234 450,789
Consolidated Edison, Inc. (a) 34,750 1,581,125
Dominion Resources, Inc. 48,462 3,686,989
DTE Energy Co. 25,311 1,093,435
KeySpan Corp. 24,226 837,493
NiSource, Inc. 38,022 899,220
PG&E Corp. 53,068 1,930,614
Public Service Enterprise Group, Inc. 33,939 2,134,424
Sempra Energy 35,800 1,585,940
TECO Energy, Inc. 28,927 500,437
Xcel Energy, Inc. (a) 56,134 1,028,936
--------------
17,835,481
--------------
OFFICE ELECTRONICS (0.1%)
Xerox Corp. (b) 134,005 1,818,448
--------------
OIL, GAS & CONSUMABLE FUELS (7.8%)
Amerada Hess Corp. 11,332 1,417,633
Anadarko Petroleum Corp. 33,558 3,044,046
Apache Corp. 46,720 2,982,138
Burlington Resources, Inc. 54,204 3,914,613
Chevron Corp. 319,689 18,244,651
ConocoPhillips 197,859 12,936,021
Devon Energy Corp. 64,468 3,892,578
El Paso Corp. 93,762 1,112,017
EOG Resources, Inc. (a) 34,168 2,315,907
V ExxonMobil Corp. 894,993 50,244,907
Kerr-McGee Corp. 16,265 1,383,176
</Table>
<Table>
<Caption>
SHARES VALUE
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
Kinder Morgan, Inc. (a) 13,577 $ 1,234,149
Marathon Oil Corp. 52,006 3,128,681
Murphy Oil Corp. 23,270 1,090,200
Occidental Petroleum Corp. 56,678 4,470,761
Sunoco, Inc. 19,460 1,449,770
Valero Energy Corp. 43,207 4,547,105
Williams Cos., Inc. (The) 79,777 1,779,027
XTO Energy, Inc. 50,606 2,199,337
--------------
121,386,717
--------------
PAPER & FOREST PRODUCTS (0.4%)
Georgia-Pacific Corp. 36,379 1,183,409
International Paper Co. 69,776 2,036,064
Louisiana-Pacific Corp. 15,499 386,390
MeadWestvaco Corp. 25,703 673,933
Weyerhaeuser Co. 34,788 2,203,472
--------------
6,483,268
--------------
PERSONAL PRODUCTS (0.1%)
Alberto-Culver Co. 10,681 463,662
Avon Products, Inc. 66,028 1,782,096
--------------
2,245,758
--------------
PHARMACEUTICALS (6.4%)
Abbott Laboratories 220,986 9,513,447
Allergan, Inc. 18,371 1,640,530
Bristol-Myers Squibb Co. 278,135 5,888,118
Eli Lilly & Co. (a) 161,183 8,025,302
Forest Laboratories, Inc. (b) 47,602 1,804,592
V Johnson & Johnson 422,900 26,481,998
King Pharmaceuticals, Inc. (b) 33,850 522,306
Merck & Co., Inc. 311,604 8,793,465
Mylan Laboratories, Inc. 30,472 585,367
V Pfizer, Inc. 1,048,057 22,784,759
Schering-Plough Corp. 209,922 4,269,814
Watson Pharmaceuticals, Inc. (b) 15,237 526,591
Wyeth 190,656 8,495,631
--------------
99,331,920
--------------
REAL ESTATE (0.8%)
Apartment Investment & Management Co. Class A 13,423 515,443
Archstone-Smith Trust 30,091 1,220,792
Equity Office Properties Trust 58,357 1,797,396
Equity Residential (a) 40,851 1,603,402
Plum Creek Timber Co., Inc. (a) 25,770 1,002,453
ProLogis 35,149 1,511,407
Public Storage, Inc. (a) 11,714 775,467
Simon Property Group, Inc. (a) 26,071 1,867,205
Vornado Realty Trust 16,740 1,355,940
--------------
11,649,505
--------------
</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)
- --------------------------------------------------------------------------------
ROAD & RAIL (0.6%)
Burlington Northern
Santa Fe Corp. 52,925 $ 3,284,526
CSX Corp. 30,183 1,382,683
Norfolk Southern Corp. 57,546 2,313,349
Union Pacific Corp. 37,536 2,596,740
--------------
9,577,298
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.1%)
Advanced Micro Devices, Inc. (b) 55,142 1,280,397
Altera Corp. (a)(b) 52,122 867,831
Analog Devices, Inc. 52,854 1,838,262
Applied Materials, Inc. 230,627 3,777,670
Applied Micro Circuits Corp. (b) 43,143 105,269
Broadcom Corp. Class A (b) 40,739 1,729,778
Freescale Semiconductor, Inc. Class B (b) 56,199 1,342,032
Intel Corp. 866,209 20,355,912
KLA-Tencor Corp. 27,499 1,272,929
Linear Technology Corp. 43,011 1,428,395
LSI Logic Corp. (b) 53,904 437,161
Maxim Integrated Products, Inc. 46,637 1,617,371
Micron Technology, Inc. (b) 85,915 1,116,036
National Semiconductor Corp. 49,646 1,123,489
Novellus Systems, Inc. 19,542 427,188
NVIDIA Corp. (a)(b) 23,351 783,426
PMC-Sierra, Inc. (a)(b) 25,133 178,444
Teradyne, Inc. (a)(b) 27,245 368,897
Texas Instruments, Inc. 230,785 6,588,912
Xilinx, Inc. 48,816 1,169,143
--------------
47,808,542
--------------
SOFTWARE (3.7%)
Adobe Systems, Inc. (a) 69,906 2,254,469
Autodesk, Inc. 32,091 1,448,267
BMC Software, Inc. (b) 31,008 607,447
Citrix Systems, Inc. (b) 23,752 654,843
Computer Associates International, Inc. 66,188 1,851,278
Compuware Corp. (b) 54,267 439,020
Electronic Arts, Inc. (b) 43,048 2,448,570
Intuit, Inc. (b) 25,955 1,192,113
Mercury Interactive Corp. (b) 11,866 412,818
V Microsoft Corp. (c) 1,309,742 33,660,369
Novell, Inc. (b) 53,025 404,051
Oracle Corp. (b) 536,149 6,798,369
Parametric Technology Corp. (b) 37,862 246,482
</Table>
<Table>
<Caption>
SHARES VALUE
SOFTWARE (CONTINUED)
Siebel Systems, Inc. 72,095 $ 746,183
Symantec Corp. (b) 170,285 4,061,297
--------------
57,225,576
--------------
SPECIALTY RETAIL (3.3%)
AutoNation, Inc. (b) 25,595 508,829
AutoZone, Inc. (b) 7,907 639,676
Bed Bath & Beyond, Inc. (b) 42,284 1,713,348
Best Buy Co., Inc. 57,526 2,546,101
Circuit City Stores, Inc. 23,361 415,592
Gap, Inc. (The) 82,345 1,422,922
Home Depot, Inc. (The) 304,268 12,487,159
Limited Brands, Inc. 49,626 993,016
Lowe's Cos., Inc. 110,830 6,735,139
Office Depot, Inc. (b) 44,929 1,236,895
OfficeMax, Inc. 9,769 273,727
RadioShack Corp. (a) 19,131 422,795
Sherwin-Williams Co. (The) 16,154 687,353
Staples, Inc. 103,879 2,361,170
Tiffany & Co. (a) 20,358 802,105
TJX Cos., Inc. (The) 67,306 1,449,098
Wal-Mart Stores, Inc. 355,129 16,801,153
--------------
51,496,078
--------------
TEXTILES, APPAREL & LUXURY GOODS (0.4%)
Coach, Inc. (b) 53,449 1,719,989
Jones Apparel Group, Inc. 17,146 467,743
Liz Claiborne, Inc. (a) 15,142 532,998
NIKE, Inc. Class B 27,154 2,282,294
Reebok International Ltd. 7,842 447,386
VF Corp. 12,679 662,478
--------------
6,112,888
--------------
THRIFTS & MORTGAGE FINANCE (1.6%)
Countrywide Financial Corp. 84,510 2,684,883
Fannie Mae 137,577 6,537,659
Freddie Mac 98,287 6,029,907
Golden West Financial Corp. (a) 36,309 2,132,428
MGIC Investment Corp. (a) 13,538 801,991
Sovereign Bancorp, Inc. 52,290 1,127,895
Washington Mutual, Inc. 141,475 5,602,410
--------------
24,917,173
--------------
TOBACCO (1.6%)
V Altria Group, Inc. 295,031 22,142,077
Reynolds American, Inc. (a) 12,154 1,033,090
UST, Inc. 23,099 956,068
--------------
24,131,235
--------------
TRADING COMPANIES & DISTRIBUTORS (0.0%)++
Grainger (W.W.), Inc. 10,787 722,513
--------------
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.8%)
Alltel Corp. 54,257 $ 3,356,338
Sprint Nextel Corp. 417,035 9,721,086
--------------
13,077,424
--------------
Total Common Stocks
(Cost $1,376,998,983) 1,548,265,139(i)
--------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (8.0%)
- --------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.4%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (d)(e) $ 6,905,813 6,905,813
--------------
Total Certificate of Deposit
(Cost $6,905,813) 6,905,813
--------------
COMMERCIAL PAPER (0.2%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (d) 2,301,938 2,301,938
National City Credit Corp.
3.72%, due 11/2/05 (c) 1,000,000 999,896
--------------
Total Commercial Paper
(Cost $3,301,834) 3,301,834
--------------
<Caption>
SHARES
INVESTMENT COMPANY (2.2%)
BGI Institutional Money Market Fund (d) 34,469,051 34,469,051
--------------
Total Investment Company
(Cost $34,469,051) 34,469,051
--------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (4.9%)
Bank of the West (The)
4.02%, due 12/8/05 (d) $ 9,207,751 9,207,751
Barclays
3.92%, due 12/5/05 (d) 4,603,876 4,603,876
3.94%, due 11/28/05 (d) 6,905,813 6,905,813
Credit Suisse First
Boston Corp.
3.74%, due 11/1/05 (d) 6,905,813 6,905,813
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (CONTINUED)
Deutsche Bank
3.95%, due 12/2/05 (d) $ 4,603,876 $ 4,603,876
First Tennessee National Corp.
3.88%, due 11/14/05 (d) 6,905,813 6,905,813
Fortis Bank
4.00%, due 12/12/05 (d) 6,905,813 6,905,813
Halifax Bank of Scotland
3.75%, due 11/1/05 (d) 6,905,813 6,905,813
Marshall & Ilsley Bank
3.97%, due 12/29/05 (d) 4,603,876 4,603,876
Societe Generale
3.77%, due 11/1/05 (d) 6,905,813 6,905,813
UBS AG
4.01%, due 12/13/05 (d) 4,603,876 4,603,876
Wells Fargo & Co.
4.00%, due 11/25/05 (d) 6,905,813 6,905,813
--------------
Total Time Deposits
(Cost $75,963,946) 75,963,946
--------------
U.S. GOVERNMENT (0.3%)
United States Treasury Bills
1.372%, due 2/9/06 (c) 200,000 197,416
3.63%, due 2/16/06 (c) 1,500,000 1,484,139
3.776%, due 2/9/06 (c) 2,200,000 2,177,182
--------------
Total U.S. Government
(Cost $3,858,737) 3,858,737
--------------
Total Short-Term Investments
(Cost $124,499,381) 124,499,381
--------------
Total Investments
(Cost $1,501,498,364) (f) 107.6% 1,672,764,520(g)
Liabilities in Excess of Cash and Other Assets (7.6) (117,896,055)
----------- --------------
Net Assets 100.0% $1,554,868,465
=========== ==============
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (H)
FUTURES CONTRACT (-0.0%)++
- -----------------------------------------------------------------------------
Standard & Poor's 500 Index
December 2005 15 $ (96,352)
Mini December 2005 6 1,667
-------------------
Total Futures Contract
(Settlement Value $4,899,690) (i) $ (94,685)
===================
</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>
++ Less than one tenth of a percent.
(a) Represents security, or a portion thereof, which is out on loan.
(b) Non-income producing security.
(c) Represents security, or a portion thereof, which is segregated or
designated as collateral for futures contracts.
(d) Represents security, or a portion thereof, purchased with cash collateral
received for securities on loan.
(e) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(f) The cost for federal income tax purposes is $1,521,047,471.
(g) At October 31, 2005 net unrealized appreciation was $151,717,049, 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 $271,605,950 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $119,888,901.
(h) Represents the difference between the value of the contracts at the time
they were opened and the value at October 31, 2005.
(i) The combined market value of common stocks and settlement value of Standard
& Poor's 500 Index futures contracts represents 99.9% of 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 59
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,501,498,364) including
$115,816,857 market value of securities
loaned $1,672,764,520
Cash 31,986
Receivables:
Fund shares sold 1,677,601
Dividends and interest 1,425,761
Variation margin on futures contracts 39,012
Other assets 60,598
--------------
Total assets 1,675,999,478
--------------
LIABILITIES:
Securities lending collateral 119,640,748
Payables:
Fund shares redeemed 685,572
Manager 329,390
Shareholder communication 138,378
Transfer agent 119,985
Professional 115,713
NYLIFE Distributors 65,250
Custodian 13,128
Accrued expenses 22,849
--------------
Total liabilities 121,131,013
--------------
Net assets $1,554,868,465
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 11,105
Class I 44,249
Additional paid-in capital 1,416,250,168
Accumulated undistributed net investment
income 18,362,847
Accumulated net realized loss on investments
and futures contracts (50,971,375)
Net unrealized appreciation on investments
and futures contracts 171,171,471
--------------
Net assets $1,554,868,465
==============
CLASS A
Net assets applicable to outstanding shares $ 309,387,356
==============
Shares of capital stock outstanding 11,105,418
==============
Net asset value per share outstanding $ 27.86
Maximum sales charge (3.00% of offering
price) 0.86
--------------
Maximum offering price per share outstanding $ 28.72
==============
CLASS I
Net assets applicable to outstanding shares $1,245,481,109
==============
Shares of capital stock outstanding 44,249,289
==============
Net asset value and offering price per share
outstanding $ 28.15
==============
</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 OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 28,248,416
Interest 3,187,344
Income from securities loaned--net 79,224
-------------
Total income 31,514,984
-------------
EXPENSES:
Manager 5,494,727
Distribution/Service--Class A 761,670
Transfer agent--Class A 563,343
Transfer agent--Class I 39,743
Professional 325,015
Shareholder communication 182,121
Custodian 135,526
Directors 115,588
Registration 38,499
Miscellaneous 105,426
-------------
Total expenses before reimbursement 7,761,658
Expense reimbursement from Manager (2,020,606)
-------------
Net expenses 5,741,052
-------------
Net investment income 25,773,932
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Security transactions (18,307,542)
Futures transactions 7,400,833
-------------
Net realized loss on investments (10,906,709)
-------------
Net change in unrealized appreciation on:
Security transactions 98,156,550
Futures transactions (809,881)
-------------
Net change in unrealized appreciation on
investments 97,346,669
-------------
Net realized and unrealized gain on
investments 86,439,960
-------------
Net increase in net assets resulting from
operations $ 112,213,892
=============
</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 CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 25,773,932 $ 15,150,402
Net realized gain (loss) on
investments (10,906,709) 2,084,240
Net change in unrealized
appreciation on investments 97,346,669 76,378,479
-------------------------------
Net increase in net assets
resulting from operations 112,213,892 93,613,121
-------------------------------
Dividends to shareholders:
From net investment income:
Class A (3,521,725) --
Class I (16,314,898) (9,637,543)
Service Class -- (2,029,302)
-------------------------------
Total dividends to shareholders (19,836,623) (11,666,845)
-------------------------------
Capital share transactions:
Net proceeds from sale of
shares:
Class A 131,907,053 339,361,707
Class I 442,646,109 331,146,317
Service Class -- 16,110,983
Net asset value of shares issued
to shareholders in reinvestment
of dividends:
Class A 3,418,513 --
Class I 16,313,839 9,634,831
Service Class -- 2,029,023
-------------------------------
594,285,514 698,282,861
Cost of shares redeemed:
Class A (125,812,654) (65,366,049)
Class I (268,830,636) (201,319,436)
Service Class -- (225,114,946)
-------------------------------
(394,643,290) (491,800,431)
Increase in net assets
derived from capital share
transactions 199,642,224 206,482,430
-------------------------------
Net increase in net assets 292,019,493 288,428,706
NET ASSETS:
Beginning of year 1,262,848,972 974,420,266
-------------------------------
End of year $1,554,868,465 $1,262,848,972
===============================
Accumulated undistributed net
investment income at end of year $ 18,362,847 $ 12,428,343
===============================
</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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
---------------------------- ------------------------------------------------------------------
JANUARY 2,
2004*
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31, YEAR ENDED OCTOBER 31,
2005 2004 2005 2004 2003 2002 2001
Net asset value at beginning
of period $ 26.11 $ 25.46 $ 26.35 $ 24.43 $ 20.57 $ 25.84 $ 37.38
----------- ----------- ---------- -------- -------- -------- --------
Net investment income 0.40(d) 0.20 0.48(d) 0.33 0.32(a) 0.31 0.30(a)
Net realized and unrealized
gain on investments 1.68 0.45 1.73 1.88 3.85 (3.86) (9.06)
----------- ----------- ---------- -------- -------- -------- --------
Total from investment
operations 2.08 0.65 2.21 2.21 4.17 (3.55) (8.76)
----------- ----------- ---------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment income (0.33) -- (0.41) (0.29) (0.31) (0.32) (0.36)
From net realized gain on
investments -- -- -- -- -- (1.40) (2.42)
----------- ----------- ---------- -------- -------- -------- --------
Total dividends and
distributions -- -- (0.41) (0.29) (0.31) (1.72) (2.78)
----------- ----------- ---------- -------- -------- -------- --------
Net asset value at end of
period $ 27.86 $ 26.11 $ 28.15 $ 26.35 $ 24.43 $ 20.57 $ 25.84
=========== =========== ========== ======== ======== ======== ========
Total investment return (b) 7.97% 2.55%(c) 8.42% 9.10% 20.59% (15.23)% (24.90)%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 1.43%(d) 1.09%+ 1.86%(d) 1.38% 1.46% 1.31% 1.03%
Net expenses 0.73% 0.59%+ 0.30% 0.30% 0.30% 0.30% 0.30%
Expenses (before
reimbursement) 0.87% 0.87%+ 0.44% 0.58% 0.61% 0.59% 0.57%
Portfolio turnover rate 6% 2% 6% 2% 3% 4% 5%
Net assets at end of period
(in 000's) $309,387 $280,346 $1,245,481 $982,503 $777,843 $527,277 $612,937
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(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) Net investment income and the ratio of net investment income includes $0.07 and 0.26%,
respectively, as a result of a special one time dividend from Microsoft Corp.
</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
MAINSTAY SMALL CAP OPPORTUNITY FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 15.92% 15.78% 13.92%
Excluding sales charges 22.66 17.09 14.57
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALLCAP CAP VALUE
FUND VALUE INDEX 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------ ------------- -------------
10/31/95 9450 10000 10000 10000 10000
11703 11958 12046 12410 11702
16435 16403 15897 16394 15963
15778 15142 14139 20000 14029
16461 15250 15842 25134 14342
16730 17888 19844 26665 17072
16684 19454 18567 20024 18424
17627 18962 17865 16999 17891
24959 26602 23864 20535 25311
30024 31388 27868 22470 29644
10/31/05 36828 35480 32124 24429 34013
<Caption>
RUSSELL 2000
INDEX
------------
10/31/95 10000
11660
15081
13295
15272
17930
15653
13842
19845
22172
10/31/05 24851
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 16.59% 16.00% 13.53%
Excluding sales charges 21.59 16.22 13.53
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALLCAP CAP VALUE
FUND VALUE INDEX 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------ ------------- -------------
10/31/95 10000 10000 10000 10000 10000
12274 11958 12046 12410 11702
17007 16403 15897 16394 15963
16127 15142 14139 20000 14029
16640 15250 15842 25134 14342
16774 17888 19844 26665 17072
16607 19454 18567 20024 18424
17410 18962 17865 16999 17891
24505 26602 23864 20535 25311
29248 31388 27868 22470 29644
10/31/05 35562 35480 32124 24429 34013
<Caption>
RUSSELL 2000
INDEX
------------
10/31/95 10000
11660
15081
13295
15272
17930
15653
13842
19845
22172
10/31/05 24851
</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 max-imum 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 contractual and
may be modified or terminated only with the approval of the Board of
Directors/Trustees. 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 1.00% sales charge and a
1.00% 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.
64 MainStay Small Cap Opportunity Fund
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges 20.72% 16.25% 13.55%
Excluding sales charges 21.72 16.25 13.55
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALLCAP CAP VALUE
FUND VALUE INDEX 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------ ------------- -------------
10/31/95 10000 10000 10000 10000 10000
12268 11958 12046 12410 11702
17007 16403 15897 16394 15963
16125 15142 14139 20000 14029
16654 15250 15842 25134 14342
16788 17888 19844 26665 17072
16606 19454 18567 20024 18424
17425 18962 17865 16999 17891
24547 26602 23864 20535 25311
29283 31388 27868 22470 29644
10/31/05 35643 35480 32124 24429 34013
<Caption>
RUSSELL 2000
INDEX
------------
10/31/95 10000
11660
15081
13295
15272
17930
15653
13842
19845
22172
10/31/05 24851
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
23.15% 17.45% 14.91%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY
SMALL CAP LIPPER SMALL-
OPPORTUNITY RUSSELL 2000 S&P SMALLCAP CAP VALUE
FUND VALUE INDEX 600 INDEX S&P 500 INDEX FUNDS INDEX
----------- ------------ ------------ ------------- -------------
10/31/95 10000 10000 10000 10000 10000
12415 11958 12046 12410 11702
17490 16403 15897 16394 15963
16855 15142 14139 20000 14029
17633 15250 15842 25134 14342
17962 17888 19844 26665 17072
17962 19454 18567 20024 18424
19011 18962 17865 16999 17891
27004 26602 23864 20535 25311
32600 31388 27868 22470 29644
10/31/05 40146 35480 32124 24429 34013
<Caption>
RUSSELL 2000
INDEX
------------
10/31/95 10000
11660
15081
13295
15272
17930
15653
13842
19845
22172
10/31/05 24851
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- ------------------------------------------------------------
Russell 2000(R) Value Index(1) 13.04% 14.68% 13.50%
S&P 500(R) Index(2) 8.72 -1.74 9.34
Russell 2000(R) Index(3) 12.08 6.75 9.53
S&P SmallCap 600(R) Index(4) 15.27 10.11 12.38
Lipper Small-Cap Value Funds
Index(5) 14.74 14.78 13.02
Average Lipper small-cap value
fund(6) 13.61 14.12 12.63
</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 unmanagedindex 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 65
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/01/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,139.80 $ 8.95 $1,016.70 $ 8.44
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,135.75 $12.97 $1,012.95 $12.23
- ------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,136.35 $12.98 $1,012.95 $12.23
- ------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,142.10 $ 6.26 $1,019.20 $ 5.90
- ------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.66% for Class A, 2.41% for Class B and Class C, and 1.16% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 184 (to reflect the one-half year period).
66 MainStay Small Cap Opportunity Fund
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Common Stocks 99.1
Short-Term Investments (collateral from securities lending 17.3
is 17.3%)
Liabilities in Excess of Cash and Other Assets (16.4)
</Table>
See Portfolio of Investments on page 70 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Westar Energy, Inc.
2. Laidlaw International, Inc.
3. AmerUs Group Co.
4. Helmerich & Payne, Inc.
5. Overseas Shipholding Group, Inc.
6. Florida East Coast Industries, Inc.
7. Commerce Group, Inc.
8. Sunrise Senior Living, Inc.
9. Selective Insurance Group, Inc.
10. PNM Resources, Inc.
</Table>
www.MAINSTAYfunds.com 67
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 fundamental characteristics and have been overlooked by
the market. The Fund uses a quantitative and statistical model to analyze the
relative quality and price of the stocks.
WHAT MAJOR FACTORS INFLUENCED THE STOCK AND BOND MARKETS DURING THE 12 MONTHS
ENDED OCTOBER 31, 2005?
For the 12 months ended October 31, 2005, all broadly watched equity indices
provided positive performance. Mid- and small-capitalization stocks generally
outperformed their large-cap counterparts. The market favored value stocks over
growth stocks at all capitalization levels. Despite wide fluctuations in
crude-oil prices, instability in many regions of the world, and the devastation
caused by hurricanes Katrina and Rita, the U.S. stock market posted significant
gains during the 12 months ended October 31, 2005.
The Federal Open Market Committee continued to raise its target for the federal
funds rate, with eight 25-basis-point increases during the reporting period. (A
basis point is one-hundredth of a percentage point.) At the end of October 2005,
the target rate stood at 3.75%, its highest level in more than four years. Among
the considerations that influenced the gradual tightening policy were mounting
inflationary pressures, low unemployment, an upward path of record energy
prices, and growing labor costs.
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All share classes of MainStay Small Cap Opportunity Fund outperformed the
Russell 2000(R) Value Index(2), the Fund's primary benchmark for the 12 months
ended October 31, 2005. Fund holdings in the energy, consumer discretionary, and
materials sectors showed strong performance relative to related stocks in the
Index. In addition to providing strong returns, the Fund's position in the
energy sector was significantly overweighted, which enhanced the Fund's relative
performance.
WHICH SECTORS AND INDIVIDUAL STOCKS PROVIDED THE STRONGEST PERFORMANCE FOR THE
FUND DURING THE 12-MONTH REPORTING PERIOD?
For the 12 months ended October 31, 2005, the Fund's five strongest-performing
sectors were energy, industrials, financials, consumer discretionary, and
materials.
Among the strongest individual contributors to the Fund's performance were
independent energy company Vintage Petroleum, Massachusetts-based automobile
insurance company Safety Insurance Group, property and casualty insurance
company United Fire & Casualty, steel manufacturer and marketer Oregon Steel
Mills, and energy company Frontier Oil.
WHICH SECTORS AND INDIVIDUAL STOCKS DETRACTED FROM THE FUND'S PERFORMANCE?
The Fund's five weakest-performing sectors during the 12-month reporting period
were information technology, telecommunication services, health care, consumer
staples, and utilities.
The individual stock that made the greatest negative contribution to the Fund's
performance was Doral Financial, a financial services company in Puerto Rico and
New York City. The second-greatest negative contribution came from Hutchinson
Technology, which manufactures and sells components of hard
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.
The Fund's use of securities lending presents the risk of default by the
borrower, which may result in a loss to the Fund.
The Fund may experience a portfolio turnover rate of 100% and may generate
short-term capital gains which are taxable.
1. See footnote on page 65 for more information on the Russell 2000(R) Index and
the S&P SmallCap 600(R) Index.
2. See footnote on page 65 for more information on the Russell 2000(R) Value
Index.
68 MainStay Small Cap Opportunity Fund
disk drives. Next was MRV Communications, which designs, manufactures, and sells
network infrastructure equipment, followed by Komag, a producer of disks for
disk drives, and by Universal American Financial, a holding company for
specialty health and life insurance organizations.
WERE THERE ANY SIGNIFICANT EQUITY PURCHASES OR SALES DURING THE REPORTING
PERIOD?
The Fund uses a proprietary model to select stocks that are relatively
undervalued. One of the stocks the Fund purchased during the reporting period
was SkyWest, which operates a regional airline in the United States. The Fund
purchased the stock in July 2005. We established a position in Investment
Technology Group, an investment brokerage trade-execution company, in June 2005
and added to the position in October 2005. The Fund also established a position
in St. Mary Land & Exploration, an oil and gas company, in December 2004 and
added to the position in October 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 are no longer attractive according to the model. In
July 2005, the Fund sold its entire position in Frontier Oil. In June and July,
the Fund eliminated its entire position in Lufkin Industries, a producer of
pumping units used to extract crude oil and fluids. In July, the Fund also sold
its entire position in Cenveo, which provides communication solutions through
print and electronic media. Our proprietary quantitative model indicated that
all three of these stocks had become overvalued.
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 more than tripled its weighting in the
utilities sector. The Fund's weighting in the energy sector, on the other hand,
declined substantially from the beginning of the reporting period to the end of
October 2005.
HOW DID THE FUND'S WEIGHTINGS DIFFER FROM THOSE OF THE RUSSELL 2000(R) VALUE
INDEX AT THE END OF THE REPORTING PERIOD?
As of October 31, 2005, the Fund was overweighted relative to the Russell
2000(R) Value Index in the utilities, energy, and consumer staples sectors. As
previously discussed, the Fund's overweighted position relative to the Russell
2000(R) Value Index in the energy sector had a positive impact on relative per-
formance. As of the same date, the Fund was under-
weighted in the information technology, financials, and materials sectors.
Although the Fund had poor stock selection in the information technology sector,
the Fund's underweighted position in the sector helped relative performance.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
INFORMATION ABOUT MAINSTAY SMALL CAP OPPORTUNITY FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 69
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (99.1%)+
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.3%)
DRS Technologies, Inc. 36,310 $ 1,788,631
------------
AIRLINES (0.4%)
SkyWest, Inc. 73,422 2,151,999
------------
AUTO COMPONENTS (0.2%)
R&B, Inc. (a) 110,628 1,227,971
------------
CAPITAL MARKETS (0.7%)
Apollo Investment Corp. 28,407 530,643
Capital Southwest Corp. 14,274 1,248,261
Investment Technology Group, Inc. (a) 72,575 2,359,413
------------
4,138,317
------------
CHEMICALS (0.2%)
H.B. Fuller Co. 40,827 1,223,585
------------
COMMERCIAL BANKS (0.5%)
ABC Bancorp 2,220 42,957
Citizens & Northern Corp. (b) 21,826 594,322
First Community Bancorp 19,745 993,568
First Indiana Corp. 48,493 1,695,315
------------
3,326,162
------------
COMMERCIAL SERVICES & SUPPLIES (2.5%)
Consolidated Graphics, Inc. (a) 18,447 719,249
Corrections Corp. of America (a) 154,829 6,174,581
FTI Consulting, Inc. (a)(b) 97,393 2,665,646
Hudson Highland Group, Inc. (a) 142,203 3,402,918
Pico Holdings, Inc. (a) 67,134 2,254,360
------------
15,216,754
------------
COMMUNICATIONS EQUIPMENT (0.5%)
Digi International, Inc. (a) 101,576 1,077,721
MRV Communications, Inc. (a) 1,167,174 2,252,646
------------
3,330,367
------------
COMPUTERS & PERIPHERALS (1.9%)
Hutchinson Technology, Inc. (a)(b) 199,898 4,957,470
Intergraph Corp. (a)(b) 4,664 225,644
Komag, Inc. (a)(b) 235,564 6,317,827
Tidel Technologies, Inc. (a) 11,241 2,979
------------
11,503,920
------------
CONSTRUCTION & ENGINEERING (2.8%)
Quanta Services, Inc. (a) 289,877 3,330,687
URS Corp. (a) 169,793 6,864,731
Washington Group International, Inc. (a)(b) 143,982 7,155,905
------------
17,351,323
------------
CONSUMER FINANCE (0.5%)
Advanta Corp. Class B 99,738 2,829,567
------------
CONTAINERS & PACKAGING (0.8%)
Greif, Inc. Class A 84,174 5,134,614
------------
DISTRIBUTORS (0.8%)
Building Material Holding Corp. 55,136 4,687,111
------------
</Table>
<Table>
<Caption>
SHARES VALUE
DIVERSIFIED CONSUMER SERVICES (0.5%)
Alderwoods Group, Inc. (a) 179,920 $ 2,831,941
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
Talk America Holdings, Inc. (a)(b) 102,570 988,775
------------
ELECTRIC UTILITIES (5.1%)
Cleco Corp. 173,368 3,675,402
El Paso Electric Co. (a) 324,319 7,021,506
Empire District
Electric Co. (The) (b) 73,029 1,475,186
Sierra Pacific Resources (a)(b) 558,366 7,230,840
V Westar Energy, Inc. 530,176 11,716,890
------------
31,119,824
------------
ELECTRICAL EQUIPMENT (1.2%)
General Cable Corp. (a) 55,480 901,550
Regal-Beloit Corp. (b) 192,906 6,140,198
------------
7,041,748
------------
ENERGY EQUIPMENT & SERVICES (1.8%)
V Helmerich & Payne, Inc. 172,723 9,568,854
SEACOR Holdings, Inc. (a) 15,871 1,136,840
------------
10,705,694
------------
FOOD & STAPLES RETAILING (3.4%)
Great Atlantic & Pacific Tea Co. (The) (a)(b) 60,599 1,702,226
Ingles Markets, Inc. Class A 241,428 3,891,819
Nash Finch Co. (b) 200,313 6,221,722
Performance Food Group Co. (a)(b) 266,937 7,364,792
Smart & Final, Inc. (a) 135,977 1,706,511
------------
20,887,070
------------
</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.
70 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 PRODUCTS (2.4%)
Chiquita Brands International, Inc. (b) 266,613 $ 7,361,185
Sanderson Farms, Inc. 40,765 1,406,800
Seaboard Corp. 4,324 6,144,404
------------
14,912,389
------------
GAS UTILITIES (3.3%)
Energen Corp. 144,355 5,427,748
New Jersey Resources Corp. 3,182 137,335
Northwest Natural Gas Co. 179,557 6,212,672
South Jersey Industries, Inc. 21,798 609,254
WGL Holdings, Inc. 241,112 7,493,761
------------
19,880,770
------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.6%)
Viasys Healthcare, Inc. (a) 143,046 3,417,369
Vital Signs, Inc. 7,767 364,894
------------
3,782,263
------------
HEALTH CARE PROVIDERS & SERVICES (5.8%)
Alliance Imaging, Inc. (a) 195,824 1,353,144
Genesis HealthCare Corp. (a) 164,262 6,665,752
Gentiva Health Services, Inc. (a) 298,949 4,391,561
Kindred Healthcare, Inc. (a) 235,381 6,590,668
Medcath Corp. (a) 95,408 1,754,553
Sierra Health Services, Inc. (a) 83,922 6,294,150
V Sunrise Senior Living, Inc. (a)(b) 256,210 8,285,831
------------
35,335,659
------------
HOTELS, RESTAURANTS & LEISURE (1.7%)
Jack in the Box, Inc. (a) 90,138 2,677,099
LoneStar Steakhouse & Saloon, Inc. 74,280 1,917,167
O'Charley's, Inc. (a) 43,054 590,270
Vail Resorts, Inc. (a) 158,134 5,297,489
------------
10,482,025
------------
HOUSEHOLD DURABLES (2.7%)
Avatar Holdings, Inc. (a)(b) 13,187 747,044
Blount International, Inc. (a) 288,334 4,572,977
California Coastal Communities, Inc. (a) 103,782 3,705,017
National Presto Industries, Inc. 112,711 4,940,123
WCI Communities, Inc. (a)(b) 106,907 2,674,813
------------
16,639,974
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (2.3%)
Black Hills Corp. 165,512 6,880,334
Dynegy, Inc. Class A (a)(b) 1,563,107 6,940,195
------------
13,820,529
------------
INSURANCE (17.3%)
21st Century Insurance Group 20,499 326,959
Allmerica Financial Corp. (a) 87,037 3,316,110
American Equity Investment Life Holding Co. (b) 307,645 3,580,988
American Physicians Capital, Inc. (a) 49,512 2,092,872
V AmerUs Group Co. 179,418 10,607,192
</Table>
<Table>
<Caption>
SHARES VALUE
INSURANCE (CONTINUED)
Argonaut Group, Inc. (a) 219,874 $ 6,411,526
V Commerce Group, Inc. 154,934 8,803,350
Delphi Financial Group, Inc. Class A 32,136 1,505,250
FBL Financial Group, Inc. Class A 40,189 1,253,093
FPIC Insurance Group, Inc. (a) 61,002 2,296,725
Harleysville Group, Inc. 27,768 674,762
Horace Mann Educators Corp. 46,691 906,272
Kansas City Life Insurance Co. 10,492 535,092
LandAmerica Financial Group, Inc. (b) 119,606 7,554,315
Midland Co. (The) 23,486 887,066
National Western Life Insurance Co. Class A 5,841 1,182,861
Odyssey Re Holdings Corp. (b) 44,710 1,148,153
Ohio Casualty Corp. 283,512 7,734,207
Phoenix Cos., Inc. (The) (b) 293,438 3,800,022
RLI Corp. 118,983 6,395,336
Safety Insurance Group, Inc. 95,232 3,581,676
V Selective Insurance Group, Inc. (b) 146,224 8,029,160
Stewart Information Services Corp. 44,951 2,289,354
United Fire & Casualty Co. (b) 152,242 6,853,935
Universal American Financial Corp. (a) 440,153 6,514,264
Zenith National Insurance Corp. (b) 157,651 7,097,448
------------
105,377,988
------------
INTERNET & CATALOG RETAIL (0.1%)
Systemax, Inc. (a) 84,874 606,849
------------
MACHINERY (2.9%)
Circor International, Inc. 39,636 1,116,546
EnPro Industries, Inc. (a) 247,498 6,905,194
Gehl Co. (a) 13,487 309,796
NACCO Industries, Inc. Class A 58,230 6,761,085
Terex Corp. (a)(b) 52,358 2,878,119
------------
17,970,740
------------
</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 71
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
MEDIA (1.4%)
Carmike Cinemas, Inc. 8,770 $ 193,642
Lin TV Corp. Class A (a) 99,155 1,272,159
RCN Corp. (a)(b) 221,932 4,505,220
Scholastic Corp. (a) 69,768 2,270,948
------------
8,241,969
------------
METALS & MINING (1.9%)
A.M. Castle & Co. (a) 135,118 2,692,902
Commercial Metals Co. 58,361 1,855,296
Ryerson Tull, Inc. (b) 261,726 5,284,248
Steel Technologies, Inc. 60,807 1,593,751
------------
11,426,197
------------
MULTILINE RETAIL (0.3%)
Dillard's, Inc. Class A 92,875 1,923,441
------------
MULTI-UTILITIES (1.3%)
V PNM Resources, Inc. 307,364 7,791,677
------------
OIL, GAS & CONSUMABLE FUELS (8.0%)
Cabot Oil & Gas Corp. 14,736 674,761
Callon Petroleum Co. (a) 268,128 4,906,742
Cimarex Energy Co. (a)(b) 98,840 3,880,458
Encore Acquisition Co. (a) 139,875 4,799,111
Giant Industries, Inc. (a) 102,130 5,840,815
V Overseas Shipholding Group, Inc. 192,781 9,176,376
</Table>
<Table>
<Caption>
SHARES VALUE
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
Petroleum Development Corp. (a) 28,928 $ 971,402
Remington Oil & Gas Corp. (a) 38,710 1,354,850
St. Mary Land & Exploration Co. 166,386 5,658,788
Swift Energy Co. (a)(b) 90,500 3,951,230
USEC, Inc. 78,173 781,730
Vintage Petroleum, Inc. 125,639 6,519,408
------------
48,515,671
------------
REAL ESTATE (5.2%)
American Home Mortgage Investment Corp. (b) 248,739 6,723,415
Arbor Realty Trust, Inc. 134,167 3,536,642
Capital Trust, Inc. Class A 24,443 748,445
Commercial Net Lease Realty, Inc. 104,565 2,026,470
CRIIMI MAE, Inc. (a) 192,350 3,768,137
FelCor Lodging Trust, Inc. (a)(b) 232,343 3,466,558
Gramercy Capital Corp. 31,302 738,414
LaSalle Hotel Properties 166,638 5,897,319
Luminent Mortgage Capital, Inc. 224,242 1,565,209
Trammell Crow Co. (a) 119,254 3,049,325
------------
31,519,934
------------
ROAD & RAIL (5.4%)
Amerco, Inc. 6,490 378,562
Dollar Thrifty Automotive Group, Inc. (a) 133,113 5,018,360
V Florida East Coast Industries, Inc. 202,649 8,833,470
Kansas City Southern (a)(b) 231,600 5,132,256
V Laidlaw International, Inc. 479,311 10,899,532
RailAmerica, Inc. (a) 215,259 2,550,819
------------
32,812,999
------------
SOFTWARE (2.1%)
Reynolds & Reynolds Co. (The) Class A 57,768 1,533,163
Take-Two Interactive Software, Inc. (a)(b) 288,081 5,948,873
THQ, Inc. (a) 235,612 5,461,486
------------
12,943,522
------------
SPECIALTY RETAIL (3.1%)
Asbury Automotive Group, Inc. (a) 7,284 123,100
Burlington Coat Factory Warehouse Corp. 167,376 6,454,019
Payless ShoeSource, Inc. (a) 153,101 2,812,465
Rent-Way, Inc. (a) 159,214 982,350
Sports Authority, Inc. (The) (a)(b) 145,571 4,052,697
Stage Stores, Inc. 109,156 3,025,804
United Auto Group, Inc. 49,227 1,660,427
------------
19,110,862
------------
TEXTILES, APPAREL & LUXURY GOODS (1.8%)
Brown Shoe Co., Inc. 59,570 1,934,238
Hartmarx Corp. (a) 130,680 912,146
Phillips-Van Heusen Corp. 31,837 905,763
Stride Rite Corp. 73,615 958,467
Warnaco Group, Inc. (The) (a) 279,327 6,335,136
------------
11,045,750
------------
THRIFTS & MORTGAGE FINANCE (3.7%)
Corus Bankshares, Inc. (b) 71,672 3,934,793
Doral Financial Corp. (b) 640,907 5,486,164
Downey Financial Corp. 117,637 7,169,975
FirstFed Financial Corp. (a) 49,472 2,646,257
Franklin Bank Corp. (a) 31,019 535,078
ITLA Capital Corp. (a) 38,601 1,921,172
TierOne Corp. 40,124 1,133,904
------------
22,827,343
------------
TRADING COMPANIES & DISTRIBUTORS (1.4%)
GATX Corp. 207,669 7,760,591
Huttig Building Products, Inc. (a) 110,059 935,502
------------
8,696,093
------------
</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)
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.1%)
Price Communications Corp. (a) 37,373 $ 568,817
------------
Total Common Stocks
(Cost $569,186,403) 603,718,834
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (17.3%)
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (1.4%)
Skandinaviska Enskilda
Banken AB
4.082%, due 2/22/06 (c)(d) $ 8,643,052 8,643,052
------------
Total Certificate of Deposit
(Cost $8,643,052) 8,643,052
------------
COMMERCIAL PAPER (1.0%)
Falcon Asset Securitization Corp. 4.026%, due
12/2/05 (c) 5,646,506 5,646,506
------------
Total Commercial Paper
(Cost $5,646,506) 5,646,506
------------
<Caption>
SHARES
INVESTMENT COMPANY (2.6%)
BGI Institutional Money Market Fund (c) 15,926,482 15,926,482
------------
Total Investment Company
(Cost $15,926,482) 15,926,482
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (12.3%)
Bank of the West (The)
4.02%, due 12/8/05 (c) $11,524,070 11,524,070
Barclays
3.92%, due 12/5/05 (c) 5,762,035 5,762,035
3.94%, due 11/28/05 (c) 5,762,035 5,762,035
Credit Suisse First Boston, Inc.
3.74%, due 11/1/05 (c) 8,643,052 8,643,052
Deutsche Bank
3.95%, due 12/2/05 (c) 5,762,035 5,762,035
First Tennessee National Corp.
3.88%, due 11/14/05 (c) 5,762,034 5,762,034
Halifax Bank of Scotland
3.75%, due 11/1/05 (c) 5,762,035 5,762,035
Marshall & Ilsley Bank
3.97%, due 12/29/05 (c) 5,762,035 5,762,035
Societe Generale
3.77%, due 11/1/05 (c) 8,643,052 8,643,052
UBS AG
4.01%, due 12/13/05 (c) 5,762,035 5,762,035
Wells Fargo & Co.
4.00%, due 11/25/05 (c) 5,762,035 5,762,035
------------
Total Time Deposits
(Cost $74,906,453) 74,906,453
------------
Total Short-Term Investments
(Cost $105,122,493) 105,122,493
------------
Total Investments
(Cost $674,308,896) (e) 116.4% 708,841,327(f)
Liabilities in Excess of Cash and Other Assets (16.4) (99,811,770)
----------- ------------
Net Assets 100.0% $609,029,557
=========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Represents security, or a portion thereof, which is out on loan.
(c) Represents security, or a portion thereof, purchased with cash collateral
received for securities on loan.
(d) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(e) The cost for federal income tax purposes is $677,951,678.
(f) At October 31, 2005 net unrealized appreciation was $30,889,649, 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 $58,050,718 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $27,161,069.
</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
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $674,308,896) including
$100,916,164 market value of securities
loaned $708,841,327
Cash 8,410,453
Receivables:
Fund shares sold 6,473,563
Investment securities sold 4,555,220
Dividends and interest 494,008
Other assets 50,794
-------------
Total assets 728,825,365
-------------
LIABILITIES:
Securities lending collateral 105,122,493
Payables:
Investment securities purchased 12,960,367
Fund shares redeemed 791,344
Manager 491,331
Transfer agent 186,444
NYLIFE Distributors 113,905
Shareholder communication 56,820
Custodian 3,528
Accrued expenses 69,576
-------------
Total liabilities 119,795,808
-------------
Net assets $609,029,557
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
Class A $ 99,296
Class B 25,281
Class C 25,182
Class I 160,462
Additional paid-in capital 514,297,631
Accumulated undistributed net realized gain on
investments 59,889,274
Net unrealized appreciation on investments 34,532,431
-------------
Net assets $609,029,557
=============
CLASS A
Net assets applicable to outstanding shares $194,615,349
=============
Shares of capital stock outstanding 9,929,568
=============
Net asset value per share outstanding $ 19.60
Maximum sales charge (5.50% of offering price) 1.14
-------------
Maximum offering price per share outstanding $ 20.74
=============
CLASS B
Net assets applicable to outstanding shares $ 48,496,182
=============
Shares of capital stock outstanding 2,528,141
=============
Net asset value and offering price per share
outstanding $ 19.18
=============
CLASS C
Net assets applicable to outstanding shares $ 48,315,601
=============
Shares of capital stock outstanding 2,518,225
=============
Net asset value and offering price per share
outstanding $ 19.19
=============
CLASS I
Net assets applicable to outstanding shares $317,602,425
=============
Shares of capital stock outstanding 16,046,216
=============
Net asset value and offering price per share
outstanding $ 19.79
=============
</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.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 4,608,908
Interest 144,077
Income from securities loaned--net 72,857
------------
Total income 4,825,842
------------
EXPENSES:
Manager 4,014,003
Transfer agent--Classes A, B and C 414,410
Transfer agent--Class I 155,159
Distribution--Class B 252,262
Distribution--Class C 151,684
Distribution/Service--Class A 201,059
Service--Class B 84,087
Service--Class C 50,561
Professional 110,485
Shareholder communication 92,412
Registration 65,641
Custodian 65,136
Trustees 28,629
Miscellaneous 28,088
------------
Net expenses 5,713,616
------------
Net investment loss (887,774)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 61,067,318
Net change in unrealized appreciation on
investments 2,629,815
------------
Net realized and unrealized gain on investments 63,697,133
------------
Net increase in net assets resulting from
operations $62,809,359
============
</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 CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income (loss) $ (887,774) $ 498,063
Net realized gain on investments 61,067,318 40,242,703
Net change in unrealized
appreciation on investments 2,629,815 (4,766,868)
-----------------------------
Net increase in net assets
resulting from operations 62,809,359 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 186,567,392 26,466,450
Class B 32,762,708 15,449,601
Class C 44,287,573 5,487,844
Class I 156,616,407 120,485,449
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 $ 3,678,131 $ --
Class B 2,891,437 --
Class C 864,881 69
Class I 29,358,441 8,970,892
Service Class -- 61,284
-----------------------------
457,026,970 177,071,689
Cost of shares redeemed:
Class A (23,646,858) (2,619,360)
Class B (3,927,509) (1,096,142)
Class C (3,193,494) (189,760)
Class I (79,008,062) (123,333,409)
Service Class -- (1,347,714)
-----------------------------
(109,775,923) (128,586,385)
Increase in net assets derived from
capital share transactions 347,251,047 48,485,304
-----------------------------
Net increase in net assets 369,510,247 75,084,063
NET ASSETS:
Beginning of year 239,519,310 164,435,247
-----------------------------
End of year $ 609,029,557 $ 239,519,310
=============================
</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.
This page intentionally left blank
www.MAINSTAYfunds.com 77
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
---------------------------- ---------------------------- -------------------------------
JANUARY 2, JANUARY 2,
2004** 2004**
YEAR ENDED THROUGH YEAR ENDED THROUGH YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 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)
(e) (0.08) (0.09) (0.22) (0.19) (0.22) (0.25)
Net realized and unrealized
gain (loss) on investments 4.01 1.89 3.93 1.86 3.95 3.28
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations 3.93 1.80 3.71 1.67 3.73 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 $ 19.60 $ 18.58 $ 19.18 $ 18.38 $ 19.19 $18.37
=========== =========== =========== =========== =========== ===========
Total investment return (b) 22.66% 10.73%(c) 21.59% 9.99%(c) 21.72% 19.29%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income
(loss) (0.44%) (0.36%)++ (1.19%) (1.12%)++ (1.19%) (1.13%)
Net expenses 1.66% 1.87% ++# 2.41% 2.62% ++# 2.41% 2.62% #
Expenses (before
reimbursement) 1.66% 1.87% ++# 2.41% 2.62% ++# 2.41% 2.62% #
Portfolio turnover rate 159% 132% 159% 132% 159% 132%
Net assets at end of period
(in 000's) $194,615 $24,621 $48,496 $14,905 $48,316 $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)
(e) (0.05)
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 135%
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.
+ Less than 0.01% of average net assets.
++ Annualized.
# Includes transfer agent fees paid indirectly 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 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>
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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
-------------------------------------------------------------------------------------
JANUARY 1,
2001*
THROUGH YEAR ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
$ 18.67 $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76
-------- -------- -------- -------- ----------- ------------
0.01(e) 0.06(e) 0.07(e) 0.15 0.08 (0.00)(a)
4.02 3.21 4.74 0.50 0.31 (1.11)
-------- -------- -------- -------- ----------- ------------
4.03 3.27 4.81 0.65 0.39 (1.11)
-------- -------- -------- -------- ----------- ------------
-- (0.05) (0.13) (0.11) -- --
(2.91) (0.81) -- -- -- --
-------- -------- -------- -------- ----------- ------------
(2.91) (0.86) (0.13) (0.11) -- --
-------- -------- -------- -------- ----------- ------------
$ 19.79 $ 18.67 $ 16.26 $ 11.58 $ 11.04 $ 10.65
======== ======== ======== ======== =========== ============
23.15% 20.72% 42.04% 5.84% 3.66%(c) (9.44%)
0.06% 0.32% 0.53% 1.08% 0.70%++ (0.00%)+
1.16% 1.18%# 1.27%# 1.26%# 1.23%(d)++# 1.21%#
1.16% 1.18%# 1.34%# 1.27%# 1.23%(d)++# 1.21%#
159% 132% 135% 103% 77% 105%
$317,602 $194,476 $163,362 $111,181 $108,105 $157,630
</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 79
MAINSTAY CASH RESERVES FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
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>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
2.42% 2.06% 3.67%
</Table>
7-DAY CURRENT YIELD: 3.38%
(PERFORMANCE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER INSTITUTIONAL
MAINSTAY CASH RESERVES FUND MONEY MARKET FUND
--------------------------- ----------------------------
10/31/95 10000 10000
10518 10531
11067 11095
11655 11695
12216 12266
12947 13012
13551 13628
13774 13861
13889 13994
13996 14121
10/31/05 14335 14485
</Table>
SWEEP SHARES CLASS SHARES(1)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
1.91% 1.55% 3.11%
</Table>
7-DAY CURRENT YIELD: 2.88%
(PERFORMANCE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER INSTITUTIONAL
MAINSTAY CASH RESERVES FUND MONEY MARKET FUND
--------------------------- ----------------------------
10/31/95 10000 10000
10439 10531
10926 11095
11449 11695
11927 12266
12578 13012
13100 13628
13249 13861
13293 13994
13328 14121
10/31/05 13583 14485
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- -----------------------------------------------------------------------------
Average Lipper institutional money market fund(2) 2.48% 2.12% 3.77%
</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 contractual and may be modified or terminated
only with the approval of the Board of Directors/Trustees. 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 10/31/05, MainStay Cash Reserves Fund had an effective 7-day yield of
3.44% and a 7-day current yield of 3.38% for Class I shares and an effective
7-day yield of 2.93% and a 7-day current yield of 2.88% 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
7-day current yield would have been 3.39% and 3.33% for Class I shares and
2.88% and 2.83% for Sweep Shares Class shares. The fee waivers and/or expense
limitations are contractual and may be modified or terminated only with the
approval of the Board of Directors/Trustees. 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.
80 MainStay Cash Reserves Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $$1,014.80 $2.54 $1,022.50 $2.55
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,012.30 $5.07 $1,020.00 $5.09
- --------------------------------------------------------------------------------------------------------------------------
</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 184 (to
reflect the one-half year period).
www.MAINSTAYfunds.com 81
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Commercial Paper 63
Corporate Bonds 16.7
Repurchase Agreements 9.6
Federal Agencies 5.1
Certificates of Deposit 4
Asset-Backed Securities 1.2
Cash and Other Assets Less Liabilities 0.4
</Table>
See Portfolio of Investments on page 85 for specific holdings within these
categories.
82 MainStay Cash Reserves Fund
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 dollar-weighted average
maturity of the Fund's investment portfolio will not exceed 90 days. The Fund
may invest in obligations issued or guaranteed by of the U.S. government and its
agencies or instrumentalities. It may also invest in CDs, bankers' acceptances,
commercial paper, loans to U.S. and foreign issuers and securities of foreign
branches of U.S. banks, 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 12 MONTHS ENDED
OCTOBER 31, 2005?
The most significant factor affecting the money markets continued to be the
Federal Reserve's action to tighten the money supply. During the reporting
period, the Federal Open Market Committee increased the targeted federal funds
rate eight times--with a 25-basis-point hike on each occasion. (A basis point is
one-hundredth of a percentage point.) The FOMC moves brought the targeted
federal funds rate from 1.75% at the beginning of the reporting period to 3.75%
at the end of October 2005. On November 1, 2005, just after the end of the
reporting period, the Federal Reserve raised rates an additional 25 basis points
to 4.00%.
DID YOU ADJUST THE FUND'S DURATION IN LIGHT OF THE FEDERAL OPEN MARKET
COMMITTEE'S RATE HIKES?
During the reporting period, we made a conscious decision to shorten the Fund's
duration. On October 31, 2005, the Fund had a duration of 40 days, compared to
49 days on October 31, 2004. The shorter duration helped the Fund's performance
by allowing the portfolio to react more quickly to interest-rate changes. When
rates move higher, a shorter duration enables the Fund's yield to move higher
more quickly than it could if the duration were longer.
DID THE SHAPE OF THE MONEY-MARKET YIELD CURVE INFLUENCE THE FUND'S INVESTMENT
DECISIONS?
The money-market yield curve, measured as the difference between one-month
LIBOR(1) and 12-month LIBOR, maintained an upward slope throughout the period.
Generally, the difference was fairly steady--between 55 basis points and 70
basis points--and the average spread differential was 66 basis points during the
reporting period. There was, however, a spike during the first calendar quarter
of 2005, when the difference reached 100 basis points. This upward-sloping curve
led the Fund to invest in securities with longer maturities in hopes of securing
higher yields. If the Federal Reserve continues to tighten monetary policy,
however, these investments could become a drag on the Fund's yield.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
We sought to increase the Fund's yield by purchasing various securities with
longer-term maturities. We used a number of corporate issuers that also allowed
the Fund to increase its exposure to the industrial sector. Key corporate
industrial investments included securities issued by 3M, Honeywell
International, Pitney Bowes, Alabama Power, General Dynamics, and Nike. General
Dynamics and Nike are noteworthy because these issuers are seldom seen in the
commercial-paper market.
In addition, the Fund's performance was bolstered by investments in
floating-rate securities of such issuers as General Electric Capital, J.P.
Morgan Chase, TIAA Global Markets, and Union Bank of Switzerland.
Other longer-maturity investments were made in the agency coupon sector. Agency
debentures generally trade at slightly lower prices than their agency
discount-note counterparts. During the reporting period, the Fund invested in
debentures of the Federal Home Loan Bank, the Federal Farm Credit Bank, and the
Federal Agricultural Mortgage Association.
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.
www.MAINSTAYfunds.com 83
Other significant Fund purchases included a number of investments in the
domestic bank sector. These securities allowed the Fund to diversify away from
the commercial paper market. Domestic names are generally a bit more expensive
than their Yankee bank counterparts. The Fund, however, was able to purchase the
following securities at little or no concession: Marshall & Ilsley Bank,
Wachovia Bank, SunTrust Banks, National City Bank, and Manufacturer's & Traders
Trust Company.
We continued to comb the structured products sector for value. During the
reporting period, we invested in a number of asset-backed securities, including
issues from USAA Auto Owner Trust, Wachovia Auto Owner Trust, Nissan Auto
Receivables Owner Trust, Caterpillar Financial Asset Trust, and John Deere Owner
Trust. These securities fit the Fund's portfolio well. Their monthly cash flows
can be reinvested at current market rates, which is beneficial when interest
rates are rising. The securities are, however, subject to prepayments, and
slower prepayments could hinder the performance of the Fund. Consequently, we
focused our attention on collateral diversification in this sector (automobiles,
farm equipment, and heavy equipment) and on different types of originators
(captive finance, banks, and insurance companies).
DID THE FUND CHANGE ITS ASSET CLASS WEIGHTINGS?
During the 12-month reporting period, we took on meaningful exposure to
repurchase agreements in the Fund. We used repurchase agreements to increase the
Fund's overnight exposure, which shortened duration and allowed the Fund to
react more quickly to rising interest rates. These instruments had the
additional benefit of allowing us to look through to the underlying collateral
for exposure purposes (in this case, government agency securities). We also
significantly increased the Fund's exposure to the corporate bond sector. To
accomplish these changes, we reduced the Fund's commercial paper exposure.
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.
INFORMATION ABOUT MAINSTAY CASH RESERVES FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
84 MainStay Cash Reserves Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (99.6%)+
- ------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (1.2%)
Capital One Auto Finance Trust
Series 2005-BSS, Class A1
3.34%, due 6/15/06 $ 1,001,744 $ 1,001,744
Caterpillar Financial Asset Trust
Series 2005-A, Class A1
3.206%, due 4/25/06 1,310,910 1,310,910
John Deere Owner Trust
Series 2005-A1, Class A1
3.396%, due 6/15/06 1,104,094 1,104,094
USAA Auto Owner Trust
Series 2005-2, Class A1
3.423%, due 7/13/06 1,737,751 1,737,751
Wachovia Auto Owner Trust
Series 2005-A, Class A1
3.34%, due 5/22/06 1,017,942 1,017,942
------------
6,172,441
------------
CERTIFICATES OF DEPOSIT (4.0%)
HBOS Treasury Services PLC
3.05%, due 12/30/05 (a) 10,000,000 10,000,457
SunTrust Banks, Inc.
4.015%, due 10/2/06 (b) 10,000,000 10,000,000
------------
20,000,457
------------
COMMERCIAL PAPER (63.0%)
Alcoa, Inc.
3.80%, due 11/1/05 15,000,000 15,000,000
Alltel Corp.
3.94%, due 11/17/05 15,000,000 14,973,733
Becton Dickinson & Co.
3.92%, due 11/21/05 5,000,000 4,989,111
3.96%, due 12/1/05 10,000,000 9,967,000
Cargill, Inc.
3.91%, due 11/16/05 10,000,000 9,983,708
Coca-Cola Co. (The)
3.75%, due 11/14/05 10,000,000 9,986,458
Colgate-Palmolive Co.
3.98%, due 11/29/05 10,000,000 9,969,045
Countrywide Financial Corp.
4.00%, due 12/2/05 15,000,000 14,948,333
CRC Funding LLC
4.06%, due 12/15/05 15,000,000 14,925,567
General Electric Capital Corp.
3.85%, due 11/2/05 7,600,000 7,599,187
Hershey Co. (The)
3.93%, due 11/21/05 10,000,000 9,978,167
Honeywell International, Inc.
3.82%, due 11/7/05 10,000,000 9,993,633
JPMorgan Chase & Co.
3.90%, due 11/21/05 10,000,000 9,978,333
</Table>
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
COMMERCIAL PAPER (CONTINUED)
Kimberly-Clark Worldwide Inc.
3.77%, due 11/7/05 $10,000,000 $ 9,993,717
Market Street Funding Corp.
3.92%, due 11/16/05 15,000,000 14,975,500
Marshall & Ilsley Corp.
4.00%, due 12/5/05 10,000,000 9,962,222
National Rural Utilities Cooperative Finance Corp.
4.01%, due 11/28/05 10,000,000 9,969,925
Parker-Hannifin Corp.
3.86%, due 11/9/05 10,100,000 10,091,336
PepsiCo, Inc.
3.73%, due 11/4/05 10,000,000 9,996,892
Sheffield Receivables Corp.
3.84%, due 11/8/05 15,000,000 14,988,800
South Carolina Electric & Gas
4.04%, due 11/17/05 15,000,000 14,973,067
Southern Co. (The)
3.80%, due 11/9/05 10,000,000 9,991,556
Three Pillars Funding Corp.
3.91%, due 11/15/05 15,000,000 14,977,192
Three Rivers Funding Corp.
3.81%, due 11/3/05 15,000,000 14,996,825
Variable Funding Capital Corp.
3.79%, due 11/3/05 10,000,000 9,997,895
Windmill Funding I Corp.
3.92%, due 11/18/05 15,000,000 14,972,233
World Omni Leasing, Inc.
3.81%, due 11/2/05 15,000,000 14,998,413
------------
317,177,848
------------
CORPORATE BONDS (16.7%)
3M Co.
5.674%, due 12/12/05 (c)(d) 2,000,000 2,006,184
Abbott Laboratories
5.625%, due 7/1/06 5,000,000 5,047,890
Alabama Power Co.
Series H
5.49%, due 11/1/05 4,250,000 4,250,000
Bank One Corp.
6.50%, due 2/1/06 5,972,000 6,014,043
General Dynamics Corp.
2.125%, due 5/15/06 6,000,000 5,935,261
General Electric Capital Corp.
2.85%, due 1/30/06 4,225,000 4,217,097
Manufacturers & Traders Trust Co.
3.995%, due 6/20/06 (b) 10,000,000 10,002,135
</Table>
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. www.MAINSTAYfunds.com 85
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
National City Bank
4.04%, due 7/7/06 (b) $10,000,000 $ 9,999,321
National Rural Utilities Cooperative Finance Corp.
6.00%, due 5/15/06 5,000,000 5,059,609
Nike, Inc.
5.50%, due 8/15/06 1,250,000 1,262,892
Pfizer, Inc.
4.27%, due 11/4/05 (b) 17,000,000 17,000,000
Pitney Bowes, Inc.
5.875%, due 5/1/06 3,150,000 3,183,738
TIAA Global Markets, Inc.
4.28%, due 1/13/06 (b)(c) 10,000,000 10,003,504
------------
83,981,674
------------
FEDERAL AGENCIES (5.1%)
Federal Agricultural
Mortgage Corp.
5.35%, due 7/26/06 5,000,000 5,046,182
Federal Farm Credit Bank
2.375%, due 2/27/06 2,000,000 1,992,631
Federal Home Loan Bank
2.50%, due 3/13/06 4,010,000 3,991,398
3.25%, due 8/11/06 5,000,000 4,971,040
3.625%, due 6/8/06 4,595,000 4,585,156
International Bank for Reconstruction &
Development
5.00%, due 3/28/06 5,000,000 5,021,840
------------
25,608,247
------------
</Table>
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
REPURCHASE AGREEMENT (9.6%)
Citibank
4.01%, dated 10/31/05 due 11/1/05
Proceeds at Maturity
$48,502,402
(Collateralized by Various Bonds with a
Principal Amount of $48,188,000 and a Market
Value of $49,467,244) $48,497,000 $ 48,497,000
------------
Total Short-Term Investments
(Amortized Cost $501,437,667) (e) 99.6% 501,437,667
Cash and Other Assets,
Less Liabilities 0.4 1,787,995
----------- ------------
Net Assets 100.0% $503,225,662
=========== ============
</Table>
<Table>
(a) Yankee certificate of deposit (CD)--dollar-denominated CD issued in the
United States by foreign banks and corporations.
(b) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(c) May be sold to institutional investors only.
(d) Illiquid security. The total market value of these securities at October
31, 2005 is $2,006,184, which represents 0.4% of the Fund's net assets.
(e) The cost stated also represents the aggregate cost for federal income tax
purposes.
</Table>
86 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.
The table below sets forth the diversification of Cash Reserves Fund investments
by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT+
Aerospace/Defense $ 5,935,261 1.2%
Agricultural Operations 9,983,708 2.0
Athletic Footwear 1,262,892 0.3
Automobile--Sequential 3,757,437 0.7
Beverages--Non-Alcoholic 19,983,350 4.0
Commercial Banks--Central U.S. 29,961,543 5.9
Commercial Banks--Eastern U.S. 20,002,592 4.0
Cosmetics & Toiletries 19,962,762 3.9
Diversified Financial Services 11,816,284 2.3
Diversified Manufacturing Operations 22,091,153 4.4
Electric--Integrated 29,214,624 5.8
Finance--Financial Assets 14,977,192 3.0
Finance--Investment Banker/Broker 9,978,333 2.0
Finance--Mortgage Loan/Banker 14,948,333 2.9
Finance--Other Services 25,033,038 5.0
Finance--Receivables 99,855,232 19.8
Food--Confectionery 9,978,167 2.0
Medical Products 14,956,111 3.0
Medical--Drugs 22,047,890 4.4
Metal--Aluminum 15,000,000 3.0
Office Automation & Equipment 3,183,738 0.6
Other Asset-Backed Securities 2,415,004 0.5
Sovereign 48,497,000 9.6
Sovereign Agency 20,586,407 4.1
Super-Regional Banks--U.S. 6,014,043 1.2
Supranational Banks 5,021,840 1.0
Telephone--Integrated 14,973,733 3.0
------------ ----------
501,437,667 99.6
Cash and Other Assets,
Less Liabilities 1,787,995 0.4
------------ ----------
Net Assets $503,225,662 100.0%
============ ==========
</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 87
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value (amortized
cost $501,437,667) $501,437,667
Receivables:
Fund shares sold 2,965,367
Interest 1,455,488
Other assets 54,886
-------------
Total assets 505,913,408
-------------
LIABILITIES:
Due to custodian 657
Payables:
Fund shares redeemed 2,246,768
NYLIFE Distributors 229,682
Shareholder communication 117,433
Professional 57,383
Transfer agent 12,006
Manager 11,017
Custodian 4,392
Accrued expenses 8,408
-------------
Total liabilities 2,687,746
-------------
Net assets $503,225,662
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
8 billion shares authorized:
Class I $ 232,202
Sweep Shares Class 271,025
Additional paid-in capital 502,725,932
Accumulated net realized loss on investments (3,497)
-------------
Net assets $503,225,662
=============
CLASS I
Net assets applicable to outstanding shares $232,187,115
=============
Shares of capital stock outstanding 232,202,092
=============
Net asset value and offering price per share
outstanding $ 1.00
=============
SWEEP SHARES CLASS
Net assets applicable to outstanding shares $271,038,547
=============
Shares of capital stock outstanding 271,024,904
=============
Net asset value and offering price per share
outstanding $ 1.00
=============
</Table>
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.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $14,581,870
------------
EXPENSES:
Manager 2,401,986
Distribution--Sweep Shares Class 668,457
Service--Sweep Shares Class 668,457
Shareholder communication 201,436
Professional 138,790
Transfer agent 48,371
Custodian 42,193
Directors 42,068
Registration 34,113
Miscellaneous 39,843
------------
Total expenses before reimbursement 4,285,714
Expense reimbursement from Manager (431,544)
------------
Net expenses 3,854,170
------------
Net investment income 10,727,700
------------
REALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (789)
------------
Net increase in net assets resulting from
operations $10,726,911
============
</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
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
DECREASE IN NET ASSETS:
Operations:
Net investment income $ 10,727,700 $ 2,447,467
Net realized loss on investments (789) (2,708)
----------------------------
Net increase in net assets
resulting from operations 10,726,911 2,444,759
----------------------------
Dividends to shareholders:
From net investment income:
Class I (5,645,755) (1,733,035)
Service Class -- (10,535)
Sweep Shares Class (5,081,945) (703,897)
From net realized gain on investments:
Class I -- (3,677)
Service Class -- (208)
Sweep Shares Class -- (4,426)
----------------------------
Total dividends to shareholders (10,727,700) (2,455,778)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class I 625,554,688 506,072,909
Service Class -- 2,796,267
Sweep Shares Class 283,632,518 136,261,850
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Class I 5,645,755 1,742,010
Service Class -- 5,989
Sweep Shares Class 5,081,945 544,302
----------------------------
919,914,906 647,423,327
Cost of shares redeemed:
Class I (645,555,155) (482,325,843)
Service Class -- (20,300,483)
Sweep Shares Class (278,489,784) (148,842,045)
----------------------------
(924,044,939) (651,468,371)
Decrease in net assets derived
from capital share
transactions (4,130,033) (4,045,044)
----------------------------
Net decrease in net assets (4,130,822) (4,056,063)
NET ASSETS:
Beginning of year 507,356,484 511,412,547
----------------------------
End of year $ 503,225,662 $507,356,484
============================
</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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2005 2004 2003 2002 2001
Net asset value at beginning
of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income 0.02 0.01 0.01 0.02 0.04
Net realized gain (loss) on
investments (0.00)(a) 0.00(a) 0.00(a) 0.00(a) --
-------- -------- -------- -------- --------
Total from investment
operations 0.02 0.01 0.01 0.02 0.04
-------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment income (0.02) (0.01) (0.01) (0.02) (0.04)
From net realized gain on
investments -- (0.00)(a) (0.00)(a) (0.00)(a) --
-------- -------- -------- -------- --------
Total dividends and
distributions (0.02) (0.01) (0.01) (0.02) (0.04)
-------- -------- -------- -------- --------
Net asset value at end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return 2.42% 0.77% 0.83% 1.65% 4.67%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 2.40% 0.77% 0.84% 1.61% 4.50%
Net expenses 0.50% 0.50% 0.50% 0.50% 0.50%
Expenses (before
reimbursement) 0.59% 0.60% 0.60% 0.62% 0.61%
Net assets at end of year (in
000's) $232,187 $246,542 $221,058 $329,921 $199,495
</Table>
<Table>
<Caption>
SWEEP SHARES CLASS
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2005 2004 2003 2002 2001
Net asset value at beginning
of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income 0.02 0.00(a) 0.00(a) 0.01 0.04
Net realized gain (loss) on
investments (0.00)(a) 0.00(a) 0.00(a) 0.00(a) --
-------- -------- -------- -------- --------
Total from investment
operations 0.02 0.00(a) 0.00(a) 0.01 0.04
-------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment income (0.02) (0.00)(a) (0.00)(a) (0.01) (0.04)
From net realized gain on
investments -- (0.00)(a) (0.00)(a) (0.00)(a) --
-------- -------- -------- -------- --------
Total dividends and
distributions (0.02) (0.00)(a) (0.00)(a) (0.01) (0.04)
-------- -------- -------- -------- --------
Net asset value at end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return 1.91% 0.27% 0.33% 1.14% 4.15%
Ratios (to average net
assets)/ Supplemental Data:
Net investment income 1.90% 0.27% 0.34% 1.11% 4.00%
Net expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses (before
reimbursement) 1.09% 1.10% 1.10% 1.12% 1.11%
Net assets at end of year (in
000's) $271,039 $260,814 $272,856 $291,312 $285,034
</Table>
<Table>
(a) Less than one cent per share.
</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
MAINSTAY FLOATING RATE FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
A REDEMPTION FEE OF 2% WILL BE APPLIED TO SHARES THAT ARE REDEEMED WITHIN 60
DAYS OF PURCHASE. PERFORMANCE DATA SHOWN DOES NOT REFLECT THIS FEE, WHICH, IF
SHOWN, WOULD LOWER PERFORMANCE.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE SINCE
TOTAL RETURNS YEAR INCEPTION
- -----------------------------------------
With sales charges 0.61% 1.59%
Excluding sales charges 3.72 3.67
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 9700 10000
9874 10226
10/31/05 10241 10826
</Table>
CLASS B SHARES--MAXIMUM 3% CDSC IF REDEEMED WITHIN THE FIRST FOUR YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE SINCE
TOTAL RETURNS YEAR INCEPTION
- ------------------------------------------
With sales charges -0.04% 1.59%
Excluding sales charges 2.95 2.90
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
10141 10226
10/31/05 10240 10826
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE SINCE
TOTAL RETURNS YEAR INCEPTION
- -----------------------------------------
With sales charges 1.95% 2.90%
Excluding sales charges 2.94 2.90
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
10141 10226
10/31/05 10439 10826
</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 3.00% 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 3.00% 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 contractual and
may be modified or terminated only with the approval of the Board of Directors/
Trustees.
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.
92 MainStay Floating Rate Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE SINCE
TOTAL RETURNS YEAR INCEPTION
- -----------------------------------------
3.98% 3.93%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
CREDIT SUISSE FIRST BOSTON
MAINSTAY FLOATING RATE FUND LEVERAGED LOAN INDEX
--------------------------- --------------------------
5/3/04 10000 10000
10192 10226
10/31/05 10597 10826
</Table>
<Table>
<Caption>
ONE SINCE
BENCHMARK PERFORMANCE YEAR INCEPTION
Credit Suisse First Boston(TM) Leveraged Loan Index(1) 5.87% 5.42%
Average Lipper loan participation fund(2) 4.10 3.75
</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 93
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,019.90 $5.29 $1,019.80 $5.29
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,016.25 $9.10 $1,016.05 $9.10
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,016.15 $9.10 $1,016.05 $9.10
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,021.15 $4.02 $1,021.05 $4.02
- -------------------------------------------------------------------------------------------------------------------------
</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 184 (to reflect the one-half year period).
94 MainStay Floating Rate Fund
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Floating Rate Loans 83.5
Short-Term Investments 12.2
Foreign Floating Rate Loans 2.6
Cash and Other Assets Less Liabilities 1.2
Corporate Bonds 0.4
Foreign Corporate Bonds 0.1
</Table>
See Portfolio of Investments on page 98 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Intelsat Bermuda Ltd. Term Loan 5.813%, due
7/28/11
2. Alliance Imaging, Inc. Tranche C1 Term Loan
6.125%-6.50%, due 12/29/11
3. Reliant Energy, Inc. Term Loan 6.089%-6.426%,
due 4/30/10
4. Constellation Brands, Inc. Term Loan B
5.438%-5.75%, due 11/30/11
5. DaVita, Inc. Term Loan B 6.25%-6.54%, due
10/5/12
6. JohnsonDiversey, Inc. Tranche B Term Loan 5.46%,
due 11/3/09
7. Polypore, Inc. Term Loan 6.34%, due 11/12/11
8. Concentra Operating Corp. Term Loan 6.05%, due
9/30/11
9. Visant Corp. Term Loan C 5.94%-6.188%, due
12/21/11
10. Neiman Marcus Group, Inc. (The) Term Loan B
6.475%, due 4/6/13
</Table>
www.MAINSTAYfunds.com 95
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
Questions answered by portfolio managers Anthony Malloy and Robert Dial 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 12 MONTHS ENDED OCTOBER 31, 2005?
The loan market continues to experience strong asset demand, driven largely by
robust collateralized loan obligation fund, or CLO, issuance. During the third
fiscal quarter of 2005, CLO issuance achieved a record level of $14 billion, up
from $7.9 billion in the second calendar quarter of 2005 and $6.8 billion in the
third calendar quarter of 2004. As a result of this supply-and-demand
relationship, leveraged-loan primary-issue spreads continued to tighten during
the third calendar quarter of 2005, and secondary prices remained rich.(1)
During the reporting period, the pace and quality of deal flow remained uneven.
The repricing trend that dominated the market for the past two years now appears
to have subsided substantially.
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, which are
typically pegged to the U.S. dollar London interbank offer rates (LIBOR),(2)
generally reset every 30, 60 or 90 days. At the end of October 2005, the
weighted average reset figure for the Fund was 61 days. This means that as
short-term interest rates increase, the Fund tends to adjust within 61 days,
raising the yield it pays to investors. An inverse dynamic would apply when
interest rates decline.
At the end of October 2005, the Fund's portfolio had a weighted average spread
of 244 basis points above the LIBOR reference rate and a weighted average credit
rating of approximately B1.(3) In an effort to minimize net-asset-value
volatility, the Fund holds a significantly underweighted position relative to
the Credit Suisse Leveraged Loan Index(4) among more-speculative loans,
including unrated loans and loans rated CCC and below.(5)
WHAT WERE THE MAJOR FACTORS THAT AFFECTED THE FUND'S PERFORMANCE DURING THE
REPORTING PERIOD?
Excluding all sales charges, for the 12 months ended October 31, 2005, Class A
shares returned 3.72%,
Floating-rate funds are generally considered to have speculative characteristics
that involve default risk of principal and interest, collateral impairment,
non-diversification, 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. 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 term "credit spread" refers to the marginal interest rate paid in
addition to a benchmark interest rate linked to a market, index, or
instrument.
2. London interbank offer rates (LIBOR) are floating interest rates that are
widely used as reference rates in bank, corporate, and government lending
agreements.
3. 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, in each generic rating classified from Aa
through Caa. 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.
4. See footnote on page 93 for more information on the Credit Suisse First
Boston(TM) Leveraged Loan Index.
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.
96 MainStay Floating Rate Fund
Class B shares returned 2.95%, and Class C shares returned 2.94%. Over the same
period, Class I shares returned 3.98%.(6) All share classes of the Fund under-
performed the 5.87% return of the Credit Suisse First Boston(TM) Leveraged Loan
Index for the same period.
The Fund underperformed the Index for a variety of reasons. First, the Fund
bears real-world expenses that a tracking 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, the Fund had significant
cash inflows, but faced the lag associated with the longer-settlement nature of
the loan asset class. 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 Fund's
conservative orientation and commitment to preservation of capital, by virtue of
its underweighted position in CCC-rated and unrated issues, contributed to
relative underperformance.
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 SEC yield on October 31,
2005, was 4.78% for Class A shares, 4.18% for Class B shares, 4.17% for Class C
shares, and 5.19% for Class I shares.
WERE THERE OTHER FACTORS THAT HELPED OR HURT THE FUND'S PERFORMANCE?
The Federal Open Market Committee raised the targeted federal funds rate eight
times during the reporting period, with a 25-basis-point increase on each
occasion. By October 31, 2005, these tightening moves had helped push net yields
on Class A shares above 5%--up about two percentage points from their level a
year earlier. Rising interest rates and the corresponding increases in Fund
yields resulted in significant inflows during the reporting period.
Unfortunately, primary-issuance volume in the loan market was modest, credit
quality was inconsistent, and secondary issues traded at historically rich
prices. As a result, we found it difficult to deploy new cash in securities that
we felt offered appropriate relative values.
WHICH INDUSTRIES DID YOU FIND ATTRACTIVE DURING THE PERIOD?
As of October 31, 2005, the largest industry concentrations in the Fund were in
utilities, health care, chemicals, and manufacturing. Among the Fund's largest
industry concentrations, the Fund was overweighted versus the Credit Suisse
First Boston(TM) Leveraged Loan Index in health care and consumer non-durables.
The Fund was market weighted relative to the Index in utilities and
underweighted in diversified media. We are comfortable with these overweighted
positions because they are in sectors traditionally considered to be defensive.
WERE THERE ANY SIGNIFICANT SALES DURING THE 12-MONTH REPORTING PERIOD?
The Fund exited its entire position in Refco Group on October 14, 2005. Refco
Group was one of the largest global clearing services for exchange-traded
derivatives and a major provider of prime brokerage services in fixed-income and
foreign-exchange markets. After an October 10, 2005, announcement that an
internal review had uncovered accounting irregularities, the company's CEO was
relieved of his position and charged by regulators with securities fraud. In the
absence of reliable accounting data for the period from 2002 to 2005, the
company lost clients and liquidity, which brought the company's viability into
question.
Ratings for the company's bank loans were downgraded, and the company's bank
loan and bond prices dropped sharply before fluctuating in a discounted range.
Since we believed the company's recovery prospects were to be impaired, when
loan prices briefly rallied, we exited the Fund's position in Refco Group. The
sale detracted from the Fund's performance.
6. For full information and disclosure about Fund performance see page 92.
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.
INFORMATION ABOUT MAINSTAY FLOATING RATE FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 97
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS (86.6%)+
CORPORATE BOND (0.4%)
- ------------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES (0.4%)
Qwest Corp.
7.12%, due 6/15/13 (a)(b) $ 3,000,000 $ 3,165,000
------------
Total Corporate Bond
(Cost $3,007,223) 3,165,000
------------
FOREIGN CORPORATE BOND (0.1%)
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.1%)
Intelsat Bermuda Ltd.
8.70%, due 1/15/12 (a)(b) 1,000,000 1,012,500
------------
Total Foreign Corporate Bond
(Cost $1,000,000) 1,012,500
------------
FLOATING RATE LOANS (83.5%)(C)
- ------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.7%)
Axletech International Holdings, Inc.
Term Loan
8.00%, due 10/21/12 2,000,000 2,021,666
2nd Lien Term Loan
12.25%, due 4/21/13 1,000,000 1,007,500
Hexcel Corp.
Term Loan B
5.563%-5.938%, due 3/1/12 2,261,111 2,280,896
Transdigm, Inc.
Term Loan
6.185%, due 7/22/10 2,460,038 2,491,814
Vought Aircraft Industries, Inc. Term Loan
6.59%, due 12/22/11 4,468,235 4,502,864
------------
12,304,740
------------
ALUMINUM (0.4%)
Novelis, Inc.
CAD Term Loan
5.46%, due 1/9/12 1,141,124 1,152,358
U.S. Term Loan
5.46%, due 1/9/12 1,981,953 2,001,463
------------
3,153,821
------------
APPAREL RETAIL (0.7%)
Eddie Bauer, Inc.
Term Loan B
6.71%, due 6/21/11 5,486,250 5,554,828
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
APPAREL, ACCESSORIES & LUXURY GOODS (1.8%)
St. John Knits International, Inc.
Term Loan B
6.563%, due 3/23/12 $ 4,817,738 $ 4,877,960
Visant Corp.
Term Loan C
V 5.94%-6.188%, due 12/21/11 6,441,881 6,536,500
William Carter Company (The)
Term Loan
5.65%-5.811%, due 7/14/12 2,109,375 2,131,787
------------
13,546,247
------------
AUTO PARTS & EQUIPMENT (2.7%)
Accuride Corp.
Term Loan
6.125%-6.25%, due 1/31/12 3,124,545 3,138,606
Dayco Products LLC
Term Loan B
6.52%-7.18%, due 6/21/11 2,948,964 2,974,768
HLI Operating Co., Inc.
Term Loan
6.76%-7.67%, due 6/3/09 1,654,177 1,646,202
2nd Lien Term Loan C
8.99%-9.39%, due 6/3/10 1,000,000 980,000
Key Automotive Group
Term Loan B
6.85%-8.75%, due 6/29/10 2,868,743 2,861,571
Term Loan C
9.60%-9.80%, due 6/29/11 1,826,720 1,790,186
Plastech Engineered Products, Inc.
2nd Lien Term Loan
11.65%, due 3/31/11 1,000,000 920,000
Safelite Glass Corp.
Term Loan A
8.52%, due 9/30/07 252,108 249,587
Term Loan B
9.02%, due 9/30/07 608,733 602,646
TRW Automotive, Inc.
Tranche E Term Loan
4.938%, due 10/31/10 1,985,000 1,994,429
Tranche B Term Loan
5.25%, due 6/30/12 1,985,000 2,001,541
</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.
98 MainStay 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>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT (CONTINUED)
United Components, Inc.
Term Loan C
6.26%, due 6/30/10 $ 1,048,833 $ 1,061,944
------------
20,221,480
------------
BROADCASTING & CABLE TV (6.3%)
Atlantic Broadband Finance LLC
Term Loan B
6.52%, due 9/1/11 3,000,000 3,045,000
Bragg Communications Inc.
Term Loan B
5.86%, due 8/31/11 2,970,000 3,007,125
Charter Communications Operating LLC
Term Loan A
7.25%, due 4/27/10 1,997,517 1,993,356
Term Loan B
7.42%-7.50%, due 4/7/11 4,936,313 4,946,185
DirectTV Holdings LLC
Term Loan B
5.386%-5.47%, due 4/13/13 4,333,333 4,367,640
Emmis Operating Co.
Term Loan B
5.72%, due 11/10/11 2,977,500 2,994,993
Entravision Communications Corp.
Term Loan
5.55%, due 3/29/13 2,500,000 2,517,970
Insight Midwest Holdings LLC
Term Loan C
6.0625%, due 12/31/09 1,969,925 1,995,780
MCC Iowa LLC
Term Loan A
5.12%-5.54%, due 3/31/10 2,770,408 2,764,637
Term Loan C
5.87%-6.23%, due 2/1/14 1,949,399 1,976,203
Nexstar Broadcasting, Inc.
Mission Term Loan B
5.77%, due 10/1/12 3,405,352 3,422,379
Nexstar Term Loan B
5.77%, due 10/1/12 3,466,479 3,483,811
Olympus Cable Holdings, Inc.
Term Loan B
8.75%, due 9/30/10 3,000,000 2,968,929
Rainbow National Services LLC
Term Loan B
6.625%, due 3/31/12 995,000 1,002,462
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BROADCASTING & CABLE TV (CONTINUED)
UPC Broadband Holding B.V.
Term Loan F2
6.69%, due 12/31/11 $ 4,000,000 $ 4,043,000
Term Loan H2
6.554%, due 9/30/12 2,000,000 2,015,416
------------
46,544,886
------------
BUILDING PRODUCTS (0.9%)
Nortek, Inc.
Term Loan
5.91%-8.00%, due 8/27/11 2,959,950 2,988,069
Stile Acquisition Corp.
Canadian Term Loan
6.02%-6.206%, due 4/6/13 1,988,306 1,980,172
U.S. Term Loan
6.02%-6.206%, due 4/6/13 1,991,694 1,983,546
------------
6,951,787
------------
CASINOS & GAMING (2.0%)
Boyd Gaming Corp.
Term Loan
5.52%-5.70%, due 6/30/11 3,451,300 3,487,970
Penn National Gaming, Inc.
Term Loan B
5.89%-6.22%, due 10/3/12 4,000,000 4,046,252
Resorts International Holdings LLC
Term Loan B
6.53%, due 4/26/12 979,331 978,841
2nd Lien Term Loan
10.27%, due 4/26/13 500,000 493,437
Venetian Casino Resort, LLC/ Las Vegas Sands, Inc
Delayed Draw Term
5.77%, due 6/15/11 1,025,641 1,033,013
Term Loan B
5.77%-7.50%, due 6/15/11 4,974,359 5,010,115
------------
15,049,628
------------
COMMODITY CHEMICALS (0.6%)
Huntsman International LLC
Term B Dollar Facility
5.72%, due 8/16/12 4,515,402 4,536,367
------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (0.6%)
Agco Corp.
Term Loan
5.77%, due 3/31/08 1,329,436 1,346,884
</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 99
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS (CONTINUED)
Terex Corp.
Term Loan
6.33%-6.416%, due 7/3/09 $ 3,104,253 $ 3,137,235
------------
4,484,119
------------
CONSTRUCTION MATERIALS (0.5%)
St. Marys Cement, Inc.
Term Loan B
6.02%, due 12/4/09 3,959,723 4,009,219
------------
DEPARTMENT STORES (0.9%)
Neiman Marcus Group, Inc. (The)
Term Loan B
6.475%, due 4/6/13 6,500,000 6,528,438
DISTILLERS & VINTNERS (0.9%)
Constellation Brands, Inc.
Term Loan B
V 5.438%-5.75%, due 11/30/11 6,751,458 6,818,129
------------
DIVERSIFIED CHEMICALS (0.9%)
BCP Crystal US Holdings Corp.
Credit Linked Deposit
6.313%, due 4/6/11 4,430,205 4,492,967
Brenntag
Term Loan B2
6.81%, due 2/27/12 2,000,000 2,004,500
------------
6,497,467
------------
DIVERSIFIED COMMERCIAL SERVICES (0.5%)
Coinstar, Inc.
Term Loan
6.10%, due 7/7/11 1,237,716 1,259,376
Pike Electric, Inc.
Term Loan B
6.188%, due 7/1/12 1,822,868 1,841,096
Term Loan C
6.25%, due 12/10/12 691,755 698,672
------------
3,799,144
------------
DIVERSIFIED METALS & MINING (1.4%)
Foundation PA Coal Corp.
Term Loan B
5.66%-6.16%, due 7/30/11 3,106,383 3,153,842
Murray Energy Corp.
Term Loan B
6.86%, due 1/28/10 1,990,000 1,997,463
2nd Lien Term Loan
11.625%, due 1/28/11 497,500 522,375
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED METALS & MINING (CONTINUED)
Trout Coal Holdings LLC
1st Lien Term Loan
6.05%-7.09%, due 3/23/11 $ 1,990,000 $ 1,997,463
2nd Lien Term Loan
10.00%, due 3/23/12 500,000 503,750
Tube City IMS Corp.
First Lien Term Loan C
6.84%, due 12/31/10 1,985,000 1,994,925
------------
10,169,818
------------
DRUG RETAIL (0.7%)
Jean Coutu Group, Inc. (The)
Term Loan B
6.375%-6.50%, due 7/30/11 4,954,962 5,006,836
------------
ELECTRIC UTILITIES (0.4%)
Allegheny Energy Supply Co. LLC
Delayed Draw Term
5.636%-5.918%, due 3/8/11 3,177,296 3,207,480
------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.9%)
Polypore, Inc.
Term Loan
V 6.34%, due 11/12/11 6,635,946 6,627,100
------------
ELECTRONIC EQUIPMENT MANUFACTURERS (0.7%)
Invensys International Holdings Ltd.
A Bonding Facility
6.762%, due 3/5/09 972,960 987,554
Term Loan B1
7.791%, due 9/4/09 2,439,118 2,457,411
2nd Lien Term Loan
8.529%, due 12/5/09 2,000,000 2,022,500
------------
5,467,465
------------
ENVIRONMENTAL SERVICES (0.9%)
Allied Waste Industries, Inc.
Term Loan
5.52%-6.09%, due 1/15/12 5,481,148 5,506,685
Tranche A
4.02, due 1/15/12 1,337,838 1,344,341
------------
6,851,026
------------
FOOD & STAPLES RETAILING (0.5%)
Bi-Lo LLC
Term Loan
7.80%-8.081%, due 6/30/11 3,500,000 3,504,375
------------
</Table>
100 MainStay 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>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
FOREST PRODUCTS (0.5%)
Boise Cascade LLC
Term Loan D
5.781%-5.843%, due 10/28/11 $ 995,382 $ 1,008,101
------------
RLC Industries Co.
Term Loan B
5.52%, due 2/24/10 2,941,166 2,952,195
------------
3,960,296
------------
HEALTH CARE EQUIPMENT (0.9%)
Accellent Corp. (Medical Device)
Term Loan C
6.331%, due 6/30/10 2,962,500 2,968,055
Sunrise Medical Holdings, Inc.
Term Loan B1
7.063%-7.438%, due 5/13/10 3,862,202 3,862,202
------------
6,830,257
------------
HEALTH CARE FACILITIES (3.1%)
Community Health Systems, Inc.
Term Loan
5.61%, due 8/19/11 4,954,962 5,013,803
Healthsouth Corp.
Term Loan
6.53%, due 6/14/07 2,356,594 2,363,958
Tranche B LC Commitment
3.555%, due 3/21/10 637,500 639,492
Term Loan 1
8.97%, due 6/15/10 2,000,000 2,003,334
Lifepoint Hospitals, Inc.
Term Loan B
5.435%, due 4/15/12 4,056,097 4,076,378
Select Medical Corp.
Term Loan B
5.57%-7.50%, due 2/24/12 5,970,000 5,969,170
Vanguard Health Holding Co., LLC
Replacement Term
6.211%, due 9/23/11 2,940,000 2,976,750
------------
23,042,885
------------
HEALTH CARE SERVICES (5.5%)
Alliance Imaging, Inc.
Tranche C1 Term Loan
V 6.125%-6.50%, due 12/29/11 6,921,154 6,984,600
AMR HoldCo., Inc./Emcare HoldCo., Inc.
Term Loan
5.66%-8.00%, due 2/10/12 4,975,000 5,006,094
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
HEALTH CARE SERVICES (CONTINUED)
Aveta Holdings LLC
Term Loan B
7.46%, due 8/22/11 $ 4,000,000 $ 3,990,000
Concentra Operating Corp.
Term Loan
V 6.05%, due 9/30/11 6,514,457 6,583,673
DaVita, Inc.
Term Loan B
V 6.25%-6.54%, due 10/5/12 6,725,490 6,817,966
Pacificare Health Systems, Inc.
Tranche B Term Loan
5.375%, due 12/13/10 3,000,000 3,003,126
Rural Metro Operating Co. LLC
LC Facility Deposits
3.74%, due 3/4/11 411,765 417,941
Term Loan
6.038%, due 3/4/11 1,423,529 1,444,882
US Oncology, Inc.
Term Loan B
6.438%-6.95%, due 8/20/11 3,972,052 4,031,633
VWR International, Inc.
Term Loan B
6.69%, due 4/7/11 2,746,000 2,779,468
------------
41,059,383
------------
HOME FURNISHINGS (1.8%)
Berkline/Benchcraft Holdings LLC
Term Loan B
7.02%, due 11/3/11 3,128,125 3,065,563
2nd Lien Term Loan
12.054%, due 5/3/12 750,000 675,000
National Bedding Co. LLC
1st Lien Term Loan
5.82%-6.15%, due 8/31/11 2,992,500 3,005,592
2nd Lien Term Loan
8.938%-9.168%, due 8/31/12 1,000,000 985,000
Sealy Mattress Co.
Tranche D Term Loan
5.62%-7.25%, due 4/6/12 2,204,488 2,220,334
Simmons Co.
Term Loan C
5.75%-6.438%, due 12/19/11 1,397,162 1,409,970
Term Loan
7.00%, due 6/19/12 2,000,000 1,965,834
------------
13,327,293
------------
</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 101
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (3.1%)
AMSCAN Holdings, Inc.
Term Loan
6.56%-6.89%, due 4/30/12 $ 5,547,864 $ 5,561,734
JohnsonDiversey, Inc.
Tranche B Term Loan
V 5.46%, due 11/3/09 6,588,702 6,644,297
Solo Cup Co.
Term Loan B1
6.36%-6.52%, due 2/27/11 6,176,149 6,190,045
Spectrum Brand Corp.
Term Loan
5.79%-6.11%, due 2/6/12 4,975,000 5,001,950
------------
23,398,026
------------
HOUSEWARES & SPECIALTIES (0.7%)
Jarden Corp.
Term Loan
6.02%, due 1/24/12 4,974,944 5,008,704
------------
INDUSTRIAL CONGLOMERATES (0.5%)
Walter Industries, Inc.
Term Loan
5.86%-6.22%, due 10/3/12 4,000,000 4,047,500
------------
INDUSTRIAL MACHINERY (1.1%)
Flowserve Corp.
Term Loan B
5.813%, due 8/10/12 1,500,000 1,519,220
Gleason Corp.
1st Lien U.S. Term Loan
6.591%-6.966%, due 7/27/11 924,959 934,209
2nd Lien Eurodollar Term Loan
9.42%, due 1/31/12 (e) 1,990,000 2,019,850
Mueller Industries, Inc.
Term Loan B
6.21%-6.493%, due 10/3/12 3,878,941 3,928,813
------------
8,402,092
------------
INTERNET RETAIL (0.2%)
FTD.com, Inc.
Term Loan
6.188%, due 2/28/11 1,604,727 1,622,781
------------
LEISURE FACILITIES (0.7%)
Six Flags Theme Parks, Inc.
Term Loan B
6.50%-6.84%, due 6/30/09 5,330,897 5,379,446
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LEISURE PRODUCTS (0.3%)
Fender Musical Instruments Corp.
1st Lien Term Loan B
6.31%-6.47%, due 3/30/12 $ 995,000 $ 999,975
2nd Lien Term Loan
8.72%, due 10/1/12 1,000,000 1,005,000
------------
2,004,975
------------
METAL & GLASS CONTAINERS (3.0%)
Berry Plastics Corp.
Term Loan C
5.855%, due 12/2/11 2,992,500 3,024,669
BWAY Corp.
Term Loan
6.313%, due 6/30/11 3,552,744 3,597,153
Graham Packaging Holdings Co.
Term Loan B
6.375%-6.625%, due 10/7/11 5,458,750 5,521,870
Second Lien Term Loan
8.25%, due 4/7/12 1,000,000 1,015,833
Graphic Packaging International, Inc.
Term Loan C
6.19%-6.716%, due 8/8/10 3,751,403 3,781,414
Owens-Illinois, Inc.
Term Loan A1
5.67%, due 4/1/07 2,303,388 2,316,823
Term Loan B1
5.78%, due 4/1/08 1,839,667 1,854,231
Precise Technology, Inc.
1st Lien Term Loan
7.063%, due 3/22/11 871,846 873,481
------------
21,985,474
------------
MOVIES & ENTERTAINMENT (3.2%)
Cinram International, Inc. Tranche D Advances
6.12%, due 9/30/09 4,000,000 4,035,000
Loews Cineplex Entertainment Corp.
Closing Date Term Loan
5.97%-6.35%, due 7/30/11 2,954,405 2,963,637
Metro-Goldwyn-Mayer Studios, Inc.
Term Loan A
6.27%, due 4/8/11 2,000,000 2,014,444
Tranche B
Term Loan
6.27%, due 4/8/12 6,000,000 6,047,250
Regal Cinemas Corp.
Term Loan
6.02%, due 11/10/10 3,885,091 3,922,120
</Table>
102 MainStay 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>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
MOVIES & ENTERTAINMENT (CONTINUED)
WMG Acquisition Corp.
Term Loan
5.52%-6.371%, due 2/28/11 $ 4,944,528 $ 4,989,855
------------
23,972,306
------------
MULTI-UTILITIES & UNREGULATED POWER (5.5%)
AES Corp.
Term Loan
5.07%-5.69%, due 4/30/08 2,000,000 2,023,500
Calpine Generating Co. LLC
First Lien Term Loan
7.61%, due 4/1/09 5,000,000 5,125,000
Cogentrix Delaware Holdings, Inc.
Term Loan
5.78%, due 4/14/12 2,330,146 2,355,388
Coleto Creek WLE, LP
Term Loan C
7.493%, due 6/30/12 500,000 510,000
Covanta Energy Corp.
Funded Letter of Credit
3.85%-3.89%, due 6/24/12 2,764,228 2,797,053
Term Loan
6.96%, due 6/24/12 2,230,183 2,256,666
KGen LLC
Tranche A Term Loan
6.645%, due 8/5/11 4,975,000 4,950,125
Midwest Generation LLC
Term Loan B
6.05%-6.22%, due 4/27/11 2,297,746 2,321,443
NRG Energy, Inc.
Credit Linked Deposit
3.92%, due 12/24/11 2,844,982 2,856,243
Term Loan
5.895%, due 12/24/11 3,630,400 3,644,770
Reliant Energy Inc.
Term Loan
V 6.089%-6.426%, due 4/30/10 6,947,500 6,962,388
Texas Genco LLC
Delayed Draw Term Loan B
5.87%-5.946%, due 12/14/11 1,454,231 1,457,640
Initial Term Loan
5.87%-6.02%, due 12/14/11 3,511,923 3,520,155
------------
40,780,371
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
OFFICE SERVICES AND SUPPLIES (2.3%)
American Reprographics Company LLC
First Lien Term Loan
5.524%-5.64%, due 6/18/09 $ 2,196,857 $ 2,207,842
Fidelity National Information Solutions, Inc.
Term Loan B
5.685%, due 3/9/13 6,177,500 6,196,255
Language Line LLC
Term Loan B
8.37%-8.45%, due 6/10/11 2,254,437 2,267,400
Relizon Co. (The)
Incremental Tranche B-1
6.82%, due 2/20/11 71,468 71,646
Term Loan B
6.82%, due 2/20/11 654,701 656,338
Sungard Data Systems, Inc.
Term Loan
6.28%, due 2/11/13 5,985,000 6,033,287
------------
17,432,768
------------
OIL & GAS EQUIPMENT & SERVICES (0.7%)
Dresser Rand Group, Inc.
Term Loan B
5.938%-6.134%, due 10/29/11 845,152 857,830
Dresser, Inc.
Term Loan C
6.59%, due 4/10/09 1,853,659 1,867,561
Universal Compression, Inc.
Term Loan
5.00%-5.59%, due 2/15/12 2,290,000 2,312,186
------------
5,037,577
------------
OIL & GAS EXPLORATION & PRODUCTION (1.5%)
Kerr-McGee Corp.
Tranche X Term Loan
6.26%, due 5/24/07 5,950,000 5,956,372
LB Pacific, L.P.
Term Loan
6.61%-6.95%, due 3/3/12 1,990,000 2,022,338
</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 103
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION (CONTINUED)
Quest Cherokee LLC
Letter of Credit
8.725%, due 12/31/08 $ 222,222 $ 221,944
Term Loan B
8.61%, due 7/22/10 1,760,000 1,757,800
Targa Resources, Inc.
Term Loan
6.34%, due 10/31/12 1,000,000 1,003,125
------------
10,961,579
------------
OIL & GAS REFINING & MARKETING & TRANSPORTATION (0.8%)
EPCO Holdings, Inc.
Institutional Term Loan
6.247%-6.603%, due 8/18/10 2,000,000 2,025,000
Lyondell-Citgo Refining L.P.
Term Loan
5.51%, due 5/21/07 2,468,750 2,493,438
Williams Production RMT Co.
Term Loan C
6.20%, due 5/30/08 1,378,398 1,394,767
------------
5,913,205
------------
PACKAGED FOODS & MEATS (2.8%)
American Seafoods Group LLC
Tranche B-1 Term Loan
5.84%, due 9/30/12 (d) 333,148 337,767
Chiquita Brands LLC
Term Loan B
6.57%, due 6/28/12 2,242,500 2,277,539
Dole Food Co., Inc.
Term Loan B
5.313%-7.25%, due 4/18/12 2,928,036 2,949,265
Michael Foods, Inc.
Term Loan B
5.09%-6.281%, due 11/21/10 2,464,429 2,499,855
Nellson Nutraceutical, Inc.
First Lien Term Loan
10.75%, due 10/4/09 911,541 881,916
OSI Group LLC
Dutch Term Loan
6.02%, due 9/2/11 1,100,000 1,111,916
German Term Loan
6.02%, due 9/2/11 880,000 889,533
U.S. Term Loan
6.02%, due 9/2/11 1,980,000 2,001,449
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
PACKAGED FOODS & MEATS (CONTINUED)
Pinnacle Foods Holdings Corp.
Term Loan
6.37%-7.31%, due 11/25/10 $ 4,775,568 $ 4,827,804
Reddy Ice Group, Inc.
Term Loan
5.865%, due 8/12/12 3,000,000 3,026,250
------------
20,803,294
------------
PAPER PACKAGING (0.4%)
Smurfit-Stone Container Enterprises, Inc.
Deposit Fund Commitment
3.34%, due 11/1/10 261,990 264,719
Term Loan B
5.563%-5.875%, due 11/1/11 2,078,069 2,099,716
Term Loan C
5.875%, due 11/1/11 639,406 646,067
------------
3,010,502
------------
PAPER PRODUCTS (0.4%)
Appleton Papers, Inc.
Term Loan
5.73%-6.33%, due 6/11/10 2,782,758 2,810,585
------------
PERSONAL PRODUCTS (0.4%)
Aearo Corp.
Initial Term Loan
6.563%, due 4/7/11 2,955,000 2,977,163
------------
PHARMACEUTICALS (0.6%)
Warner Chilcott Corp.
Tranche D Term Loan
1.375%, due 1/18/12 505,571 508,593
Tranche C Term Loan
6.20%, due 1/18/12 1,094,377 1,097,503
Tranche B Term Loan
6.46%-6.77%, due 1/18/12 2,715,904 2,723,979
------------
4,330,075
------------
PUBLISHING (3.0%)
Dex Media East LLC
Term Loan B
5.50%-5.93%, due 5/8/09 1,708,117 1,713,989
Dex Media West LLC
Term Loan B
5.49%-5.96%, due 3/9/10 2,916,048 2,926,578
Freedom Communications Holdings, Inc.
Term Loan B
5.37%-5.53%, due 5/1/13 2,616,831 2,633,841
</Table>
104 MainStay 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>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
PUBLISHING (CONTINUED)
xHanley Wood LLC
Closing Date Term Loan
6.02%-6.33%, due 12/31/06 $ 3,576,159 $ 3,579,491
Morris Publishing Group LLC
Term Loan A
5.563%, due 9/30/10 1,004,348 1,013,136
Term Loan C
5.81%, due 3/31/11 1,941,848 1,941,848
Network Communications, Inc.
Term Loan B
6.25%-6.69%, due 6/30/11 2,858,596 2,858,596
New Publishing Acquisition, Inc.
Term Loan
6.03%, due 8/5/12 2,500,000 2,362,500
R.H. Donnelley, Inc.
Tranche A-3 Term Loan
5.78%-5.92%, due 12/31/09 869,762 873,386
Tranche D Term Loan
5.52%-5.86%, due 6/30/11 2,602,293 2,615,304
------------
22,518,669
------------
REAL ESTATE INVESTMENT TRUSTS (2.7%)
General Growth Properties, Inc.
Term Loan A
5.61%, due 11/12/07 4,481,319 4,498,124
Term Loan B
6.09%, due 11/12/08 1,987,182 2,008,047
Macerich Partnership L.P.
Interim Term Loan
5.663%, due 4/25/06 4,285,385 4,285,385
Term Loan
5.625%, due 4/26/10 3,500,000 3,515,313
Maguire Properties L.P.
Term Loan B
5.64%, due 3/15/10 5,533,333 5,584,057
------------
19,890,926
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (1.3%)
CB Richard Ellis Services, Inc.
Term Loan
5.475%-6.342%, due 3/31/10 4,188,030 4,219,440
Lion Gables GP Realty L.P.
Term Loan
5.63%, due 9/30/06 2,812,105 2,823,354
LNR Property Group
Term Loan B
6.71%-6.89%, due 2/3/08 2,959,940 2,974,740
------------
10,017,534
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
RESTAURANTS (0.3%)
Buffets, Inc.
Term Loan
7.16%, due 6/28/09 $ 2,174,101 $ 2,184,972
Domino's, Inc.
Term Loan
5.813%, due 6/25/10 58,478 59,380
------------
2,244,352
------------
SOFT DRINKS (0.8%)
Culligan International Co.
Term Loan
6.47%, due 9/30/11 1,958,316 1,978,716
Dr. Pepper/Seven Up Bottling Group, Inc.
Tranche B Term Loan
5.86%-6.181%, due 12/19/10 4,256,361 4,311,693
------------
6,290,409
------------
SPECIALTY CHEMICALS (3.3%)
Basell AF S.A.R.L
Facility B2 US
6.581%, due 8/1/13 833,333 845,660
Facility B4 US
6.581%, due 8/1/13 166,667 169,063
Facility C2 US
7.243%, due 8/1/14 833,333 846,702
Facility C4 US
7.243, due 8/1/14 166,667 169,271
Gentek, Inc.
1st Lien Term Loan
6.37%-6.76%, due 2/28/11 2,870,298 2,880,344
2nd Lien Term Loan
9.90%, due 2/28/12 1,500,000 1,470,750
Hercules, Inc.
Term Loan B
5.77%-5.86%, due 10/8/10 4,508,288 4,555,625
Koch Cellulose LLC
LC Facility Deposits
5.36%, due 5/7/11 593,660 599,844
Term Loan B
5.77%, due 5/7/11 1,922,403 1,941,627
Kraton Polymers LLC
Term Loan
6.188%-6.625%, due 12/23/10 1,097,220 1,112,307
Nalco Co.
Term Loan B
5.66%-5.96%, due 11/4/10 1,728,881 1,753,614
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
SPECIALTY CHEMICALS (CONTINUED)
Polymer Group, Inc.
1st Lien Term Loan
7.25%, due 4/27/10 $ 2,792,500 $ 2,829,732
Rockwood Specialties Group, Inc.
Tranche D Term Loan
6.466%, due 12/10/12 4,975,000 5,050,660
------------
24,225,199
------------
SPECIALTY STORES (1.1%)
Advance Auto Stores, Inc.
Term Loan B
5.375%-5.38%, due 9/30/10 936,767 947,891
Tranche B Term Loan
5.313%-5.5%, due 9/30/10 556,154 562,758
Affinity Group, Inc.
Term Loan B2
7.081%, due 6/24/09 1,176,988 1,185,815
Term Loan B1
7.081%-7.126%, due 6/24/09 470,796 474,327
Eye Care Centers of America, Inc.
Term Loan B
7.00%-7.09%, due 3/1/12 4,975,000 5,006,094
------------
8,176,885
------------
SYSTEMS SOFTWARE (0.5%)
Telcordia Technologies, Inc
Term Loan
6.36%, due 9/15/12 3,482,500 3,443,322
------------
TEXTILES (0.8%)
Springs Industries, Inc.
Term Loan B
7.063%, due 12/7/10 6,203,125 6,164,355
------------
TIRE & RUBBER (0.2%)
Goodyear Tire & Rubber Company (The)
2nd Lien Term Loan
7.06%, due 4/30/10 1,750,000 1,763,489
------------
TRADING COMPANIES & DISTRIBUTORS (0.7%)
Ashtead Group PLC
Term Loan
6.063%, due 11/12/09 5,000,000 5,041,665
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TRUCKING (0.3%)
Performance Transportation Services
Term Loan
8.188%, due 1/31/10 $ 840,978 $ 698,012
Credit Link Deposit
8.27%, due 1/31/10 586,957 487,174
SIRVA Worldwide, Inc.
Term Loan
7.44%-7.58%, due 12/1/10 1,000,000 954,500
------------
2,139,686
------------
WIRELESS TELECOMMUNICATION SERVICES (1.5%)
Centennial Cellular Operating, Co. LLC
Term Loan
5.77%-6.45%, due 2/9/11 4,952,381 4,974,488
Nextel Partners Operating Corp.
Tranche D Term Loan
5.37%, due 5/31/12 2,000,000 2,004,584
PanAmSat Corp.
Term Loan A2
5.781%, due 8/20/09 305,955 308,667
Term Loan A1
5.857%, due 8/20/09 585,145 590,332
Term Loan B1
5.857%-6.046%, due 8/22/11 2,977,410 3,012,766
------------
10,890,837
------------
Total Floating Rate Loans
(Cost $621,061,035) 621,740,265
------------
FOREIGN FLOATING RATE LOANS (2.6%)(C)
- ------------------------------------------------------------------------------
BROADCASTING & CABLE TV (0.7%)
Canadian Cable Acquisition Co., Inc.
Term Loan B
7.02%, due 8/1/11 2,970,000 2,992,275
New Skies Satellites B.V.
Term Loan
6.25%-6.438%, due 5/2/11 1,770,087 1,790,000
------------
4,782,275
------------
DIVERSIFIED CHEMICALS (0.5%)
Invista Canada Co.
Tranche B-2
6.313%, due 4/29/11 1,021,794 1,036,695
Invista S.A.R.L
Tranche B-1
6.313%, due 4/29/11 2,355,088 2,389,432
------------
3,426,127
------------
</Table>
106 MainStay 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>
PRINCIPAL
AMOUNT VALUE
FOREIGN FLOATING RATE LOANS (CONTINUED)
- ------------------------------------------------------------------------------
GENERAL MERCHANDISE STORES (0.5%)
Dollarama Group L.P.
Term Loan B
6.493%, due 11/18/11 $ 3,970,000 $ 4,029,550
------------
WIRELESS TELECOMMUNICATION SERVICES (0.9%)
Intelsat Bermuda Ltd.
Term Loan
V 5.813%, due 7/28/11 6,947,500 7,002,503
------------
Total Foreign Floating Rate Loans
(Cost $19,170,098) 19,240,455
------------
Total Long-Term Investments
(Cost $644,238,356) 645,158,220
------------
SHORT-TERM INVESTMENTS (12.2%)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (7.8%)
Becton Dickinson & Co.
4.00%, due 11/29/05 3,000,000 2,990,667
General Electric Capital Corp.
3.97%, due 12/9/05 10,000,000 9,958,095
Goldman Sachs Group, Inc. (The)
4.00%, due 11/16/05 10,000,000 9,983,333
Hershey Co. (The) (a)
3.72%, due 11/1/05 10,000,000 10,000,000
Merck & Co., Inc.
3.92%, due 11/3/05 10,000,000 9,997,822
National Rural Utilities Cooperative Finance Corp.
4.01%, due 11/28/05 10,000,000 9,969,925
Target Corp.
3.83%, due 11/7/05 5,000,000 4,996,808
------------
Total Commercial Paper
(Cost $57,896,650) 57,896,650
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL AGENCY (4.4%)
Federal Agricultural Mortgage Corp.
3.72%, due 11/1/05 $32,875,000 $ 32,875,000
------------
Total Federal Agency
(Cost $32,875,000) 32,875,000
------------
Total Short-Term Investments
(Cost $90,771,650) 90,771,650
------------
Total Investments
(Cost $735,010,006) (f) 98.8% 735,929,870(g)
Cash and Other Assets
Less Liabilities 1.2 9,297,447
----------- ------------
Net Assets 100.0% $745,227,317
=========== ============
</Table>
<Table>
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(c) 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 shown is the rate(s) in
effect at October 31, 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)).
(d) This security has additional commitments and contingencies. (See Note 6).
(e) Illiquid security.
(f) The cost for federal income tax purposes is $735,010,006.
(g) At October 31, 2005 net unrealized appreciation was $919,864, 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 $2,665,411 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $1,745,547.
</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
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $735,010,006) $735,929,870
Cash 3,323,848
Receivables:
Fund shares sold 9,957,552
Interest 3,719,116
Investment securities sold 7,812,333
Other assets 65,464
-------------
Total assets 760,808,183
-------------
LIABILITIES:
Payables:
Investment securities purchased 7,504,710
Fund shares redeemed 6,026,258
Manager 370,379
NYLIFE Distributors 295,432
Professional 100,546
Shareholder communication 86,874
Transfer agent 83,629
Custodian 10,473
Accrued expenses 16,930
Dividend payable 1,085,635
-------------
Total liabilities 15,580,866
-------------
Net assets $745,227,317
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1
billion shares authorized:
Class A $ 50,642
Class B 6,224
Class C 16,816
Class I 929
Additional paid-in capital 748,037,763
Accumulated distributions in excess of net
investment income (410,185)
Accumulated net realized loss on investments (3,394,736)
Net unrealized appreciation on investments 919,864
-------------
Net assets $745,227,317
=============
CLASS A
Net assets applicable to outstanding shares $505,726,351
=============
Shares of capital stock outstanding 50,641,845
=============
Net asset value per share outstanding $ 9.99
Maximum sales charge (3.00% of offering price) 0.31
-------------
Maximum offering price per share outstanding $ 10.30
=============
CLASS B
Net assets applicable to outstanding shares $ 62,196,506
=============
Shares of capital stock outstanding 6,224,384
=============
Net asset value and offering price per share
outstanding $ 9.99
=============
CLASS C
Net assets applicable to outstanding shares $168,020,656
=============
Shares of capital stock outstanding 16,816,247
=============
Net asset value and offering price per share
outstanding $ 9.99
=============
CLASS I
Net assets applicable to outstanding shares $ 9,283,804
=============
Shares of capital stock outstanding 929,302
=============
Net asset value and offering price per share
outstanding $ 9.99
=============
</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.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $30,544,727
------------
EXPENSES:
Manager 3,542,818
Distribution/Service--Class A 1,015,954
Service--Class B 127,726
Service--Class C 321,773
Transfer agent 406,464
Distribution--Class B 383,179
Distribution--Class C 965,320
Professional 224,178
Shareholder communication 128,400
Registration 111,805
Custodian 79,198
Trustees 48,827
Miscellaneous 149,685
------------
Total expenses 7,505,327
------------
Net investment income 23,039,400
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (3,165,728)
Net change in unrealized appreciation on
investments (271,327)
------------
Net realized and unrealized loss on investments (3,437,055)
------------
Net increase in net assets resulting from
operations $19,602,345
============
</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
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2005 AND THE PERIOD MAY 3, 2004 THROUGH OCTOBER
31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 23,039,400 $ 2,982,232
Net realized loss on investments (3,165,728) (229,008)
Net change in unrealized
appreciation on investments (271,327) 1,191,191
----------------------------
Net increase in net assets
resulting from operations 19,602,345 3,944,415
----------------------------
Dividends to shareholders:
From net investment income:
Class A (16,755,410) (2,420,439)
Class B (1,737,768) (337,800)
Class C (4,370,180) (596,756)
Class I (195,925) (17,539)
----------------------------
Total dividends to shareholders (23,059,283) (3,372,534)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 442,727,728 269,458,103
Class B 40,272,526 42,644,547
Class C 128,405,865 89,961,938
Class I 7,453,652 2,283,052
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Class A 9,346,235 1,301,078
Class B 1,400,576 269,715
Class C 2,808,555 384,865
Class I 181,033 16,626
----------------------------
632,596,170 406,319,924
</Table>
<Table>
<Caption>
2005 2004
Cost of shares redeemed:+
Class A $(198,902,816) $(16,151,177)
Class B (17,441,086) (4,759,409)
Class C (48,255,192) (4,669,150)
Class I (620,570) (4,320)
----------------------------
(265,219,664) (25,584,056)
Increase in net assets derived
from capital share
transactions 367,376,506 380,735,868
----------------------------
Net increase in net assets 363,919,568 381,307,749
NET ASSETS:
Beginning of period 381,307,749 --
----------------------------
End of period $ 745,227,317 $381,307,749
============================
Accumulated distribution in excess
of net investment income at end of
period $ (410,185) $ (374,165)
============================
</Table>
+ Cost of shares redeemed net of redemption fee of $28,546 for the year ended
October 31, 2005 and $47,683 for the year ended October 31, 2004.
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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B
---------------------------- ----------------------------
MAY 3, MAY 3,
YEAR 2004* YEAR 2004*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2005 2004
Net asset value at beginning of period $ 10.03 $ 10.00 $ 10.03 $ 10.00
----------- ----------- ----------- -----------
Net investment income (a) 0.40 0.14 0.33 0.10
Net realized and unrealized gain (loss) on
investments (0.03) 0.04 (0.04) 0.04
----------- ----------- ----------- -----------
Total from investment operations 0.37 0.18 0.29 0.14
----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.41) (0.15) (0.33) (0.11)
----------- ----------- ----------- -----------
Redemption fee 0.00(b) 0.00(b) 0.00(b) 0.00(b)
----------- ----------- ----------- -----------
Net asset value at end of period $ 9.99 $ 10.03 $ 9.99 $ 10.03
=========== =========== =========== ===========
Total investment return (c) 3.72% 1.79%(d) 2.95% 1.41%(d)
Ratios (to average net assets)/Supplemental Data:
Net investment income 4.11% 2.83%+ 3.36% 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 13% 3% 13% 3%
Net assets at end of period (in 000's) $505,726 $254,969 $62,196 $38,233
</Table>
<Table>
<Caption>
CLASS C CLASS I
---------------------------- ----------------------------
MAY 3, MAY 3,
YEAR 2004* YEAR 2004*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2005 2004
Net asset value at beginning of period $ 10.03 $ 10.00 $10.03 $10.00
----------- ----------- ----------- -----------
Net investment income (a) 0.33 0.10 0.43 0.15
Net realized and unrealized gain (loss) on
investments (0.04) 0.04 (0.04) 0.04
----------- ----------- ----------- -----------
Total from investment operations 0.29 0.14 0.39 0.19
----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.33) (0.11) (0.43) (0.16)
----------- ----------- ----------- -----------
Redemption fee 0.00(b) 0.00(b) 0.00(b) 0.00(b)
----------- ----------- ----------- -----------
Net asset value at end of period $ 9.99 $ 10.03 $ 9.99 $10.03
=========== =========== =========== ===========
Total investment return (c) 2.94% 1.41%(d) 3.98% 1.92%(d)
Ratios (to average net assets)/Supplemental Data:
Net investment income 3.36% 2.08%+ 4.36% 3.08%+
Net expenses 1.79% 1.82%+ 0.79% 0.82%+
Expenses (before reimbursement) 1.79% 1.82%+ 0.79% 0.82%+
Portfolio turnover rate 13% 3% 13% 3%
Net assets at end of period (in 000's) $168,021 $85,807 $9,284 $2,298
</Table>
<Table>
* Commencement of operations.
+ 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>
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
MAINSTAY INDEXED BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges -2.62% 4.83% 5.11%
Excluding sales charges 0.39 5.47 5.43
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
CITIGROUP BROAD INVESTMENT
MAINSTAY INDEXED BOND FUND GRADE BOND INDEX
-------------------------- --------------------------
10/31/95 9700 10000
10142 10589
10966 11524
11900 12607
11788 12669
12613 13590
14274 15576
15082 16472
15642 17294
16397 18280
10/31/05 16460 18507
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
0.82% 5.75% 5.69%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP BROAD INVESTMENT
MAINSTAY INDEXED BOND FUND GRADE BOND INDEX
-------------------------- --------------------------
10/31/95 10000 10000
10480 10589
11358 11524
12353 12607
12257 12669
13148 13590
14915 15576
15798 16472
16425 17294
17249 18280
10/31/05 17389 18507
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
Citigroup Broad Investment Grade Bond Index(1) 1.24% 6.37% 6.35%
Average Lipper general U.S. government fund(2) 0.60 5.01 5.13
</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 3.00% 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
contractual and may be modified or terminated only with the approval of the
Board of Directors/Trustees. 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 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.
112 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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $ 997.60 $4.03 $1,021.00 $4.08
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,000.50 $2.32 $1,022.70 $2.35
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.80% for Class A, and 0.46% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 184 (to reflect the
one-half year period).
www.MAINSTAYfunds.com 113
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 73.7
Corporate Bonds 18.6
Short-Term Investments (collateral from securities lending 17.6
is 15.6%)
Foreign Bonds 3.3
Yankee Bonds 1.3
Asset-Backed Securities 1
Liabilities in Excess of Cash and Other Assets (15.5)
</Table>
See Portfolio of Investments on page 117 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Note 3.375%, due 2/15/08
2. United States Treasury Note 4.25%, due 8/15/15
3. United States Treasury Note 3.75%, due 3/31/07
4. United States Treasury Note 3.75%, due 5/15/08
5. United States Treasury Note 4.125%, due 8/15/08
6. Federal Home Loan Mortgage Corporation (Mortgage
Pass-Through Securities) 5.50%, due 7/1/35
7. United States Treasury Bond 5.375%, due 2/15/31
8. United States Treasury Note 3.125%, due 5/15/07
9. United States Treasury Note 4.00%, due 2/15/14
10. Federal Home Loan Mortgage Corporation (Mortgage
Pass-Through Securities) 4.50%, due 8/1/20
</Table>
114 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 in the Citigroup Broad Investment Grade Bond Index (the "BIG
Index"),(1) including investment grade corporate bonds, U.S. dollar-denominated
securities of foreign issuers, U.S. Treasury or agency issues, mortgage-related
securities, and other securities. In implementing this strategy, we employ a
specialized method to track the performance of the BIG Index. Using this method
the Fund invests in 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 AND
THE FUND DURING THE 12-MONTH REPORTING PERIOD?
Bond prices fluctuated during the reporting period in response to the changing
outlook for the U.S. econ-
omy and 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 the
targeted federal funds rate eight times, with a 25-basis-point increase on each
occasion. (A basis point is one-hundredth of a percentage point.) Those rate
hikes brought the federal funds target rate from 1.75% to 3.75%. As the Federal
Reserve moved to raise interest rates, the difference between short- and
long-term interest rates narrowed and the yield curve flattened. From November
1, 2004, through October 31, 2005, the yield on the two-year Treasury note
increased 179 basis points to 4.37% and the 10-year Treasury yield rose 48 basis
points to 4.55%. Over the same period, the yield on 30-year Treasurys declined
eight basis points to 4.75%.(2)
HOW DID YOU POSITION THE FUND DURING THE PERIOD?
As always, the Fund seeks to track the total-return performance of the BIG
Index. Since the Fund does not hold every security in the Index, however, 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 112.
Excluding all sales charges, both share classes of the Fund underperformed the
BIG Index for the 12 months ended October 31, 2005. Since the Fund incurs
expenses that an un-
managed index does not, there will be times when the Fund's performance will lag
the performance of the Index.
HOW DID THE VARIOUS SECTORS OF THE BIG INDEX PERFORM?
Treasurys, agencies, mortgage issues, and corporate bonds are the largest
segments of BIG Index. Among these segments, mortgage issues had the highest
return for the 12 months ended October 31, 2005, followed by agencies, corporate
bonds, and Treasurys. Among Treasurys and agencies, the flattening yield curve
caused longer-duration securities to outperform short-duration issues.
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 112 for more information on the Citigroup Broad
Investment Grade Bond Index.
2. Source: Bloomberg--Historical yield curve data.
www.MAINSTAYfunds.com 115
In the credit component--or corporate-bond portion--of the Index, A-rated
bonds(3) showed the strongest performance, followed by AAA-rated bonds,
BBB-rated bonds, and AA-rated bonds. Among the broad credit sectors, industrials
provided the weakest performance during the reporting period, while finance was
the best-performing broad industry sector.
The poor performance of the industrial component of the Index was because of
poor performance in specific subsectors, including vehicle parts,
textile/apparel/shoes, and auto manufacturing. Within the automobile
manufacturing subsector, General Motors and Ford Motor Company bonds lost their
investment-grade status and were removed from the Index. The best-performing
industrial subsectors included airlines, tobacco, and oilfield machinery &
services. Despite insurance setbacks from hurricanes Katrina and Rita, property
& casualty outperformed other subsectors in the finance portion of the credit
component of the Index.
3. Debt rated AAA has the highest rating assigned by Standard & Poor's, and in
the opinion of Standard & Poor's, the obligor's capacity to meet its
financial commitment on the obligation is extremely strong. 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.
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.
INFORMATION ABOUT MAINSTAY INDEXED BOND FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
116 MainStay Indexed Bond Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (97.9%)+
COLLATERALIZED ASSET-BACKED SECURITIES (1.0%)
- ------------------------------------------------------------------------------
CREDIT CARDS (0.9%)
Bank One Issuance Trust
Series 2002-3, Class A3
3.59%, due 5/17/10 $ 1,000,000 $ 978,801
Chase Issuance Trust
Series 2005-10A, Class A
4.65%, due 12/17/12 500,000 499,150
MBNA Credit Card Master
Note Trust
Series 2005-6A, Class A1
4.50%, due 1/15/13 500,000 496,773
Series 2002-1, Class A6
4.95%, due 6/15/09 1,000,000 1,004,018
------------
2,978,742
------------
TRANSPORTATION (0.1%)
Continental Airlines, Inc.
Series 1992-2, Class A1
7.256%, due 3/15/20 70,903 69,754
Northwest Airlines, Inc.
Series 2000-1, Class G
8.072%, due 4/1/21 129,489 131,309
------------
201,063
------------
Total Asset-Backed Securities
(Cost $3,223,422) 3,179,805
------------
CORPORATE BONDS (18.6%)
- ------------------------------------------------------------------------------
BANKS (3.4%)
ABN-Amro Bank NV Chicago
7.55%, due 6/28/06 403,000 410,277
Bank of America Corp.
4.75%, due 8/1/15 250,000 239,849
5.375%, due 6/15/14 250,000 253,062
5.875%, due 2/15/09 250,000 256,998
7.40%, due 1/15/11 500,000 551,959
Bank One Corp.
5.90%, due 11/15/11 250,000 258,811
6.875%, due 8/1/06 250,000 253,779
Branch Banking & Trust Co.
4.875%, due 1/15/13 100,000 98,333
Capital One Bank
4.25%, due 12/1/08 100,000 97,488
5.125%, due 2/15/14 100,000 96,874
Citigroup, Inc.
4.70%, due 5/29/15 300,000 287,443
4.875%, due 5/7/15 350,000 338,584
5.00%, due 3/6/07 250,000 250,854
5.625%, due 8/27/12 100,000 102,673
5.875%, due 2/22/33 250,000 249,132
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BANKS (CONTINUED)
Fleet National Bank
5.75%, due 1/15/09 $ 250,000 $ 256,177
HSBC Bank USA NA
3.875%, due 9/15/09 100,000 96,202
HSBC Finance Corp.
5.00%, due 6/30/15 250,000 240,836
JPMorgan Chase & Co.
4.875%, due 3/15/14 250,000 241,568
5.15%, due 10/1/15 500,000 487,148
5.75%, due 1/2/13 200,000 205,447
6.75%, due 2/1/11 500,000 534,647
Key Bank N.A.
5.00%, due 7/17/07 100,000 100,158
5.80%, due 7/1/14 50,000 51,726
MBNA America Bank NA
5.375%, due 1/15/08 300,000 302,775
Mellon Funding Corp.
5.00%, due 12/1/14 250,000 246,688
National City Bank of Pennsylvania
6.25%, due 3/15/11 250,000 263,103
Pemex Project Funding
Master Trust
7.375%, due 12/15/14 350,000 382,550
PNC Bank N.A.
5.25%, due 1/15/17 75,000 73,625
PNC Funding Corp.
7.50%, due 11/1/09 100,000 108,650
Popular North America, Inc.
4.70%, due 6/30/09 100,000 98,786
Sanwa Bank, Ltd.
7.40%, due 6/15/11 100,000 109,529
SunTrust Banks, Inc.
5.05%, due 7/1/07 250,000 250,797
5.45%, due 12/1/17 100,000 100,279
Union Bank of Switzerland
7.25%, due 7/15/06 250,000 254,111
US Bank NA
6.375%, due 8/1/11 250,000 266,285
Wachovia Bank N.A.
4.85%, due 7/30/07 500,000 500,207
4.875%, due 2/1/15 250,000 242,248
Wachovia Corp.
6.25%, due 8/4/08 250,000 258,084
</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 117
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
BANKS (CONTINUED)
Washington Mutual
Financial Corp.
6.875%, due 5/15/11 $ 100,000 $ 108,390
Washington Mutual, Inc.
4.00%, due 1/15/09 100,000 96,676
4.20%, due 1/15/10 250,000 241,242
5.25%, due 9/15/17 175,000 167,977
7.50%, due 8/15/06 250,000 254,670
Wells Fargo & Co.
4.625%, due 8/9/10 350,000 344,961
Wells Fargo Bank N.A.
6.45%, due 2/1/11 500,000 531,878
World Savings Bank FSB
4.125%, due 12/15/09 100,000 96,920
------------
11,260,456
------------
CONSUMER (1.2%)
Altria Group, Inc.
7.65%, due 7/1/08 100,000 106,329
Anheuser-Busch Cos., Inc.
5.95%, due 1/15/33 250,000 260,689
Archer-Daniels-Midland Co.
8.125%, due 6/1/12 250,000 290,319
Bunge Ltd. Finance Corp.
5.35%, due 4/15/14 100,000 98,380
Campbell Soup Co.
4.875%, due 10/1/13 100,000 98,184
Coca-Cola Enterprises, Inc.
7.00%, due 10/1/26 100,000 114,210
8.50%, due 2/1/22 252,000 324,810
ConAgra Foods, Inc.
6.00%, due 9/15/06 100,000 100,950
7.875%, due 9/15/10 100,000 110,594
General Mills, Inc.
5.125%, due 2/15/07 100,000 100,133
6.00%, due 2/15/12 65,000 67,755
H.J. Heinz Finance Co.
6.625%, due 7/15/11 300,000 319,637
Kellogg Co.
6.60%, due 4/1/11 200,000 214,247
Kraft Foods, Inc.
5.25%, due 10/1/13 100,000 99,505
6.25%, due 6/1/12 250,000 262,784
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (a) 250,000 255,851
Procter & Gamble Co. (The)
5.80%, due 8/15/34 75,000 77,016
6.875%, due 9/15/09 250,000 268,068
Sara Lee Corp.
6.25%, due 9/15/11 150,000 154,610
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CONSUMER (CONTINUED)
Tyson Foods, Inc.
7.25%, due 10/1/06 $ 140,000 $ 142,875
Unilever Capital Corp.
5.90%, due 11/15/32 100,000 102,948
6.875%, due 11/1/05 285,000 285,000
------------
3,854,894
------------
ELECTRIC (1.3%)
American Electric Power Co., Inc.
Series C
5.375%, due 3/15/10 200,000 201,594
Appalachian Power Co.
Series H
5.95%, due 5/15/33 100,000 97,813
Arizona Public Service Co.
6.375%, due 10/15/11 100,000 105,593
CenterPoint Energy Houston Electric LLC
Series K2
6.95%, due 3/15/33 100,000 115,595
Dominion Resources, Inc.
5.00%, due 3/15/13 100,000 96,945
5.15%, due 7/15/15 100,000 95,871
Series B
6.25%, due 6/30/12 150,000 156,621
DTE Energy Co.
7.05%, due 6/1/11 100,000 107,368
Duke Energy Corp.
6.45%, due 10/15/32 250,000 261,323
FirstEnergy Corp.
Series B
6.45%, due 11/15/11 250,000 262,977
Series C
7.375%, due 11/15/31 50,000 56,938
FPL Group Capital, Inc.
7.375%, due 6/1/09 250,000 269,837
Midamerican Energy
Holdings Co.
5.875%, due 10/1/12 100,000 102,478
Midamerican Funding LLC
6.75%, due 3/1/11 100,000 106,885
Pacific Gas & Electric Co.
6.05%, due 3/1/34 250,000 251,158
Pepco Holdings, Inc.
6.45%, due 8/15/12 100,000 104,680
7.45%, due 8/15/32 100,000 113,286
Progress Energy, Inc.
6.85%, due 4/15/12 400,000 424,987
PSI Energy, Inc.
5.00%, due 9/15/13 100,000 97,401
</Table>
118 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)
- ------------------------------------------------------------------------------
ELECTRIC (CONTINUED)
San Diego Gas & Electric Co.
5.35%, due 5/15/35 $ 25,000 $ 23,911
SCANA Corp.
6.25%, due 2/1/12 100,000 105,207
Sempra Energy
6.00%, due 2/1/13 100,000 102,291
Southern California Edison Co.
5.00%, due 1/15/14 100,000 98,481
6.00%, due 1/15/34 100,000 102,821
Southern Power Co.
6.25%, due 7/15/12 100,000 104,779
TXU Electric Delivery Co.
6.375%, due 5/1/12 100,000 104,841
7.00%, due 9/1/22 100,000 108,767
Union Electric Co.
4.65%, due 10/1/13 100,000 95,908
Union Oil Co. of California
7.35%, due 6/15/09 100,000 108,013
Wisconsin Energy Corp.
6.50%, due 4/1/11 100,000 105,542
Wisconsin Power & Light Co.
6.25%, due 7/31/34 50,000 52,013
------------
4,141,924
------------
ENERGY (1.0%)
Amerada Hess Corp.
7.30%, due 8/15/31 100,000 112,930
Amoco Co.
6.50%, due 8/1/07 250,000 257,007
Anadarko Finance Co.
6.75%, due 5/1/11 100,000 107,474
Burlington Resources, Inc.
7.375%, due 3/1/29 104,000 124,336
ConocoPhillips
5.90%, due 10/15/32 250,000 263,234
ConocoPhillips Holding Co.
6.35%, due 4/15/09 150,000 158,032
Consolidated Edison Co. of
New York, Inc.
5.625%, due 7/1/12 100,000 103,331
Constellation Energy Group, Inc.
6.125%, due 9/1/09 100,000 102,826
Consumers Energy Co.
Series B
5.375%, due 4/15/13 100,000 99,488
Devon Financing Corp. LLC
6.875%, due 9/30/11 400,000 433,123
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
ENERGY (CONTINUED)
Enterprise Products
Operating, L.P.
5.75%, due 3/1/35 $ 100,000 $ 89,265
6.875%, due 3/1/33 100,000 102,933
Halliburton Co.
5.50%, due 10/15/10 100,000 102,078
Kinder Morgan Energy
Partners, L.P.
6.75%, due 3/15/11 200,000 212,755
7.125%, due 3/15/12 150,000 163,677
Kinder Morgan, Inc.
5.15%, due 3/1/15 100,000 96,616
Marathon Oil Corp.
6.80%, due 3/15/32 100,000 112,242
Northern States Power Co.
6.875%, due 8/1/09 100,000 105,981
Occidental Petroleum Corp.
7.20%, due 4/1/28 100,000 119,844
Texaco Capital, Inc.
9.75%, due 3/15/20 176,000 255,074
Valero Energy Corp.
7.50%, due 4/15/32 100,000 117,966
XTO Energy, Inc.
5.30%, due 6/30/15 75,000 74,095
------------
3,314,307
------------
FINANCE--OTHER (2.3%)
American Express Travel Related Services Co., Inc.
Series E
3.625%, due 2/20/09 250,000 239,721
Archstone-Smith Operating Trust
5.25%, due 5/1/15 100,000 97,740
AvalonBay Communities, Inc.
4.95%, due 3/15/13 100,000 97,312
Bear Stearns Cos., Inc. (The)
5.70%, due 11/15/14 250,000 255,472
Boston Properties, Inc.
6.25%, due 1/15/13 100,000 104,264
Camden Property Trust
4.375%, due 1/15/10 100,000 95,994
Chelsea Property Group, Inc.
6.00%, due 1/15/13 100,000 102,485
Countrywide Home Loans, Inc.
3.25%, due 5/21/08 250,000 239,458
5.625%, due 5/15/07 100,000 101,034
</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 119
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
FINANCE--OTHER (CONTINUED)
Credit Suisse First Boston
USA, Inc.
3.875%, due 1/15/09 $ 125,000 $ 120,819
4.875%, due 1/15/15 250,000 239,783
5.125%, due 1/15/14 100,000 98,680
6.50%, due 1/15/12 250,000 266,932
EOP Operating, L.P.
4.75%, due 3/15/14 100,000 94,423
7.75%, due 11/15/07 425,000 447,771
ERP Operating, L.P.
6.95%, due 3/2/11 100,000 107,581
Goldman Sachs Group, Inc. (The)
4.75%, due 7/15/13 250,000 239,781
5.15%, due 1/15/14 625,000 613,642
5.70%, due 9/1/12 450,000 459,641
Lehman Brothers Holdings, Inc.
Series G
4.80%, due 3/13/14 200,000 193,469
6.625%, due 2/5/06 250,000 251,359
7.00%, due 2/1/08 250,000 261,028
Liberty Property, L.P.
5.125%, due 3/2/15 100,000 95,675
Merrill Lynch & Co., Inc.
Series B
5.30%, due 9/30/15 250,000 249,622
6.00%, due 2/17/09 250,000 257,813
Morgan Stanley
3.625%, due 4/1/08 250,000 242,896
4.00%, due 1/15/10 350,000 334,706
5.375%, due 10/15/15 175,000 172,734
6.10%, due 4/15/06 250,000 251,613
6.60%, due 4/1/12 175,000 187,642
6.75%, due 10/15/13 175,000 188,212
National Rural Utilities Cooperative Finance Corp.
5.75%, due 8/28/09 250,000 256,196
ProLogis
5.625%, due 11/15/15 (a) 50,000 49,866
Regency Centers, L.P.
5.25%, due 8/1/15 (a) 100,000 96,931
Residential Capital Corp.
6.375%, due 6/30/10 (a) 125,000 126,968
Simon Property Group, L.P.
5.375%, due 8/28/08 100,000 100,894
SLM Corp.
5.625%, due 8/1/33 250,000 247,549
------------
7,587,706
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
GAS (0.2%)
KeySpan Corp.
4.65%, due 4/1/13 $ 100,000 $ 96,595
Michigan Consolidated Gas Co.
Series B
7.15%, due 5/30/06 375,000 379,738
NiSource Finance Corp.
6.15%, due 3/1/13 100,000 103,848
7.625%, due 11/15/05 100,000 100,104
------------
680,285
------------
INDEPENDENT (1.5%)
American General Finance Corp.
Series G
5.75%, due 3/15/07 250,000 252,611
CIT Group, Inc.
5.75%, due 9/25/07 250,000 253,952
7.75%, due 4/2/12 250,000 282,793
CitiFinancial Credit Co.
8.70%, due 6/15/10 227,000 260,449
General Electric Capital Corp.
5.00%, due 6/15/07 750,000 752,961
6.00%, due 6/15/12 1,125,000 1,183,287
6.75%, due 3/15/32 400,000 457,505
6.80%, due 11/1/05 250,000 250,000
Household Finance Corp.
5.75%, due 1/30/07 250,000 252,824
HSBC Finance Corp.
6.375%, due 10/15/11 550,000 581,014
6.40%, due 6/17/08 250,000 258,801
International Lease Finance Corp.
Series O
4.375%, due 11/1/09 250,000 245,102
------------
5,031,299
------------
INSURANCE (0.7%)
Aetna, Inc.
7.875%, due 3/1/11 100,000 112,102
AIG SunAmerica Global
Financing VI
6.30%, due 5/10/11 (a) 250,000 264,629
Allstate Corp. (The)
5.00%, due 8/15/14 150,000 146,554
7.20%, due 12/1/09 100,000 107,808
Aon Corp.
7.375%, due 12/14/12 100,000 111,141
Assurant, Inc.
5.625%, due 2/15/14 100,000 99,993
Berkshire Hathaway
Finance Corp.
4.85%, due 1/15/15 250,000 243,003
Chubb Corp.
5.20%, due 4/1/13 100,000 99,077
</Table>
120 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)
- ------------------------------------------------------------------------------
INSURANCE (CONTINUED)
Genworth Financial, Inc.
5.75%, due 6/15/14 $ 50,000 $ 51,599
Hartford Financial Services Group, Inc. (The)
7.90%, due 6/15/10 100,000 111,107
Marsh & McLennan Cos., Inc.
5.375%, due 7/15/14 100,000 95,737
Metlife, Inc.
5.00%, due 11/24/13 50,000 48,989
5.00%, due 6/15/15 100,000 97,171
6.125%, due 12/1/11 100,000 105,081
Nationwide Financial
Services, Inc.
5.10%, due 10/1/15 25,000 24,225
Prudential Financial, Inc.
5.10%, due 9/20/14 100,000 98,353
SAFECO Corp.
4.20%, due 2/1/08 100,000 98,167
Travelers Property Casualty Corp.
5.00%, due 3/15/13 100,000 96,618
UnitedHealth Group, Inc.
5.00%, due 8/15/14 100,000 98,527
WellPoint, Inc.
5.95%, due 12/15/34 150,000 151,864
------------
2,261,745
------------
MANUFACTURING (2.8%)
Alcoa, Inc.
6.00%, due 1/15/12 250,000 260,512
American Standard, Inc.
7.375%, due 2/1/08 50,000 52,264
Boeing Co. (The)
6.125%, due 2/15/33 250,000 267,491
Caterpillar, Inc.
5.30%, due 9/15/35 313,000 298,119
Centex Corp.
7.50%, due 1/15/12 100,000 108,000
Computer Sciences Corp.
5.00%, due 2/15/13 100,000 91,495
CRH America, Inc.
5.30%, due 10/15/13 100,000 99,432
DaimlerChrysler NA
Holding Corp.
4.05%, due 6/4/08 250,000 242,713
6.40%, due 5/15/06 250,000 252,079
8.50%, due 1/18/31 250,000 293,404
Dow Chemical Co. (The)
6.00%, due 10/1/12 200,000 209,208
E.I. du Pont de Nemours & Co.
4.75%, due 11/15/12 250,000 245,722
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MANUFACTURING (CONTINUED)
Eastman Chemical Co.
7.25%, due 1/15/24 $ 100,000 $ 108,596
Electronic Data Systems Corp.
Series B
6.50%, due 8/1/13 100,000 100,833
Emerson Electric Co.
7.125%, due 8/15/10 250,000 273,327
First Data Corp.
4.70%, due 8/1/13 100,000 95,962
Ford Motor Credit Co.
4.95%, due 1/15/08 250,000 234,457
6.50%, due 1/25/07 250,000 247,033
6.875%, due 2/1/06 200,000 199,897
7.00%, due 10/1/13 (b) 350,000 320,343
7.375%, due 2/1/11 500,000 469,599
7.875%, due 6/15/10 504,000 485,139
General Dynamics Corp.
4.25%, due 5/15/13 100,000 95,209
Goodrich Corp.
7.00%, due 4/15/38 50,000 54,885
Hewlett-Packard Co.
3.625%, due 3/15/08 250,000 243,370
Honeywell International, Inc.
7.50%, due 3/1/10 100,000 109,978
ICI Wilmington, Inc.
4.375%, due 12/1/08 100,000 97,746
International Business
Machines Corp.
4.25%, due 9/15/09 150,000 147,061
6.50%, due 1/15/28 100,000 110,397
7.50%, due 6/15/13 100,000 115,019
International Paper Co.
5.25%, due 4/1/16 100,000 93,514
5.85%, due 10/30/12 100,000 100,170
John Deere Capital Corp.
7.00%, due 3/15/12 250,000 275,104
Jones Apparel Group, Inc.
5.125%, due 11/15/14 50,000 44,914
Lennar Corp.
5.125%, due 10/1/10 (a) 50,000 48,892
5.60%, due 5/31/15 (a) 50,000 47,893
Litton Industries, Inc.
8.00%, due 10/15/09 100,000 110,349
Lockheed Martin Corp.
7.65%, due 5/1/16 250,000 296,939
Lubrizol Corp.
5.50%, due 10/1/14 100,000 98,544
Masco Corp.
4.80%, due 6/15/15 200,000 190,069
6.75%, due 3/15/06 100,000 100,753
</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 121
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
MANUFACTURING (CONTINUED)
MeadWestvaco Corp.
6.85%, due 4/1/12 $ 100,000 $ 105,479
Motorola, Inc.
7.50%, due 5/15/25 100,000 118,082
Newmont Mining Corp.
8.625%, due 5/15/11 50,000 58,052
Northrop Grumman Corp.
7.125%, due 2/15/11 100,000 109,191
7.875%, due 3/1/26 100,000 124,807
Praxair, Inc.
3.95%, due 6/1/13 100,000 92,898
Pulte Homes, Inc.
7.875%, due 8/1/11 100,000 109,517
Raytheon Co.
5.50%, due 11/15/12 100,000 101,494
6.40%, due 12/15/18 100,000 108,179
6.75%, due 8/15/07 88,000 90,550
Rohm & Haas Co.
7.85%, due 7/15/29 100,000 126,063
Textron Financial Corp.
4.125%, due 3/3/08 125,000 122,863
Toyota Motor Credit Corp.
4.25%, due 3/15/10 100,000 97,444
United Technologies Corp.
6.35%, due 3/1/11 250,000 265,753
Weyerhaeuser Co.
6.75%, due 3/15/12 200,000 211,779
7.375%, due 3/15/32 100,000 107,721
------------
9,286,303
------------
SERVICE (2.6%)
Albertson's, Inc.
8.00%, due 5/1/31 100,000 91,544
Belo Corp.
8.00%, due 11/1/08 100,000 106,559
Bristol-Myers Squibb Co.
5.75%, due 10/1/11 250,000 258,620
Cardinal Health, Inc.
4.00%, due 6/15/15 100,000 88,496
Cendant Corp.
6.25%, due 1/15/08 200,000 203,452
Clear Channel
Communications, Inc.
5.50%, due 9/15/14 100,000 93,915
6.00%, due 11/1/06 200,000 202,100
6.875%, due 6/15/18 100,000 99,540
Comcast Cable
Communications Holdings, Inc.
8.375%, due 3/15/13 250,000 287,977
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SERVICE (CONTINUED)
Comcast Cable Communications, Inc.
6.375%, due 1/30/06 $ 100,000 $ 100,431
7.125%, due 6/15/13 250,000 270,636
Comcast Corp.
4.95%, due 6/15/16 100,000 92,883
5.65%, due 6/15/35 200,000 178,842
COX Communications, Inc.
3.875%, due 10/1/08 40,000 38,563
5.45%, due 12/15/14 100,000 97,129
7.75%, due 8/15/06 100,000 102,112
7.75%, due 11/1/10 200,000 217,332
CVS Corp.
4.875%, due 9/15/14 50,000 47,962
Eli Lilly & Co.
4.50%, due 3/15/18 100,000 92,704
Federated Department
Stores, Inc.
6.625%, due 9/1/08 100,000 103,881
Genentech, Inc.
4.75%, due 7/15/15 (a) 100,000 96,525
GlaxoSmithKline Capital, Inc.
4.375%, due 4/15/14 100,000 95,203
Harrah's Operating Co., Inc.
5.625%, due 6/1/15 (a) 50,000 47,979
8.00%, due 2/1/11 100,000 110,239
Historic TW, Inc.
6.625%, due 5/15/29 250,000 252,677
IAC/InterActiveCorp.
7.00%, due 1/15/13 100,000 102,489
Kroger Co. (The)
5.50%, due 2/1/13 250,000 244,289
Lowe's Cos., Inc.
6.875%, due 2/15/28 100,000 114,889
Marriott International, Inc.
4.625%, due 6/15/12 50,000 47,844
May Department Stores Co. (The)
6.65%, due 7/15/24 50,000 50,528
6.70%, due 9/15/28 100,000 101,517
Merck & Co., Inc.
4.75%, due 3/1/15 250,000 236,503
News America, Inc.
5.30%, due 12/15/14 200,000 195,874
7.25%, due 5/18/18 100,000 110,650
Pfizer, Inc.
4.65%, due 3/1/18 300,000 284,838
Quest Diagnostics, Inc.
5.125%, due 11/1/10 (a) 50,000 49,902
R.R. Donnelley & Sons Co.
5.50%, due 5/15/15 (a) 100,000 96,830
</Table>
122 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)
- ------------------------------------------------------------------------------
SERVICE (CONTINUED)
Republic Services, Inc.
6.75%, due 8/15/11 $ 50,000 $ 53,485
Safeway, Inc.
5.80%, due 8/15/12 200,000 199,839
Schering-Plough Corp.
6.75%, due 12/1/33 100,000 112,556
Science Applications
International Corp.
6.25%, due 7/1/12 100,000 103,732
Target Corp.
5.875%, due 3/1/12 250,000 261,722
Time Warner, Inc.
6.75%, due 4/15/11 250,000 264,090
6.875%, due 5/1/12 125,000 133,795
7.625%, due 4/15/31 150,000 169,127
Viacom, Inc.
5.50%, due 5/15/33 100,000 86,431
5.625%, due 8/15/12 350,000 347,291
Wal-Mart Stores, Inc.
4.75%, due 8/15/10 150,000 148,536
5.25%, due 9/1/35 250,000 234,614
6.875%, due 8/10/09 250,000 266,763
Walt Disney Co. (The)
6.375%, due 3/1/12 250,000 263,306
6.75%, due 3/30/06 100,000 100,882
Waste Management, Inc.
5.00%, due 3/15/14 50,000 48,468
7.00%, due 10/15/06 100,000 101,756
7.125%, due 12/15/17 100,000 110,948
Wyeth
5.50%, due 3/15/13 250,000 252,168
5.50%, due 2/1/14 50,000 50,358
6.45%, due 2/1/24 100,000 107,013
Yum! Brands, Inc.
8.875%, due 4/15/11 100,000 116,479
------------
8,546,813
------------
TELECOM (1.1%)
ALLTEL Corp.
4.656%, due 5/17/07 100,000 99,513
7.00%, due 7/1/12 250,000 272,850
BellSouth Corp.
5.20%, due 9/15/14 100,000 97,917
6.00%, due 11/15/34 100,000 96,215
6.875%, due 10/15/31 250,000 265,748
CenturyTel, Inc.
Series H
8.375%, due 10/15/10 100,000 111,178
Cingular Wireless LLC
6.50%, due 12/15/11 100,000 106,520
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TELECOM (CONTINUED)
New Cingular Wireless
Services, Inc.
7.35%, due 3/1/06 $ 150,000 $ 151,301
8.125%, due 5/1/12 100,000 115,003
8.75%, due 3/1/31 100,000 130,405
SBC Communications, Inc.
5.10%, due 9/15/14 200,000 193,086
5.875%, due 2/1/12 100,000 102,326
6.15%, due 9/15/34 250,000 244,206
Sprint Capital Corp.
6.875%, due 11/15/28 100,000 106,620
8.375%, due 3/15/12 500,000 576,896
8.75%, due 3/15/32 100,000 129,344
Verizon Global Funding Corp.
6.125%, due 6/15/07 250,000 254,899
7.75%, due 12/1/30 350,000 405,915
Verizon Pennsylvania, Inc.
Series A
5.65%, due 11/15/11 250,000 248,245
------------
3,708,187
------------
TRANSPORTATION (0.4%)
Burlington Northern
Santa Fe Corp.
6.75%, due 7/15/11 100,000 107,459
7.125%, due 12/15/10 100,000 109,129
CSX Corp.
6.30%, due 3/15/12 100,000 105,717
CSX Transportation, Inc.
7.875%, due 5/15/43 100,000 125,955
Norfolk Southern Corp.
5.64%, due 5/17/29 144,000 140,959
6.00%, due 4/30/08 100,000 101,919
7.05%, due 5/1/37 100,000 116,610
7.80%, due 5/15/27 6,000 7,460
Union Pacific Corp.
5.75%, due 10/15/07 100,000 101,502
6.125%, due 1/15/12 100,000 104,816
6.65%, due 1/15/11 100,000 106,548
------------
1,128,074
------------
UTILITY--OTHER (0.1%)
Exelon Corp.
6.75%, due 5/1/11 200,000 211,435
PSE&G Power LLC
7.75%, due 4/15/11 100,000 110,275
------------
321,710
------------
Total Corporate Bonds
(Cost $61,707,495) 61,123,703
------------
</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 123
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN BONDS (3.3%)
- ------------------------------------------------------------------------------
BANKS (0.5%)
Bank of Tokyo-Mitsubishi, Ltd. (The)
8.40%, due 4/15/10 $ 100,000 $ 112,365
HSBC Holdings PLC
7.50%, due 7/15/09 250,000 271,013
International Bank of Reconstruction & Development
(zero coupon), due 3/11/31 504,000 132,758
Korea Development Bank
4.25%, due 11/13/07 100,000 98,652
Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08 550,000 536,121
Landwirtschaftliche Rentenbank
Series 5
3.25%, due 6/16/08 250,000 240,928
Royal Bank of Scotland
Group PLC
5.00%, due 11/12/13 100,000 99,466
5.05%, due 1/8/15 100,000 98,269
UFJ Finance Aruba AEC
6.75%, due 7/15/13 100,000 108,218
------------
1,697,790
------------
CONSUMER (0.1%)
Diageo Capital PLC
3.375%, due 3/20/08 250,000 241,777
------------
ELECTRIC (0.0%)++
Scottish Power PLC
5.375%, due 3/15/15 100,000 98,306
------------
ENERGY (0.0%)++
Transocean, Inc.
7.375%, due 4/15/18 100,000 116,702
------------
FOREIGN SOVEREIGN (1.4%)
Canadian Government
5.25%, due 11/5/08 500,000 510,755
Italian Republic
4.375%, due 10/25/06 250,000 249,477
5.625%, due 6/15/12 750,000 782,994
Malaysian Government
7.50%, due 7/15/11 100,000 111,904
Republic of Chile
5.50%, due 1/15/13 100,000 102,380
Republic of Finland
4.75%, due 3/6/07 250,000 249,837
Republic of Korea
8.875%, due 4/15/08 250,000 275,181
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN SOVEREIGN (CONTINUED)
Republic of Poland
5.25%, due 1/15/14 $ 100,000 $ 101,100
Republic of South Africa
7.375%, due 4/25/12 100,000 110,500
United Mexican States
Series A
5.875%, due 1/15/14 750,000 762,000
6.375%, due 1/16/13 550,000 576,125
6.75%, due 9/27/34 (b) 150,000 156,375
7.50%, due 1/14/12 250,000 277,000
8.50%, due 2/1/06 250,000 252,625
------------
4,518,253
------------
INSURANCE (0.1%)
Axa
8.60%, due 12/15/30 105,000 136,619
XL Capital, Ltd.
5.25%, due 9/15/14 50,000 47,910
------------
184,529
------------
MANUFACTURING (0.2%)
Alcan, Inc.
5.00%, due 6/1/15 100,000 95,880
BHP Billiton Finance USA Ltd.
4.80%, due 4/15/13 100,000 97,953
Celulosa Arauco y
Constitucion S.A.
5.625%, due 4/20/15 50,000 48,558
Hanson Australia Funding, Ltd.
5.25%, due 3/15/13 100,000 98,442
Stora Enso Oyj
7.375%, due 5/15/11 100,000 107,318
Tyco International Group S.A.
6.00%, due 11/15/13 100,000 103,735
------------
551,886
------------
REGIONAL GOVERNMENT (0.3%)
Hydro-Quebec
Series JL
6.30%, due 5/11/11 250,000 266,665
Province of British Columbia
5.375%, due 10/29/08 250,000 254,590
Province of Ontario
6.00%, due 2/21/06 511,000 513,329
------------
1,034,584
------------
SERVICE (0.0%)++
Thomson Corp. (The)
6.20%, due 1/5/12 100,000 105,327
------------
</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
FOREIGN BONDS (CONTINUED)
- ------------------------------------------------------------------------------
TELECOM (0.7%)
America Movil S.A. de C.V.
5.75%, due 1/15/15 $ 125,000 $ 122,716
British Telecommunications PLC
8.375%, due 12/15/10 100,000 114,013
8.875%, due 12/15/30 100,000 130,636
Deutsche Telekom International Finance B.V.
5.25%, due 7/22/13 100,000 98,875
8.50%, due 6/15/10 350,000 390,576
9.25%, due 6/1/32 100,000 135,288
France Telecom S.A.
8.50%, due 3/1/31 250,000 326,656
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10 100,000 111,502
Telecom Italia Capital S.A.
4.95%, due 9/30/14 150,000 142,329
6.00%, due 9/30/34 100,000 94,943
Series C
6.375%, due 11/15/33 100,000 99,351
Telefonica Europe BV
8.25%, due 9/15/30 100,000 125,136
Telefonos de Mexico S.A. de C.V.
4.50%, due 11/19/08 100,000 97,836
Vodafone Group PLC
7.75%, due 2/15/10 250,000 275,004
7.875%, due 2/15/30 100,000 123,278
------------
2,388,139
------------
Total Foreign Bonds
(Cost $10,981,335) 10,937,293
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (73.7%)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (1.3%)
2.875%, due 9/15/06 1,000,000 985,934
3.375%, due 9/14/07 1,500,000 1,466,610
4.25%, due 5/15/09 (b) 2,000,000 1,965,874
------------
4,418,418
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (3.5%)
2.75%, due 8/15/06 500,000 493,259
4.00%, due 12/15/09 3,250,000 3,161,067
4.125%, due 7/12/10 1,085,000 1,054,806
4.50%, due 1/15/15 2,000,000 1,936,542
5.00%, due 7/15/14 1,000,000 1,004,469
5.25%, due 1/15/06 2,000,000 2,003,684
6.25%, due 7/15/32 1,500,000 1,739,544
------------
11,393,371
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (14.7%)
4.00%, due 1/1/20 $ 723,924 $ 685,270
4.00%, due 2/1/20 2,055,457 1,944,141
4.00%, due 4/1/20 530,105 501,397
4.50%, due 7/15/13 1,000,000 975,771
V 4.50%, due 8/1/20 4,890,459 4,733,454
4.50%, due 11/1/20 TBA (c) 1,000,000 967,188
4.50%, due 8/1/33 427,184 399,832
4.50%, due 6/1/34 488,851 456,951
4.50%, due 5/1/35 928,858 867,134
4.50%, due 6/1/35 991,643 925,747
4.50%, due 8/1/35 993,019 927,031
5.00%, due 5/1/18 613,153 605,354
5.00%, due 6/1/18 313,540 309,519
5.00%, due 7/1/18 917,863 906,134
5.00%, due 9/1/18 1,259,692 1,243,806
5.00%, due 11/1/18 927,338 915,444
5.00%, due 12/1/18 399,124 394,005
5.00%, due 11/1/20 TBA (c) 3,000,000 2,958,750
5.00%, due 4/1/35 494,634 476,055
5.00%, due 7/1/35 1,479,423 1,423,855
5.00%, due 8/1/35 4,471,386 4,303,438
5.00%, due 9/1/35 2,495,115 2,401,397
5.00%, due 10/1/35 2,000,000 1,924,879
5.50%, due 3/1/17 255,035 256,788
5.50%, due 7/1/17 138,851 139,803
5.50%, due 10/1/17 512,897 516,393
5.50%, due 11/1/33 115,884 114,580
5.50%, due 8/1/34 1,878,280 1,857,135
5.50%, due 2/1/35 964,057 952,374
V 5.50%, due 7/1/35 4,980,551 4,917,992
5.50%, due 8/1/35 4,424,765 4,369,188
5.50%, due 11/1/35 TBA (c) 41,779 41,231
6.00%, due 12/1/13 14,265 14,576
6.00%, due 4/1/14 44,841 45,816
6.00%, due 2/1/17 148,216 151,469
6.00%, due 3/1/17 148,899 152,165
6.00%, due 5/1/17 281,602 287,775
6.00%, due 7/1/17 82,210 84,012
6.00%, due 8/1/17 35,614 36,396
6.00%, due 3/1/29 44,085 44,635
6.00%, due 6/1/31 177,808 179,826
6.00%, due 12/1/31 396,882 401,386
6.00%, due 9/1/32 160,572 162,329
6.00%, due 12/1/32 3,697 3,731
6.00%, due 4/1/33 294,338 297,484
6.00%, due 11/1/33 807 815
6.00%, due 12/1/33 665 672
6.00%, due 1/1/34 363,734 367,474
6.00%, due 2/1/34 3,030 3,061
6.00%, due 4/1/34 18,972 19,167
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 5/1/35 $ 53,727 $ 54,280
6.50%, due 4/1/11 8,284 8,541
6.50%, due 5/1/11 7,936 8,182
6.50%, due 10/1/11 6,829 7,041
6.50%, due 6/1/14 55,163 56,915
6.50%, due 2/1/17 26,486 27,316
6.50%, due 4/1/17 28,559 29,453
6.50%, due 5/1/17 85,610 88,292
6.50%, due 12/1/24 92,394 94,726
6.50%, due 11/1/25 64,366 66,335
6.50%, due 5/1/26 23,093 23,676
6.50%, due 3/1/27 21,850 22,491
6.50%, due 5/1/31 47,538 48,830
6.50%, due 8/1/31 39,768 40,849
6.50%, due 1/1/32 182,001 186,948
6.50%, due 3/1/32 211,873 217,541
6.50%, due 4/1/32 60,112 61,712
6.50%, due 7/1/32 49,061 50,367
6.50%, due 1/1/34 304,181 311,874
7.00%, due 6/1/11 14,801 15,428
7.00%, due 11/1/11 4,877 5,084
7.00%, due 4/1/26 19,448 20,351
7.00%, due 7/1/26 2,879 3,013
7.00%, due 12/1/27 35,069 36,666
7.00%, due 1/1/30 21,132 22,064
7.00%, due 3/1/31 108,129 112,887
7.00%, due 10/1/31 53,527 55,883
7.00%, due 3/1/32 189,869 198,225
7.50%, due 9/1/11 5,648 5,930
7.50%, due 10/1/11 17,265 18,155
7.50%, due 1/1/26 5,986 6,347
7.50%, due 11/1/26 1,345 1,426
7.50%, due 3/1/27 1,659 1,758
7.50%, due 2/1/30 3,456 3,655
7.50%, due 2/1/32 120,927 127,883
8.00%, due 7/1/26 14,111 15,063
------------
48,720,012
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (2.2%)
3.25%, due 11/15/07 1,000,000 973,180
3.25%, due 8/15/08 2,000,000 1,926,658
4.625%, due 10/15/13 2,000,000 1,961,836
5.00%, due 1/15/07 1,500,000 1,506,915
6.21%, due 8/6/38 475,000 550,050
------------
6,918,639
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (18.3%)
4.50%, due 1/1/20 $ 1,444,688 $ 1,398,101
4.50%, due 7/1/20 3,911,705 3,784,208
4.50%, due 8/1/20 981,147 949,168
5.00%, due 10/1/17 45,285 44,721
5.00%, due 11/1/17 380,213 375,474
5.00%, due 12/1/17 304,997 301,196
5.00%, due 2/1/18 411,575 406,288
5.00%, due 7/1/18 151,295 149,352
5.00%, due 8/1/18 955,927 943,648
5.00%, due 11/1/18 484,849 478,621
5.00%, due 1/1/19 923,488 911,347
5.00%, due 1/1/20 977,722 964,869
5.00%, due 6/1/20 492,431 485,922
5.00%, due 10/1/20 3,000,000 2,960,344
5.00%, due 4/1/35 2,436,031 2,344,950
5.00%, due 6/1/35 2,954,215 2,843,760
5.00%, due 7/1/35 3,970,053 3,821,618
5.00%, due 8/1/35 1,990,955 1,916,515
5.50%, due 6/1/16 7,739 7,799
5.50%, due 11/1/16 247,914 249,813
5.50%, due 2/1/17 20,113 20,264
5.50%, due 6/1/17 221,483 223,096
5.50%, due 8/1/17 173,741 175,006
5.50%, due 8/1/19 431,826 434,886
5.50%, due 10/1/19 387,074 389,817
5.50%, due 6/1/33 1,003,980 992,046
5.50%, due 7/1/33 1,162,791 1,148,970
5.50%, due 9/1/33 1,171,081 1,157,161
5.50%, due 11/1/33 372,305 367,880
5.50%, due 12/1/33 418,778 413,800
5.50%, due 2/1/34 229,133 226,255
5.50%, due 4/1/34 917,390 906,184
5.50%, due 5/1/34 828,310 817,784
5.50%, due 6/1/34 31,667 31,265
5.50%, due 7/1/34 827,065 816,555
5.50%, due 9/1/34 498,599 492,262
5.50%, due 10/1/34 2,466,276 2,434,935
5.50%, due 2/1/35 30,860 30,453
5.50%, due 5/1/35 974,452 961,603
5.50%, due 6/1/35 526,725 519,780
5.50%, due 7/1/35 1,931,260 1,905,796
5.50%, due 8/1/35 1,417,526 1,398,835
5.50%, due 9/1/35 984,360 971,380
5.50%, due 11/1/35 TBA (c) 2,000,000 1,972,500
6.00%, due 6/1/16 176,012 180,101
6.00%, due 7/1/16 53,775 55,024
6.00%, due 9/1/16 82,497 84,414
6.00%, due 9/1/17 94,622 96,818
6.00%, due 12/1/28 162,057 163,892
6.00%, due 3/1/29 7,119 7,198
</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
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- ------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 5/1/29 $ 201,285 $ 203,507
6.00%, due 12/1/29 8,448 8,544
6.00%, due 12/1/30 1,187 1,197
6.00%, due 4/1/31 1,879 1,898
6.00%, due 1/1/32 5,713 5,769
6.00%, due 4/1/32 126,193 127,418
6.00%, due 5/1/32 67,816 68,463
6.00%, due 8/1/32 271,302 273,890
6.00%, due 5/1/33 239,610 241,975
6.00%, due 3/1/34 12,915 13,032
6.00%, due 8/1/34 4,309,153 4,348,288
6.00%, due 10/1/34 510,330 514,837
6.00%, due 2/1/35 67,718 68,318
6.00%, due 6/1/35 989,621 998,390
6.00%, due 11/1/35 TBA (c) 3,100,000 3,126,158
6.50%, due 3/1/11 1,214 1,253
6.50%, due 4/1/11 7,898 8,157
6.50%, due 6/1/11 1,215 1,255
6.50%, due 9/1/11 12,462 12,870
6.50%, due 10/1/11 123,888 127,944
6.50%, due 11/1/11 10,511 10,855
6.50%, due 6/1/15 184,149 190,240
6.50%, due 5/1/26 13,718 14,143
6.50%, due 4/1/27 16,270 16,768
6.50%, due 2/1/28 30,870 31,814
6.50%, due 10/1/28 107,090 110,337
6.50%, due 7/1/31 184,043 189,277
6.50%, due 9/1/31 74,480 76,598
6.50%, due 10/1/31 142,148 146,191
6.50%, due 2/1/32 33,820 34,764
6.50%, due 5/1/32 259,406 266,782
6.50%, due 6/1/32 144,485 148,517
6.50%, due 7/1/32 269,828 277,359
6.50%, due 8/1/32 626,368 643,885
6.50%, due 9/1/32 437,374 449,581
6.50%, due 10/1/34 336,925 345,867
7.00%, due 2/1/09 111,310 114,264
7.00%, due 5/1/11 2,771 2,891
7.00%, due 6/1/11 13,988 14,559
7.00%, due 10/1/11 720 750
7.00%, due 11/1/11 17,857 18,642
7.00%, due 4/1/26 12,285 12,883
7.00%, due 5/1/26 31,290 32,811
7.00%, due 11/1/26 10,189 10,684
7.00%, due 1/1/28 501 524
7.00%, due 6/1/29 28,197 29,534
7.00%, due 8/1/29 195,485 204,707
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
7.00%, due 2/1/31 $ 203,341 $ 212,742
7.00%, due 8/1/31 16,194 16,945
7.00%, due 9/1/31 47,167 49,342
7.00%, due 11/1/31 3,685 3,855
7.00%, due 4/1/32 45,923 48,043
7.00%, due 5/1/32 124,198 129,927
7.50%, due 3/1/30 5,045 5,327
7.50%, due 7/1/30 31,966 33,757
7.50%, due 7/1/31 89,045 93,996
7.50%, due 8/1/31 2,730 2,882
8.00%, due 8/1/10 2,012 2,105
8.00%, due 9/1/11 3,275 3,452
8.00%, due 11/1/11 7,233 7,674
8.00%, due 1/1/25 266 284
8.00%, due 6/1/25 735 787
8.00%, due 9/1/25 2,102 2,249
8.00%, due 2/1/26 1,277 1,366
8.00%, due 9/1/26 15,113 16,163
8.00%, due 10/1/26 2,070 2,214
8.00%, due 11/1/26 5,953 6,366
8.00%, due 4/1/27 7,127 7,622
8.00%, due 6/1/27 22,540 24,105
8.00%, due 12/1/27 10,568 11,111
8.00%, due 1/1/28 35,081 37,516
9.50%, due 3/1/16 41,408 43,707
9.50%, due 9/1/17 35,213 36,978
9.50%, due 9/1/19 5,491 6,068
------------
59,088,647
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (2.3%)
5.00%, due 4/20/33 489,442 476,838
5.00%, due 9/15/35 99,850 97,446
5.00%, due 11/1/35 TBA (c) 1,500,000 1,462,968
5.50%, due 7/15/34 500,050 499,573
5.50%, due 7/20/34 455,436 454,199
5.50%, due 4/15/35 1,000,100 999,152
5.50%, due 10/15/35 999,900 998,953
6.00%, due 3/20/29 130,298 132,430
6.00%, due 7/15/29 411,454 419,345
6.00%, due 1/15/32 167,346 170,319
6.00%, due 12/15/32 106,956 108,856
6.00%, due 11/15/33 282,713 287,721
6.00%, due 1/20/35 426,256 432,826
6.00%, due 6/15/35 439,188 447,191
6.50%, due 2/15/29 24,237 25,212
6.50%, due 3/15/29 139,591 145,055
6.50%, due 7/15/29 45,548 47,356
6.50%, due 8/15/29 131,764 136,938
6.50%, due 3/20/31 100,006 103,170
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.50%, due 6/15/32 $ 136,313 $ 141,434
6.50%, due 9/15/32 192,770 200,012
6.50%, due 10/15/32 79,721 82,717
6.50%, due 3/15/35 498,956 517,872
7.00%, due 3/15/07 5,580 5,642
7.00%, due 11/15/11 21,275 21,997
7.00%, due 2/15/26 6,568 6,923
7.00%, due 4/15/26 2,361 2,488
7.00%, due 6/15/29 664 698
7.00%, due 12/15/29 12,840 13,510
7.00%, due 5/15/31 4,431 4,658
7.00%, due 8/15/31 64,927 68,258
7.00%, due 8/20/31 127,550 133,457
7.00%, due 8/15/32 184,103 193,555
7.50%, due 8/15/08 389 402
7.50%, due 1/15/09 1,295 1,349
7.50%, due 9/15/11 46,872 49,401
7.50%, due 3/15/26 6,013 6,383
7.50%, due 10/15/26 13,690 14,533
7.50%, due 11/15/26 6,613 7,021
7.50%, due 1/15/30 23,481 24,871
7.50%, due 10/15/30 16,064 17,015
7.50%, due 3/15/32 99,475 105,372
8.00%, due 6/15/26 645 690
8.00%, due 9/15/26 1,855 1,986
8.00%, due 10/15/26 1,065 1,140
8.00%, due 11/15/26 3,505 3,751
8.00%, due 5/15/27 910 973
8.00%, due 7/15/27 1,921 2,055
8.00%, due 9/15/27 1,125 1,204
8.00%, due 11/15/30 92,501 98,886
8.50%, due 7/15/26 2,111 2,293
8.50%, due 11/15/26 10,376 11,270
------------
9,189,364
------------
UNITED STATES TREASURY BONDS (4.2%)
V 5.375%, due 2/15/31 (b) 4,500,000 4,907,813
6.00%, due 2/15/26 2,500,000 2,874,023
6.25%, due 8/15/23 2,600,000 3,034,382
6.25%, due 5/15/30 (b) 1,007,000 1,216,739
7.50%, due 11/15/16 403,000 500,082
8.75%, due 5/15/17 252,000 342,208
8.875%, due 2/15/19 302,000 423,366
9.875%, due 11/15/15 (g) 302,000 428,038
------------
13,726,651
------------
UNITED STATES TREASURY NOTES (27.2%)
2.625%, due 11/15/06 3,500,000 3,438,341
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
UNITED STATES TREASURY NOTES (CONTINUED)
3.00%, due 12/31/06 $ 2,225,000 $ 2,189,887
V 3.125%, due 5/15/07 5,000,000 4,906,835
3.125%, due 9/15/08 3,500,000 3,378,869
V 3.375%, due 2/15/08 (b) 18,920,000 18,497,252
3.375%, due 9/15/09 1,000,000 962,266
3.375%, due 10/15/09 1,500,000 1,441,875
3.625%, due 6/30/07 3,005,000 2,967,789
V 3.75%, due 3/31/07 (b) 6,500,000 6,442,618
V 3.75%, due 5/15/08 (b) 6,100,000 6,003,498
3.875%, due 5/15/09 (b) 2,500,000 2,453,320
4.00%, due 8/31/07 (b) 4,050,000 4,022,156
V 4.00%, due 2/15/14 5,025,000 4,828,909
V 4.125%, due 8/15/08 (b) 5,850,000 5,806,581
4.25%, due 10/15/10 (b) 1,200,000 1,189,547
4.25%, due 11/15/14 1,850,000 1,804,834
V 4.25%, due 8/15/15 (b) 15,930,000 15,544,191
4.50%, due 10/31/07 1,000,000 997,422
4.75%, due 5/15/14 2,600,000 2,632,500
------------
89,508,690
------------
Total U.S. Government &
Federal Agencies
(Cost $246,398,401) 242,963,792(k)
------------
YANKEE BONDS (1.3%) (D)
- ------------------------------------------------------------------------------
BANKS (0.5%)
Abbey National PLC
7.95%, due 10/26/29 100,000 126,661
Australia & New Zealand Banking Group, Ltd.
7.55%, due 9/15/06 353,000 361,356
HSBC Bank PLC
6.95%, due 3/15/11 200,000 221,615
Inter-American
Development Bank
6.80%, due 10/15/25 604,000 706,425
Santander Financial Issuances
6.375%, due 2/15/11 100,000 105,963
------------
1,522,020
------------
ELECTRIC (0.0%)++
United Utilities PLC
5.375%, due 2/1/19 100,000 96,019
------------
ENERGY (0.3%)
Canadian Natural Resources, Ltd.
5.45%, due 10/1/12 100,000 101,090
EnCana Corp.
4.75%, due 10/15/13 100,000 97,231
6.30%, due 11/1/11 100,000 105,682
</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
YANKEE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
ENERGY (CONTINUED)
Nexen, Inc.
5.20%, due 3/10/15 $ 100,000 $ 97,615
Norsk Hydro ASA
7.25%, due 9/23/27 250,000 301,830
Petro-Canada
4.00%, due 7/15/13 100,000 91,808
TransCanada Pipelines, Ltd.
4.00%, due 6/15/13 100,000 92,771
------------
888,027
------------
INSURANCE (0.0%)++
ACE, Ltd.
6.00%, due 4/1/07 175,000 177,129
------------
MANUFACTURING (0.2%)
Alcan, Inc.
6.45%, due 3/15/11 100,000 105,090
Brascan Corp.
5.75%, due 3/1/10 50,000 50,821
Falconbridge, Ltd.
8.375%, due 2/15/11 75,000 83,999
Inco, Ltd.
5.70%, due 10/15/15 100,000 98,803
Potash Corp. of Saskatchewan
7.125%, due 6/15/07 100,000 103,275
Tyco International Group S.A.
6.375%, due 10/15/11 250,000 262,667
------------
704,655
------------
REGIONAL GOVERNMENT (0.2%)
Province of Manitoba
5.50%, due 10/1/08 250,000 255,051
Province of Quebec
Series NJ
7.50%, due 7/15/23 302,000 379,470
------------
634,521
------------
TELECOM (0.1%)
TELUS Corp.
7.50%, due 6/1/07 100,000 103,840
8.00%, due 6/1/11 100,000 112,449
------------
216,289
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TRANSPORTATION (0.0%)++
Canadian National Railway Co.
6.375%, due 10/15/11 $ 100,000 $ 106,443
------------
Total Yankee Bonds
(Cost $4,187,759) 4,345,103
------------
Total Long-Term Bonds
(Cost $326,498,412) 322,549,696
------------
SHORT-TERM INVESTMENTS (17.6%)
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.9%)
Skandinaviska Enskilda
Banken AB
4.082%, due 2/22/06 (e)(f) 2,960,436 2,960,436
------------
Total Certificate of Deposit
(Cost $2,960,436) 2,960,436
------------
COMMERCIAL PAPER (2.2%)
Alcoa, Inc.
4.06%, due 11/1/05 (g) 570,000 570,000
Countrywide Financial Corp.
4.06%, due 11/1/05 (g) 5,900,000 5,900,000
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (e) 986,812 986,812
------------
Total Commercial Paper
(Cost $7,456,812) 7,456,812
------------
<Caption>
SHARES
INVESTMENT COMPANY (4.5%)
BGI Institutional Money Market Fund (e) 14,776,451 14,776,451
------------
Total Investment Company
(Cost $14,776,451) 14,776,451
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (9.9%)
Bank of the West (The)
4.02%, due 12/8/05 (e) $ 3,947,247 3,947,247
Barclays
3.92%, due 12/5/05 (e) 1,973,624 1,973,624
3.94%, due 11/28/05 (e) 2,960,435 2,960,435
Credit Suisse First Boston Corp.
3.74%, due 11/1/05 (e) 2,960,435 2,960,435
Deutsche Bank
3.95%, due 12/2/05 (e) 1,973,624 1,973,624
First Tennessee National Corp.
3.88%, due 11/14/05 (e) 2,960,436 2,960,436
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
TIME DEPOSITS (CONTINUED)
Fortis Bank
4.00%, due 12/12/05 (e) $ 2,960,436 $ 2,960,436
Halifax Bank of Scotland
3.75%, due 11/1/05 (e) 2,960,436 2,960,436
Marshall & Ilsley Bank
3.97%, due 12/29/05 (e) 1,973,624 1,973,624
Societe Generale
3.77%, due 11/1/05 (e) 2,960,436 2,960,436
UBS AG
4.01%, due 12/13/05 (e) 1,973,624 1,973,624
Wells Fargo & Co.
4.00%, due 11/25/05 (e) 2,960,435 2,960,435
------------
Total Time Deposits
(Cost $32,564,792) 32,564,792
------------
U.S. GOVERNMENT (0.1%)
United States Treasury Bill
3.23%, due 12/8/05 (g) 300,000 298,892
------------
Total U.S. Government
(Cost $298,970) 298,892
------------
Total Short-Term Investments
(Cost $58,057,461) 58,057,383
------------
Total Investments
(Cost $384,555,873) (h) 115.5% 380,607,079(i)
Liabilities in Excess of
Cash and Other Assets (15.5) (51,159,987)
----------- ------------
Net Assets 100.0% $329,447,092
=========== ============
</Table>
<Table>
<Caption>
CONTRACTS UNREALIZED
LONG DEPRECIATION (J)
FUTURES CONTRACTS (0.0%)++
- -----------------------------------------------------------------------------------
UNITED STATES (0.0%)++
United States Treasury Note
December 2005 (5 Year) 15 $ (27,806)
-------------------
Total Futures Contracts
(Settlement Value $1,588,360) (k) $ (27,806)
===================
</Table>
<Table>
++ Less than one tenth of a percent.
(a) May be sold to institutional investors only.
(b) Represents security, or a portion thereof, which is out
on loan.
(c) TBA: Securities purchased on a forward commitment basis
with an approximate principal amount and maturity date.
The actual principal amount and the maturity will be
determined upon settlement. The market value of these
securities at October 31, 2005 is $10,528,795.
(d) Yankee Bond--dollar-denominated bond issued in the
United States by a foreign bank or corporation.
(e) Represents security, or a portion thereof, purchased
with cash collateral received for securities on loan.
(f) Floating rate. Rate shown is the rate in effect at
October 31, 2005.
(g) Segregated, partially segregated or designated as
collateral for futures contracts and TBAs.
(h) The cost for federal income tax purposes is
$384,654,444.
(i) At October 31, 2005, net unrealized depreciation was
$4,047,365 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 $2,060,040 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $6,107,405.
(j) Represents the difference between the value of the
contracts at the time they were opened and the value at
October 31, 2005
(k) The combined market value of U.S. Government & Federal
Agencies investments and settlement value of U.S.
Treasury Note futures contracts represents 73.8% of net
assets.
</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.
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $384,555,873) including
$50,200,092 market value of securities
loaned $380,607,079
Cash 19,144
Receivables:
Investment securities sold 16,098,598
Dividends and interest 3,018,939
Fund shares sold 825,051
Variation margin on futures contracts 7,734
Other assets 20,571
-------------
Total assets 400,597,116
-------------
LIABILITIES:
Securities lending collateral 51,288,491
Payables:
Investment securities purchased 18,836,569
Fund shares redeemed 761,286
Manager 96,443
Professional 52,082
Shareholder communication 28,874
Transfer agent 21,998
NYLIFE Distributors 13,670
Custodian 9,331
Accrued expenses 33,973
Dividend payable 7,307
-------------
Total liabilities 71,150,024
-------------
Net assets $329,447,092
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 6,023
Class I 24,798
Additional paid-in capital 336,696,557
Accumulated distributions in excess of net
investment income (5,795)
Accumulated net realized loss on investments
and futures contracts (3,297,891)
Net unrealized depreciation on investments and
futures contracts (3,976,600)
-------------
Net assets $329,447,092
=============
CLASS A
Net assets applicable to outstanding shares $ 64,351,023
=============
Shares of capital stock outstanding 6,022,568
=============
Net asset value per share outstanding $ 10.68
Maximum sales charge (3.00% of offering price) 0.33
-------------
Maximum offering price per share outstanding $ 11.01
=============
CLASS I
Net assets applicable to outstanding shares $265,096,069
=============
Shares of capital stock outstanding 24,798,142
=============
Net asset value and offering price per share
outstanding $ 10.69
=============
</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
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 12,020,113
Income from securities loaned--net 139,240
-------------
Total income 12,159,353
-------------
EXPENSES:
Manager 1,466,215
Distribution/Service--Class A 145,674
Professional 94,229
Transfer agent--Class A 57,745
Transfer agent--Class I 29,578
Portfolio pricing 84,178
Custodian 73,122
Shareholder communication 37,868
Registration 29,575
Directors 24,945
Miscellaneous 28,687
-------------
Total expenses before waiver/reimbursement 2,071,816
Expense waiver/reimbursement from Manager (528,248)
-------------
Net expenses 1,543,568
-------------
Net investment income 10,615,785
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments from:
Security transactions 708,201
Futures transactions (31,679)
-------------
Net realized gain on investments and futures
transactions 676,522
-------------
Net change in unrealized appreciation on
investments:
Security transactions (9,268,202)
Futures transactions (89,610)
-------------
Net unrealized loss on investments (9,357,812)
-------------
Net realized and unrealized loss on
investments and futures transactions (8,681,290)
-------------
Net increase in net assets resulting from
operations $ 1,934,495
=============
</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.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 10,615,785 $ 7,953,195
Net realized gain on investments
and futures transactions 676,522 918,947
Net change in unrealized
appreciation on investments and
futures contracts (9,357,812) 2,429,573
----------------------------
Net increase in net assets
resulting from operations 1,934,495 11,301,715
----------------------------
Dividends to shareholders:
From net investment income:
Class A (2,273,573) (1,084,652)
Class I (10,119,396) (6,323,062)
Service Class -- (156,873)
----------------------------
Total dividends to shareholders (12,392,969) (7,564,587)
----------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 36,547,875 66,652,900
Class I 104,346,947 62,155,413
Service Class -- 5,106,292
Net asset value of shares issued
to shareholders in reinvestment
of dividends:
Class A 2,249,789 1,078,191
Class I 10,087,468 6,314,766
Service Class -- 156,825
----------------------------
153,232,079 141,464,387
</Table>
<Table>
<Caption>
2005 2004
Cost of shares redeemed:
Class A $(20,487,442) $ (20,219,408)
Class I (49,109,245) (47,411,486)
Service Class -- (36,166,785)
----------------------------
(69,596,687) (103,797,679)
Increase in net assets derived
from capital share
transactions 83,635,392 37,666,708
----------------------------
Net increase in net assets 73,176,918 41,403,836
NET ASSETS:
Beginning of year 256,270,174 214,866,338
----------------------------
End of year $329,447,092 $ 256,270,174
============================
Accumulated undistributed
(distributions in excess of) net
investment income at end of year $ (5,795) $ 1,380,880
============================
</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
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
------------------------- ----------------------------------------------------------
JANUARY 2,
2004*
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31, YEAR ENDED OCTOBER 31,
2005 2004 2005 2004 2003 2002 2001
Net asset value at beginning of
period $ 11.07 $ 10.95 $ 11.07 $ 10.89 $ 10.86 $ 11.21 $ 10.73
----------- ----------- -------- -------- -------- -------- -------
Net investment income 0.36 0.33 0.40 0.34 0.39 0.52 (c) 0.65 (c)
Net realized and unrealized gain
(loss) on investments (0.32) 0.13 (0.31) 0.19 0.04 0.08 0.72
----------- ----------- -------- -------- -------- -------- -------
Total from investment operations 0.04 0.46 0.09 0.53 0.43 0.60 1.37
----------- ----------- -------- -------- -------- -------- -------
Less dividends:
From net investment income (0.43) (0.34) (0.47) (0.35) (0.40) (0.95) (0.89)
----------- ----------- -------- -------- -------- -------- -------
Net asset value at end of period $ 10.68 $ 11.07 $ 10.69 $ 11.07 $ 10.89 $ 10.86 $ 11.21
=========== =========== ======== ======== ======== ======== =======
Total investment return (a) 0.39% 3.65%(b) 0.82% 5.01% 3.97% 5.92% 13.44%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.45% 3.16%+ 3.79% 3.43% 3.39% 4.83% 6.00%
Net expenses 0.80% 0.78%+ 0.46% 0.50% 0.50% 0.50% 0.50%
Expenses (before
waiver/reimbursement) 0.98% 0.94%+ 0.64% 0.66% 0.68% 0.74% 0.71%
Portfolio turnover rate 156%(d) 104% 156%(d) 104% 110% 56% 57%
Net assets at end of period (in
000's) $64,351 $48,062 $265,096 $208,208 $184,051 $125,169 $81,890
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(b) Total return is not annualized.
(c) Per share data based on average shares outstanding during the period.
(d) The portfolio turnover rate not including mortgage dollar rolls for the year ending
October 31, 2005 is 62%.
</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.
MAINSTAY INTERMEDIATE TERM BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges -3.90% 4.20% 4.65%
Excluding sales charges 0.63 5.16 5.13
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
10/31/95 9550 10000
10022 10585
10795 11526
11710 12602
11557 12669
12244 13594
13936 15573
14142 16490
14911 17299
15650 18256
10/31/05 15749 18463
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges -4.98% 4.07% 4.37%
Excluding sales charges -0.11 4.41 4.37
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
10/31/95 10000 10000
10418 10585
11137 11526
11990 12602
11754 12669
12357 13594
13961 15573
14060 16490
14716 17299
15348 18256
10/31/05 15331 18463
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges -1.08% 4.41% 4.37%
Excluding sales charges -0.11 4.41 4.37
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
10/31/95 10000 10000
10418 10585
11137 11526
11990 12602
11754 12669
12357 13594
13961 15573
14060 16490
14716 17299
15348 18256
10/31/05 15332 18463
</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 5.00% 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 contractual and
may be modified or terminated only with the approval of the Board of Directors/
Trustees. 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.
www.MAINSTAYfunds.com 135
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
0.97% 5.45% 5.40%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE
BOND FUND BOND INDEX
-------------------------- -------------------------
10/31/95 10000 10000
10519 10585
11356 11526
12348 12602
12218 12669
12976 13594
14800 15573
15056 16490
15912 17299
16756 18256
10/31/05 16918 18463
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- ------------------------------------------------------------------------------
Lehman Brothers(R) Aggregate Bond Index(1) 1.13% 6.31% 6.32%
Average Lipper intermediate investment grade fund(2) 0.82 5.75 5.52
</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, Corporate Index, Mortgage-Backed Securities Index, and
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.
136 MainStay Intermediate Term Bond Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,001.40 $5.45 $1,019.60 $5.50
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $ 997.65 $9.21 $1,015.85 $9.30
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $ 997.65 $9.21 $1,015.85 $9.30
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,001.85 $3.68 $1,021.35 $3.72
- ---------------------------------------------------------------------------------------------------------------------------
</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 0.72% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 184 (to reflect the one-half year period).
www.MAINSTAYfunds.com 137
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 62.6
Short-Term Investments (collateral from securities lending 28.3
is 1.8%)
Corporate Bonds 14.2
Mortgage-Backed Securities 5.7
Foreign Corporate Bonds 5.4
Asset-Backed Securities 4.1
Municipal Bond 0.3
Yankee Bonds 0.2
Preferred Stock 0.1
Convertible Bonds 0.0
Common Stock 0.0
Warrants 0.0
Liabilities in Excess of Cash and Other Assets (20.9)
</Table>
* Less than one tenth of a percent.
See Portfolio of Investments on page 141 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. Federal National Mortgage Association (Mortgage
Pass-Through Securities) 6.00%, due 12/1/35 TBA
2. Federal National Mortgage Association (Mortgage
Pass-Through Securities) 5.00%, due 12/1/35 TBA
3. United States Treasury Note 2.625%, due 11/15/06
4. Federal National Mortgage Association (Mortgage
Pass-Through Securities) 5.50%, due 12/1/20 TBA
5. United States Treasury Bond 6.00%, due 2/15/26
6. United States Treasury Note 3.375%, due 2/15/08
7. Federal National Mortgage Association (Mortgage
Pass-Through Securities) 4.50%, due 11/1/18
8. United States Treasury Bond 6.25%, due 8/15/23
9. Federal National Mortgage Association 5.50%, due
5/2/06
10. Federal National Mortgage Association 4.75%, due
1/2/07
</Table>
138 MainStay Intermediate Term Bond Fund
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, with at least 65%
of its total assets 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 although it may vary
depending on market conditions. As part of the Fund's principal investment
strategies, we may use practices such as mortgage dollar rolls and securities
lending. 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 12 MONTHS ENDED OCTOBER
31, 2005?
Debate over the lasting effects of higher energy costs continued, with aggregate
demand and inflation among the key concerns. Noting that "higher energy and
other costs have the potential to add to inflation pressures," the Federal Open
Market Committee raised the targeted federal funds rate to 3.75% on September
20, 2005. The move was the Federal Open Market Committee's eighth increase
during the reporting period. Since rebuilding activity following hurricanes
Katrina and Rita may stimulate the economy, the Eurodollar futures market
anticipates that additional interest-rate hikes may be needed to keep inflation
in check.
HOW DID THE TREASURY YIELD CURVE CHANGE DURING THE REPORTING PERIOD?
From October 29, 2004 to October 31, 2005, the two-year Treasury yield advanced
183 basis points (from 2.56% to 4.38%). (A basis point is one-hundredth of a
percentage point.) Over the same period, five-year Treasury yields increased 116
basis points (from 3.29% to 4.45%) and 10-year Treasury yields rose 53 basis
points (from 4.03% to 4.56%). 30-year Treasury yields, on the other hand,
declined four basis points (from 4.79% to 4.75%).(2) Strong inflows from Asian
central banks helped support prices among longer-dated Treasurys and resulted in
a substantial flattening of the yield curve during the reporting period. We have
positioned the Fund to take advantage of this flattening trend. In July, China's
decision to revamp its currency policy and adopt a managed floating exchange
rate disrupted the Treasury market. Fortunately, Congress toned down its
protectionist rhetoric and speculation about the imminent collapse of China's
appetite for U.S. Treasurys gradually subsided.
WHAT ELSE HAVE YOU DONE TO POSITION THE FUND IN THIS MARKET ENVIRONMENT?
The Fund benefited from our positioning, which emphasized the potential for
higher interest rates and a flattening yield curve. During the 12-month
reporting period, we sought to benefit from the yield advantages of positions in
moderate- and lower-quality securities. The Fund had exposure to issuers in
oil-rich emerging economies. We also used rigorous credit analysis to help
improve the Fund's chances of avoiding negative credit events.
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. High-yield debt securities
("junk bonds") are generally considered speculative because they present a
greater risk of loss than higher quality debt securities and may be subject to
greater price volatility. Funds that invest in bonds are subject to credit,
inflation, and interest-rate risk and can lose principal value when interest
rates rise. The Fund may experience a portfolio turnover rate of over 100% and
may generate short-term capital gains which are taxable.
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. Source: Bloomberg--Historical yield curve data. Rounding may affect results.
www.MAINSTAYfunds.com 139
This positioning was significantly different than a year ago, when we were
seeking credit risk to increase incremental returns. The new positioning sought
a better balance between interest-rate risk and credit risk, particularly as it
became more difficult for the market to compensate investors appropriately for
additional credit risk.
HOW HAS THE MAKEUP OF THE FUND'S PORTFOLIO CHANGED DURING THE REPORTING PERIOD?
During the reporting period, we reduced the Fund's allocation to
investment-grade and high-yield corporate bonds to acknowledge that these
sectors had approached fair value. The proceeds were split among Treasurys,
agency debentures, mortgage-backed securities, and cash equivalents.
HOW WAS THE FUND INVESTED AT THE END OF THE REPORTING PERIOD?
On October 31, 2005, the Fund held 16% of its net assets in Treasurys, 10% in
agency debentures, 18% in investment-grade corporate bonds, 3% in high-yield
corporate bonds, 36% in residential mortgage-backed securities, 6% in commercial
mortgage-backed securities, 4% in asset-backed securities, and 7% in cash
equivalents. The Fund's substantial cash position helped balance a concentration
at the long end of the yield curve. The longer-dated securities reflected the
Fund's curve-flattening bias.
As of October 31, 2005, the Fund's duration was 4.4 years, or 96% of the
duration of the Lehman Brothers(R) Aggregate Bond Index, the Fund's benchmark.
With a shorter duration, we believe the Fund should be less sensitive than the
Index to changes in interest rates.
At the end of October, the Fund was overweighted relative to the Lehman
Brothers(R) Aggregate Bond Index in high-yield corporate bonds, asset-backed
securities, mortgage-backed securities, and cash equivalents. The Fund was
underweighted relative to the Index in Treasurys, investment-grade corporate
bonds, and agency debentures.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
will come to pass. This material does not constitute investment advice and is
not intended as an endorsement of any specific investment.
INFORMATION ABOUT MAINSTAY INTERMEDIATE TERM BOND FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
140 MainStay Intermediate Term Bond Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (92.5%)+
ASSET-BACKED SECURITIES (4.1%)
- -----------------------------------------------------------------------------
CONSUMER FINANCE (1.3%)
Harley-Davidson Motorcycle Trust
Series 2004-1, Class A2
2.53%, due 11/15/11 $1,695,000 $ 1,639,167
------------
CONSUMER LOANS (0.5%)
Atlantic City Electric Transition Funding LLC
Series 2002-1, Class A4
5.55%, due 10/20/23 675,000 693,841
------------
DIVERSIFIED FINANCIAL SERVICES (1.6%)
Capital One Master Trust
Series 2001-5, Class A
5.30%, due 6/15/09 460,000 462,041
Chemical Master Credit
Card Trust I
Series 1996-2, Class A
5.98%, due 9/15/08 1,625,000 1,629,773
------------
2,091,814
------------
ELECTRIC (0.6%)
AES Eastern Energy, L.P.
Series 1999-A
9.00%, due 1/2/17 51,006 58,912
Public Service New Hampshire Funding LLC
Pass-Through Certificates
Series 2002-1, Class A
4.58%, due 2/1/10 737,127 735,624
------------
794,536
------------
THRIFTS & MORTGAGE FINANCE (0.1%)
Vanderbilt Mortgage Finance
Series 1999-B, Class 1A4
6.545%, due 4/7/18 79,764 80,107
------------
Total Asset-Backed Securities
(Cost $5,359,354) 5,299,465
------------
CONVERTIBLE BONDS (0.0%)++
- -----------------------------------------------------------------------------
ADVERTISING (0.0%)++
Lamar Advertising Co.
2.875%, due 12/31/10 15,000 16,050
------------
HEALTH CARE-SERVICES (0.0%)++
Laboratory Corp. of America Holdings
(zero coupon), due 9/11/21 40,000 29,500
------------
MEDIA (0.0%)++
UnitedGlobalCom, Inc.
1.75%, due 4/15/24 10,000 12,194
------------
Total Convertible Bonds
(Cost $57,967) 57,744
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (14.2%)
- -----------------------------------------------------------------------------
ADVERTISING (0.0%)++
Bear Creek Corp.
9.00%, due 3/1/13 (a) $ 5,000 $ 5,125
------------
AEROSPACE & DEFENSE (0.0%)++
Sequa Corp.
9.00%, due 8/1/09 25,000 25,937
------------
AGRICULTURE (0.2%)
Cargill, Inc.
4.375%, due 6/1/13 (a) 245,000 231,827
------------
AIRLINES (0.3%)
Delta Air Lines, Inc.
8.30%, due 12/15/29 (b) 40,000 7,100
Southwest Airlines Co.
5.125%, due 3/1/17 425,000 390,773
------------
397,873
------------
AUTO PARTS & EQUIPMENT (0.0%)++
Collins & Aikman Products Co.
12.875%, due 8/15/12 (a)(b) 25,000 3,000
Goodyear Tire & Rubber Co. (The)
6.625%, due 12/1/06 15,000 15,075
12.75%, due 3/1/11 (a) 20,000 22,100
------------
40,175
------------
BUILDING MATERIALS (0.0%)++
Dayton Superior Corp.
10.75%, due 9/15/08 20,000 19,400
------------
</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 141
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
CHEMICALS (0.5%)
Cargill, Inc.
5.00%, due 11/15/13 (a) $ 570,000 $ 560,380
Equistar Chemicals, L.P.
10.625%, due 5/1/11 15,000 16,350
Terra Capital, Inc.
12.875%, due 10/15/08 20,000 23,600
------------
600,330
------------
COMMERCIAL SERVICES (0.0%)++
Williams Scotsman, Inc.
8.50%, due 10/1/15 (a) 5,000 5,075
------------
COMPUTERS (0.0%)++
SunGard Data Systems, Inc.
3.75%, due 1/15/09 15,000 13,725
4.875%, due 1/15/14 5,000 4,350
9.125%, due 8/15/13 (a) 10,000 10,150
10.25%, due 8/15/15 (a) 15,000 14,869
------------
43,094
------------
DIVERSIFIED FINANCIAL SERVICES (3.3%)
American Real Estate Partners, L.P.
8.125%, due 6/1/12 35,000 35,962
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08 450,000 441,986
Dollar Financial Group, Inc.
9.75%, due 11/15/11 15,000 15,300
FGIC Corp.
6.00%, due 1/15/34 (a) 635,000 636,295
Ford Motor Credit Co.
7.00%, due 10/1/13 (c) 413,000 378,005
General Motors Acceptance Corp.
5.625%, due 5/15/09 20,000 18,911
6.75%, due 12/1/14 (c) 20,000 19,125
8.00%, due 11/1/31 (c) 50,000 51,617
Goldman Sachs Group, Inc. (The)
6.345%, due 2/15/34 500,000 501,384
HSBC Finance Corp.
5.00%, due 6/30/15 520,000 500,939
7.25%, due 5/15/06 208,000 210,831
J Paul Getty Trust
Series 2003
5.875%, due 10/1/33 460,000 466,685
JP Morgan Chase Capital XVII
5.85%, due 8/1/35 300,000 283,266
LaBranche & Co., Inc.
11.00%, due 5/15/12 15,000 16,575
OMX Timber Finance Investments LLC
Series 1
5.42%, due 1/29/20 (a) 255,000 252,544
Rainbow National Services LLC
8.75%, due 9/1/12 (a) 15,000 15,750
Residential Capital Corp.
6.375%, due 6/30/10 (a) 435,000 441,849
Vanguard Health
Holding Co. II LLC
9.00%, due 10/1/14 15,000 15,637
------------
4,302,661
------------
ELECTRIC (1.6%)
American Electric Power Co., Inc.
Series C
5.375%, due 3/15/10 215,000 216,714
Kiowa Power Partners LLC
Series B
5.737%, due 3/30/21 (a) 725,000 717,612
NiSource Finance Corp.
5.45%, due 9/15/20 265,000 253,441
PSE&G Energy Holdings LLC
8.625%, due 2/15/08 20,000 20,750
Tenaska Virginia Partners, L.P.
6.119%, due 3/30/24 (a) 871,144 897,366
------------
2,105,883
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
ELECTRICAL COMPONENTS & EQUIPMENT (0.0%)++
Spectrum Brands, Inc.
8.50%, due 10/1/13 $ 20,000 $ 18,100
------------
ELECTRONICS (0.0%)++
Fisher Scientific International, Inc.
6.75%, due 8/15/14 55,000 56,787
------------
ENVIRONMENTAL CONTROL (0.0%)++
Geo Sub Corp.
11.00%, due 5/15/12 20,000 19,550
------------
FOOD (0.3%)
Chiquita Brands International, Inc.
7.50%, due 11/1/14 5,000 4,712
Pinnacle Foods Holding Corp.
8.25%, due 12/1/13 11,000 10,175
Safeway, Inc.
6.50%, due 3/1/11 355,000 364,689
------------
379,576
------------
</Table>
142 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)
- -----------------------------------------------------------------------------
FOREST PRODUCTS & PAPER (0.1%)
Georgia-Pacific Corp.
8.875%, due 5/15/31 $ 50,000 $ 56,875
------------
HEALTH CARE PROVIDERS & SERVICES (0.2%)
Ameripath, Inc.
10.50%, due 4/1/13 20,000 20,800
Quest Diagnostics, Inc.
5.45%, due 11/1/15 (a) 190,000 189,420
------------
210,220
------------
HEALTH CARE SERVICES (0.8%)
Highmark, Inc.
6.80%, due 8/15/13 (a) 920,000 987,264
------------
HOME BUILDERS (0.3%)
Beazer Homes USA, Inc.
6.875%, due 7/15/15 350,000 321,125
------------
INSURANCE (0.0%)++
Crum & Forster Holdings Corp.
10.375%, due 6/15/13 20,000 21,400
Provident Cos., Inc.
7.25%, due 3/15/28 10,000 9,651
------------
31,051
------------
IRON & STEEL (0.0%)++
United States Steel Corp.
9.75%, due 5/15/10 15,000 16,350
------------
LODGING (0.0%)++
MGM Mirage, Inc.
8.375%, due 2/1/11 5,000 5,287
8.50%, due 9/15/10 10,000 10,725
------------
16,012
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MEDIA (1.5%)
Clear Channel Communications, Inc.
5.50%, due 9/15/14 $ 550,000 $ 516,534
Time Warner
Entertainment Co., L.P.
10.15%, due 5/1/12 1,081,000 1,333,192
Ziff Davis Media, Inc.
10.25%, due 5/1/12 (d) 30,000 29,250
------------
1,878,976
------------
MISCELLANEOUS--MANUFACTURING (0.1%)
Mark IV Industries, Inc.
7.50%, due 9/1/07 60,000 57,000
------------
OIL & GAS (0.4%)
Enterprise Products Operating, L.P.
Series B
6.65%, due 10/15/34 535,000 535,658
Forest Oil Corp.
8.00%, due 12/15/11 10,000 10,925
Mission Resources Corp.
9.875%, due 4/1/11 5,000 5,225
Parker Drilling Co.
9.625%, due 10/1/13 (a) 15,000 16,950
------------
568,758
------------
OIL & GAS SERVICES (0.0%)++
Lone Star Technologies, Inc.
9.00%, due 6/1/11 25,000 26,375
------------
PACKAGING & CONTAINERS (0.0%)++
Owens-Illinois, Inc.
8.10%, due 5/15/07 (c) 20,000 20,300
------------
PHARMACEUTICALS (0.6%)
Eli Lilly & Co.
6.77%, due 1/1/36 500,000 587,811
Medco Health Solutions, Inc.
7.25%, due 8/15/13 155,000 167,874
------------
755,685
------------
PIPELINES (0.9%)
Dynegy Holdings, Inc.
9.875%, due 7/15/10 (a) 25,000 26,875
El Paso Production Holding Co.
7.75%, due 6/1/13 30,000 30,900
Energy Transfer Partners, L.P.
5.95%, due 2/1/15 275,000 268,113
Kern River Funding Corp.
4.893%, due 4/30/18 832,350 811,358
Pacific Energy Partners, L.P.
7.125%, due 6/15/14 20,000 20,800
Williams Cos., Inc.
7.875%, due 9/1/21 5,000 5,394
8.75%, due 3/15/32 5,000 5,769
------------
1,169,209
------------
REAL ESTATE (0.5%)
CB Richard Ellis Services, Inc.
9.75%, due 5/15/10 46,000 50,370
iStar Financial, Inc.
6.50%, due 12/15/13 480,000 486,222
</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 143
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
REAL ESTATE (CONTINUED)
Omega Healthcare Investors, Inc.
7.00%, due 4/1/14 $ 30,000 $ 30,150
Trustreet Properties, Inc.
7.50%, due 4/1/15 25,000 25,312
------------
592,054
------------
RETAIL (2.0%)
CVS Corp.
5.298%, due 1/11/27 (a) 580,267 560,317
5.789%, due 1/10/26 (a) 111,022 111,509
Dayton Hudson Co.
8.60%, due 1/15/12 390,000 460,227
Kohl's Corp.
6.00%, due 1/15/33 810,000 772,410
Toys "R" Us, Inc.
7.625%, due 8/1/11 30,000 24,750
Wal-Mart Stores, Inc.
5.25%, due 9/1/35 695,000 652,226
------------
2,581,439
------------
TELECOMMUNICATIONS (0.6%)
Ameritech Capital Funding Corp.
6.25%, due 5/18/09 185,000 190,876
Dobson Cellular Systems
8.375%, due 11/1/11 10,000 10,425
9.00%, due 11/1/11 (d) 10,000 10,375
PanAmSat Corp.
9.00%, due 8/15/14 12,000 12,630
Qwest Communications International, Inc.
7.25%, due 2/15/11 (c) 20,000 19,450
Qwest Corp.
8.875%, due 3/15/12 20,000 21,950
Qwest Services Corp.
13.50%, due 12/15/10 25,000 28,562
SBC Communications, Inc.
4.125%, due 9/15/09 415,000 399,575
Triton PCS, Inc.
8.50%, due 6/1/13 (c) 15,000 14,025
------------
707,868
------------
TEXTILES (0.0%)++
Invista
9.25%, due 5/1/12 (a) 30,000 32,212
------------
TRANSPORTATION (0.0%)++
Gulfmark Offshore, Inc.
7.75%, due 7/15/14 20,000 21,000
------------
Total Corporate Bonds
(Cost $18,613,021) 18,301,166
------------
FOREIGN CORPORATE BONDS (5.4%)
- -----------------------------------------------------------------------------
BRAZIL (0.8%)
CIA Brasileira de Bebidas
10.50%, due 12/15/11 800,000 986,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CANADA (0.3%)
Alcan, Inc.
5.00%, due 6/1/15 $ 400,000 $ 383,520
CanWest Media, Inc.
8.00%, due 9/15/12 30,000 31,425
Nova Chemicals Corp.
7.561%, due 11/15/13 (a) 5,000 5,050
Quebecor Media, Inc. (zero coupon), due 7/15/11
13.75%, beginning 7/15/06 20,000 20,350
------------
440,345
------------
CAYMAN ISLANDS (0.3%)
Arcel Finance Ltd.
6.361%, due 5/1/12 (a) 450,000 441,356
------------
CHILE (0.3%)
Corporacion Nacional del Cobre-Codelco, Inc.
5.50%, due 10/15/13 (a) 330,000 330,852
------------
COLOMBIA (0.7%)
Bavaria S.A.
8.875%, due 11/1/10 (a) 825,000 898,219
------------
GERMANY (0.3%)
Citibank Global Markets (Severstal) Deutschland
9.25%, due 4/19/14 (a) 335,000 360,125
Citigroup, Inc. (JSC Severstal)
series REGS
9.25%, due 4/19/14 80,000 85,792
------------
445,917
------------
JAPAN (0.2%)
Nippon Life Insurance Co.
4.875%, due 8/9/10 (a) 250,000 245,072
------------
</Table>
144 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
FOREIGN CORPORATE BONDS (CONTINUED)
- -----------------------------------------------------------------------------
LUXEMBOURG (0.6%)
Gazprom International S.A.
7.201%, due 2/1/20 (a) $ 420,000 $ 446,775
Millicom International Cellular S.A.
10.00%, due 12/1/13 25,000 25,750
Tengizchevroil Finance Co.
6.124%, due 11/15/14 (a) 235,000 235,588
------------
708,113
------------
MEXICO (1.0%)
Telefonos de Mexico S.A. de C.V.
4.50%, due 11/19/08 415,000 406,018
5.50%, due 1/27/15 250,000 240,886
United Mexican States
7.50%, due 1/14/12 240,000 265,920
8.125%, due 12/30/19 300,000 358,800
------------
1,271,624
------------
SINGAPORE (0.2%)
SP PowerAssets Ltd.
5.00%, due 10/22/13 (a) 305,000 302,840
------------
SOUTH KOREA (0.2%)
LG Electronics, Inc.
5.00%, due 6/17/10 (a) 265,000 258,302
------------
UNITED KINGDOM (0.5%)
BSKYB Finance UK PLC
5.625%, due 10/15/15 (a) 455,000 448,050
6.50%, due 10/15/35 (a) 230,000 225,972
------------
674,022
------------
Total Foreign Corporate Bonds
(Cost $6,822,513) 7,002,662
------------
MORTGAGE-BACKED SECURITIES (5.7%)
- -----------------------------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (5.7%)
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1, Class A1
4.907%, due 5/11/35 205,867 205,836
Series 2005-5, Class A2
5.001%, due 9/10/10 750,000 744,354
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
COMMERCIAL MORTGAGE LOANS (CONTINUED)
Citigroup Commercial
Mortgage Trust
Series 2004-C2, Class A5
4.733%, due 10/15/41 $ 760,000 $ 731,354
Citigroup/Deutsche Bank Commercial Mortgage Trust
Series 2005-C1, Class A4
5.225%, due 9/15/20 (d) 540,000 540,140
LB-UBS Commercial
Mortgage Trust
Series 2004-C2, Class A2
3.246%, due 3/15/29 600,000 569,058
Series 2004-C7, Class A1
3.625%, due 10/15/29 917,978 894,366
Series 2005-C7, Class A4
5.197%, due 11/15/30 565,000 562,000
Merrill Lynch Mortgage Trust
Series 2004-MKB1, Class A1
3.563%, due 2/12/42 876,350 853,349
Series 2004-BPC1, Class A5
4.855%, due 10/12/41 1,415,000 1,371,298
Morgan Stanley Capital I
Series 2003-IQ5, Class A1
3.02%, due 4/15/38 (d) 588,194 570,238
Wachovia Bank Commercial Mortgage Trust
Series 2004-C14, Class A1
3.477%, due 8/15/41 333,206 324,474
------------
Total Mortgage-Backed Securities
(Cost $7,552,745) 7,366,467
------------
MUNICIPAL BOND (0.3%)
- -----------------------------------------------------------------------------
TEXAS (0.3%)
Harris County Texas Industrial Development Corp.
Solid Waste Deer Park
5.683%, due 3/1/23 (d) 390,000 389,977
------------
Total Municipal Bond
(Cost $390,000) 389,977
------------
U.S. GOVERNMENT & FEDERAL AGENCIES (62.6%)
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (7.3%)
3.00%, due 8/1/10 (e) 406,875 385,043
5.00%, due 12/1/20 TBA (f) 2,405,000 2,369,675
5.00%, due 8/1/33 (e) 2,606,378 2,516,954
5.50%, due 2/1/33 (e) 1,965,649 1,944,515
5.50%, due 12/1/35 TBA (f) 2,335,000 2,301,434
------------
9,517,621
------------
</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 145
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<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 $ 1,983,631
4.625%, due 5/1/13 670,000 646,731
V 4.75%, due 1/2/07 2,715,000 2,718,082
5.125%, due 1/2/14 550,000 546,694
5.25%, due 8/1/12 1,440,000 1,450,655
V 5.50%, due 5/2/06 2,860,000 2,875,327
6.25%, due 2/1/11 255,000 268,663
6.625%, due 9/15/09 2,455,000 2,615,896
------------
13,105,679
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.4%)
Series 1998-M6, Class A2
6.32%, due 8/15/08 484,102 497,900
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (27.2%)
4.50%, due 4/1/18 (e) 761,266 737,430
4.50%, due 7/1/18 (e) 2,251,785 2,181,279
V 4.50%, due 11/1/18 (e) 3,191,193 3,091,274
5.00%, due 9/1/17 (e) 1,415,112 1,397,475
V 5.00%, due 12/1/35 TBA (f) 6,830,000 6,565,338
5.50%, due 2/1/17 (e) 1,056,994 1,064,692
V 5.50%, due 12/1/20 TBA (f) 4,550,000 4,574,170
5.50%, due 11/1/33 (e) 2,238,163 2,211,559
5.50%, due 12/1/33 (e) 1,551,312 1,532,873
5.50%, due 12/1/35 TBA (f) 2,570,000 2,531,450
6.00%, due 8/1/17 (e) 195,491 200,028
V 6.00%, due 12/1/35 TBA (f) 6,735,000 6,783,415
6.50%, due 6/1/31 (e) 251,256 258,401
6.50%, due 8/1/31 (e) 204,496 210,311
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
6.50%, due 10/1/31 (e) $ 129,443 $ 133,124
6.50%, due 6/1/32 (e) 143,085 147,078
7.00%, due 2/1/32 (e) 285,676 298,853
7.00%, due 4/1/32 (e) 443,392 463,823
7.50%, due 8/1/31 (e) 493,391 521,032
------------
34,903,605
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (2.1%)
6.00%, due 2/15/29 (e) 96,558 98,428
6.00%, due 4/15/29 (e) 529,914 540,042
6.00%, due 8/15/32 (e) 1,271,567 1,294,279
6.50%, due 7/15/28 (e) 137,034 142,518
6.50%, due 5/15/29 (e) 70,069 72,854
7.50%, due 12/15/28 (e) 264,986 281,247
7.50%, due 10/15/29 (e) 55,624 58,943
7.50%, due 8/15/30 (e) 214,827 227,610
------------
2,715,921
------------
UNITED STATES TREASURY BONDS (7.5%)
V 6.00%, due 2/15/26 3,325,000 3,822,450
V 6.25%, due 8/15/23 2,580,000 3,011,041
6.25%, due 5/15/30 255,000 308,112
6.875%, due 8/15/25 1,070,000 1,345,358
7.50%, due 11/15/16 340,000 421,905
8.75%, due 8/15/20 (c) 620,000 877,300
------------
9,786,166
------------
UNITED STATES TREASURY NOTES (8.1%)
V 2.625%, due 11/15/06 4,740,000 4,656,495
V 3.375%, due 2/15/08 3,680,000 3,597,774
3.875%, due 9/15/10 (c) 1,770,000 1,723,676
3.875%, due 2/15/13 490,000 470,381
------------
10,448,326
------------
Total U.S. Government &
Federal Agencies
(Cost $81,964,940) 80,975,218
------------
YANKEE BONDS (0.2%) (G)
- -----------------------------------------------------------------------------
INSURANCE (0.2%)
Fairfax Financial Holdings Ltd.
7.375%, due 4/15/18 (c) 20,000 16,295
7.75%, due 4/26/12 (c) 20,000 18,401
8.30%, due 4/15/26 (c) 20,000 16,576
Montpelier Re Holdings Ltd.
6.125%, due 8/15/13 150,000 147,021
------------
198,293
------------
MEDIA (0.0%)++
Rogers Cablesystems Ltd.
11.00%, due 12/1/15 25,000 26,438
------------
OIL & GAS SERVICES (0.0%)++
Petroleum Geo-Services ASA
8.00%, due 11/5/06 1,001 1,011
10.00%, due 11/5/10 20,000 22,100
------------
23,111
------------
Total Yankee Bonds
(Cost $258,072) 247,842
------------
Total Long-Term Bonds
(Cost $121,018,612) 119,640,541
------------
</Table>
146 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>
SHARES VALUE
COMMON STOCK (0.0%)++
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (0.0%)++
Marconi Corp. PLC, Sponsored ADR (h)(i) 31 $ 406
------------
Total Common Stock
(Cost $0) 406
------------
PREFERRED STOCK (0.1%)
- -----------------------------------------------------------------------------
REAL ESTATE (0.1%)
Sovereign Real Estate
Investment Corp.
12.00% (a) 50 72,125
------------
Total Preferred Stock
(Cost $76,875) 72,125
------------
<Caption>
NUMBER OF
WARRANTS
WARRANTS (0.0%)++
- -----------------------------------------------------------------------------
MEDIA (0.0%)++
Ono Finance PLC
Strike Price $0.01
Expire 3/16/11 (a)(h)(j) 60 1
Ziff Davis Holdings, Inc.
Strike Price $0.001
Expire 8/12/12 (a)(h) 1,210 122
------------
Total Warrants
(Cost $2,392) 123
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (28.3%)
- -----------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.1%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (d)(k) $ 133,317 133,317
------------
Total Certificate of Deposit
(Cost $133,317) 133,317
------------
COMMERCIAL PAPER (21.5%)
American Express Credit Corp.
3.91%, due 11/18/05 (e) 4,790,000 4,781,156
American General Finance Corp.
3.84%, due 11/15/05 2,085,000 2,081,886
3.85%, due 11/9/05 3,660,000 3,656,869
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (k) 44,439 44,439
General Electric Capital Corp.
3.86%, due 11/9/05 5,765,000 5,760,055
Goldman Sachs Group, Inc. (The)
4.01%, due 11/21/05 440,000 439,020
ING US Funding LLC
4.04%, due 12/27/05 635,000 631,009
Merck & Co., Inc.
3.74%, due 11/1/05 3,500,000 3,500,000
Merrill Lynch & Co., Inc.
3.84%, due 11/14/05 150,000 149,792
Morgan Stanley
3.85%, due 11/7/05 195,000 194,875
Rabobank USA Finance Corp.
3.92%, due 11/3/05 1,460,000 1,459,682
Toyota Motor Credit Corp.
3.81%, due 11/8/05 1,965,000 1,963,544
UBS Finance Delaware LLC
4.00%, due 11/1/05 3,140,000 3,140,000
------------
Total Commercial Paper
(Cost $27,802,327) 27,802,327
------------
FEDERAL AGENCIES (3.6%)
Federal Home Loan Bank
3.72%, due 11/2/05 2,000,000 1,999,793
------------
Federal National Mortgage Association
3.73%, due 11/14/05 2,590,000 2,586,507
------------
Total Federal Agencies
(Cost $4,586,300) 4,586,300
------------
<Caption>
SHARES
INVESTMENT COMPANIES (2.0%)
BGI Institutional Money Market Fund (k) 665,432 665,432
Merrill Lynch Funds--Premier Institutional Fund 1,940,594 1,940,594
------------
Total Investment Companies
(Cost $2,606,026) 2,606,026
------------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (1.1%)
Bank of the West (The)
4.02%, due 12/8/05 (k) $ 177,756 177,756
Barclays
3.92%, due 12/5/05 (k) 88,878 88,878
3.94%, due 11/28/05 (k) 133,317 133,317
Credit Suisse First Boston Corp.
3.74%, due 11/1/05 (k) 133,317 133,317
Deutsche Bank
3.95%, due 12/2/05 (k) 88,878 88,878
</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 147
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (CONTINUED)
First Tennessee National Corp.
3.88%, due 11/14/05 (k) $ 133,317 $ 133,317
Fortis Bank
4.00%, due 12/12/05 (k) 133,317 133,317
Halifax Bank of Scotland
3.75%, due 11/1/05 (k) 133,317 133,317
Marshall & Ilsley Bank
3.97%, due 12/29/05 (k) 88,878 88,878
Societe Generale
3.77%, due 11/1/05 (k) 133,317 133,317
UBS AG
4.01%, due 12/13/05 (k) 88,878 88,878
Wells Fargo & Co.
4.00%, due 11/25/05 (k) 133,317 133,317
------------
Total Time Deposits
(Cost $1,466,487) 1,466,487
------------
Total Short-Term Investments
(Cost $36,594,457) 36,594,457
------------
Total Investments
(Cost $157,692,336) (l) 120.9% 156,307,652(m)
Cash and Other Assets,
Less Liabilities (20.9) (27,031,483)
---------- ------------
Net Assets 100.0% $129,276,169
========== ============
</Table>
<Table>
++ Less than one tenth of a percent.
(a) May be sold to institutional investors only.
(b) Issue in default.
(c) Represents security, or a portion thereof, which is out on loan.
(d) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(e) Segregated, partially segregated or designated as collateral for TBA's.
(f) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and the
maturity will be determined upon settlement. The market value of these
securities at October 31, 2005 is $25,125,482.
(g) Yankee Bond--dollar-denominated bond issued in the United States by a
foreign bank or corporation.
(h) Non-income producing security.
(i) ADR--American Depositary Receipt.
(j) Illiquid security.
(k) Represents security, or a portion thereof, purchased with cash collateral
received for securities on loan.
(l) The cost for federal income tax purposes is $157,708,210.
(m) At October 31, 2005, net unrealized depreciation was $1,400,558 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 $733,310 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,133,868.
</Table>
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.
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $157,692,336) including
$2,257,699 market value of securities loaned $156,307,652
Cash 2,548
Receivables:
Investment securities sold 1,296,774
Dividends and interest 1,016,843
Fund shares sold 84,545
Other assets 2,951
-------------
Total assets 158,711,313
-------------
LIABILITIES:
Securities lending collateral 2,309,675
Payables:
Investment securities purchased 26,846,847
Manager 86,648
Professional 37,600
Transfer agent 16,848
Fund shares redeemed 10,677
Shareholder communication 9,909
NYLIFE Distributors 6,986
Custodian 4,048
Accrued expenses 12,009
Dividend payable 93,874
Unrealized depreciation on foreign currency
forward contracts 23
-------------
Total liabilities 29,435,144
-------------
Net assets $129,276,169
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1
billion shares authorized:
Class A $ 829
Class B 448
Class C 176
Class I 11,842
Additional paid-in capital 139,028,835
Accumulated undistributed net investment
income 225,712
Accumulated net realized loss on investments (8,606,966)
Net unrealized depreciation on investments (1,384,684)
Net unrealized depreciation on translation of
other assets and liabilities in foreign
currencies and foreign currency forward
contracts (23)
-------------
Net assets $129,276,169
=============
CLASS A
Net assets applicable to outstanding shares $ 8,061,582
=============
Shares of capital stock outstanding 829,314
=============
Net asset value per share outstanding $ 9.72
Maximum sales charge (4.50% of offering price) 0.46
-------------
Maximum offering price per share outstanding $ 10.18
=============
CLASS B
Net assets applicable to outstanding shares $ 4,359,313
=============
Shares of capital stock outstanding 448,163
=============
Net asset value and offering price per share
outstanding $ 9.73
=============
CLASS C
Net assets applicable to outstanding shares $ 1,707,914
=============
Shares of capital stock outstanding 175,575
=============
Net asset value and offering price per share
outstanding $ 9.73
=============
CLASS I
Net assets applicable to outstanding shares $115,147,360
=============
Shares of capital stock outstanding 11,842,128
=============
Net asset value and offering price per share
outstanding $ 9.72
=============
</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
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 6,505,814
Income from securities loaned--net 20,586
Dividends 17,082
-----------
Total income 6,543,482
-----------
EXPENSES:
Manager 993,065
Professional 65,565
Registration 47,990
Transfer agent--Classes A, B and C 42,257
Transfer agent--Class I 44,796
Custodian 35,667
Distribution--Class B 27,542
Distribution--Class C 10,665
Distribution/Service--Class A 19,460
Service--Class B 9,181
Service--Class C 3,554
Shareholder communication 16,784
Directors 14,474
Miscellaneous 38,275
-----------
Total expenses before reimbursement 1,369,275
Expense reimbursement from Manager (230,222)
-----------
Net expenses 1,139,053
-----------
Net investment income 5,404,429
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions 958,351
Foreign currency transactions (38)
-----------
Net realized gain on investments and foreign
currency transactions 958,313
-----------
Net change in unrealized appreciation on:
Security transactions (4,580,480)
Translation of other assets and liabilities
in foreign currencies and foreign currency
forwards contracts (1,317)
-----------
Net change in unrealized appreciation on
investments and foreign currency transactions (4,581,797)
-----------
Net realized and unrealized loss on investments
and foreign currency transactions (3,623,484)
-----------
Net increase in net assets resulting from
operations $ 1,780,945
===========
</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.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income $ 5,404,429 $ 5,512,283
Net realized gain on investments
and foreign currency transactions 958,313 1,524,551
Net change in unrealized
appreciation on investments and
foreign currency transactions (4,581,797) 1,145,004
---------------------------
Net increase in net assets
resulting from operations 1,780,945 8,181,838
---------------------------
Dividends to shareholders:
From net investment income:
Class A (255,680) (172,999)
Class B (93,542) (34,439)
Class C (36,913) (12,080)
Class I (4,971,489) (5,382,172)
Service Class -- (34,690)
---------------------------
Total dividends to shareholders (5,357,624) (5,636,380)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 3,766,852 9,342,314
Class B 2,728,587 3,085,894
Class C 1,376,846 1,131,696
Class I 19,210,142 41,460,887
Service Class -- 122,232
Net asset value of shares issued in connection
with acquisition of Eclipse Core Bond Plus
Fund:
Class I -- 26,793,396
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Class A 229,745 160,488
Class B 75,781 26,657
Class C 29,403 8,931
Class I 3,972,650 4,629,462
Service Class -- 34,517
---------------------------
31,390,006 86,796,474
</Table>
<Table>
<Caption>
2005 2004
Cost of shares redeemed:
Class A $ (3,788,902) $ (1,514,090)
Class B (1,077,851) (415,152)
Class C (598,670) (205,362)
Class I (59,445,099) (53,701,731)
Service Class -- (5,930,466)
---------------------------
(64,910,522) (61,766,801)
Increase (decrease) in net
assets derived from capital
share transactions (33,520,516) 25,029,673
---------------------------
Net increase (decrease) in net
assets (37,097,195) 27,575,131
NET ASSETS:
Beginning of year 166,373,364 138,798,233
---------------------------
End of year $129,276,169 $166,373,364
===========================
Accumulated undistributed net
investment income at end of year $ 225,712 $ 113,989
===========================
</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
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
---------------------------- ---------------------------- --------------
JANUARY 2, JANUARY 2,
YEAR 2004* YEAR 2004* YEAR
ENDED THROUGH ENDED THROUGH ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2005 2004 2005
Net asset value at beginning of period $ 9.98 $ 9.86 $ 9.99 $ 9.86 $ 9.99
----------- ----------- ----------- ----------- -----------
Net investment income 0.34 0.25 0.26 0.19 0.26
Net realized and unrealized gain (loss) on
investments (0.28) 0.12 (0.27) 0.13 (0.27)
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.06 0.37 (0.01) 0.32 (0.01)
----------- ----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.32) (0.25) (0.25) (0.19) (0.25)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 9.72 $ 9.98 $ 9.73 $ 9.99 $ 9.73
=========== =========== =========== =========== ===========
Total investment return (a) 0.63% 3.79%(b) (0.11)% 3.25%(b) (0.11)%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.45% 2.89%+ 2.70% 2.14%+ 2.70%
Net expenses 1.08% 1.19%+ 1.83% 1.94%+ 1.83%
Expenses (before reimbursement) 1.41% 1.37%+ 2.16% 2.12%+ 2.16%
Portfolio turnover rate 192%(c) 193% 192%(c) 193% 192%(c)
Net assets at end of period (in 000's) $8,062 $8,084 $4,359 $2,732 $1,708
<Caption>
CLASS C
-----------
JANUARY 2,
2004*
THROUGH
OCTOBER 31,
2004
Net asset value at beginning of period $ 9.86
-----------
Net investment income 0.19
Net realized and unrealized gain (loss) on
investments 0.13
-----------
Total from investment operations 0.32
-----------
Less dividends:
From net investment income (0.19)
-----------
Net asset value at end of period $ 9.99
===========
Total investment return (a) 3.25%(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.14%+
Net expenses 1.94%+
Expenses (before reimbursement) 2.12%+
Portfolio turnover rate 193%
Net assets at end of period (in 000's) $ 937
</Table>
<Table>
* Commencement of Operations.
+ Annualized.
(a) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(b) Total return is not annualized.
(c) The portfolio turnover rate not including mortgage dollar rolls for the year ending
October 31, 2005 is 76%.
(d) Per share data based on average shares outstanding during the period.
</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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
- ------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2003 2002 2001
$ 10.00 $ 9.83 $ 9.66 $ 10.32 $ 9.75
----------- ----------- ----------- ----------- -----------
0.38 0.34 0.36(c) 0.45(c) 0.55 (d)
(0.28) 0.17 0.18 (0.30) 0.76 (e)
----------- ----------- ----------- ----------- -----------
0.10 0.51 0.54 0.15 1.31
----------- ----------- ----------- ----------- -----------
(0.38) (0.34) (0.37) (0.81) (0.74)
----------- ----------- ----------- ----------- -----------
$ 9.72 $ 10.00 $ 9.83 $ 9.66 $ 10.32
=========== =========== =========== =========== ===========
0.97% 5.30% 5.69% 1.73% 14.06%
3.81% 3.33% 3.66% 4.62% 5.53%
0.72% 0.75% 0.75% 0.75% 0.75%
0.86% 0.93% 0.90% 0.91% 0.88%
192%(c) 193% 153% 159% 257%
$115,147 $154,620 $133,041 $130,813 $116,344
</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
MAINSTAY SHORT TERM BOND FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ----------------------------------------------
With sales charges -2.91% 2.56% 3.85%
Excluding sales charges 0.09 3.18 4.17
</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
------------------- ------------------ -----------------------
10/31/95 9700 10000 10000
10218 10601 10601
10812 11283 11284
11534 12153 12148
11794 12514 12514
12477 13272 13299
13779 14709 14769
14185 15432 15522
14425 15740 15857
14580 16011 16157
10/31/05 14594 16114 16275
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
0.59% 3.52% 4.45%
</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
------------------- ------------------ -----------------------
10/31/95 10000 10000 10000
10559 10601 10601
11199 11283 11284
11964 12153 12148
12264 12514 12514
13006 13272 13299
14395 14709 14769
14856 15432 15522
15145 15740 15857
15372 16011 16157
10/31/05 15462 16114 16275
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- -----------------------------------------------------------------------------
Citigroup 1-3 Year Treasury Index(1) 0.64% 3.96% 4.89%
Citigroup 1-3 Year U.S. Treasury Agency Index(2) 0.73 4.12 4.99
Average Lipper short U.S. government fund(3) 0.71 3.50 4.33
</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 max-imum initial sales charge of 3.00% 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 contractual and may be modified or terminated only with the
approval of the Board of Directors/Trustees. 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. 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 purposes. 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.
154 MainStay Short Term Bond Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,003.95 $5.40 $1,019.65 $5.45
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,006.20 $3.03 $1,022.00 $3.06
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.07% for Class A, and 0.60% for Class I) multiplied by the average account
value over the period, divided by 365, multiplied by 184 (to reflect the
one-half year period).
www.MAINSTAYfunds.com 155
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
U.S. Government Securities & Federal Agencies Securities 87.6
Mortgage-Backed Securities 6.2
Short-Term Investments (collateral from securities lending 4.6
is 3.6%)
Corporate Bonds 3.4
Asset-Backed Securities 1.5
Liabilities in Excess of Cash and Other Assets (3.3)
</Table>
See Portfolio of Investments on page 158 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Note 3.625%, due 4/30/07
2. United States Treasury Note 2.625%, due 11/15/06
3. United States Treasury Note 3.375%, due 2/15/08
4. Federal National Mortgage Association 4.75%, due
1/2/07
5. Federal Home Loan Mortgage Corporation 4.375%,
due 11/16/07
6. Federal National Mortgage Association 4.00%, due
9/2/08
7. Federal Home Loan Bank 3.625%, due 2/16/07
8. Federal Home Loan Mortgage Corporation 4.00%,
due 8/17/07
9. Federal National Mortgage Association 6.625%,
due 9/15/09
10. Federal Home Loan Mortgage Corporation 3.30%,
due 9/14/07
</Table>
156 MainStay Short Term Bond Fund
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, including securities with
special features, which have price characteristics similar to debt 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 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 recent data, the U.S. economy grew at an average rate of 3.6%
during the four quarters ended September 30, 2005. Despite damage to the Gulf
Coast states from hurricanes Katrina and Rita in the late summer and early
autumn, the economy still managed to grow at a seasonally adjusted annual rate
of 4.3% during the third calendar quarter of 2005 according to preliminary
estimates from Bureau of Economic Analysis.
The Federal Open Market Committee met eight times during the 12 months ended
October 31, 2005, and raised the targeted federal funds rate 25 basis points at
each meeting. (A basis point is one-hundredth of a percentage point.) These rate
hikes brought the targeted federal funds rate to 3.75% at the end of October
2005. From October 29, 2004, to October 31, 2005, yields on three-month Treasury
bills rose from 1.89% to 3.89%, while the yields on two-year Treasury notes rose
from 2.56% to 4.38%(1). The yield curve flattened significantly during 12-month
reporting period.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
During the 12 months ended October 31, 2005, the Fund was positioned to benefit
from a flattening yield curve. The spread(2) between one-year and three-year
constant-maturity Treasurys declined from 55 basis points at the beginning of
the reporting period to 10 basis points at the end of October 2005.
Spreads on shorter-maturity agency debt were generally stable over the 12 months
ended October 31, 2005. The agency sector outperformed the Treasury sector by
approximately 25 basis points, while the corporate sector outperformed the
Treasury sector by approximately 45 basis points. We substantially reduced the
Fund's exposure to corporate bonds during the reporting period. We believe that
the Fund's reduced exposure to corporate bonds contributed to the Fund's
underperformance of the average Lipper(3) peer fund for 12 months ended October
31, 2005.
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. The Fund may experience a portfolio
turnover rate of over 100% and may generate short-term capital gains which are
taxable.
1. Source: Bloomberg--Historical yield curve data.
2. The terms "spread" and "yield spread" often 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 specific time.
3. See footnote and table on page 154 for more information about Lipper Inc.
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.
INFORMATION ABOUT MAINSTAY SHORT TERM BOND FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 157
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (98.7%)+
ASSET-BACKED SECURITIES (1.5%)
- -----------------------------------------------------------------------------
CONSUMER FINANCE (1.3%)
Atlantic City Electric Transition Funding LLC
Series 2002-1, Class A1
2.89%, due 7/20/10 $ 734,685 $ 715,738
BMW Vehicle Owner Trust
Series 2003-A, Class A3
1.94%, due 2/25/07 7,790 7,776
Harley-Davidson Motorcycle Trust
Series 2002-1, Class A2
4.50%, due 1/15/10 261,701 261,561
Volkswagen Auto Loan Enhanced Trust
Series 2003-2, Class A3
2.27%, due 10/22/07 204,490 202,805
-----------
1,187,880
-----------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
Capital One Master Trust
Series 2001-5, Class A
5.30%, due 6/15/09 110,000 110,488
-----------
THRIFTS & MORTGAGE FINANCE (0.1%)
Vanderbilt Mortgage Finance
Series 1999-B, Class 1A4
6.545%, due 4/7/18 55,835 56,075
-----------
Total Asset-Backed Securities
(Cost $1,382,644) 1,354,443
-----------
CORPORATE BONDS (3.4%)
- -----------------------------------------------------------------------------
AGRICULTURE (1.3%)
Cargill, Inc.
6.25%, due 5/1/06 (a) 1,210,000 1,220,241
-----------
HEALTH CARE-SERVICES (2.1%)
Quest Diagnostics, Inc.
6.75%, due 7/12/06 1,860,000 1,883,403
-----------
Total Corporate Bonds
(Cost $3,143,599) 3,103,644
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MORTGAGE-BACKED SECURITIES (6.2%)
- -----------------------------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (6.2%)
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1, Class A1
4.907%, due 5/11/35 $ 136,298 $ 136,278
Citigroup Commercial
Mortgage Trust
Series 2005-EMG, Class A1
4.154%, due 9/20/51 (a) 715,917 702,265
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2004-CB9, Class A1
3.475%, due 6/12/41 (b) 1,377,022 1,337,408
LB-UBS Commercial
Mortgage Trust
Series 2004-C2, Class A2
3.246%, due 3/15/29 470,000 445,762
Series 2004-C7, Class A1
3.625%, due 10/15/29 610,581 594,876
Merrill Lynch Mortgage Trust
Series 2004-MKB1, Class A1
3.563%, due 2/12/42 1,290,182 1,256,320
Morgan Stanley Capital I
Series 2003-IQ5, Class A1
3.02%, due 4/15/38 (b) 387,958 376,114
Wachovia Bank Commercial Mortgage Trust
Series 2004-C14, Class A1
3.477%, due 8/15/41 932,182 907,755
-----------
5,756,778
-----------
Total Mortgage-Backed Securities
(Cost $5,907,545) 5,756,778
-----------
U.S. GOVERNMENT & FEDERAL AGENCIES (87.6%)
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (6.9%)
V 3.625%, due 2/16/07 6,410,000 6,330,958
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (17.2%)
V 3.30%, due 9/14/07 2,680,000 2,615,018
3.625%, due 2/15/07 2,600,000 2,568,309
V 4.00%, due 8/17/07 (c) 3,560,000 3,523,663
V 4.375%, due 11/16/07 7,225,000 7,192,466
-----------
15,899,456
-----------
</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.
158 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
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATION) (0.0%)++
Series 1364, Class K
5.00%, due 9/15/07 $ 44,295 $ 44,236
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (0.1%)
5.00%, due 1/1/07 45,135 45,261
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (22.4%)
3.15%, due 5/28/08 330,000 317,711
V 4.00%, due 9/2/08 6,480,000 6,347,620
V 4.75%, due 1/2/07 8,515,000 8,524,665
5.25%, due 4/15/07 2,480,000 2,501,819
V 6.625%, due 9/15/09 2,845,000 3,031,456
-----------
20,723,271
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATION) (1.1%)
Series 1998-M6, Class A2
6.32%, due 8/15/08 987,065 1,015,198
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (0.9%)
4.50%, due 11/1/18 718,213 695,725
7.50%, due 4/1/31 94,572 100,081
-----------
795,806
-----------
UNITED STATES TREASURY NOTES (39.0%)
V 2.625%, due 11/15/06 11,340,000 11,140,223
3.00%, due 11/15/07 (c) 185,000 180,071
V 3.375%, due 2/15/08 (c) 9,475,000 9,263,291
V 3.625%, due 4/30/07 15,580,000 15,406,548
-----------
35,990,133
-----------
Total U.S. Government & Federal Agencies
(Cost $81,647,184) 80,844,319
-----------
Total Long-Term Bonds
(Cost $92,080,972) 91,059,184
-----------
SHORT-TERM INVESTMENTS (4.6%)
- -----------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.2%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (b)(d) 191,926 191,926
-----------
Total Certificate of Deposit
(Cost $191,926) 191,926
-----------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
COMMERCIAL PAPER (1.1%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (d) $ 63,975 $ 63,975
International Business Machines Corp.
3.77%, due 11/9/05 180,000 179,849
UBS Finance Delaware LLC
4.00%, due 11/1/05 720,000 720,000
-----------
Total Commercial Paper
(Cost $963,824) 963,824
-----------
<Caption>
SHARES
INVESTMENT COMPANY (1.0%)
BGI Institutional Money Market Fund (d) 957,962 957,962
-----------
Total Investment Company
(Cost $957,962) 957,962
-----------
<Caption>
PRINCIPAL
AMOUNT
TIME DEPOSITS (2.3%)
Bank of the West (The)
4.02%, due 12/8/05 (d) $ 255,901 255,901
Barclays
3.92%, due 12/5/05 (d) 127,951 127,951
3.94%, due 11/28/05 (d) 191,926 191,926
Credit Suisse First Boston Corp.
3.74%, due 11/1/05 (d) 191,926 191,926
Deutsche Bank
3.95%, due 12/2/05 (d) 127,951 127,951
First Tennessee National Corp.
3.88%, due 11/14/05 (d) 191,926 191,926
Fortis Bank
4.00%, due 12/12/05 (d) 191,926 191,926
Halifax Bank of Scotland
3.75%, due 11/1/05 (d) 191,926 191,926
Marshall & Ilsley Bank
3.97%, due 12/29/05 (d) 127,951 127,951
Societe Generale
3.77%, due 11/1/05 (d) 191,926 191,926
</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 159
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
- -----------------------------------------------------------------------------
TIME DEPOSITS (CONTINUED)
UBS AG
4.01%, due 12/13/05 (d) $ 127,951 $ 127,951
Wells Fargo & Co.
4.00%, due 11/25/05 (d) 191,926 191,926
-----------
Total Time Deposits
(Cost $2,111,187) 2,111,187
-----------
Total Short-Term Investments
(Cost $4,224,899) 4,224,899
-----------
Total Investments
(Cost $96,305,871) (e) 103.3% 95,284,083(f)
Liabilities in Excess of
Cash and Other Assets (3.3) (3,031,863)
----------- -----------
Net Assets 100.0% $92,252,220
=========== ===========
</Table>
<Table>
++ Less than one tenth of a percent.
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at October 31, 2005.
(c) Represents security, or a portion thereof, which is out on loan.
(d) Represents security, or a portion thereof, purchased with cash collateral
received for securities on loan.
(e) The cost for federal income tax purposes is $96,321,825.
(f) At October 31, 2005, net unrealized depreciation was $1,037,742 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 $521 and aggregate gross unrealized depreciation
for all investments on which there was an excess of cost over market value
of $1,038,263.
</Table>
160 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 ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $96,305,871) including
$3,238,018 market value of securities loaned $95,284,083
Cash 4,893
Receivables:
Dividends and interest 642,031
Fund shares sold 18,008
Other assets 12,176
------------
Total assets 95,961,191
------------
LIABILITIES:
Securities lending collateral 3,325,050
Payables:
Fund shares redeemed 134,475
Manager 46,170
Professional 33,214
Transfer agent 12,418
Shareholder communication 10,173
Custodian 2,577
NYLIFE Distributors 1,301
Accrued expenses 5,040
Dividend payable 138,553
------------
Total liabilities 3,708,971
------------
Net assets $92,252,220
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
500 million shares authorized:
Class A $ 672
Class I 9,502
Additional paid-in capital 96,439,121
Accumulated distributions in excess of net
investment income (92,884)
Accumulated net realized loss on investments (3,082,403)
Net unrealized depreciation on investments (1,021,788)
------------
Net assets $92,252,220
============
CLASS A
Net assets applicable to outstanding shares $ 6,085,489
============
Shares of capital stock outstanding 671,754
============
Net asset value per share outstanding $ 9.06
Maximum sales charge (3.00% of offering price) 0.28
------------
Maximum offering price per share outstanding $ 9.34
============
CLASS I
Net assets applicable to outstanding shares $86,166,731
============
Shares of capital stock outstanding 9,502,347
============
Net asset value and offering price per share
outstanding $ 9.07
============
</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
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 3,045,298
Income from securities loaned--net 32,848
-----------
Total income 3,078,146
-----------
EXPENSES:
Manager 575,808
Professional 50,693
Registration 28,359
Transfer agent--Class A 22,016
Transfer agent--Class I 26,082
Shareholder communication 14,908
Distribution/Service--Class A 14,713
Custodian 14,160
Directors 10,197
Miscellaneous 16,262
-----------
Total expenses before reimbursement 773,198
Expense reimbursement from Manager (171,076)
-----------
Net expenses 602,122
-----------
Net investment income 2,476,024
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (1,158,947)
Net change in unrealized depreciation on
investments (859,250)
-----------
Net realized and unrealized loss on investments (2,018,197)
-----------
Net increase in net assets resulting from
operations $ 457,827
===========
</Table>
162 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 CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE (DECREASE)
IN NET ASSETS:
Operations:
Net investment income $ 2,476,024 $ 1,825,945
Net realized loss on investments (1,158,947) (308,327)
Net change in unrealized
appreciation (depreciation) on
investments (859,250) (301,216)
---------------------------
Net increase in net assets
resulting from operations 457,827 1,216,402
---------------------------
Dividends to shareholders:
From net investment income:
Class A (124,005) (99,114)
Class I (2,367,842) (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 (2,491,847) (2,019,891)
---------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 3,212,541 20,321,429
Class I 8,051,111 18,601,113
Service Class -- 17,020
</Table>
<Table>
<Caption>
2005 2004
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 108,119 90,912
Class I 1,003,989 929,769
Service Class -- 1,608
---------------------------
12,375,760 114,700,939
Cost of shares redeemed:
Class A (2,321,279) (15,105,952)
Class I (16,362,058) (33,490,788)
Service Class -- (780,868)
---------------------------
(18,683,337) (49,377,608)
Increase (decrease) in net
assets derived from capital
share transactions (6,307,577) 65,323,331
---------------------------
Net increase (decrease) in net
assets (8,341,597) 64,519,842
NET ASSETS:
Beginning of year 100,593,817 36,073,975
---------------------------
End of year $ 92,252,220 $100,593,817
===========================
Accumulated distributions in excess
of net investment income at end of
year $ (92,884) $ (90,640)
===========================
</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 163
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS I
---------------------------- -----------------------------------------------------------
JANUARY 2,
YEAR 2004*
ENDED THROUGH
OCTOBER 31, OCTOBER 31, YEAR ENDED OCTOBER 31,
2005 2004 2005 2004 2003 2002 2001
Net asset value at beginning
of period $ 9.24 $ 9.32 $ 9.26 $ 9.31 $ 9.34 $ 9.57 $ 9.36
----------- ----------- ------- ------- ------- ------- -------
Net investment income 0.20 0.06 0.24 0.17 0.19 0.29(a) 0.47
Net realized and unrealized
loss on investments (0.19) (0.01) (0.19) (0.03) (0.01) 0.00(d) 0.48
----------- ----------- ------- ------- ------- ------- -------
Total from investment
operations 0.01 0.05 0.05 0.14 0.18 0.29 0.95
----------- ----------- ------- ------- ------- ------- -------
Less dividends and
distributions:
From net investment income (0.19) (0.12) (0.24) (0.18) (0.21) (0.52) (0.74)
Return of capital -- (0.01) -- (0.01) -- -- --
----------- ----------- ------- ------- ------- ------- -------
Total dividends and
distributions (0.19) (0.13) (0.24) (0.19) (0.21) (0.52) (0.74)
----------- ----------- ------- ------- ------- ------- -------
Net asset value at end of
period $ 9.06 $ 9.24 $ 9.07 $ 9.26 $ 9.31 $ 9.34 $ 9.57
=========== =========== ======= ======= ======= ======= =======
Total investment return(b) 0.09% 0.57%(c) 0.59% 1.50% 1.94% 3.21% 10.68%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.16% 1.43%+ 2.63% 1.83% 2.02% 3.13% 4.93%
Net expenses 1.07% 1.00%+ 0.60% 0.60% 0.60% 0.60% 0.60%
Expenses (before
reimbursement) 1.36% 1.18%+ 0.77% 0.78% 0.98% 0.96% 1.03%
Portfolio turnover rate 151% 151% 151% 151% 173% 228% 149%
Net assets at end of period
(in 000's) $6,085 $5,192 $86,167 $95,402 $35,532 $37,201 $30,065
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(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) Less than one cent per share.
</Table>
164 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.
MAINSTAY ASSET MANAGER FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM INITIAL SALES CHARGE 5.5%
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 1.55% -0.18% 8.08%
Excluding sales charges 7.46 0.95 8.69
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
10/31/95 9450 10000 10000 10000
11090 12410 11648 10589
13957 16394 14230 11524
16696 20000 16641 12607
18695 25134 19240 12669
20743 26665 20522 13590
18191 20024 18184 15576
16556 16999 16903 16472
18699 20535 19290 17294
20239 22470 20738 18280
10/31/05 21749 24429 21965 18507
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 1.60% -0.13% 7.93%
Excluding sales charges 6.60 0.22 7.93
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
10/31/95 10000 10000 10000 10000
11648 12410 11648 10589
14550 16394 14230 11524
17301 20000 16641 12607
19256 25134 19240 12669
21218 26665 20522 13590
18496 20024 18184 15576
16704 16999 16903 16472
18722 20535 19290 17294
20124 22470 20738 18280
10/31/05 21451 24429 21965 18507
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 5.68% 0.21% 7.91%
Excluding sales charges 6.68 0.21 7.91
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
10/31/95 10000 10000 10000 10000
11659 12410 11648 10589
14557 16394 14230 11524
17296 20000 16641 12607
19229 25134 19240 12669
21179 26665 20522 13590
18446 20024 18184 15576
16666 16999 16903 16472
18685 20535 19290 17294
20066 22470 20738 18280
10/31/05 21406 24429 21965 18507
</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 max-imum initial sales charge of 5.50% 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 5.00% 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
contractual and may be modified or
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.
www.MAINSTAYfunds.com 165
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
7.76% 1.17% 8.91%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ASSET ASSET MANAGER CITIGROUP BIG BOND
MANAGER FUND S&P 500 INDEX COMPOSITE INDEX INDEX
-------------- ------------- --------------- ------------------
10/31/95 10000 10000 10000 10000
11755 12410 11648 10589
14821 16394 14230 11524
17770 20000 16641 12607
19925 25134 19240 12669
22152 26665 20522 13590
19468 20024 18184 15576
17760 16999 16903 16472
20098 20535 19290 17294
21793 22470 20738 18280
10/31/05 23485 24429 21965 18507
</Table>
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
- -----------------------------------------------------------------------------
Asset Manager Composite Index(1) 5.92% 1.37% 8.19%
S&P 500(R) Index(2) 8.72 -1.74 9.34
Citigroup Broad Investment Grade Bond Index(3) 1.24 6.37 6.35
Average Lipper flexible portfolio fund(4) 8.23 1.58 7.53
</Table>
terminated only with the approval of the Board of Directors/ Trustees. 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 1.00% 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 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
Bond Index (The "BIG 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 assume that all income and capital
gains are reinvested in the index or indices that produce them. 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 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. 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.
166 MainStay Asset Manager Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,049.05 $ 6.35 $1,018.85 $ 6.26
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,045.10 $10.21 $1,015.10 $10.06
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,045.90 $10.21 $1,015.10 $10.06
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,051.40 $ 4.55 $1,020.60 $ 4.48
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.23% for Class A, 1.98% for Class B and Class C, and 0.88% for Class I)
multiplied by the average account value over the period, divided by 365,
multiplied by 184 (to reflect the one-half year period).
www.MAINSTAYfunds.com 167
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
Common Stocks 60.6
U.S. Government & Federal Agencies 19.2
Short-Term Investments (collateral from securities lending 18.2
7.6%)
Corporate Bonds 6.0
Foreign Bonds 1.2
Real Estate Investment Trusts 1.2
Asset-Backed Securities 0.5
Yankee Bonds 0.1
Liabilities in Excess of Cash and Other Assets (7.0)
</Table>
See Portfolio of Investments on page 171 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Note 4.25%, due 8/15/15
2. MBNA Corp.
3. ExxonMobil Corp.
4. General Electric Co.
5. Microsoft Corp.
6. Pfizer, Inc.
7. Intel Corp.
8. International Business Machines Corp.
9. AT&T Corp.
10. Federal Home Loan Bank 2.875%, due 9/15/06
</Table>
168 MainStay Asset Manager Fund
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 DURING THE REPORTING
PERIOD?
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 BIG Index,(2) and up to 60%
(but normally between 5% and 10%) 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.
Effective, January 2, 2006, MainStay Asset Manager Fund will change its name to
MainStay Income Manager Fund. In connection with the change, there will be
several modifications to the Fund's principal investment strategies. As of that
date, the Fund will generally invest at least 80% of its assets in income-
producing securities subject to the following constraints: up to 65% of its net
assets will be invested in equity securities, and related derivatives, such as
dividend paying common and preferred stocks (within this allocation, at least
30% of its net assets will be invested in U.S. equity securities, including
investments in REITs). At least 35% of its net assets will be invested in
fixed-income securities, including cash and cash equivalents and related
derivatives. These securities will consist of both investment-grade and
high-yield fixed-income securities including up to 15% of total assets, at the
time of purchase, in high-yield securities; and up to 10% of total assets, at
the time of purchase, in a combination of emerging-market debt and floating-rate
loans. The Fund may also invest in other fixed-income securities without
restriction, including government, corporate, asset-backed, and mortgage-backed
securities. The Fund does not have a minimum required allocation to money-market
instruments and will normally not invest more than 10% in these instruments.
Finally, in pursuing its investment objective, the Fund may invest up to 20% of
its total assets, at the time of purchase, in foreign securities of developed or
emerging markets or in futures associated with such securities.
WHAT WERE SOME OF THE MAJOR MARKET FACTORS THAT AFFECTED THE FUND'S PERFORMANCE
DURING THE REPORTING PERIOD?
The past year saw positive returns for all the major asset classes in which the
Fund invests. Among the domestic equity asset classes, real estate investment
trusts (REITs) and mid-cap stocks were two of the best performers, while
large-cap stocks generated the worst results. International stocks did well
compared to their U.S. counterparts.
Bond market performance was mixed. During the reporting period, the Federal Open
Market Committee raised the federal funds target rate eight times, with a
25-basis-point increase on each occasion. (A basis point is one-hundredth of a
percentage point.) These rate hikes brought the targeted federal funds rate from
1.75% to 3.75%.
During the reporting period, the yield curve flattened substantially. Federal
Reserve tightening pushed yields on short-term bonds higher, while strong
support from foreign investors helped reduce the yield on 30-year Treasurys.
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. High-yield debt securities
("junk bonds") are generally considered speculative because they present a
greater risk of loss than higher quality debt securities and may be subject to
greater price volatility. Funds that invest in bonds are subject to credit,
inflation, and interest-rate risk and can lose principal value when interest
rates rise.
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 166 for more information on the Citigroup Broad
Investment Grade Bond Index.
www.MAINSTAYfunds.com 169
HOW DID THE FUND'S EQUITIES PERFORM?
During October 2005, the Fund's decision to underweight U.S. equities and
overweight non-U.S. equities hurt performance, but for the 12-month reporting
period, the decision enhanced results. In addition, strategic allocations to
mid-capitalization stocks, small-cap stocks, and REITs contributed positively to
performance, since these asset classes outperformed large-cap equities.
HOW DID THE FUND'S FIXED-INCOME INVESTMENTS HELP PERFORMANCE?
In the fixed-income portion of the Fund's portfolio, mortgage-backed securities
had the highest return during the reporting period, followed by agency
securities, credit, and U.S. Treasurys.
Among U.S. Treasurys and agency securities, the flattening yield curve caused
longer-duration securities (those with durations of more than 10 years) to
outperform short-duration securities. Within the credit component of the Index,
corporate debt rated A performed best, followed by bonds rated AAA, BBB, and
AA.(3) Of the three broadest industrial sectors in the credit component of the
BIG Index, finance was the strongest performer, utilities was next, followed by
industrials. Much of the poor performance in industrial credit came from vehicle
parts, textile/apparel/stores, and auto manufacturers. Airlines and tobacco were
particularly strong credit sectors.
HOW DID THE ACTIVELY MANAGED SEGMENTS OF THE FUND AFFECT RESULTS?
During the reporting period, the Fund's actively managed U.S.-equity component,
contributed a majority of MainStay Asset Manager Fund's outperformance. For the
12-month reporting period, the Fund's bond allocation underperformed slightly.
3. Debt rated AAA has the highest rating assigned by Standard & Poor's, and in
the opinion of Standard & Poor's, the obligor's capacity to meet its
financial commitment on the obligation is extremely strong. 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.
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
INFORMATION ABOUT MAINSTAY ASSET MANAGER FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
170 MainStay Asset Manager Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (27.0%)+
ASSET-BACKED SECURITIES (0.5%)
- --------------------------------------------------------------------------------------
AIRLINES (0.0%)++
Continental Airlines, Inc.
Series 1992-2, Class A1
7.256%, due 3/15/20 $ 35,451 $ 34,877
CONSUMER FINANCE (0.5%)
Chase Issuance Trust
Series 2005-10A, Class A
4.65%, due 12/17/12 750,000 748,725
Citibank Credit Card Issuance Trust
Series 2003-A2, Class A2
2.70%, due 1/15/08 1,000,000 996,501
------------------
1,745,226
------------------
Total Asset-Backed Securities
(Cost $1,788,734) 1,780,103
------------------
CORPORATE BONDS (6.0%)
- --------------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.2%)
Goodrich Corp.
7.00%, due 4/15/38 50,000 54,885
Honeywell International, Inc.
7.50%, due 3/1/10 100,000 109,978
Lockheed Martin Corp.
7.65%, due 5/1/16 100,000 118,775
Northrop Grumman Corp.
7.125%, due 2/15/11 100,000 109,191
7.875%, due 3/1/26 50,000 62,403
Raytheon Co.
6.40%, due 12/15/18 50,000 54,090
6.75%, due 8/15/07 58,000 59,681
United Technologies Corp.
6.35%, due 3/1/11 100,000 106,301
------------------
675,304
------------------
AGRICULTURE (0.0%)++
Bunge Ltd. Finance Corp.
5.10%, due 7/15/15 (a) 125,000 120,122
------------------
AUTOMOBILES (0.1%)
DaimlerChrysler N.A. Holding Corp.
7.30%, due 1/15/12 250,000 267,707
------------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BEVERAGES (0.1%)
Anheuser-Busch Cos., Inc.
5.75%, due 4/1/10 $ 100,000 $ 103,330
Coca-Cola Enterprises, Inc.
7.00%, due 5/15/98 100,000 116,401
Pepsi Bottling Holdings, Inc.
5.625%, due 2/17/09 (a) 100,000 102,341
------------------
322,072
------------------
BUILDING PRODUCTS (0.1%)
Masco Corp.
4.80%, due 6/15/15 75,000 71,276
6.75%, due 3/15/06 100,000 100,753
------------------
172,029
------------------
CAPITAL MARKETS (0.5%)
Bear Stearns Cos., Inc. (The)
5.70%, due 1/15/07 250,000 252,418
Credit Suisse First Boston USA, Inc.
4.625%, due 1/15/08 250,000 248,837
Goldman Sachs Group, Inc. (The)
5.70%, due 9/1/12 150,000 153,214
6.125%, due 2/15/33 100,000 100,945
JPMorgan Chase & Co.
5.75%, due 1/2/13 250,000 256,809
Lehman Brothers Holdings, Inc. Series G
4.80%, due 3/13/14 100,000 96,735
7.00%, due 2/1/08 150,000 156,617
Merrill Lynch & Co., Inc.
4.00%, due 11/15/07 250,000 246,462
Morgan Stanley
6.60%, due 4/1/12 125,000 134,030
6.75%, due 10/15/13 125,000 134,437
------------------
1,780,504
------------------
CHEMICALS (0.0%)++
E.I. du Pont de Nemours & Co.
6.875%, due 10/15/09 100,000 106,937
Lubrizol Corp.
5.50%, due 10/1/14 25,000 24,636
------------------
131,573
------------------
</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 171
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- --------------------------------------------------------------------------------------
COMMERCIAL BANKS (0.6%)
Bank of America Corp.
5.875%, due 2/15/09 $ 500,000 $ 513,996
Bank One Corp.
Series A
6.00%, due 2/17/09 250,000 256,149
FleetBoston Financial Corp.
3.85%, due 2/15/08 250,000 245,423
Key Bank N.A.
5.80%, due 7/1/14 50,000 51,726
PNC Bank N.A.
5.25%, due 1/15/17 75,000 73,625
SunTrust Banks, Inc.
5.45%, due 12/1/17 50,000 50,140
U.S. Bancorp Series N
3.95%, due 8/23/07 250,000 246,585
Wachovia Bank N.A.
4.85%, due 7/30/07 250,000 250,104
Wachovia Corp.
6.25%, due 8/4/08 100,000 103,233
Wells Fargo Bank N.A.
6.45%, due 2/1/11 250,000 265,939
------------------
2,056,920
------------------
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Cendant Corp.
6.25%, due 1/15/08 100,000 101,726
Quest Diagnostics, Inc.
5.125%, due 11/1/10 (a) 25,000 24,951
R.R. Donnelley & Sons Co.
5.50%, due 5/15/15 (a) 25,000 24,207
Republic Services, Inc.
6.75%, due 8/15/11 25,000 26,742
Waste Management, Inc.
7.375%, due 8/1/10 100,000 108,723
------------------
286,349
------------------
COMMUNICATIONS EQUIPMENT (0.0%)++
Motorola, Inc.
4.608%, due 11/16/07 100,000 99,502
------------------
COMPUTERS & PERIPHERALS (0.1%)
International Business Machines Corp.
4.25%, due 9/15/09 250,000 245,101
------------------
CONSUMER FINANCE (0.5%)
American General Finance Corp.
Series H
4.50%, due 11/15/07 250,000 248,182
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CONSUMER FINANCE (CONTINUED)
Capital One Bank
5.125%, due 2/15/14 $ 100,000 $ 96,874
Ford Motor Credit Co.
7.875%, due 6/15/10 500,000 481,288
HSBC Finance Corp.
4.125%, due 11/16/09 500,000 482,922
6.375%, due 10/15/11 50,000 52,819
John Deere Capital Corp.
3.90%, due 1/15/08 250,000 245,007
MBNA Corp.
6.125%, due 3/1/13 100,000 105,175
SLM Corp.
5.625%, due 8/1/33 100,000 99,020
Toyota Motor Credit Corp.
4.25%, due 3/15/10 50,000 48,722
------------------
1,860,009
------------------
DIVERSIFIED FINANCIAL SERVICES (0.4%)
Boeing Capital Corp.
5.75%, due 2/15/07 250,000 252,883
Caterpillar Financial Services Corp.
4.30%, due 6/1/10 50,000 48,722
Citigroup, Inc.
3.50%, due 2/1/08 500,000 486,035
5.875%, due 2/22/33 250,000 249,132
National Rural Utilities Cooperative Finance Corp.
5.75%, due 8/28/09 250,000 256,196
Residential Capital Corp.
6.375%, due 6/30/10 (a) 25,000 25,394
Textron Financial Corp.
4.125%, due 3/3/08 25,000 24,573
------------------
1,342,935
------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
ALLTEL Corp.
4.656%, due 5/17/07 100,000 99,513
Ameritech Capital Funding Corp.
6.55%, due 1/15/28 100,000 100,453
BellSouth Corp.
6.00%, due 10/15/11 250,000 258,861
GTE South, Inc.,
Series C
6.00%, due 2/15/08 300,000 304,503
SBC Communications, Inc.
5.75%, due 5/2/06 150,000 150,790
Sprint Capital Corp.
6.125%, due 11/15/08 150,000 154,483
8.75%, due 3/15/32 100,000 129,344
</Table>
172 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)
- --------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
Verizon Global Funding Corp.
7.75%, due 12/1/30 $ 100,000 $ 115,976
------------------
1,313,923
------------------
ELECTRIC UTILITIES (0.4%)
American Electric Power Co., Inc.
Series C
5.375%, due 3/15/10 100,000 100,797
CenterPoint Energy Houston Electric LLC
Series J
5.70%, due 3/15/13 50,000 51,114
Consumers Energy Co. Series B
5.375%, due 4/15/13 100,000 99,488
Dominion Resources, Inc. Series B
6.25%, due 6/30/12 100,000 104,414
DTE Energy Co.
Series A
6.65%, due 4/15/09 100,000 104,532
FirstEnergy Corp.
Series A
5.50%, due 11/15/06 100,000 100,579
Series B
6.45%, due 11/15/11 125,000 131,488
Florida Power & Light Co.
5.40%, due 9/1/35 50,000 47,960
Northern States Power Co.
6.875%, due 8/1/09 100,000 105,981
Peco Energy Co.
3.50%, due 5/1/08 100,000 96,502
Pepco Holdings, Inc.
7.45%, due 8/15/32 50,000 56,643
Progress Energy, Inc.
6.85%, due 4/15/12 25,000 26,562
7.10%, due 3/1/11 100,000 107,011
PSE&G Power LLC
7.75%, due 4/15/11 100,000 110,275
Southern California Edison Co.
6.65%, due 4/1/29 100,000 108,310
TXU Electric Delivery Co.
7.00%, due 9/1/22 100,000 108,767
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
ELECTRIC UTILITIES (CONTINUED)
Wisconsin Power & Light Co.
6.25%, due 7/31/34 $ 25,000 $ 26,006
------------------
1,486,429
------------------
FOOD & STAPLES RETAILING (0.1%)
Albertson's, Inc.
7.50%, due 2/15/11 100,000 99,078
CVS Corp.
4.875%, due 9/15/14 25,000 23,981
Kroger Co. (The)
4.95%, due 1/15/15 100,000 92,583
Safeway, Inc.
6.50%, due 3/1/11 100,000 102,729
Wal-Mart Stores, Inc.
5.25%, due 9/1/35 100,000 93,845
------------------
412,216
------------------
FOOD PRODUCTS (0.2%)
Archer-Daniels-Midland Co.
8.125%, due 6/1/12 100,000 116,128
ConAgra Foods, Inc.
6.75%, due 9/15/11 100,000 106,368
7.00%, due 10/1/28 50,000 53,451
General Mills, Inc.
3.875%, due 11/30/07 100,000 97,931
Kraft Foods, Inc.
4.125%, due 11/12/09 100,000 96,597
5.25%, due 6/1/07 100,000 100,606
Sara Lee Corp.
3.875%, due 6/15/13 25,000 22,317
Unilever Capital Corp.
7.125%, due 11/1/10 100,000 109,396
------------------
702,794
------------------
GAS UTILITIES (0.1%)
KeySpan Corp.
5.875%, due 4/1/33 25,000 25,760
Kinder Morgan Energy Partners, L.P.
7.125%, due 3/15/12 125,000 136,398
------------------
162,158
------------------
HEALTH CARE PROVIDERS & SERVICES (0.0%)++
Aetna, Inc.
7.875%, due 3/1/11 50,000 56,051
UnitedHealth Group, Inc.
4.875%, due 4/1/13 50,000 49,200
WellPoint, Inc.
5.00%, due 12/15/14 50,000 48,677
------------------
153,928
------------------
</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 173
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- --------------------------------------------------------------------------------------
HOME BUILDERS (0.0%)++
Pulte Homes, Inc.
6.25%, due 2/15/13 $ 50,000 $ 50,403
------------------
HOTELS, RESTAURANTS & LEISURE (0.0%)++
Marriott International, Inc.
4.625%, due 6/15/12 25,000 23,922
------------------
HOUSEHOLD DURABLES (0.1%)
Centex Corp.
4.875%, due 8/15/08 100,000 99,122
Lennar Corp.
5.125%, due 10/1/10 (a) 100,000 97,783
------------------
196,905
------------------
HOUSEHOLD PRODUCTS (0.0%)++
Procter & Gamble Co. (The)
4.85%, due 12/15/15 100,000 98,329
------------------
INSURANCE (0.2%)
Ace INA Holdings, Inc.
5.875%, due 6/15/14 75,000 75,810
Allstate Corp. (The)
7.20%, due 12/1/09 100,000 107,808
ASIF Global Financing XVIII
3.85%, due 11/26/07 (a) 50,000 48,967
Berkshire Hathaway Finance Corp.
4.625%, due 10/15/13 100,000 96,687
Genworth Financial, Inc.
5.75%, due 6/15/14 25,000 25,800
Marsh & McLennan Cos., Inc.
5.75%, due 9/15/15 50,000 48,641
Metlife, Inc.
5.50%, due 6/15/14 100,000 101,139
Nationwide Financial Services, Inc.
5.10%, due 10/1/15 25,000 24,225
Prudential Financial, Inc.
4.50%, due 7/15/13 100,000 95,426
------------------
624,503
------------------
LODGING (0.0%)++
Harrah's Operating Co., Inc.
5.625%, due 6/1/15 (a) 50,000 47,979
------------------
MACHINERY (0.0%)++
Caterpillar, Inc.
7.25%, due 9/15/09 100,000 107,814
------------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MEDIA (0.4%)
Clear Channel Communications, Inc.
4.25%, due 5/15/09 $ 100,000 $ 95,518
6.00%, due 11/1/06 50,000 50,525
Comcast Cable Communications Holdings, Inc.
8.375%, due 3/15/13 150,000 172,786
Comcast Cable Communications, Inc.
6.375%, due 1/30/06 50,000 50,215
Comcast Corp.
6.50%, due 1/15/15 100,000 104,788
Cox Enterprises, Inc.
7.875%, due 9/15/10 (a) 100,000 108,899
News America Holdings
9.25%, due 2/1/13 (b) 100,000 121,323
Time Warner, Inc.
7.625%, due 4/15/31 250,000 281,878
Viacom, Inc.
5.625%, due 8/15/12 50,000 49,613
7.70%, due 7/30/10 100,000 108,930
Walt Disney Co. (The)
6.75%, due 3/30/06 100,000 100,882
7.00%, due 3/1/32 50,000 56,282
------------------
1,301,639
------------------
METALS & MINING (0.1%)
Alcoa, Inc.
4.25%, due 8/15/07 250,000 247,800
------------------
MULTILINE RETAIL (0.1%)
Federated Department Stores, Inc.
7.00%, due 2/15/28 100,000 104,741
Target Corp.
5.875%, due 3/1/12 100,000 104,689
------------------
209,430
------------------
MULTI-UTILITIES & UNREGULATED POWER (0.1%)
Constellation Energy Group, Inc.
6.35%, due 4/1/07 100,000 101,885
Duke Energy Corp.
6.25%, due 1/15/12 125,000 130,999
Michigan Consolidated Gas Co.
Series B
7.15%, due 5/30/06 125,000 126,579
Pacific Gas & Electric Co.
4.80%, due 3/1/14 100,000 96,277
</Table>
174 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)
- --------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER (CONTINUED)
San Diego Gas & Electric Co.
5.35%, due 5/15/35 $ 50,000 $ 47,822
------------------
503,562
------------------
OIL & GAS (0.2%)
Amerada Hess Corp.
7.30%, due 8/15/31 100,000 112,930
Anadarko Petroleum Corp.
7.20%, due 3/15/29 100,000 114,139
Devon Financing Corp. LLC
6.875%, due 9/30/11 125,000 135,351
Enterprise Products Operating, L.P.
4.95%, due 6/1/10 100,000 97,402
Pemex Project Funding Master Trust
7.375%, due 12/15/14 100,000 109,300
USX Corp.
6.85%, due 3/1/08 100,000 104,158
Valero Energy Corp.
6.125%, due 4/15/07 100,000 101,612
XTO Energy, Inc.
5.30%, due 6/30/15 25,000 24,698
------------------
799,590
------------------
PAPER & FOREST PRODUCTS (0.1%)
International Paper Co.
6.75%, due 9/1/11 100,000 105,168
Weyerhaeuser Co.
6.75%, due 3/15/12 100,000 105,890
------------------
211,058
------------------
PHARMACEUTICALS (0.2%)
Bristol-Myers Squibb Co.
5.75%, due 10/1/11 150,000 155,172
Eli Lilly & Co.
4.50%, due 3/15/18 100,000 92,704
Merck & Co., Inc.
4.75%, due 3/1/15 100,000 94,601
Pfizer, Inc.
4.65%, due 3/1/18 50,000 47,473
Pharmacia Corp.
6.60%, due 12/1/28 50,000 56,924
Schering-Plough Corp.
5.30%, due 12/1/13 100,000 101,234
Wyeth
5.50%, due 3/15/13 100,000 100,867
------------------
648,975
------------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
REAL ESTATE (0.1%)
Archstone-Smith Operating Trust
5.25%, due 5/1/15 $ 25,000 $ 24,435
Camden Property Trust
4.375%, due 1/15/10 65,000 62,396
EOP Operating, L.P.
7.00%, due 7/15/11 100,000 107,617
ERP Operating, L.P.
7.125%, due 10/15/17 100,000 111,607
ProLogis
5.625%, due 11/15/15 (a) 25,000 24,933
Simon Property Group, L.P.
6.375%, due 11/15/07 100,000 102,488
------------------
433,476
------------------
ROAD & RAIL (0.1%)
Burlington Northern Santa Fe Corp.
7.125%, due 12/15/10 100,000 109,129
CSX Corp.
7.45%, due 5/1/07 100,000 103,688
Norfolk Southern Corp.
6.75%, due 2/15/11 100,000 107,309
7.05%, due 5/1/37 25,000 29,152
Union Pacific Corp.
6.65%, due 1/15/11 100,000 106,548
------------------
455,826
------------------
SPECIALTY RETAIL (0.0%)++
Lowe's Cos., Inc.
5.50%, due 10/15/15 25,000 24,634
------------------
TEXTILES, APPAREL & LUXURY GOODS (0.0%)++
Jones Apparel Group, Inc.
5.125%, due 11/15/14 50,000 44,914
------------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Countrywide Home Loans, Inc.
5.625%, due 5/15/07 100,000 101,034
General Electric Capital Corp.
6.00%, due 6/15/12 500,000 525,905
6.75%, due 3/15/32 250,000 285,941
Washington Mutual, Inc.
4.20%, due 1/15/10 250,000 241,242
7.50%, due 8/15/06 250,000 254,670
------------------
1,408,792
------------------
</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
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- --------------------------------------------------------------------------------------
TOBACCO (0.0%)++
Altria Group, Inc.
7.20%, due 2/1/07 $ 100,000 $ 102,341
------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%)++
New Cingular Wireless Services, Inc.
7.875%, due 3/1/11 100,000 111,968
------------------
Total Corporate Bonds
(Cost $21,700,951) 21,245,435
------------------
FOREIGN BONDS (1.2%)
- --------------------------------------------------------------------------------------
BEVERAGES (0.0%)++
Diageo Capital PLC
3.375%, due 3/20/08 100,000 96,711
------------------
CAPITAL MARKETS (0.1%)
Kreditanstalt fuer Wiederaufbau
3.375%, due 1/23/08 250,000 243,691
------------------
COMMERCIAL BANKS (0.0%)++
Royal Bank of Scotland Group PLC
5.05%, due 1/8/15 100,000 98,269
------------------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
CIT Group Funding Co. of Canada
5.20%, due 6/1/15 (a) 250,000 243,513
UFJ Finance Aruba AEC
6.75%, due 7/15/13 100,000 108,218
------------------
351,731
------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
British Telecommunications PLC
8.875%, due 12/15/30 100,000 130,636
Deutsche Telekom International Finance B.V.
8.50%, due 6/15/10 250,000 278,983
France Telecom S.A.
7.20%, due 3/1/06 150,000 151,287
8.50%, due 3/1/31 100,000 130,662
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10 100,000 111,502
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
Telecom Italia Capital S.A. Series C
6.375%, due 11/15/33 $ 100,000 $ 99,351
------------------
902,421
------------------
ELECTRIC UTILITIES (0.0%)++
Scottish Power PLC
5.375%, due 3/15/15 50,000 49,153
------------------
FOREIGN GOVERNMENTS (0.5%)
Italian Republic
5.625%, due 6/15/12 500,000 521,996
Malaysian Government
8.75%, due 6/1/09 100,000 112,220
Province of Ontario
5.50%, due 10/1/08 250,000 256,074
Province of Quebec
7.50%, due 9/15/29 150,000 194,018
Republic of South Africa
6.50%, due 6/2/14 100,000 106,875
United Mexican States Series A
6.375%, due 1/16/13 500,000 523,750
------------------
1,714,933
------------------
INDUSTRIAL CONGLOMERATES (0.0%)++
Tyco International Group S.A.
6.00%, due 11/15/13 100,000 103,735
------------------
INSURANCE (0.1%)
Axa S.A.
8.60%, due 12/15/30 100,000 130,114
XL Capital, Ltd.
5.25%, due 9/15/14 25,000 23,955
------------------
154,069
------------------
METALS & MINING (0.0%)++
Alcan, Inc.
5.00%, due 6/1/15 50,000 47,940
BHP Billiton Finance USA Ltd.
4.80%, due 4/15/13 50,000 48,976
------------------
96,916
------------------
OIL & GAS (0.1%)
Conoco Funding Co.
6.35%, due 10/15/11 250,000 267,466
------------------
</Table>
176 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
FOREIGN BONDS (CONTINUED)
- --------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.0%)++
Celulosa Arauco y Constitucion S.A.
5.625%, due 4/20/15 $ 25,000 $ 24,279
Stora Enso Oyj
7.375%, due 5/15/11 100,000 107,318
------------------
131,597
------------------
WIRELESS TELECOMMUNICATION SERVICES (0.0%)++
Vodafone Group PLC
7.75%, due 2/15/10 100,000 110,002
------------------
Total Foreign Bonds
(Cost $4,335,429) 4,320,694
------------------
U.S. GOVERNMENT & FEDERAL AGENCIES (19.2%)
- --------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (1.6%)
2.75%, due 3/14/08 1,000,000 957,758
V 2.875%, due 9/15/06 3,000,000 2,957,802
3.375%, due 9/14/07 1,500,000 1,466,610
5.25%, due 6/18/14 500,000 511,721
------------------
5,893,891
------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.1%)
3.625%, due 9/15/08 1,000,000 971,390
4.125%, due 7/12/10 1,085,000 1,054,806
4.875%, due 11/15/13 1,000,000 998,199
6.25%, due 7/15/32 500,000 579,848
------------------
3,604,243
------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (3.4%)
4.00%, due 1/1/20 50,257 47,582
4.00%, due 2/1/20 919,718 869,910
4.50%, due 7/1/18 349,138 338,293
4.50%, due 8/1/20 391,401 378,905
4.50%, due 8/1/33 421,317 394,341
4.50%, due 8/1/35 496,509 463,516
5.00%, due 12/1/18 399,124 394,005
5.00%, due 10/1/20 499,950 493,341
5.00%, due 7/1/35 495,669 477,052
5.00%, due 8/1/35 2,285,730 2,199,876
5.00%, due 10/1/35 1,000,100 962,536
5.50%, due 12/1/17 336,661 338,956
5.50%, due 1/1/18 289,059 291,029
5.50%, due 10/1/33 200,190 197,937
5.50%, due 6/1/35 997,843 985,309
5.50%, due 8/1/35 1,474,648 1,456,126
6.00%, due 5/1/16 427,670 437,055
6.00%, due 1/1/26 14,327 14,528
6.00%, due 12/1/27 615 622
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 1/1/28 $ 8,283 $ 8,389
6.00%, due 11/1/32 575,091 581,382
6.00%, due 5/1/35 39,972 40,380
6.50%, due 11/1/16 135,837 140,089
6.50%, due 2/1/27 1,677 1,728
6.50%, due 5/1/29 105,206 108,222
6.50%, due 6/1/29 165,961 170,719
6.50%, due 7/1/29 274,096 281,954
6.50%, due 8/1/29 138,288 142,253
6.50%, due 9/1/29 10,823 11,133
6.50%, due 10/1/29 1,154 1,187
6.50%, due 6/1/32 107,417 110,337
7.00%, due 3/1/26 1,236 1,294
7.00%, due 9/1/26 35,150 36,781
7.00%, due 10/1/26 364 379
7.00%, due 7/1/30 6,200 6,473
7.00%, due 7/1/32 156,720 163,611
7.50%, due 7/1/11 13,132 13,814
7.50%, due 9/1/11 10,600 11,144
7.50%, due 5/1/32 163,279 172,659
7.75%, due 10/1/07 18,163 18,599
8.00%, due 10/1/11 5,880 6,179
8.00%, due 11/1/11 32,342 34,266
------------------
12,803,891
------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (5.5%)
4.50%, due 1/1/20 963,126 932,068
4.50%, due 7/1/20 1,963,434 1,899,439
5.00%, due 10/1/17 310,151 306,285
5.00%, due 1/1/18 944,433 932,662
5.00%, due 3/1/18 311,302 307,304
5.00%, due 1/1/19 461,744 455,674
5.00%, due 10/1/20 495,809 489,255
5.00%, due 6/1/35 2,954,215 2,843,760
5.00%, due 8/1/35 993,534 956,387
5.50%, due 9/1/18 370,571 373,184
5.50%, due 6/1/33 580,868 573,964
5.50%, due 7/1/33 2,002,899 1,979,092
5.50%, due 12/1/33 198,867 196,504
5.50%, due 2/1/34 367,403 363,036
5.50%, due 10/1/34 997,998 985,316
5.50%, due 8/1/35 997,666 984,511
5.50%, due 11/1/35 TBA (c) 1,000,000 986,250
6.00%, due 4/1/19 14,855 15,138
6.00%, due 6/1/28 43,151 43,640
6.00%, due 12/1/28 188,811 190,950
6.00%, due 12/1/31 12,058 12,177
6.00%, due 1/1/32 11,456 11,565
</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 177
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
- --------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 2/1/32 $ 254,925 $ 257,440
6.00%, due 4/1/32 8,219 8,297
6.00%, due 6/1/32 238,607 240,883
6.00%, due 10/1/32 8,495 8,576
6.00%, due 2/1/33 10,184 10,282
6.00%, due 4/1/33 9,611 9,703
6.00%, due 8/1/34 1,292,746 1,304,486
6.00%, due 11/1/35 TBA (c) 300,000 302,531
6.50%, due 7/1/29 280,839 289,266
6.50%, due 8/1/32 153,237 157,514
7.00%, due 5/1/26 22,048 23,120
7.00%, due 6/1/26 4,753 4,984
7.00%, due 7/1/30 59,966 62,732
7.50%, due 7/1/11 1,759 1,821
7.50%, due 8/1/11 5,031 5,186
7.50%, due 10/1/11 8,357 8,791
7.50%, due 10/1/15 150,808 159,283
8.00%, due 7/1/09 4,065 4,254
8.00%, due 4/1/10 11,441 12,063
8.00%, due 10/1/10 7,151 7,539
8.00%, due 8/1/11 3,269 3,469
8.00%, due 10/1/11 32,681 34,675
8.00%, due 11/1/11 4,669 4,954
8.50%, due 8/1/26 4,350 4,729
8.50%, due 10/1/26 659 716
9.00%, due 6/1/26 3,584 3,936
9.00%, due 7/1/26 15,766 17,289
9.00%, due 8/1/26 3,706 3,994
9.00%, due 9/1/26 316 328
------------------
18,791,002
------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (0.8%)
5.00%, due 8/15/33 328,267 320,736
5.50%, due 9/15/35 1,000,099 999,152
6.00%, due 1/15/33 278,989 283,954
6.00%, due 11/15/33 282,713 287,721
6.50%, due 4/15/29 483 502
6.50%, due 5/15/29 1,373 1,426
6.50%, due 8/15/29 100 104
6.50%, due 5/15/31 186,380 193,491
6.50%, due 7/15/32 118,837 123,302
7.00%, due 7/15/11 6,248 6,478
7.00%, due 10/15/11 92,145 95,934
7.00%, due 9/15/23 9,269 9,792
7.00%, due 7/15/25 22,028 23,248
7.00%, due 12/15/25 19,356 20,428
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
7.00%, due 5/15/26 $ 11,517 $ 12,140
7.00%, due 11/15/27 38,181 40,210
7.00%, due 12/15/27 168,414 177,367
7.00%, due 6/15/28 9,464 9,959
7.50%, due 3/15/26 12,269 13,026
7.50%, due 6/15/26 752 798
7.50%, due 10/15/30 64,255 68,060
8.00%, due 8/15/26 4,691 5,021
8.00%, due 9/15/26 1,289 1,380
8.00%, due 10/15/26 39,097 41,845
8.50%, due 11/15/26 27,449 29,813
9.00%, due 11/15/26 6,167 6,773
------------------
2,772,660
------------------
UNITED STATES TREASURY BONDS (1.1%)
5.25%, due 2/15/29 1,400,000 1,485,257
5.375%, due 2/15/31 415,000 452,609
6.25%, due 8/15/23 1,800,000 2,100,726
------------------
4,038,592
------------------
UNITED STATES TREASURY NOTES (5.7%)
3.125%, due 5/15/07 1,000,000 981,367
3.375%, due 2/15/08 750,000 733,242
3.625%, due 1/15/10 400,000 387,156
3.75%, due 3/31/07 (b) 2,000,000 1,982,344
3.75%, due 5/15/08 (b) 2,650,000 2,608,077
3.875%, due 5/15/09 (b) 1,000,000 981,328
3.875%, due 9/15/10 600,000 584,297
4.00%, due 6/15/09 2,000,000 1,970,156
4.00%, due 3/15/10 750,000 736,172
4.00%, due 2/15/14 (b) 1,250,000 1,201,221
4.125%, due 8/15/08 750,000 744,434
4.25%, due 10/15/10 500,000 495,645
V 4.25%, due 8/15/15 (b) 6,875,000 6,708,495
------------------
20,113,934
------------------
Total U.S. Government & Federal Agencies
(Cost $68,816,526) 68,018,213(n)
------------------
YANKEE BONDS (0.1%) (D)
- --------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.0%)++
TELUS Corp.
8.00%, due 6/1/11 50,000 56,225
------------------
INDUSTRIAL CONGLOMERATES (0.0%)++
Tyco International Group S.A.
6.375%, due 10/15/11 50,000 52,533
------------------
</Table>
178 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
YANKEE BONDS (CONTINUED)
- --------------------------------------------------------------------------------------
x
MINING (0.0%)++
Falconbridge, Ltd.
8.375%, due 2/15/11 $ 25,000 $ 28,000
------------------
OIL & GAS (0.1%)
EnCana Corp.
6.30%, due 11/1/11 100,000 105,682
Norsk Hydro ASA
7.25%, due 9/23/27 100,000 120,732
------------------
226,414
------------------
ROAD & RAIL (0.0%)++
Canadian National Railway Co.
7.625%, due 5/15/23 50,000 60,865
------------------
Total Yankee Bonds
(Cost $423,858) 424,037
------------------
Total Long-Term Bonds
(Cost $97,065,498) 95,788,482
------------------
SHARES
x
COMMON STOCKS (60.6%)
- --------------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.4%)
AAR Corp. (e) 582 9,271
Applied Signal Technology, Inc. 195 3,346
Armor Holdings, Inc. (e) 493 22,042
Boeing Co. (The) 31,828 2,057,362
Cubic Corp. (b) 355 5,826
Curtiss-Wright Corp. 353 20,245
DRS Technologies, Inc. 439 21,625
EDO Corp. 297 8,583
Engineered Support Systems, Inc. 661 26,737
Esterline Technologies Corp. (e) 383 14,420
GenCorp, Inc. (e)(b) 918 16,836
Goodrich Corp. 4,102 147,959
Honeywell International, Inc. 7,107 243,059
Kaman Corp. Class A 413 9,677
Lockheed Martin Corp. 16,134 977,075
Mercury Computer Systems, Inc. (e) 338 6,419
Moog, Inc. Class A (e) 530 15,714
Precision Castparts Corp. 13,451 637,039
Raytheon Co. 7,482 276,460
Rockwell Collins, Inc. 7,337 336,181
</Table>
<Table>
<Caption>
SHARES VALUE
AEROSPACE & DEFENSE (CONTINUED)
Teledyne Technologies, Inc. (e) 540 $ 19,040
Triumph Group, Inc. (e) 290 10,104
------------------
4,885,020
------------------
AIR FREIGHT & LOGISTICS (0.3%)
C.H. Robinson Worldwide, Inc. 3,072 108,319
CNF, Inc. 5,821 327,548
EGL, Inc. (e) 659 18,472
FedEx Corp. 5,224 480,242
Forward Air Corp. 537 19,037
HUB Group, Inc. Class A (e) 100 3,637
Ryder System, Inc. 3,224 127,896
United Parcel Service, Inc. Class B 2,076 151,423
------------------
1,236,574
------------------
AIRLINES (0.0%)++
Frontier Airlines, Inc. (e)(b) 607 5,736
Mesa Air Group, Inc. (e)(b) 576 6,497
SkyWest, Inc. 970 28,431
------------------
40,664
------------------
AUTO COMPONENTS (0.2%)
ArvinMeritor, Inc. 599 9,602
Bandag, Inc. 306 13,005
BorgWarner, Inc. 2,597 150,600
Dana Corp. 1,258 9,448
Delphi Corp. 9,218 3,722
Drew Industries, Inc. (e) 100 2,885
Goodyear Tire & Rubber Co. (The) (e)(b) 8,999 140,744
Lear Corp. (b) 5,416 164,971
Midas, Inc. (e) 270 5,281
Standard Motor Products, Inc. 303 2,533
Superior Industries International Inc. (b) 400 8,140
Visteon Corp. (e) 4,185 34,861
------------------
545,792
------------------
AUTOMOBILES (0.4%)
Coachmen Industries, Inc. 271 3,228
Ford Motor Co. 94,069 782,654
General Motors Corp. (b) 19,648 538,355
Monaco Coach Corp. 531 6,515
Winnebago Industries, Inc. (b) 510 14,953
------------------
1,345,705
------------------
BEVERAGES (0.4%)
Coca-Cola Co. (The) 11,412 $ 488,205
Coca-Cola Enterprises, Inc. 5,187 98,034
</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 179
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
BEVERAGES (CONTINUED)
Constellation Brands, Inc. Class A (e) 5,211 $ 122,667
Hansen Natural Corp. (e) 100 5,052
Pepsi Bottling Group, Inc. (The) (b) 7,344 208,790
PepsiCo, Inc. 6,340 374,567
------------------
1,297,315
------------------
BIOTECHNOLOGY (0.5%)
Amgen, Inc. (e) 14,997 1,136,173
ArQule, Inc. (e) 563 4,020
Biogen Idec, Inc. (e)(b) 2,900 117,827
Cephalon, Inc. (e)(b) 1,305 59,495
Enzo Biochem, Inc. (e) 459 6,261
Invitrogen Corp. (e) 3,340 212,391
Regeneron Pharmaceuticals, Inc. (e) 735 9,195
Savient Pharmaceuticals, Inc. (e) 1,087 4,076
Techne Corp. (e) 3,752 203,433
Vertex Pharmaceuticals, Inc. (e) 7,913 180,021
------------------
1,932,892
------------------
BUILDING PRODUCTS (0.2%)
Apogee Enterprises, Inc. 502 8,223
ElkCorp. 319 10,090
Griffon Corp. (e)(b) 488 10,736
Lennox International, Inc. 838 23,372
Masco Corp. 22,197 632,614
NCI Building Systems, Inc. (e) 347 14,272
Simpson Manufacturing Co., Inc. 613 24,189
Universal Forest Products, Inc. 288 15,938
York International Corp. 1,461 81,977
------------------
821,411
------------------
CAPITAL MARKETS (2.0%)
A.G. Edwards, Inc. 8,490 359,297
Ameriprise Financial, Inc. (e) 6,841 254,615
Charles Schwab Corp. (The) 17,889 271,913
E*TRADE Financial Corp. (e) 18,838 349,445
Eaton Vance Corp. 1,134 28,225
Federated Investors, Inc. Class B 1,458 51,045
Franklin Resources, Inc. 2,556 225,874
Goldman Sachs Group, Inc. (The) 2,291 289,514
</Table>
<Table>
<Caption>
SHARES VALUE
CAPITAL MARKETS (CONTINUED)
Investment Technology Group, Inc. (e) 697 $ 22,659
Investors Financial Services Corp. 5,354 204,416
Janus Capital Group, Inc. (b) 7,641 134,100
LaBranche & Co., Inc. (e)(b) 1,043 9,950
Legg Mason, Inc. 9,846 1,056,574
Lehman Brothers Holdings, Inc. 2,324 278,113
Merrill Lynch & Co., Inc. 14,594 944,816
Midcap SPDR Trust
Series 1 (b)(f) 2,692 343,230
Morgan Stanley 20,286 1,103,761
Raymond James Financial, Inc. 488 16,607
S&P 500 Index - SPDR Trust
Series 1 (b)(f) 5,994 720,778
SEI Investments Co. 1,670 64,796
State Street Corp. 5,923 327,127
SWS Group, Inc. 310 5,490
------------------
7,062,345
------------------
CHEMICALS (0.6%)
Airgas, Inc. 1,733 48,992
Arch Chemicals, Inc. 410 10,771
Cambrex Corp. 470 8,968
Chemtura Corp. 6,643 71,080
E.I. du Pont de Nemours & Co. 20,512 855,145
Eastman Chemical Co. 1,918 101,194
FMC Corp. (e) 3,925 213,677
Georgia Gulf Corp. 556 16,180
H.B. Fuller Co. 476 14,266
Headwaters, Inc. (e) 673 21,428
Lubrizol Corp. 3,292 136,914
Lyondell Chemical Co. 3,790 101,572
MacDermid, Inc. 464 12,992
Material Sciences Corp. (e) 253 3,846
Minerals Technologies, Inc. 527 28,173
Monsanto Co. 4,563 287,515
OM Group, Inc. (e) 477 7,622
Omnova Solutions, Inc. (e) 714 3,213
Penford Corp. 153 1,995
PolyOne Corp. (e) 1,525 8,799
PPG Industries, Inc. 87 5,217
Quaker Chemical Corp. 169 2,685
Schulman (A.), Inc. 539 11,001
Scotts Miracle-Gro Co. (The) Class A 1,014 89,019
Wellman, Inc. 289 1,890
------------------
2,064,154
------------------
</Table>
180 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)
- --------------------------------------------------------------------------------------
COMMERCIAL BANKS (1.8%)
Amegy Bancorp, Inc. 1,164 $ 26,923
Bank of Hawaii Corp. 4,686 240,767
BB&T Corp. (b) 13,817 585,012
Boston Private Financial Holdings, Inc. 455 13,172
Central Pacific Financial Corp. 510 18,411
Chittenden Corp. 777 22,354
Colonial BancGroup, Inc. (The) 1,315 32,020
Comerica, Inc. 7,136 412,318
Community Bank System, Inc. 514 12,207
Compass Bancshares, Inc. 3,080 150,181
East-West Bancorp, Inc. (b) 938 35,916
First Bancorp Puerto Rico 1,260 14,389
First Horizon National Corp. 2,112 81,692
First Midwest Bancorp, Inc. 729 27,717
First Republic Bank 399 15,126
FirstMerit Corp. 1,882 49,628
Gold Banc Corp., Inc. 672 9,959
Greater Bay Bancorp 2,473 62,048
Hibernia Corp. Class A 3,631 107,732
Hudson United Bancorp 734 30,439
Huntington
Bancshares, Inc. (b) 1,813 42,170
Irwin Financial Corp. 297 6,198
KeyCorp 13,833 445,976
Nara Bancorp, Inc. 390 7,032
National City Corp. (b) 29,874 962,839
PNC Financial Services Group, Inc. 2,402 145,825
PrivateBancorp, Inc. 292 9,919
Prosperity Bancshares, Inc. 100 3,049
Provident Bankshares Corp. 549 19,138
Regions Financial Corp. 3,974 129,354
Republic Bancorp, Inc. 1,172 15,998
South Financial
Group, Inc. (The) 1,197 33,001
Sterling Bancshares, Inc. 807 11,936
SunTrust Banks, Inc. 3,943 285,789
Susquehanna Bancshares, Inc. 776 17,918
SVB Financial Group (e) 1,231 61,193
TCF Financial Corp. 2,967 80,406
Trustco Bank Corp., NY 1,270 16,383
U.S. Bancorp (b) 14,582 431,336
UCBH Holdings, Inc. 1,532 26,657
Umpqua Holdings Corp. 745 19,817
United Bankshares, Inc. 638 23,287
</Table>
<Table>
<Caption>
SHARES VALUE
COMMERCIAL BANKS (CONTINUED)
Unizan Financial Corp. 3,636 $ 95,409
Wachovia Corp. 2,495 126,047
Wells Fargo & Co. 16,754 1,008,591
Whitney Holding Corp. 1,032 27,864
Wilmington Trust Corp. 4,802 182,044
Wintrust Financial Corp. 397 21,311
Zions Bancorporation 753 55,323
------------------
6,259,821
------------------
COMMERCIAL SERVICES & SUPPLIES (1.2%)
ABM Industries, Inc. 647 12,798
Administaff, Inc. 385 16,293
Allied Waste
Industries, Inc. (e)(b) 5,837 47,513
Angelica Corp. 158 2,242
Arbitron, Inc. 509 19,042
Bowne & Co., Inc. 616 8,760
Brady Corp. Class A 827 23,793
Brink's Co. (The) 4,615 181,231
Career Education Corp. (e) 9,480 337,393
CDI Corp. 262 7,223
Cendant Corp. 53,600 933,712
Central Parking Corp. 345 5,168
Chemed Corp. 408 19,617
Coinstar, Inc. (e)(b) 393 9,974
Consolidated
Graphics, Inc. (e) 199 7,759
Corinthian Colleges, Inc. (e) 2,047 25,465
Corporate Executive
Board Co. (The) 345 28,511
CPI Corp. 145 2,610
Dun & Bradstreet
Corp. (The) (e) 3,059 193,696
Equifax, Inc. 6,654 229,363
G&K Services, Inc. Class A 347 13,148
H&R Block, Inc. 8,286 205,990
Healthcare Services Group, Inc. 371 6,915
Heidrick & Struggles International, Inc. (e) 334 10,782
Herman Miller, Inc. 2,777 76,118
HNI Corp. 2,821 137,947
John H. Harland Co. 473 19,672
Labor Ready, Inc. (e) 860 20,081
Mobile Mini, Inc. (e) 261 12,183
NCO Group, Inc. (e) 530 9,524
On Assignment, Inc. (e) 450 3,829
Portfolio Recovery Associates, Inc. (e) 200 7,780
Pre-Paid Legal
Services, Inc. (b) 171 7,319
</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 181
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (CONTINUED)
R.R. Donnelley & Sons Co. 1,831 $ 64,122
Republic Services, Inc. 9,424 333,138
Robert Half International, Inc. 1,475 54,398
School Specialty, Inc. (e) 377 12,780
Sotheby's Holdings, Inc. Class A (e) 714 11,117
SOURCECORP, Inc. (e) 295 6,711
Spherion Corp. (e) 1,089 9,692
Standard Register Co. (The) 213 3,238
Stericycle, Inc. (e) 1,526 87,837
Tetra Tech, Inc. (e) 912 14,081
United Rentals, Inc. (e) 7,143 139,789
United Stationers, Inc. (e) 559 25,362
Vertrue, Inc. (e)(b) 176 6,626
Viad Corp. 377 10,861
Volt Information
Sciences, Inc. (e) 198 3,722
Waste Connections, Inc. (e) 768 25,628
Waste Management, Inc. 27,298 805,564
Watson Wyatt & Co. Holdings 701 18,576
------------------
4,276,693
------------------
COMMUNICATIONS EQUIPMENT (1.9%)
Adaptec, Inc. (e) 1,826 7,505
ADC Telecommunications, Inc. (e) 961 16,769
ADTRAN, Inc. 4,452 134,673
Audiovox Corp. Class A (e) 319 4,533
Bel Fuse, Inc. Class B 201 6,050
Belden CDT, Inc. (b) 780 15,545
Black Box Corp. 301 12,076
C-COR, Inc. (e) 665 3,544
Cisco Systems, Inc. (e) 169,134 2,951,388
CommScope, Inc. (e) 2,841 55,456
Comtech
Telecommunications Corp. (e) 325 12,467
Corning, Inc. (e) 71,516 1,436,756
Digi International, Inc. (e) 361 3,830
Ditech Communications Corp. (e) 541 3,446
Dycom Industries, Inc. (e) 1,413 28,161
Harmonic, Inc. (e) 1,242 5,726
Inter-Tel, Inc. 350 6,478
Motorola, Inc. 83,573 1,851,978
NETGEAR, Inc. (e) 548 10,713
Network Equipment Technologies, Inc. (e) 411 2,051
PC-Tel, Inc. (e) 363 3,358
Powerwave Technologies, Inc. (e)(b) 8,918 99,971
QUALCOMM, Inc. 316 12,564
</Table>
<Table>
<Caption>
SHARES VALUE
COMMUNICATIONS EQUIPMENT (CONTINUED)
Symmetricom, Inc. (e) 770 $ 6,137
Tollgrade Communications, Inc. (e) 243 2,357
ViaSat, Inc. (e) 376 9,321
------------------
6,702,853
------------------
COMPUTERS & PERIPHERALS (2.3%)
Apple Computer, Inc. (e) 15,904 915,911
Avid Technology, Inc. (e)(b) 659 32,443
Dell, Inc. (e) 26,342 839,783
Diebold, Inc. 1,832 66,208
Hewlett-Packard Co. 77,029 2,159,893
Hutchinson Technology, Inc. (e)(b) 434 10,763
Imation Corp. 3,075 131,641
V International Business Machines Corp. 40,249 3,295,588
Lexmark International, Inc. (e) 1,009 41,894
NCR Corp. (e) 3,186 96,281
SanDisk Corp. (e) 4,356 256,525
SBS Technologies, Inc. (e) 261 2,547
Sun Microsystems, Inc. (e) 55,173 220,692
Synaptics, Inc. (e)(b) 400 9,292
Western Digital Corp. (e) 13,126 158,825
------------------
8,238,286
------------------
CONSTRUCTION & ENGINEERING (0.1%)
EMCOR Group, Inc. (e) 274 16,714
Granite Construction, Inc. 1,422 48,504
Insituform Technologies, Inc.
Class A (e) 483 8,675
Quanta Services, Inc. (e) 12,946 148,750
Shaw Group, Inc. (The) (e) 1,272 34,090
URS Corp. (e) 684 27,654
------------------
284,387
------------------
CONSTRUCTION MATERIALS (0.2%)
AMCOL International Corp. 369 7,498
Florida Rock
Industries, Inc. (b) 791 45,008
Martin Marietta Materials, Inc. 5,678 448,051
Texas Industries, Inc. 356 17,658
Vulcan Materials Co. (b) 5,214 338,910
------------------
857,125
------------------
CONSUMER FINANCE (2.3%)
American Express Co. 41,656 2,073,219
AmeriCredit Corp. (e) 17,294 386,521
Capital One Financial Corp. 6,608 504,521
Cash America International, Inc. 472 10,318
V MBNA Corp. 207,953 5,317,358
MoneyGram International, Inc. 173 4,204
</Table>
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>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
CONSUMER FINANCE (CONTINUED)
Rewards Network, Inc. (e) 415 $ 2,237
World Acceptance Corp. (e) 300 8,442
------------------
8,306,820
------------------
CONTAINERS & PACKAGING (0.1%)
AptarGroup, Inc. 570 29,178
Caraustar Industries, Inc. (e) 510 4,452
Chesapeake Corp. 328 6,606
Longview Fibre Co. 3,989 74,993
Myers Industries, Inc. 605 6,909
Pactiv Corp. (e)(b) 7,458 146,923
Rock-Tenn Co. Class A 523 7,254
------------------
276,315
------------------
DISTRIBUTORS (0.0%)++
Adesa, Inc. 5,644 120,782
Genuine Parts Co. 1,075 47,698
------------------
168,480
------------------
DIVERSIFIED CONSUMER SERVICES (0.0%)++
Education Management Corp. (e) 582 17,949
------------------
DIVERSIFIED FINANCIAL SERVICES (1.4%)
CIT Group, Inc. 10,607 485,058
Citigroup, Inc. (i) 59,835 2,739,246
Financial Federal Corp. 291 11,110
GATX Corp. 6,090 227,583
JPMorgan Chase & Co. 25,549 935,604
Moody's Corp. 2,152 114,616
Piper Jaffray Cos., Inc. (e) 324 11,129
Principal Financial Group, Inc. 11,623 576,849
------------------
5,101,195
------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.8%)
V AT&T Corp. 163,338 3,230,826
CenturyTel, Inc. 5,556 181,848
Cincinnati Bell, Inc. (e) 29,868 118,277
Citizens Communications Co. (b) 8,528 104,383
Commonwealth Telephone Enterprises, Inc. 337 12,095
General Communication, Inc.
Class A (e) 785 7,544
Qwest Communications International, Inc. (e)(b) 39,877 173,864
Verizon Communications, Inc. 81,242 2,559,935
------------------
6,388,772
------------------
</Table>
<Table>
<Caption>
SHARES VALUE
ELECTRIC UTILITIES (2.6%)
Allegheny Energy, Inc. (e)(b) 6,653 $ 188,014
Alliant Energy Corp. 5,479 144,920
American Electric
Power Co., Inc. 19,758 750,014
Central Vermont Public Service Corp. 213 3,412
CH Energy Group, Inc. 262 12,196
Cinergy Corp. 29,594 1,180,801
Cleco Corp. 784 16,621
CMS Energy Corp. (e) 7,023 104,713
Consolidated
Edison, Inc. (b) 2,057 93,594
DPL, Inc. 5,155 132,844
DTE Energy Co. 1,480 63,936
Edison International 16,625 727,510
El Paso Electric Co. (e) 801 17,342
Entergy Corp. 7,419 524,672
FirstEnergy Corp. 9,776 464,360
Great Plains Energy, Inc. 1,724 49,496
Green Mountain Power Corp. 119 3,891
Northeast Utilities 2,912 52,969
Pepco Holdings, Inc. 12,801 275,093
Pinnacle West Capital Corp. 687 28,689
Public Service Enterprise Group, Inc. 39,589 2,489,752
Puget Energy, Inc. 3,092 66,292
SCANA Corp. 5,402 214,297
TXU Corp. 11,787 1,187,540
UIL Holdings Corp. 242 11,979
UniSource Energy Corp. 570 18,223
Wisconsin Energy Corp. 8,934 337,973
------------------
9,161,143
------------------
ELECTRICAL EQUIPMENT (0.1%)
A.O. Smith Corp. 338 10,944
Acuity Brands, Inc. 709 19,717
AMETEK, Inc. 1,819 74,088
Baldor Electric Co. 474 11,518
C&D Technologies, Inc. 467 4,264
Emerson Electric Co. 3,589 249,615
Intermagnetics General Corp. (e) 454 13,007
MagneTek, Inc. (e) 421 1,335
Regal-Beloit Corp. 466 14,833
Roper Industries, Inc. 1,398 52,705
Thomas & Betts Corp. (e) 216 8,407
Vicor Corp. 323 5,443
Woodward Governor Co. 182 14,542
------------------
480,418
------------------
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.6%)
Aeroflex, Inc. (e) 1,205 $ 10,917
Agilent Technologies, Inc. (e) 8,502 272,149
Agilysys, Inc. 484 7,231
Amphenol Corp. Class A 6,461 258,246
Anixter International, Inc. 540 20,023
Arrow Electronics, Inc. (e) 12,267 361,999
Artesyn Technologies, Inc. (e) 707 6,215
Avnet, Inc. (e) 16,473 379,703
Bell Microproducts, Inc. (e) 474 3,266
Benchmark Electronics, Inc. (e) 681 19,129
Checkpoint Systems, Inc. (e) 599 14,376
Cognex Corp. 735 21,006
Coherent, Inc. (e) 505 14,953
CTS Corp. 632 7,445
Daktronics, Inc. 300 6,483
Electro Scientific
Industries, Inc. (e) 509 11,183
FLIR Systems, Inc. (e) 1,124 23,559
Global Imaging
Systems, Inc. (e)(b) 392 13,959
Itron, Inc. (e) 374 16,254
Keithley Instruments, Inc. 271 4,350
Littelfuse, Inc. (e) 371 9,093
Methode Electronics, Inc. 651 6,679
MTS Systems Corp. 321 12,827
Park Electrochemical Corp. 361 9,061
Paxar Corp. (e) 660 11,332
PerkinElmer, Inc. 2,104 46,435
Photon Dynamics, Inc. (e) 295 5,136
Planar Systems, Inc. (e) 261 2,328
Plexus Corp. (e) 1,881 33,237
RadiSys Corp. (e) 326 5,239
Rogers Corp. (e) 295 11,018
Sanmina-SCI Corp. (e) 13,415 48,965
ScanSource, Inc. (e)(b) 222 12,574
Solectron Corp. (e)(b) 49,629 175,190
Symbol Technologies, Inc. 290 2,407
Tech Data Corp. (e) 1,323 45,829
Technitrol, Inc. 679 11,421
Thermo Electron Corp. (e)(b) 2,679 80,879
Trimble Navigation Ltd. (e) 900 25,983
Varian, Inc. (e) 2,167 79,681
X-Rite, Inc. 367 3,776
------------------
2,111,536
------------------
ENERGY EQUIPMENT & SERVICES (0.6%)
Atwood Oceanics, Inc. (e) 227 15,985
BJ Services Co. 2,804 97,439
Cal Dive International, Inc. (e)(b) 635 39,078
CARBO Ceramics, Inc. 312 18,458
</Table>
<Table>
<Caption>
SHARES VALUE
ENERGY EQUIPMENT & SERVICES (CONTINUED)
Cooper Cameron Corp. (e) 862 $ 63,555
Dril-Quip, Inc. (e) 123 5,031
ENSCO International, Inc. 2,549 116,209
Grant Prideco, Inc. (e) 2,491 96,875
Hanover Compressor Co. (e) 3,528 45,370
Helmerich & Payne, Inc. 6,305 349,297
Hydril (e) 354 23,484
Input/Output, Inc. (e)(b) 1,231 9,454
Lone Star Technologies, Inc. (e) 482 22,052
Maverick Tube Corp. (e) 716 22,167
Oceaneering International, Inc. (e) 442 21,269
Offshore Logistics, Inc. (e) 380 12,920
Patterson-UTI Energy, Inc. 9,289 317,034
Pride International, Inc. (e) 5,925 166,315
SEACOR Holdings, Inc. (e) 346 24,784
Smith International, Inc. 66 2,138
TETRA Technologies, Inc. (e) 592 16,558
Tidewater, Inc. 1,432 65,815
Transocean, Inc. (e) 10,337 594,274
Unit Corp. (e) 770 40,348
Veritas DGC, Inc. (e) 556 17,909
Weatherford International Ltd. (e)(b) 55 3,443
W-H Energy Services, Inc. (e) 498 15,089
------------------
2,222,350
------------------
FOOD & STAPLES RETAILING (0.6%)
Albertson's, Inc. (b) 16,869 423,581
Casey's General Stores, Inc. 842 18,170
Great Atlantic & Pacific
Tea Co. (The) (e) 285 8,006
Kroger Co. (The) (e) 26,312 523,609
Longs Drug Stores Corp. 448 18,686
Nash Finch Co. (b) 214 6,647
Performance Food
Group Co. (e)(b) 628 17,327
Safeway, Inc. (b) 18,966 441,149
SUPERVALU, Inc. 5,720 179,780
United Natural
Foods, Inc. (e) 656 18,440
Whole Foods
Market, Inc. (b) 2,170 312,762
------------------
1,968,157
------------------
FOOD PRODUCTS (0.6%)
American Italian Pasta Co. Class A 327 2,109
Archer-Daniels-Midland Co. 25,624 624,457
ConAgra Foods, Inc. 6,390 148,695
Corn Products International, Inc. 1,233 29,358
Dean Foods Co. (e) 15,373 555,734
</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>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
Delta & Pine Land Co. 650 $ 16,218
Flowers Foods, Inc. 908 26,604
General Mills, Inc. (b) 8,901 429,562
Hain Celestial Group, Inc. (e) 511 9,873
J&J Snack Foods Corp. 113 6,374
JM Smucker Co. (The) 486 22,215
Kellogg Co. 3,115 137,590
Lance, Inc. 532 9,326
McCormick & Co., Inc. 2,273 68,849
Peet's Coffee & Tea, Inc. (e) 175 5,822
Ralcorp Holdings, Inc. (e) 492 19,139
Sanderson Farms, Inc. 259 8,938
Sensient Technologies Corp. 2,977 52,663
TreeHouse Foods, Inc. (e)(b) 517 13,359
Tyson Foods, Inc. Class A 6,398 113,884
------------------
2,300,769
------------------
GAS UTILITIES (0.1%)
Atmos Energy Corp. 1,311 34,479
Cascade Natural Gas Corp. 199 4,099
Laclede Group, Inc. (The) 349 10,435
New Jersey Resources Corp. 459 19,810
Nicor, Inc. 2,233 87,534
Northwest Natural Gas Co. 470 16,262
Piedmont Natural
Gas Co., Inc. (b) 1,268 30,001
Southern Union Co. (e) 1,593 37,467
Southwest Gas Corp. 618 16,847
Southwestern Energy Co. (e) 1,377 99,888
UGI Corp. 1,701 40,144
WGL Holdings, Inc. 1,095 34,033
------------------
430,999
------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.7%)
Advanced Medical Optics, Inc. (e) 1,275 45,492
Advanced Neuromodulation Systems, Inc. (e) 325 19,822
American Medical Systems Holdings, Inc. (e) 1,163 19,015
Analogic Corp. 245 11,466
Applera Corp.-Applied BioSystems Group 2,145 52,059
ArthroCare Corp. (e) 377 13,847
Bausch & Lomb, Inc. 1,292 95,853
Baxter International, Inc. 17,978 687,299
Beckman Coulter, Inc. 1,913 94,234
BioLase Technology, Inc. (b) 406 2,712
BioSite, Inc. (e)(b) 283 15,630
CONMED Corp. (e) 480 11,510
</Table>
<Table>
<Caption>
SHARES VALUE
HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED)
Cooper Cos., Inc. (The) 724 $ 49,840
Cyberonics, Inc. (e)(b) 400 12,008
Cytyc Corp. (e)(b) 944 23,930
Datascope Corp. 206 6,545
Diagnostic Products Corp. 394 16,587
DJ Orthopedics, Inc. (e) 400 11,632
Edwards Lifesciences Corp. (e) 2,424 100,305
Greatbatch, Inc. (e) 387 10,085
Guidant Corp. 2,644 166,572
Haemonetics Corp. (e) 440 21,318
Hologic, Inc. (e) 362 20,077
Hospira, Inc. (e) 4,794 191,041
ICU Medical, Inc. (e) 247 8,623
IDEXX Laboratories, Inc. (e) 535 37,520
Immucor, Inc. (e) 744 19,284
Integra LifeSciences Holdings Corp. (e) 307 10,592
Intuitive Surgical, Inc. (e) 375 33,274
Invacare Corp. 529 17,875
Kensey Nash Corp. (e)(b) 191 4,380
Laserscope (e) 100 2,701
Mentor Corp. 630 28,350
Merit Medical Systems, Inc. (e) 439 5,233
Osteotech, Inc. (e) 306 1,040
PolyMedica Corp. 405 13,369
Possis Medical, Inc. (e) 325 3,855
Resmed, Inc. (e) 1,144 43,621
Respironics, Inc. (e) 1,174 42,111
STERIS Corp. 1,487 33,918
SurModics, Inc. (e)(b) 261 10,315
Sybron Dental Specialties, Inc. (e) 642 27,542
Theragenics Corp. (e) 535 1,610
Varian Medical Systems, Inc. (e) 10,284 468,539
Viasys Healthcare, Inc. (e) 549 13,116
Vital Signs, Inc. 95 4,463
------------------
2,530,210
------------------
HEALTH CARE PROVIDERS & SERVICES (3.8%)
Aetna, Inc. 14,840 1,314,230
Amedisys, Inc. (e)(b) 254 9,705
American Healthways, Inc. (e) 544 22,065
AMERIGROUP Corp. (e) 839 14,028
AmerisourceBergen Corp. 5,348 407,892
AmSurg Corp. (e) 484 11,495
Apria Healthcare Group, Inc. (e) 5,212 120,241
Cardinal Health, Inc. 21,869 1,367,031
Caremark Rx, Inc. (e) 18,919 991,356
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
Centene Corp. (e) 700 $ 14,105
Cerner Corp. (e)(b) 508 42,901
CIGNA Corp. 6,634 768,682
Community Health Systems, Inc. (e) 8,419 312,429
Coventry Health Care, Inc. (e) 7,429 401,092
Cross Country Healthcare, Inc. (e) 443 8,049
Cryolife, Inc. (e)(b) 472 3,077
Dendrite International, Inc. (e) 739 12,969
Gentiva Health Services, Inc. (e) 412 6,052
HCA, Inc. (b) 21,885 1,054,638
Health Net, Inc. (e) 12,300 576,132
Hooper Holmes, Inc. 1,184 3,422
Humana, Inc. (e) 6,892 305,936
LabOne, Inc. (e) 300 13,161
LCA-Vision, Inc. 345 14,493
LifePoint Hospitals, Inc. (e) 2,650 103,615
Lincare Holdings, Inc. (e) 8,666 354,006
Manor Care, Inc. 1,360 50,660
McKesson Corp. 14,526 659,916
Medco Health Solutions, Inc. (e) 7,047 398,156
NDC Health Corp. 591 11,134
Odyssey HealthCare, Inc. (e) 656 11,336
Omnicare, Inc. 3,058 165,438
Owens & Minor, Inc. 668 19,673
PacifiCare Health Systems, Inc. (e) 5,041 415,177
PAREXEL International Corp. (e) 469 10,262
Patterson Cos., Inc. (e) 3,356 138,871
Pediatrix Medical Group, Inc. (e) 384 29,591
Pharmaceutical Product Development, Inc. 867 49,826
RehabCare Group, Inc. (e) 294 6,259
Renal Care Group, Inc. (e) 1,581 74,070
SFBC International, Inc. (e)(b) 282 12,024
Sierra Health Services, Inc. (e) 438 32,850
Sunrise Senior Living, Inc. (e)(b) 598 19,339
Tenet Healthcare Corp. (e) 3,988 33,579
Triad Hospitals, Inc. (e) 6,030 248,014
United Surgical Partners International, Inc. (e) 700 25,095
</Table>
<Table>
<Caption>
SHARES VALUE
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
UnitedHealth Group, Inc. 40,755 $ 2,359,307
Universal Health Services, Inc. Class B (b) 7,007 330,310
------------------
13,353,689
------------------
HOTELS, RESTAURANTS & LEISURE (0.8%)
Applebees International, Inc. 2,056 45,047
Aztar Corp. (e) 585 17,591
Bally Total Fitness
Holding Corp. (e) 621 3,558
Boyd Gaming Corp. 558 23,018
Brinker International, Inc. (e)(b) 10,792 411,391
CBRL Group, Inc. 5,785 200,740
CEC Entertainment, Inc. (e) 576 19,475
Darden Restaurants, Inc. 7,257 235,272
GTECH Holdings Corp. 13,004 414,047
Harrah's Entertainment, Inc. 1,536 92,897
Hilton Hotels Corp. 12,640 245,848
IHOP Corp. 320 15,110
Jack in the Box, Inc. (e) 614 18,236
Landry's Restaurants, Inc. 294 8,085
LoneStar Steakhouse & Saloon, Inc. 328 8,466
Marcus Corp. 362 7,950
Marriott International, Inc. Class A 1,487 88,655
Multimedia Games, Inc. (e)(b) 500 4,960
O'Charley's, Inc. (e) 380 5,210
P.F. Chang's China Bistro, Inc. (e)(b) 434 19,851
Panera Bread Co. Class A (e)(b) 503 29,773
Papa John's International, Inc. (e) 204 10,594
Pinnacle Entertainment, Inc. (e) 603 11,427
RARE Hospitality International, Inc. (e) 564 17,236
Red Robin Gourmet Burgers, Inc. (e)(b) 241 11,623
Ruby Tuesday, Inc. (b) 6,707 146,950
Ryan's Restaurant Group, Inc. (e) 693 7,387
Shuffle Master, Inc. (e)(b) 586 14,861
Sonic Corp. (e) 988 28,593
Steak N Shake Co. (The) (e) 494 9,099
Triarc Cos., Inc. Class B 923 13,725
Wendy's International, Inc. 2,908 135,862
WMS Industries, Inc. (e)(b) 383 9,625
Yum! Brands, Inc. 7,323 372,521
------------------
2,704,683
------------------
</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>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.5%)
American Greetings Corp. Class A (b) 8,380 $ 211,595
Applica, Inc. (e) 423 706
Bassett Furniture Industries, Inc. 207 3,875
Black & Decker Corp. (The) 628 51,578
Champion Enterprises, Inc. (e) 1,188 16,489
D.R. Horton, Inc. 738 22,649
Department 56, Inc. (e) 234 2,551
Ethan Allen Interiors, Inc. 573 19,379
Fedders Corp. 530 1,219
Fleetwood Enterprises, Inc. (e) 950 10,498
Fortune Brands, Inc. 605 45,962
Furniture Brands International, Inc. (b) 3,829 69,496
Interface, Inc. Class A (e) 937 7,234
La-Z-Boy, Inc. (b) 910 10,774
Lennar Corp. Class A 2,454 136,393
Libbey, Inc. 248 2,790
M.D.C. Holdings, Inc. 544 37,318
M/I Homes, Inc. 209 9,384
Maytag Corp. 3,724 64,127
Meritage Homes Corp. (e) 390 24,285
National Presto Industries, Inc. 95 4,164
Newell Rubbermaid, Inc. 14,026 322,458
NVR, Inc. (e)(b) 92 63,066
Russ Berrie & Co., Inc. 284 3,831
Ryland Group, Inc. 1,780 119,794
Skyline Corp. 153 6,082
Standard Pacific Corp. 1,112 42,901
Toll Brothers, Inc. (e)(b) 6,312 232,976
Toro Co. (The) 707 25,813
Tupperware Corp. 3,672 84,199
Whirlpool Corp. (b) 565 44,353
------------------
1,697,939
------------------
HOUSEHOLD PRODUCTS (1.3%)
Church & Dwight Co., Inc. 1,496 52,435
Clorox Co. (The) 6,515 352,592
Colgate-Palmolive Co. 446 23,620
Energizer Holdings, Inc. (e) 6,294 317,784
Kimberly-Clark Corp. 23,563 1,339,321
Procter & Gamble Co. (The) 45,634 2,555,048
Spectrum Brands, Inc. (e) 623 12,896
WD-40 Co. 304 8,369
------------------
4,662,065
------------------
</Table>
<Table>
<Caption>
SHARES VALUE
INDUSTRIAL CONGLOMERATES (1.5%)
ALLETE, Inc. 497 $ 21,873
V General Electric Co. (i) 151,145 5,125,327
Standex International Corp. 219 5,917
Teleflex, Inc. 1,767 116,958
Textron, Inc. 2,252 162,234
Tredegar Corp. 467 5,880
------------------
5,438,189
------------------
INSURANCE (4.6%)
ACE Ltd. 14,590 760,139
AFLAC, Inc. 25,510 1,218,868
Allmerica Financial Corp. (e) 2,110 80,391
American Financial Group, Inc. 2,587 88,424
American International Group, Inc. 31,906 2,067,509
AmerUs Group Co. 4,805 284,072
Aon Corp. 16,213 548,810
Arthur J. Gallagher & Co. (b) 2,059 60,576
Brown & Brown, Inc. (b) 1,440 78,235
Chubb Corp. (The) 8,258 767,746
Delphi Financial Group, Inc. Class A 476 22,296
Everest Re Group Ltd. 5,434 540,411
Fidelity National Financial, Inc. 6,880 257,725
Fidelity National Title Group, Inc. Class A (e) 946 20,576
First American Corp. (b) 3,814 167,129
Hartford Financial Services Group, Inc. (The) (b) 3,758 299,701
HCC Insurance Holdings, Inc. 11,016 330,480
Hilb, Rogal & Hobbs Co. 565 21,159
Horace Mann Educators Corp. 2,988 57,997
Infinity Property & Casualty Corp. 352 13,101
LandAmerica Financial Group, Inc. 302 19,074
Loews Corp. 2,334 217,015
MBIA, Inc. (b) 2,280 132,787
MetLife, Inc. 36,898 1,823,130
Old Republic International Corp. 5,009 129,783
Philadelphia Consolidated Holding Corp. (e) 309 29,744
Presidential Life Corp. 430 8,136
ProAssurance Corp. (e) 500 23,400
Progressive Corp. (The) 10,126 1,172,692
Protective Life Corp. 8,563 375,402
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
INSURANCE (CONTINUED)
Prudential Financial, Inc. 21,913 $ 1,595,047
RLI Corp. 334 17,953
SAFECO Corp. 3,804 211,883
SCPIE Holdings, Inc. (e) 237 3,579
Selective Insurance Group, Inc. (b) 463 25,423
St. Paul Travelers Cos., Inc. (The) 34,366 1,547,501
Stewart Information Services Corp. 301 15,330
Torchmark Corp. 877 46,332
UICI 586 21,166
United Fire & Casualty Co. (b) 100 4,502
UnumProvident Corp. (b) 14,984 304,025
W.R. Berkley Corp. 9,716 424,589
XL Capital Ltd. Class A 7,151 458,093
Zenith National Insurance Corp. 547 24,626
------------------
16,316,557
------------------
INTERNET & CATALOG RETAIL (0.0%)++
Insight Enterprises, Inc. (e) 844 17,319
J. Jill Group, Inc. (The) (e) 350 4,445
------------------
21,764
------------------
INTERNET SOFTWARE & SERVICES (0.0%)++
Digital Insight Corp. (e) 600 17,898
Internet Security Systems, Inc. (e) 656 16,157
j2 Global Communications, Inc. (e)(b) 378 16,711
MIVA, Inc. (e) 500 2,785
WebEx Communications, Inc. (e)(b) 647 14,823
Websense, Inc. (e) 375 22,155
Zix Corp. (e)(b) 497 914
------------------
91,443
------------------
IT SERVICES (0.8%)
Acxiom Corp. 10,335 220,549
BISYS Group, Inc. (The) (e) 5,570 70,628
CACI International, Inc. (e) 491 26,779
Carreker Corp. (e) 421 2,311
Ceridian Corp. (e) 5,054 110,733
CIBER, Inc. (e) 1,015 6,476
Cognizant Technology Solutions Corp. Class A (e) 4,332 190,521
Computer Sciences Corp. (e) 9,465 485,081
CSG Systems International, Inc. (e) 5,723 134,548
</Table>
<Table>
<Caption>
SHARES VALUE
IT SERVICES (CONTINUED)
DST Systems, Inc. (e) 3,496 $ 196,196
eFunds Corp. (e) 767 15,823
First Data Corp. (b) 29,101 1,177,135
Fiserv, Inc. (e) 1,636 71,460
Gevity HR, Inc. 100 2,574
Global Payments, Inc. 1,104 47,306
Intrado, Inc. (e) 270 5,222
iPayment Holdings, Inc. (e) 200 7,192
Keane, Inc. (e) 1,223 13,820
Mantech International Corp. Class A (e) 298 8,255
MAXIMUS, Inc. 320 11,600
Pegasus Solutions, Inc. (e) 370 3,138
Sabre Holdings Corp. Class A 4,423 86,381
StarTek, Inc. 260 3,307
Unisys Corp. (e) 2,360 12,060
------------------
2,909,095
------------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Action Performance Cos., Inc. 327 4,009
Arctic Cat, Inc. 267 5,001
Brunswick Corp. 809 30,847
Eastman Kodak Co. (b) 4,893 107,157
Harley-Davidson, Inc. (b) 5,051 250,176
Hasbro, Inc. 2,927 55,145
JAKKS Pacific, Inc. (e) 449 8,253
K2, Inc. (e) 776 7,783
MarineMax, Inc. (e) 100 2,470
Meade Instruments Corp. (e) 477 1,259
Nautilus Group, Inc. 519 9,409
Polaris Industries, Inc. (b) 698 31,473
SCP Pool Corp. 861 30,970
Sturm, Ruger & Co., Inc. 492 3,606
------------------
547,558
------------------
MACHINERY (0.5%)
A.S.V., Inc. (e)(b) 297 6,932
Albany International Corp. Class A 510 19,701
Astec Industries, Inc. (e) 290 8,224
Barnes Group, Inc. 290 10,150
Briggs & Stratton Corp. 852 27,247
Ceradyne, Inc. (e)(b) 382 14,974
CLARCOR, Inc. 864 23,760
Cummins, Inc. (b) 758 64,710
Deere & Co. (b) 2,097 127,246
Dionex Corp. (e) 354 17,144
Eaton Corp. 1,255 73,832
EnPro Industries, Inc. (e) 343 9,570
Federal Signal Corp. 1,134 18,393
</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)
- --------------------------------------------------------------------------------------
MACHINERY (CONTINUED)
Gardner Denver, Inc. (e) 412 $ 20,023
Harsco Corp. 3,001 192,814
IDEX Corp. 838 33,537
Illinois Tool Works, Inc. (b) 2,475 209,781
Ingersoll-Rand Co. Class A 3,615 136,611
JLG Industries, Inc. 856 32,836
Joy Global, Inc. 1,392 63,851
Kaydon Corp. 470 13,889
Kennametal, Inc. 886 45,283
Lindsay Manufacturing Co. 205 4,213
Lydall, Inc. (e) 290 2,598
Manitowoc Co. 497 26,445
Milacron, Inc. (e) 814 1,042
Mueller Industries, Inc. 575 15,836
Navistar International Corp. (e) 538 14,806
Nordson Corp. 1,123 41,742
Oshkosh Truck Corp. 1,220 53,143
Parker-Hannifin Corp. 2,020 126,614
Reliance Steel & Aluminum Co. 465 26,514
Robbins & Myers, Inc. 263 5,678
SPX Corp. (b) 3,964 170,531
Stewart & Stevenson Services, Inc. 522 12,455
Valmont Industries, Inc. 275 8,957
Wabash National Corp. 488 8,984
Watts Water Technologies, Inc. Class A 426 11,826
Wolverine Tube, Inc. (e) 296 1,888
------------------
1,703,780
------------------
MARINE (0.1%)
Alexander & Baldwin, Inc. 3,604 176,380
Kirby Corp. (e) 409 21,133
------------------
197,513
------------------
MEDIA (1.0%)
4Kids Entertainment, Inc. (e) 236 4,026
Advo, Inc. 511 12,622
Catalina Marketing Corp. 2,796 72,864
Clear Channel Communications, Inc. 9,333 283,910
Comcast Corp. Class A (e)(b) 1,199 33,368
Emmis Communications Corp. Class A (e)(b) 3,196 62,546
Gannett Co., Inc. 8,010 501,907
Knight-Ridder, Inc. (b) 577 30,800
Media General, Inc. Class A 944 49,796
</Table>
<Table>
<Caption>
SHARES VALUE
MEDIA (CONTINUED)
Readers Digest Association, Inc. (The) 7,908 $ 121,151
Thomas Nelson, Inc. 257 5,502
Time Warner, Inc. 14,721 262,475
Viacom, Inc. Class B 62,215 1,926,799
Walt Disney Co. (The) 5,196 126,627
------------------
3,494,393
------------------
METALS & MINING (0.4%)
A.M. Castle & Co. (e) 266 5,301
Alaska Air Group, Inc. (e) 2,991 94,306
Aleris International, Inc. (e) 480 12,461
Brush Engineered Materials, Inc. (e) 296 4,464
Carpenter Technology Corp. 366 22,070
Century Aluminum Co. (e) 383 6,963
Chaparral Steel Co. (e) 356 8,893
Cleveland-Cliffs, Inc. (b) 364 29,681
Commercial Metals Co. 993 31,567
Freeport-McMoRan Copper & Gold, Inc. Class B 9,119 450,661
Massey Energy Co. 1,259 50,448
Nucor Corp. 1,356 81,157
Phelps Dodge Corp. 4,939 595,001
Quanex Corp. (b) 396 22,932
RTI International Metals, Inc. (e) 372 12,469
Ryerson Tull, Inc. (b) 444 8,964
Steel Dynamics, Inc. (b) 1,330 41,190
Steel Technologies, Inc. 175 4,587
United States Steel Corp. 2,871 104,878
------------------
1,587,993
------------------
MULTILINE RETAIL (1.0%)
Dillard's, Inc. Class A 2,355 48,772
Dollar Tree Stores, Inc. (e) 11,581 249,686
Federated Department Stores, Inc. 11,184 686,362
Fred's, Inc. 656 9,774
J.C. Penney Co., Inc. 8,960 458,752
Nordstrom, Inc. 12,175 421,864
Saks, Inc. (e) 9,186 166,726
Sears Holdings Corp. (e)(b) 2,868 344,877
Shopko Stores, Inc. (e) 532 15,252
Target Corp. 23,882 1,329,989
------------------
3,732,054
------------------
MULTI-UTILITIES (0.1%)
Centerpoint Energy, Inc. (b) 7,585 100,425
NiSource, Inc. 3,902 92,282
PNM Resources, Inc. 3,298 83,604
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
MULTI-UTILITIES (CONTINUED)
TECO Energy, Inc. 3,368 $ 58,266
Vectren Corp. 1,981 53,784
------------------
388,361
------------------
MULTI-UTILITIES & UNREGULATED POWER (1.0%)
AES Corp. (The) (e) 24,875 395,264
Avista Corp. 815 14,279
Constellation Energy Group, Inc. 1,503 82,364
El Paso Corp. 3,006 35,651
Energen Corp. 1,202 45,195
Energy East Corp. 5,901 140,739
Equitable Resources, Inc. (b) 8,232 318,167
MDU Resources Group, Inc. 11,477 378,397
National Fuel Gas Co. 4,026 121,344
Omnicom Group, Inc. (b) 3,110 258,006
ONEOK, Inc. 2,271 65,269
PG&E Corp. 18,845 685,581
Questar Corp. 6,445 507,544
Sierra Pacific Resources (e) 16,639 215,475
Westar Energy, Inc. 1,847 40,819
Williams Cos., Inc. (The) 19,164 427,357
------------------
3,731,451
------------------
OFFICE ELECTRONICS (0.1%)
Gerber Scientific, Inc. (e) 396 3,132
Xerox Corp. (e) 16,184 219,617
------------------
222,749
------------------
OIL & GAS (5.9%)
Amerada Hess Corp. 3,534 442,103
Anadarko Petroleum Corp. 8,058 730,941
Burlington Resources, Inc. 18,959 1,369,219
Cabot Oil & Gas Corp. 802 36,724
Chevron Corp. 16,977 968,877
Cimarex Energy Co. (e) 1,378 54,100
ConocoPhillips 42,511 2,779,369
Devon Energy Corp. 23,134 1,396,831
EOG Resources, Inc. (b) 1,884 127,698
V ExxonMobil Corp. (i) 92,474 5,191,490
Forest Oil Corp. (e) 4,565 199,399
Frontier Oil Corp. 899 33,155
Kerr-McGee Corp. 5,122 435,575
Marathon Oil Corp. 18,340 1,103,334
Newfield Exploration Co. (e) 12,009 544,368
Noble Energy, Inc. 8,000 320,400
Occidental Petroleum Corp. 20,146 1,589,116
Overseas Shipholding Group, Inc. 1,850 88,060
Peabody Energy Corp. 2,997 234,246
</Table>
<Table>
<Caption>
SHARES VALUE
OIL & GAS (CONTINUED)
Penn Virginia Corp. 311 $ 16,906
Petroleum Development Corp. (e) 274 9,201
Pioneer Natural Resources Co. 9,364 468,668
Plains Exploration & Production Co. (e) 6,271 244,569
Pogo Producing Co. (b) 5,906 298,253
Remington Oil & Gas Corp. (e) 421 14,735
Spinnaker Exploration Co. (e) 442 27,218
St. Mary Land & Exploration Co. 939 31,935
Stone Energy Corp. (e) 443 20,334
Sunoco, Inc. 7,011 522,320
Swift Energy Co. (e) 501 21,874
Valero Energy Corp. 13,461 1,416,636
Vintage Petroleum, Inc. 922 47,843
Western Gas Resources, Inc. 1,496 64,777
World Fuel Services Corp. 375 11,963
XTO Energy, Inc. 42 1,825
------------------
20,864,062
------------------
PAPER & FOREST PRODUCTS (0.2%)
Buckeye Technologies, Inc. (e) 676 5,070
Deltic Timber Corp. 217 9,982
Georgia-Pacific Corp. 11,005 357,993
Louisiana-Pacific Corp. 1,867 46,544
MeadWestvaco Corp. 6,452 169,171
Neenah Paper, Inc. 242 7,030
Pope & Talbot, Inc. 280 2,447
Potlatch Corp. 3,286 146,983
Schweitzer-Mauduit International, Inc. 270 6,539
Wausau Paper Corp. 866 9,483
Weyerhaeuser Co. 1,101 69,737
------------------
830,979
------------------
PERSONAL PRODUCTS (0.0%)++
Nature's Sunshine Products, Inc. 238 4,605
NBTY, Inc. (e) 1,003 20,070
USANA Health Sciences, Inc. (e) 171 7,527
------------------
32,202
------------------
PHARMACEUTICALS (2.5%)
Abbott Laboratories 564 24,280
Allergan, Inc. 1,695 151,364
Alpharma, Inc. Class A 698 17,373
Barr Pharmaceuticals, Inc. (e) 2,506 143,970
Bradley Pharmaceuticals, Inc. (e)(b) 276 3,323
</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)
- --------------------------------------------------------------------------------------
PHARMACEUTICALS (CONTINUED)
Connetics Corp. (e) 572 $ 7,459
Eli Lilly & Co. (b) 6,422 319,751
Forest Laboratories, Inc. (e) 14,462 548,254
IVAX Corp. (e)(b) 3,982 113,686
Johnson & Johnson 30,780 1,927,444
King Pharmaceuticals, Inc. (e) 6,173 95,249
Medicis Pharmaceutical Corp. Class A (b) 873 25,754
Merck & Co., Inc. 63,946 1,804,556
MGI Pharma, Inc. (e) 1,203 22,568
Mylan Laboratories, Inc. 695 13,351
Noven Pharmaceuticals, Inc. (e) 386 5,439
V Pfizer, Inc. (i) 167,871 3,649,516
Watson Pharmaceuticals, Inc. (e) 2,720 94,003
------------------
8,967,340
------------------
ROAD & RAIL (0.5%)
Arkansas Best Corp. 415 16,085
Burlington Northern Santa Fe Corp. 6,350 394,081
CSX Corp. 7,244 331,848
Heartland Express, Inc. 756 14,931
JB Hunt Transport Services, Inc. 3,190 61,918
Kansas City Southern (e)(b) 1,344 29,783
Knight Transportation, Inc. 639 17,387
Landstar System, Inc. 979 37,711
Norfolk Southern Corp. 13,720 551,544
Old Dominion Freight Line, Inc. (e) 310 10,971
Swift Transportation Co., Inc. (e) 3,832 69,934
Union Pacific Corp. 2,214 153,165
Yellow Roadway Corp. (e) 1,769 80,401
------------------
1,769,759
------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.3%)
Actel Corp. (e) 456 6,361
Advanced Energy Industries, Inc. (e) 590 6,343
Advanced Micro Devices, Inc. (e) 7,824 181,673
Atmel Corp. (e) 11,018 27,104
ATMI, Inc. (e) 609 16,632
Axcelis Technologies, Inc. (e) 1,660 7,221
Brooks Automation, Inc. (e)(b) 1,287 15,076
Cohu, Inc. 388 8,986
Cymer, Inc. (e)(b) 605 21,084
DSP Group, Inc. (e) 450 11,061
ESS Technology, Inc. (e) 707 2,043
</Table>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED)
Exar Corp. (e) 587 $ 7,390
Fairchild Semiconductor International, Inc. (e) 9,260 142,604
FEI Co. (e) 418 7,900
Freescale Semiconductor, Inc. Class B (e) 20,544 490,591
Integrated Device Technology, Inc. (e) 2,485 24,552
V Intel Corp. 147,609 3,468,812
Kopin Corp. (e) 1,270 7,176
Kulicke & Soffa Industries, Inc. (e) 914 5,731
Lam Research Corp. (e) 11,858 400,089
Lattice Semiconductor Corp. (e) 1,979 8,668
LSI Logic Corp. (e) 13,206 107,101
MEMC Electronic Materials, Inc. (e) 5,358 96,123
Micron Technology, Inc. (e) 31,209 405,405
Microsemi Corp. (e) 1,052 24,375
National Semiconductor Corp. 17,761 401,931
NVIDIA Corp. (e)(b) 4,099 137,521
Pericom Semiconductor Corp. (e) 469 3,724
Photronics, Inc. (e) 693 12,474
Power Integrations, Inc. (e) 541 11,421
RF Micro Devices, Inc. (e) 4,229 22,160
Rudolph Technologies, Inc. (e) 299 3,642
Skyworks Solutions, Inc. (e) 2,531 13,566
Standard Microsystems Corp. (e) 307 8,679
Supertex, Inc. (e) 227 8,317
Texas Instruments, Inc. 66,011 1,884,614
Ultratech, Inc. (e) 418 5,760
Varian Semiconductor
Equipment Associates, Inc. (e) 624 23,600
Veeco Instruments, Inc. (e) 535 8,501
------------------
8,046,011
------------------
SOFTWARE (2.1%)
Activision, Inc. (e) 15,839 249,775
Advent Software, Inc. (e) 414 12,718
Altiris, Inc. (e) 430 7,267
ANSYS, Inc. (e) 502 18,705
Autodesk, Inc. 10,672 481,627
BMC Software, Inc. (e)(b) 11,152 218,468
Cadence Design Systems, Inc. (e)(b) 19,651 314,023
Captaris, Inc. (e) 546 1,966
Catapult Communications Corp. (e) 230 4,207
Citrix Systems, Inc. (e) 2,834 78,133
Compuware Corp. (e) 12,815 103,673
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------
SOFTWARE (CONTINUED)
EPIQ Systems, Inc. (e) 214 $ 4,077
FactSet Research Systems, Inc. 562 19,709
Fair Isaac Corp. 2,824 117,930
FileNet Corp. (e) 667 18,776
Hyperion Solutions Corp. (e)(b) 651 31,482
Intuit, Inc. (e) 6,210 285,225
JDA Software Group, Inc. (e) 522 8,441
Kronos, Inc. (e)(b) 516 23,664
Macromedia, Inc. (e) 3,319 145,770
Manhattan Associates, Inc. (e) 501 11,127
MapInfo Corp. (e) 275 3,380
McAfee, Inc. (e) 14,074 422,642
Mercury Interactive Corp. (e) 714 24,840
MICROS Systems, Inc. (e) 634 29,113
V Microsoft Corp. (i) 148,071 3,805,425
MRO Software, Inc. (e) 448 7,338
Napster, Inc. (e) 563 2,038
Novell, Inc. (e) 9,731 74,150
Parametric Technology Corp. (e) 4,285 27,895
Phoenix Technologies Ltd. (e) 434 2,578
Progress Software Corp. (e) 632 19,680
Radiant Systems, Inc. (e) 495 5,623
Reynolds & Reynolds Co. (The) Class A 440 11,678
Secure Computing Corp. (e) 100 1,198
SERENA Software, Inc. (e) 483 10,573
Siebel Systems, Inc. 1,423 14,728
Sonic Solutions, Inc. (e) 394 7,541
SPSS, Inc. (e) 316 7,205
SS&C Technologies, Inc. 288 10,322
Sybase, Inc. (e) 9,527 211,976
Synopsys, Inc. (e) 17,823 337,746
Take-Two Interactive Software, Inc. (e)(b) 1,143 23,603
TALX Corp. 370 14,626
THQ, Inc. (e) 979 22,693
Transaction Systems Architects, Inc. Class A (e) 765 20,663
Verity, Inc. (e) 683 6,796
------------------
7,282,813
------------------
SPECIALTY RETAIL (2.1%)
Aaron Rents, Inc. 746 14,696
Abercrombie & Fitch Co. Class A 7,352 382,230
Advance Auto Parts, Inc. (e) 7,766 291,225
Aeropostale, Inc. (e) 3,146 61,473
</Table>
<Table>
<Caption>
SHARES VALUE
SPECIALTY RETAIL (CONTINUED)
American Eagle Outfitters, Inc. 5,147 $ 121,212
AnnTaylor Stores Corp. (e) 2,295 55,700
AutoNation, Inc. (e) 1,533 30,476
AutoZone, Inc. (e) 2,622 212,120
Barnes & Noble, Inc. 7,466 269,971
Best Buy Co., Inc. 2,240 99,142
Borders Group, Inc. 8,228 161,516
Building Material Holding Corp. 238 20,232
Burlington Coat Factory Warehouse Corp. 278 10,720
Cato Corp. (The) Class A 556 11,109
Chico's FAS, Inc. (e) 7,193 284,411
Children's Place Retail Stores, Inc. (The) (e) 350 15,026
Christopher & Banks Corp. 607 8,116
Circuit City Stores, Inc. 3,014 53,619
Claire's Stores, Inc. 846 22,038
Cost Plus, Inc. (e) 391 6,006
Dress Barn, Inc. (e) 437 11,611
Finish Line, Inc. (The) Class A 774 12,105
GameStop Corp. Class A (e)(b) 351 12,453
Gap, Inc. (The) 9,972 172,316
Genesco, Inc. (e) 397 14,610
Goody's Family Clothing, Inc. 442 4,199
Group 1 Automotive, Inc. (e) 413 11,415
Guitar Center, Inc. (e) 415 21,626
Gymboree Corp. (The) (e) 538 9,523
Hancock Fabrics, Inc. (b) 337 2,191
Haverty Furniture Cos., Inc. 401 4,908
Hibbett Sporting Goods, Inc. (e) 615 16,131
Home Depot, Inc. (The) 30,380 1,246,795
Hot Topic, Inc. (e)(b) 803 11,957
Jo-Ann Stores, Inc. (e) 387 5,654
Jos. A. Bank Clothiers, Inc. (e)(b) 100 4,081
Limited Brands, Inc. 9,274 185,573
Linens 'n Things, Inc. (e) 751 18,880
Men's Wearhouse, Inc. (The) (e) 843 20,822
Michaels Stores, Inc. 9,111 301,392
Movie Gallery, Inc. 499 3,473
Office Depot, Inc. (e) 13,362 367,856
OfficeMax, Inc. 1,222 34,240
O'Reilly Automotive, Inc. (e) 5,063 142,777
Pacific Sunwear of California, Inc. (e)(b) 7,299 182,621
Payless ShoeSource, Inc. (e) 8,358 153,536
</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)
- --------------------------------------------------------------------------------------
SPECIALTY RETAIL (CONTINUED)
PEP Boys-Manny, Moe & Jack 919 $ 12,682
PETsMART, Inc. 3,727 87,585
RadioShack Corp. 2,277 50,322
Rent-A-Center, Inc. (e) 6,579 118,554
Ross Stores, Inc. 3,028 81,877
Select Comfort Corp. (e) 600 13,140
Sonic Automotive, Inc. 497 10,989
Stage Stores, Inc. 450 12,474
Staples, Inc. 11,551 262,554
Stein Mart, Inc. 449 8,239
TBC Corp. (e) 397 13,732
TJX Cos., Inc. (The) 7,982 171,852
Too, Inc. (e) 543 15,427
Tractor Supply Co. (e) 558 27,063
Urban Outfitters, Inc. (e)(b) 2,866 81,194
Wal-Mart Stores, Inc. (i) 25,193 1,191,881
Zale Corp. (e) 815 22,844
------------------
7,286,192
------------------
TEXTILES, APPAREL & LUXURY GOODS (0.2%)
Ashworth, Inc. (e) 312 2,193
Brown Shoe Co., Inc. 326 10,585
Coach, Inc. (e) 9,540 306,997
Fossil, Inc. (e) 822 12,873
Haggar Corp. 92 2,622
Jones Apparel Group, Inc. 1,932 52,705
Kellwood Co. 448 9,816
K-Swiss, Inc. Class A 434 13,215
Oxford Industries, Inc. 270 13,298
Phillips-Van Heusen Corp. 619 17,611
Polo Ralph Lauren Corp. 514 25,289
Quiksilver, Inc. (e) 1,900 21,907
Reebok International Ltd. 437 24,931
Russell Corp. 593 8,023
Stride Rite Corp. 591 7,695
Timberland Co. Class A (e) 474 13,343
Wolverine World Wide, Inc. 901 18,876
------------------
561,979
------------------
THRIFTS & MORTGAGE FINANCE (1.0%)
Anchor Bancorp Wisconsin, Inc. 315 9,973
BankAtlantic Bancorp, Inc. Class A 753 10,459
BankUnited Financial Corp. Class A 499 11,836
Brookline Bancorp, Inc. 984 13,825
Commercial Federal Corp. 661 22,606
Countrywide Financial Corp. 14,906 473,564
</Table>
<Table>
<Caption>
SHARES VALUE
THRIFTS & MORTGAGE FINANCE (CONTINUED)
Dime Community Bancshares 468 $ 6,739
Downey Financial Corp. 351 21,393
Fannie Mae 18,030 856,786
FirstFed Financial Corp. (e) 273 14,603
Flagstar Bancorp, Inc. 585 7,851
Freddie Mac 2,751 168,774
Fremont General Corp. 1,098 23,816
Independence Community Bank Corp. (b) 7,653 302,676
IndyMac Bancorp, Inc. 527 19,673
MAF Bancorp, Inc. 503 20,895
PMI Group, Inc. (The) 781 31,146
Radian Group, Inc. 4,555 237,316
Sterling Financial Corp. 565 14,148
Washington Mutual, Inc. 29,522 1,169,071
------------------
3,437,150
------------------
TOBACCO (0.7%)
Alliance One International, Inc. 1,433 3,568
Altria Group, Inc. 28,829 2,163,616
UST, Inc. 4,207 174,128
------------------
2,341,312
------------------
TRADING COMPANIES & DISTRIBUTORS (0.0%)++
Applied Industrial Technologies, Inc. 457 15,058
Hughes Supply, Inc. 1,090 36,461
Lawson Products 120 4,098
Watsco, Inc. 429 24,380
------------------
79,997
------------------
WATER UTILITIES (0.0%)++
American States Water Co. 278 8,713
------------------
WIRELESS TELECOMMUNICATION SERVICES (0.4%)
Sprint Nextel Corp. 55,531 1,294,428
Telephone & Data Systems, Inc. 3,252 122,991
------------------
1,417,419
------------------
Total Common Stocks
(Cost $172,666,112) 215,043,354(m)
------------------
REAL ESTATE INVESTMENT TRUSTS (1.2%)
- --------------------------------------------------------------------------------------
Acadia Realty Trust 859 16,321
Affordable Residential Communities (b) 513 5,125
Alexandria Real Estate Equities, Inc. 256 20,698
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
- --------------------------------------------------------------------------------------
AMB Property Corp. 1,090 $ 48,156
American Financial Realty Trust 1,446 17,800
American First Apartment Investors, Inc. 129 1,752
American Land Lease, Inc. 111 2,641
Amli Residential Properties Trust 332 12,566
Apartment Investment & Management Co. Class A 2,810 107,904
Arch Coal, Inc. (b) 4,785 368,780
Archstone-Smith Trust 2,636 106,943
Arden Realty, Inc. 864 39,001
Ashford Hospitality Trust, Inc. 326 3,423
Associated Estates Realty Corp. 305 2,782
Avalonbay Communities, Inc. (b) 967 83,404
Bedford Property Investors Inc. 216 4,849
Boston Properties, Inc. 1,392 96,354
Boykin Lodging Co. (e) 273 3,011
Brandywine Realty Trust 702 19,235
BRE Properties, Inc. Class A 661 29,157
Camden Property Trust 709 39,952
Capital Automotive 1,248 48,198
CarrAmerica Realty Corp. 717 23,611
CBL & Associates Properties, Inc. (b) 810 30,254
Cedar Shopping Centers, Inc. 257 3,603
Centerpoint Properties Trust (b) 616 28,065
Colonial Properties Trust 1,290 56,386
Commercial Net Lease Realty, Inc. 1,519 29,438
Corporate Office Properties Trust 460 15,990
Correctional Properties Trust 173 4,861
Cousins Properties, Inc. 646 19,083
Crescent Real Estate Equities Co. 1,311 26,154
Developers Diversified Realty Corp. 1,398 61,065
Duke Realty Corp. 1,909 65,097
EastGroup Properties, Inc. 652 28,492
Entertainment Properties Trust 745 29,875
Equity Inns, Inc. 638 8,320
Equity Lifestyle Properties, Inc. 302 12,784
</Table>
<Table>
<Caption>
SHARES VALUE
Equity Office Properties Trust 5,384 $ 165,827
Equity One, Inc. 732 17,165
Equity Residential (b) 3,764 147,737
Essex Property Trust, Inc. 680 61,118
Federal Realty Investment Trust 680 41,242
FelCor Lodging Trust, Inc. (e) 784 11,697
First Industrial Realty Trust, Inc. 541 21,981
First Potomac Realty Trust 187 4,739
General Growth Properties, Inc. 3,044 129,309
Getty Realty Corp. 326 8,884
Glenborough Realty Trust, Inc. 1,043 19,953
Glimcher Realty Trust 468 10,750
Government Properties Trust, Inc. 265 2,406
Health Care Property Investors, Inc. 1,788 45,505
Health Care, Inc. (b) 677 23,857
Healthcare Realty Trust, Inc. 618 23,385
Heritage Property Investment Trust 469 15,289
Hersha Hospitality Trust 200 1,960
Highland Hospitality Corp. 527 5,539
Highwoods Properties, Inc. 1,057 29,818
Home Properties, Inc. 440 17,094
Hospitality Properties Trust 861 34,182
Host Marriott Corp. (b) 4,469 75,035
HRPT Properties Trust 2,669 29,119
Innkeepers USA Trust 492 7,675
Investors Real Estate Trust 562 5,243
Kilroy Realty Corp. 848 47,615
Kimco Realty Corp. 2,560 75,827
LaSalle Hotel Properties 386 13,661
Lexington Corporate Properties Trust 1,463 31,864
Liberty Property Trust 1,117 46,568
Macerich Co. (The) 1,882 120,956
Mack-Cali Realty Corp. 799 34,077
Maguire Properties, Inc. 562 16,860
Mid-America Apartment Communities, Inc. 282 13,155
Mills Corp. (The) 708 37,878
Mission West Properties Inc. 282 2,882
Monmouth Real Estate Investment Corp. Class A 229 1,878
National Health Realty, Inc. 127 2,427
</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
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
- --------------------------------------------------------------------------------------
Nationwide Health Properties, Inc. 852 $ 19,758
New Century Financial Corp. (b) 946 29,203
New Plan Excel Realty Trust 1,321 30,370
OMEGA Healthcare Investors, Inc. 650 7,989
One Liberty Properties, Inc. 139 2,606
Pan Pacific Retail Properties, Inc. 489 31,052
Parkway Properties, Inc. 399 18,757
Pennsylvania Real Estate Investment Trust 472 18,172
Post Properties, Inc. 525 21,420
Prentiss Properties Trust 587 23,163
ProLogis 3,264 140,352
PS Business Parks, Inc. 288 13,404
Public Storage, Inc. (b) 3,050 201,910
Ramco-Gershenson Properties Trust 228 6,325
Rayonier, Inc. 1,144 43,735
Realty Income Corp. 1,044 23,250
Reckson Associates
Realty Corp. 1,038 36,434
Regency Centers Corp. 898 49,992
Saul Centers, Inc. 212 7,420
Senior Housing Properties Trust 837 14,823
Shurgard Storage Centers, Inc.
Class A 1,371 77,366
Simon Property Group, Inc. (b) 2,856 204,547
Sizeler Property Investors, Inc. 207 2,405
SL Green Realty Corp. 546 37,144
Sovran Self Storage, Inc. 457 21,264
Sun Communities, Inc. 252 7,681
Tanger Factory Outlet Centers, Inc. 334 8,981
Taubman Centers, Inc. 656 21,628
Town & Country Trust (b) 258 7,637
Trizec Properties, Inc. 1,625 36,156
Trustreet Properties, Inc. 312 4,689
United Dominion Realty Trust, Inc. (b) 1,785 39,502
United Mobile Homes, Inc. 127 1,943
Universal Health Realty Income Trust 150 4,883
Urstadt Biddle
Properties, Inc. Class A 292 4,841
Ventas, Inc. 1,107 33,907
Vornado Realty Trust 1,535 124,335
</Table>
<Table>
<Caption>
SHARES VALUE
Washington Real Estate Investment Trust 551 $ 16,447
Weingarten Realty Investors 1,129 40,147
Windrose Medical Properties Trust 131 1,985
Winston Hotels, Inc. 410 4,227
------------------
Total Real Estate Investment Trusts
(Cost $2,845,793) 4,365,137(m)
------------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (18.2%)
- --------------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.4%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (g)(h) $ 1,548,833 1,548,833
------------------
Total Certificate of Deposit
(Cost $1,548,833) 1,548,833
------------------
COMMERCIAL PAPER (8.4%)
American Honda Finance Corp.
3.74%, due 11/2/05 (i) 6,600,000 6,599,314
3.88%, due 11/16/05 (i) 1,000,000 998,383
Countrywide Financial Corp.
4.06%, due 11/1/05 (i) 740,000 740,000
Dealers Capital Access
3.83%, due 11/4/05 (i) 2,700,000 2,699,138
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (g) 516,277 516,277
Golden Peanut Co. LLC
3.80%, due 11/10/05 (i) 1,200,000 1,198,861
4.02%, due 12/20/05 (i) 4,700,000 4,674,283
Intesa Funding LLC
3.78%, due 11/3/05 (i) 10,400,000 10,397,816
3.98%, due 11/23/05 (i) 2,000,000 1,995,136
------------------
Total Commercial Paper
(Cost $29,819,208) 29,819,208
------------------
<Caption>
SHARES
INVESTMENT COMPANY (2.2%)
BGI Institutional Money Market Fund (g) 7,730,704 7,730,704
------------------
Total Investment Company
(Cost $7,730,704) 7,730,704
------------------
</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 OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (4.8%)
Bank of the West (The)
4.02%, due 12/8/05 (g) $ 2,065,111 $ 2,065,111
Barclays
3.92%, due 12/5/05 (g) 1,032,555 1,032,555
3.94%, due 11/28/05 (g) 1,548,833 1,548,833
Credit Suisse First Boston Corp.
3.74%, due 11/1/05 (g) 1,548,833 1,548,833
Deutsche Bank
3.95%, due 12/2/05 (g) 1,032,555 1,032,555
First Tennessee National Corp.
3.88%, due 11/14/05 (g) 1,548,833 1,548,833
Fortis Bank
4.00%, due 12/12/05 (g) 1,548,833 1,548,833
HBOS Halifax Bank of Scotland
3.75%, due 11/1/05 (g) 1,548,833 1,548,833
Marshall & Ilsley Bank
3.97%, due 12/29/05 (g) 1,032,555 1,032,555
Societe Generale
3.77%, due 11/1/05 (g) 1,548,833 1,548,833
UBS AG
4.01%, due 12/13/05 (g) 1,032,555 1,032,555
Wells Fargo & Co.
4.00%, due 11/25/05 (g) 1,548,833 1,548,833
------------------
Total Time Deposits
(Cost $17,037,162) 17,037,162
------------------
U.S. GOVERNMENT (2.4%)
United States Treasury Bills
3.57%, due 2/9/06 (i) 3,210,000 3,169,950
3.598%, due 2/9/06 (i) 850,000 841,505
3.63%, due 2/16/06 (i) 3,200,000 3,166,080
3.642%, due 2/9/06 (i) 240,000 237,572
3.682%, due 2/9/06 (i) 100,000 98,977
3.711%, due 2/9/06 (i) 100,000 98,969
3.746%, due 2/9/06 (i) 1,000,000 989,594
------------------
Total U.S. Government
(Cost $8,602,647) 8,602,647
------------------
Total Short-Term Investments
(Cost $64,738,554) 64,738,554
------------------
Total Investments
(Cost $337,315,957) (j) 107.0% 379,935,527(k)
Liabilities in Excess of
Cash and Other Assets (7.0) (24,925,981)
------------- ------------------
Net Assets 100.0% $ 355,009,546
============= ==================
</Table>
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (L)
FUTURES CONTRACTS (-0.1%)
- -----------------------------------------------------------------------------
IBEX 35 Index
November 2005 47 $ 23,939
Milan MIB 30 Index
December 2005 26 (259,291)
Standard & Poor's Toronto Stock Exchange 60
Index
December 2005 61 (226,297)
United States Treasury Note
December 2005 (10 Year) 118 (357,547)
-------------------
Total Futures Contracts Long
(Settlement Value $29,129,463) (819,196)
-------------------
<Caption>
CONTRACTS
SHORT
Standard & Poor's 500 Index
December 2005 23 127,375
Standard & Poor's MidCap 400 Index
December 2005 41 311,025
-------------------
Total Futures Contracts Short
(Settlement Value $21,367,850) 438,400
-------------------
Total Futures Contracts
(Settlement Value $7,761,613) (m)(n) $ (380,796)
===================
</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>
++ Less than one tenth of a percent.
(a) May be sold to institutional investors only.
(b) Represents security, or a portion thereof, which is out
on loan.
(c) TBA: Securities purchased on a forward commitment basis
with an approximate principal amount and maturity date.
The actual principal amount and the maturity will be
determined upon settlement. The market value of these
securities at October 31, 2005 is $1,288,781.
(d) Yankee Bond--dollar-denominated bond issued in the
United States by a foreign bank or corporation.
(e) Non-income producing security.
(f) Exchange Traded Fund--represents a basket of securities
that are traded on an exchange.
(g) Represents security, or a portion thereof, purchased
with cash collateral received for securities on loan.
(h) Floating rate. Rate shown is the rate in effect at
October 31, 2005.
(i) Segregated, partially segregated or designated as
collateral for futures contracts and TBAs.
(j) The cost for federal income tax purposes is
$340,617,333.
(k) At October 31, 2005 net unrealized appreciation was
$39,318,194, 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 $46,546,881 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $7,228,687.
(l) Represents the difference between the value of the
contracts at the time they were opened and the value at
October 31, 2005.
(m) The combined market value of common stocks and
settlement value of Standard & Poor's 500 Index futures
contracts represents 64.0% of net assets.
(n) The combined market value of U.S. Government & Federal
Agencies investments and settlement value of U.S.
Treasury Note futures contracts represents 22.8% of 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 197
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $337,315,957) including
$26,049,444 market value of securities
loaned $379,935,527
Cash denominated in foreign currencies
(identified cost $2,105,858) 2,091,112
Cash 175,990
Receivables:
Investment securities sold 4,062,950
Dividends and interest 1,104,935
Fund shares sold 361,592
Other assets 28,585
-------------
Total assets 387,760,691
-------------
LIABILITIES:
Securities lending collateral 26,832,976
Payables:
Investment securities purchased 3,083,893
Variation margin on futures contracts 2,134,876
Manager 257,207
Transfer agent 179,693
Fund shares redeemed 75,928
Professional 53,830
NYLIFE Distributors 49,902
Custodian 22,513
Accrued expenses 60,327
-------------
Total liabilities 32,751,145
-------------
Net assets $355,009,546
=============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1
billion shares authorized:
Class A $ 5,528
Class B 2,630
Class C 452
Class I 17,743
Additional paid-in capital 344,682,850
Accumulated undistributed net investment
income 5,618,339
Accumulated net realized loss on investments,
futures contracts and foreign currency
transactions (37,561,831)
Net unrealized appreciation on investments and
futures contracts 42,238,774
Net unrealized appreciation on foreign
currency transactions 5,061
-------------
Net assets $355,009,546
=============
CLASS A
Net assets applicable to outstanding shares $ 74,168,559
=============
Shares of capital stock outstanding 5,527,815
=============
Net asset value per share outstanding $ 13.42
Maximum sales charge (5.50% of offering price) 0.78
-------------
Maximum offering price per share outstanding $ 14.20
=============
CLASS B
Net assets applicable to outstanding shares $ 34,755,344
=============
Shares of capital stock outstanding 2,630,100
=============
Net asset value and offering price per share
outstanding $ 13.21
=============
CLASS C
Net assets applicable to outstanding shares $ 5,976,138
=============
Shares of capital stock outstanding 452,070
=============
Net asset value and offering price per share
outstanding $ 13.22
=============
CLASS I
Net assets applicable to outstanding shares $240,109,505
=============
Shares of capital stock outstanding 17,742,904
=============
Net asset value and offering price per share
outstanding $ 13.53
=============
</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.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 4,951,781
Dividends (a) 4,116,209
Income from securities loaned--net 44,593
------------
Total income 9,112,583
------------
EXPENSES:
Manager 2,239,424
Transfer agent--Classes A, B and C 280,322
Transfer agent--Class I 418,452
Distribution--Class B 222,617
Distribution--Class C 35,524
Distribution/Service--Class A 169,620
Service--Class B 74,206
Service--Class C 11,841
Custodian 114,020
Professional 109,248
Registration 58,076
Shareholder communication 50,588
Directors 29,102
Miscellaneous 115,344
------------
Total expenses before reimbursement 3,928,384
Expense reimbursement from Manager (288,200)
------------
Net expenses 3,640,184
------------
Net investment income 5,472,399
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Security transactions 20,271,800
Futures transactions 637,326
Foreign currency transactions 100,816
------------
Net realized gain on investments and foreign
currency transactions 21,009,942
------------
Net change in unrealized appreciation
(depreciation) on investments:
Security transactions (1,000,779)
Futures transactions (766,887)
Translation of other assets and liabilities
in foreign currencies and foreign currency
forwards contracts 27,705
------------
Net change in unrealized depreciation on
investments and foreign currency transactions (1,739,961)
------------
Net realized and unrealized gain on investments
and foreign currency transactions 19,269,981
------------
Net increase in net assets resulting from
operations $24,742,380
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $34.
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
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 5,472,399 $ 4,675,300
Net realized gain on investment,
futures transactions and foreign
currency transactions 21,009,942 25,456,712
Net change in unrealized
appreciation (depreciation) on
investments, futures contracts
and foreign currency transactions (1,739,961) (5,846,554)
----------------------------
Net increase in net assets
resulting from operations 24,742,380 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 27,147,132 62,346,988
Class B 16,869,238 20,384,771
Class C 3,844,235 3,296,544
Class I 30,813,805 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 $ 836,197 $ --
Class B 257,606 --
Class C 37,036 757
Class I 3,485,389 5,295,326
Service Class -- 634,600
----------------------------
83,290,638 127,857,644
Cost of shares redeemed:
Class A (13,295,310) (8,381,903)
Class B (3,885,353) (655,422)
Class C (1,352,258) (189,336)
Class I (43,142,283) (83,823,084)
Service Class -- (38,107,319)
----------------------------
(61,675,204) (131,157,064)
Increase (decrease) in net
assets derived from capital
share transactions 21,615,434 (3,299,420)
----------------------------
Net increase in net assets 41,652,937 14,983,209
NET ASSETS:
Beginning of year 313,356,609 298,373,400
----------------------------
End of year $355,009,546 $ 313,356,609
============================
Accumulated undistributed net
investment income at end of year $ 5,618,339 $ 4,700,715
============================
</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.
This page intentionally left blank
www.MAINSTAYfunds.com 201
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B CLASS C
---------------------------- ---------------------------- --------------
JANUARY 2, JANUARY 2,
YEAR 2004* YEAR 2004* YEAR
ENDED THROUGH ENDED THROUGH ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
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 0.18(e)(g) 0.12 0.08(e)(g) 0.04 0.08(e)(g)
Net realized and unrealized
gain on investments 0.76 0.38 0.74 0.38 0.75
Net realized and unrealized
gain (loss) on foreign
currency transactions 0.00(a) 0.00(a) 0.00(a) 0.00(a) 0.00(a)
----------- ----------- ----------- ----------- -----------
Total from investment
operations 0.94 0.50 0.82 0.42 0.83
----------- ----------- ----------- ----------- -----------
Less dividends:
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 $ 13.42 $ 12.67 $ 13.21 $ 12.54 $13.22
=========== =========== =========== =========== ===========
Total investment return (b) 7.46% 4.11%(c) 6.60% 3.47%(c) 6.68%
Ratios (to average net assets)/
Supplemental Data:
Net investment income 1.40%(g) 1.40%+ 0.65%(g) 0.65%+ 0.65%(g)
Net expenses 1.23% 1.02%+ 1.98% 1.77%+ 1.98%
Expenses (before
reimbursement) 1.31% 1.23%+ 2.06% 1.98%+ 2.06%
Portfolio turnover rate 100%(f) 89% 100%(f) 89% 100%(f)
Net assets at end of period (in
000's) $74,169 $55,796 $34,755 $20,087 $5,976
<Caption>
CLASS C
-----------------------------
DECEMBER 30,
YEAR 2002*
ENDED THROUGH
OCTOBER 31, OCTOBER 31,
2004 2003
Net asset value at beginning of
period $11.86 $10.64
----------- ------------
Net investment income 0.11 0.06(e)
Net realized and unrealized
gain on investments 0.76 1.16
Net realized and unrealized
gain (loss) on foreign
currency transactions 0.00(a) (0.00)(a)
----------- ------------
Total from investment
operations 0.87 1.22
----------- ------------
Less dividends:
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 $11.86
=========== ============
Total investment return (b) 7.39% 11.47%(c)
Ratios (to average net assets)/
Supplemental Data:
Net investment income 0.65% 0.65%+
Net expenses 1.77% 1.83%+
Expenses (before
reimbursement) 1.98% 2.06%+
Portfolio turnover rate 89% 113%
Net assets at end of period (in
000's) $3,218 $ 46
</Table>
<Table>
* Commencement of operations.
+ 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 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.
</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 based on average shares outstanding during the period.
(f) The portfolio turnover rate not including mortgage dollar rolls for the year ending
October 31, 2005 is 76%.
(g) Net investment income and the ratio of net investment income includes $0.02 per share and
0.12%, respectively as a result of a special one time dividend from Microsoft Corp.
</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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
- ---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
2005 2004 2003 2002 2001
$ 12.74 $ 11.99 $ 10.81 $ 12.11 $ 15.21
-------- -------- -------- -------- --------
0.24(e)(g) 0.22 0.18 (e) 0.22 0.37 (d)
0.74 0.78 1.22 (1.25) (2.09)(d)
(a)
0.00 0.00(a) (0.00)(a) (0.00)(a) (0.00)(a)
-------- -------- -------- -------- --------
0.98 1.00 1.40 (1.03) (1.72)
-------- -------- -------- -------- --------
(0.19) (0.25) (0.22) (0.27) (0.50)
-- -- -- -- (0.88)
-------- -------- -------- -------- --------
(0.19) (0.25) (0.22) (0.27) (1.38)
-------- -------- -------- -------- --------
$ 13.53 $ 12.74 $ 11.99 $ 10.81 $ 12.11
======== ======== ======== ======== ========
7.76% 8.43% 13.17% (8.78%) (12.12%)
1.75%(g) 1.59% 1.65% 1.84% 2.66%(d)
0.88% 0.83% 0.83% 0.83% 0.83%
0.96% 1.04% 1.06% 0.94% 0.87%
100%(f) 89% 113% 4% 15%
$240,110 $234,256 $262,438 $399,199 $452,246
</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
MAINSTAY BALANCED FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 2.96% 7.42% 8.76%
Excluding sales charges 8.96 8.64 9.38
</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
------------- ------------- ------------- --------- ------------
10/31/95 9450 10000 10000 10000 10000
10463 10574 12410 11485 11965
13065 11378 16394 14026 15408
14060 12424 20000 15107 16095
14067 12537 25134 15707 18851
15302 13354 26665 17277 23323
16108 15256 20024 18129 19121
16418 16163 16999 18320 17586
19673 17000 20535 22305 23897
21256 17717 22470 25287 27502
10/31/05 23159 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 3.19% 7.56% 8.58%
Excluding sales charges 8.19 7.85 8.58
</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
------------- ------------- ------------- --------- ------------
10/31/95 10000 10000 10000 10000 10000
10989 10574 12410 11485 11965
13620 11378 16394 14026 15408
14555 12424 20000 15107 16095
14455 12537 25134 15707 18851
15609 13354 26665 17277 23323
16304 15256 20024 18129 19121
16493 16163 16999 18320 17586
19618 17000 20535 22305 23897
21056 17717 22470 25287 27502
10/31/05 22780 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
With sales charges 7.15% 7.85% 8.59%
Excluding sales charges 8.15 7.85 8.59
</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
------------- ------------- ------------- --------- ------------
10/31/95 10000 10000 10000 10000 10000
10990 10574 12410 11485 11965
13625 11378 16394 14026 15408
14562 12424 20000 15107 16095
14461 12537 25134 15707 18851
15618 13354 26665 17277 23323
16314 15256 20024 18129 19121
16500 16163 16999 18320 17586
19640 17000 20535 22305 23897
21073 17717 22470 25287 27502
10/31/05 22790 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</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 maxi-
mum 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 5.00% 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.
204 MainStay Balanced Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
9.46% 8.99% 9.68%
</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
------------- ------------- ------------- --------- ------------
10/31/95 10000 10000 10000 10000 10000
11099 10574 12410 11485 11965
13892 11378 16394 14026 15408
14988 12424 20000 15107 16095
15029 12537 25134 15707 18851
16391 13354 26665 17277 23323
17296 15256 20024 18129 19121
17673 16163 16999 18320 17586
21230 17000 20535 22305 23897
23024 17717 22470 25287 27502
10/31/05 25203 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</Table>
CLASS R1 SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
9.33% 8.87% 9.57%
</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
------------- ------------- ------------- --------- ------------
10/31/95 10000 10000 10000 10000 10000
11088 10574 12410 11485 11965
13864 11378 16394 14026 15408
14943 12424 20000 15107 16095
14967 12537 25134 15707 18851
16306 13354 26665 17277 23323
17189 15256 20024 18129 19121
17546 16163 16999 18320 17586
21056 17000 20535 22305 23897
22813 17717 22470 25287 27502
10/31/05 24941 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</Table>
CLASS R2 SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL ONE FIVE TEN
TOTAL RETURNS YEAR YEARS YEARS
- ---------------------------------------------
9.05% 8.59% 9.30%
</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
------------- ------------- ------------- --------- ------------
10/31/95 10000 10000 10000 10000 10000
11062 10574 12410 11485 11965
13800 11378 16394 14026 15408
14836 12424 20000 15107 16095
14820 12537 25134 15707 18851
16113 13354 26665 17277 23323
16945 15256 20024 18129 19121
17253 16163 16999 18320 17586
20654 17000 20535 22305 23897
22311 17717 22470 25287 27502
10/31/05 24331 17782 24429 28145 32476
<Caption>
LIPPER
BALANCED FUND
INDEX
-------------
10/31/95 10000
11450
13769
15251
17165
18519
16899
15611
18141
19629
10/31/05 21036
</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 fee waivers and/or expense
limitations are contractual and may be modified or terminated only with the
approval of the Board of Directors/Trustees. 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 to a 1.00% sales charge and a 1.00% CDSC on redemptions within one
year of purchase. From inception through 12/29/02, performance for Class L
shares
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.
www.MAINSTAYfunds.com 205
<Table>
<Caption>
ONE FIVE TEN
BENCHMARK PERFORMANCE YEAR YEARS YEARS
Balanced Composite Index(1) 11.30% 10.25% 10.90%
Merrill Lynch Corporate & Government 1-10 Years Bond
Index(2) 0.36 5.89 5.92
Russell Midcap Index(3) 18.09 6.85 12.50
S&P 500(R) Index(4) 8.72 -1.74 9.34
Lipper Balanced Fund Index(5) 7.16 2.58 7.72
Average Lipper balanced fund(6) 6.81 1.80 7.28
</Table>
(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 & 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
that all income and capital gains are reinvested in the index or indices that
produce them. 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.
206 MainStay Balanced Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,044.50 $ 6.80 $1,018.40 $ 6.72
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,041.25 $10.65 $1,014.65 $10.51
- --------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,041.25 $10.65 $1,014.65 $10.51
- --------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,047.30 $ 4.44 $1,020.70 $ 4.38
- --------------------------------------------------------------------------------------------------------------------------
CLASS R1 SHARES $1,000.00 $1,047.30 $ 4.95 $1,020.20 $ 4.89
- --------------------------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,045.75 $ 6.24 $1,018.95 $ 6.16
- --------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.32% for Class A, 2.07% for Class B and Class C, 0.86% for Class I, 0.96%
for Class R1, and 1.21% for Class R2) multiplied by the average account value
over the period, divided by 365, multiplied by 184 (to reflect the one-half
year period).
www.MAINSTAYfunds.com 207
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
Common Stocks 59.1
Corporate Bonds 38.0
Short-Term Investments (collateral from securities lending 5.9
is 5.9%)
U.S. Government & Federal Agencies 1.2
Investment Company 0.5
Convertible Preferred Stock 0.0*
Convertible Bond 0.0*
Preferrred Stock 0.0*
Warrant 0.0*
Liabilities in Excess of Cash and Other Assets (4.7)
</Table>
* Less than one tenth of a percent.
See Portfolio of Investments on page 211 for specific holdings within these
categories.
TOP TEN HOLDINGS AS OF OCTOBER 31, 2005 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. ExxonMobil Corp.
2. Merrill Lynch & Co., Inc.
3. Citigroup, Inc.
4. Morgan Stanley
5. Merck & Co., Inc.
6. Wal-Mart Stores, Inc. 6.875%, due 8/10/09
7. Prudential Financial, Inc.
8. Lehman Brothers Holdings, Inc.
9. Freddie Mac
10. Viacom, Inc. Class B
</Table>
208 MainStay Balanced Fund
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. The Fund will
always invest at least 25% of its assets in fixed-income securities. 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-
and large-capitalization stocks that the manager determines to have strong or
improving operating characteristics and to have been overlooked by the
marketplace so that they are undervalued or "underpriced." The Fund uses
quantitative and statistical methods to analyze the relative quality and value
of stocks. The Fund selects fixed-income securities based on their credit
quality and duration. The fixed-income portion of the portfolio has an
intermediate-term duration, which ranges from three to five years and a laddered
maturity schedule.
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 12 MONTHS
ENDED OCTOBER 31, 2005?
For the 12 months ended October 31, 2005, all broadly watched equity indices
provided positive performance. Mid- and small-capitalization stocks generally
outperformed their large-cap counterparts. The market favored value stocks over
growth stocks at all capitalization levels. Despite wide fluctuations in
crude-oil prices, instability in many regions of the world, and the devastation
caused by hurricanes Katrina and Rita, the U.S. stock market posted significant
gains during the 12 months ended October 31, 2005.
The Federal Open Market Committee continued to raise its target for the federal
funds rate, with eight 25-basis-point increases during the reporting period. (A
basis point is one-hundredth of a percentage point.) At the end of October 2005,
the federal funds target rate stood at 3.75%, its highest level in more than
four years. Among the considerations that influenced the gradual tightening
policy were mounting inflationary pressures, low unemployment, an upward path of
record energy prices, and growing labor costs.
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All share classes of MainStay Balanced Fund underperformed the Fund's Balanced
Composite Index during the 12 months ended October 31, 2005.(1) The stock
portion on the Fund underperformed the Russell Midcap(R) Value Index, which is
the stock component of the Balanced Composite Index. In particular, the
performance of the Fund's holdings in the financials and consumer discretionary
sectors was weaker than the performance of related stocks in the Russell
Midcap(R) Value Index during the reporting period.
The fixed-income portion of the Fund slightly lagged the return of the Merrill
Lynch Corporate & Government 1-10 Years Bond Index(2) for the 12-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 sectors were
energy, financials, utilities, consumer staples, and industrials. Among the
strongest individual contributors to the Fund's performance were petroleum
refiners Premcor, Sunoco, and Valero Energy. Oil & gas companies Burlington
Resources and Amerada Hess were also strong contributors.
WHICH INDUSTRY GROUPS AND INDIVIDUAL STOCKS DETRACTED FROM PERFORMANCE IN THE
EQUITY PORTION OF THE FUND?
The Fund's five weakest-performing sectors during the 12-month reporting period
were telecommunication services, materials, information technology, consumer
discretionary, and health care. The greatest negative individual contribution to
the Fund's per-
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 Funds 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 206 for more information about the Fund's Balanced
Composite Index.
2. See footnote on page 206 for more information about the Merrill Lynch
Corporate & Government 1-10 Years Bond Index.
www.MAINSTAYfunds.com 209
formance came from steel manufacturer Steel Dynamics. The second-largest
negative contribution to performance came from steel and metal products firm
Commercial Metals, followed by real estate investment trust Annaly Mortgage
Management, engine, electric power, and engine-related product company Cummins,
and pharmaceutical company Pfizer.
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 Anadarko Petroleum, an
oil & gas exploration & production company. The Fund initially purchased the
stock in November 2004. We established a position in Lehman Brothers Holdings,
an investment banking, capital markets, and investment management company, in
June 2005. The Fund also established a position in Janus Capital Group, an
investment advisory company, in May 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 February 2005, the Fund sold its entire
position in St. Paul Travelers, a commercial property and casualty insurance
company. According to our proprietary quantitative model, the stock had become
overvalued. In July 2005, the Fund sold managed care and health insurance
company Pacificare Health Systems for a similar reason. In June and July 2005,
the Fund also sold its entire position in petroleum refiner Premcor because of a
pending merger with Valero Energy.
HOW DID THE EQUITY PORTION OF THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING
PERIOD?
The Fund's equity weighting in the financials sector increased substantially
during the 12-month reporting period. The Fund's equity weighting in the
information technology sector, on the other hand, decreased substantially from
the beginning of the reporting period to the end of October 2005.
HOW DID THE FUND'S EQUITY WEIGHTINGS COMPARE WITH THOSE IN THE RUSSELL MIDCAP(R)
VALUE INDEX AT THE END OF THE REPORTING PERIOD?
As of October 31, 2005, the equity portion of the Fund was overweighted relative
to the Russell Midcap(R) Value Index in the financials, energy, and consumer
discretionary sectors. As of the same date, the equity portion of the Fund was
underweighted relative to the Russell Midcap(R) Value Index in the information
technology and utilities sectors.
WERE THERE ANY SIGNIFICANT CHANGES IN THE FIXED-INCOME PORTION OF THE FUND
DURING THE REPORTING PERIOD?
There were no significant or strategic purchases or sales for the fixed-income
portion of the Fund's portfolio during the reporting period. The fixed-income
portion of MainStay Balanced Fund selects short- to intermediate-term bonds from
among investment-grade corporate, government mortgage-backed, and asset-backed
securities. We employ bottom-up credit analysis and maintain a laddered maturity
schedule and a controlled duration of three to five years.
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.
INFORMATION ABOUT MAINSTAY BALANCED FUND ON THIS PAGE AND THE PRECEDING PAGES
HAS NOT BEEN AUDITED.
210 MainStay Balanced Fund
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS (39.2%)+
CONVERTIBLE BOND (0.0%)++
- --------------------------------------------------------------------------------
INTERNET (0.0%)++
At Home Corp.
4.75%, due 12/15/06 (a)(b)(c)(d) $ 177,810 $ 18
--------------
Total Convertible Bond
(Cost $13,325) 18
--------------
CORPORATE BONDS (38.0%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.9%)
General Dynamics Corp.
4.50%, due 8/15/10 874,000 859,924
United Technologies Corp.
6.50%, due 6/1/09 5,628,000 5,937,247
7.125%, due 11/15/10 2,180,000 2,395,061
--------------
9,192,232
--------------
AUTO PARTS & EQUIPMENT (0.4%)
Johnson Controls, Inc.
6.30%, due 2/1/08 4,325,000 4,442,082
--------------
BANKS (6.3%)
Bank of America Corp.
7.40%, due 1/15/11 1,000,000 1,103,919
7.80%, due 2/15/10 1,500,000 1,656,132
Bank One Corp.
6.00%, due 8/1/08 5,247,000 5,395,102
7.875%, due 8/1/10 7,000,000 7,777,525
Bank One N.A.
6.25%, due 2/15/08 1,800,000 1,856,142
BankAmerica Corp.
7.125%, due 3/1/09 1,660,000 1,767,297
BankBoston N.A.
6.375%, due 3/25/08 1,000,000 1,032,487
Deutsche Bank Financial, Inc.
6.70%, due 12/13/06 1,311,000 1,336,655
FleetBoston Financial Corp.
6.375%, due 5/15/08 3,000,000 3,099,600
7.375%, due 12/1/09 1,200,000 1,301,471
JPMorgan Chase & Co.
6.75%, due 8/15/08 1,405,000 1,470,082
Mellon Bank N.A.
7.625%, due 9/15/07 1,311,000 1,378,214
Mellon Funding Corp.
6.375%, due 2/15/10 1,960,000 2,063,214
6.70%, due 3/1/08 2,026,000 2,103,938
SunTrust Banks, Inc.
6.25%, due 6/1/08 5,000,000 5,166,230
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BANKS (CONTINUED)
U.S. Bancorp
3.125%, due 3/15/08 $ 437,000 $ 420,502
6.875%, due 9/15/07 3,000,000 3,111,270
U.S. Bank N.A.
5.70%, due 12/15/08 1,747,000 1,786,344
6.30%, due 7/15/08 3,305,000 3,428,855
Union Bank of Switzerland
7.25%, due 7/15/06 1,000,000 1,016,443
Wachovia Bank N.A.
7.80%, due 8/18/10 4,475,000 5,019,997
Wachovia Corp.
4.95%, due 11/1/06 437,000 437,423
6.15%, due 3/15/09 1,920,000 1,992,338
6.25%, due 8/4/08 2,317,000 2,391,920
6.375%, due 1/15/09 1,736,000 1,809,738
Wells Fargo & Co.
3.50%, due 4/4/08 437,000 423,998
Wells Fargo Bank N.A.
6.45%, due 2/1/11 1,847,000 1,964,757
7.55%, due 6/21/10 5,000,000 5,532,260
--------------
67,843,853
--------------
BEVERAGES (1.1%)
Anheuser-Busch Cos., Inc.
5.375%, due 9/15/08 900,000 914,493
5.625%, due 10/1/10 1,500,000 1,545,583
5.65%, due 9/15/08 454,000 464,496
5.75%, due 4/1/10 655,000 676,814
6.00%, due 4/15/11 2,110,000 2,215,852
7.50%, due 3/15/12 2,200,000 2,498,989
9.00%, due 12/1/09 1,190,000 1,369,235
PepsiCo., Inc.
5.75%, due 1/15/08 1,747,000 1,780,880
--------------
11,466,342
--------------
CHEMICALS (1.0%)
Dow Capital BV
8.50%, due 6/8/10 495,000 556,804
E.I. du Pont de Nemours & Co.
3.375%, due 11/15/07 805,000 782,527
4.75%, due 11/15/12 2,000,000 1,965,778
6.75%, due 9/1/07 2,000,000 2,067,532
Praxair, Inc.
6.50%, due 3/1/08 2,536,000 2,613,726
Sherwin-Williams Co. (The)
6.85%, due 2/1/07 2,649,000 2,711,871
--------------
10,698,238
--------------
</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 211
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- --------------------------------------------------------------------------------
COMPUTERS (1.3%)
Computer Sciences Corp.
6.25%, due 3/15/09 $ 1,012,000 $ 1,023,301
Hewlett-Packard Co.
5.50%, due 7/1/07 1,200,000 1,213,616
5.75%, due 12/15/06 1,311,000 1,323,611
International Business Machines Corp.
4.75%, due 11/29/12 1,500,000 1,481,067
4.875%, due 10/1/06 437,000 437,810
5.375%, due 2/1/09 958,000 975,273
5.50%, due 1/15/09 467,000 476,947
6.45%, due 8/1/07 6,664,000 6,844,155
--------------
13,775,780
--------------
COSMETICS & PERSONAL CARE (0.9%)
Gillette Co. (The)
2.875%, due 3/15/08 437,000 418,731
3.50%, due 10/15/07 1,311,000 1,281,069
Kimberly-Clark Corp.
7.10%, due 8/1/07 3,245,000 3,370,893
Procter & Gamble Co. (The)
4.75%, due 6/15/07 218,000 218,367
6.875%, due 9/15/09 3,877,000 4,157,195
--------------
9,446,255
--------------
DIVERSIFIED FINANCIAL SERVICES (12.1%)
American Express Co.
5.50%, due 9/12/06 1,000,000 1,006,604
American Express Credit Corp.
3.00%, due 5/16/08 874,000 835,564
Associates Corp. of N.A.
6.25%, due 11/1/08 1,800,000 1,869,408
Bear Stearns Cos., Inc. (The)
4.00%, due 1/31/08 1,092,000 1,072,553
7.625%, due 12/7/09 3,250,000 3,551,938
7.80%, due 8/15/07 2,000,000 2,101,944
Boeing Capital Corp.
5.75%, due 2/15/07 859,000 868,906
Caterpillar Financial
Services Corp.
4.875%, due 6/15/07 1,725,000 1,728,110
CIT Group, Inc.
4.75%, due 12/15/10 655,000 644,253
5.50%, due 11/30/07 1,000,000 1,012,453
5.875%, due 10/15/08 1,800,000 1,842,041
6.875%, due 11/1/09 2,500,000 2,664,077
7.375%, due 4/2/07 2,000,000 2,068,182
Citicorp
6.375%, due 11/15/08 1,500,000 1,562,806
7.20%, due 6/15/07 1,000,000 1,037,942
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Citigroup Global Markets Holdings, Inc.
6.50%, due 2/15/08 $ 3,500,000 $ 3,624,166
Citigroup, Inc.
5.00%, due 3/6/07 655,000 657,237
6.50%, due 1/18/11 1,474,000 1,570,958
Credit Suisse First
Boston USA, Inc.
6.125%, due 11/15/11 5,462,000 5,720,882
6.50%, due 6/1/08 4,500,000 4,651,619
General Electric Capital Corp.
4.25%, due 1/15/08 437,000 431,848
5.375%, due 3/15/07 874,000 880,917
6.50%, due 12/10/07 2,000,000 2,067,748
6.875%, due 11/15/10 2,877,000 3,104,395
Goldman Sachs Group, Inc.
5.70%, due 9/1/12 874,000 892,725
6.65%, due 5/15/09 2,430,000 2,554,445
7.35%, due 10/1/09 7,650,000 8,251,948
Heller Financial, Inc.
6.375%, due 3/15/06 218,000 219,520
7.375%, due 11/1/09 5,000,000 5,434,550
HSBC Finance Corp.
5.875%, due 2/1/09 437,000 447,374
6.375%, due 8/1/10 1,657,000 1,741,492
6.40%, due 6/17/08 3,600,000 3,726,731
6.50%, due 11/15/08 3,000,000 3,125,706
6.75%, due 5/15/11 2,374,000 2,551,352
8.00%, due 7/15/10 3,000,000 3,349,116
International Lease
Finance Corp.
4.50%, due 5/1/08 437,000 430,831
5.625%, due 6/1/07 655,000 661,568
6.375%, due 3/15/09 2,000,000 2,076,916
John Deere BV
5.875%, due 4/6/06 1,500,000 1,508,397
John Deere Capital Corp.
3.125%, due 12/15/05 437,000 436,405
3.90%, due 1/15/08 218,000 213,646
4.50%, due 8/22/07 437,000 434,419
6.00%, due 2/15/09 2,000,000 2,054,212
JP Morgan & Co., Inc.
6.25%, due 2/15/11 262,000 275,261
JPMorgan Chase & Co.
5.35%, due 3/1/07 1,048,000 1,055,547
Lehman Brothers Holdings, Inc.
4.08%, due 9/28/07 (e) 2,000,000 1,985,660
6.625%, due 2/5/06 501,000 503,723
6.625%, due 1/18/12 1,311,000 1,408,496
7.00%, due 2/1/08 4,143,000 4,325,752
8.25%, due 6/15/07 1,000,000 1,049,963
</Table>
212 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)
Lehman Brothers, Inc.
6.50%, due 4/15/08 $ 1,600,000 $ 1,657,616
7.625%, due 6/1/06 306,000 310,640
Merrill Lynch & Co., Inc.
3.97%, due 3/12/07 (e) 1,000,000 996,410
4.33%, due 3/2/09 (e) 437,000 427,412
6.00%, due 2/17/09 8,337,000 8,597,548
6.375%, due 10/15/08 1,112,000 1,155,686
7.00%, due 1/15/07 1,757,000 1,802,705
Morgan Stanley Dean Witter
5.80%, due 4/1/07 874,000 884,649
6.75%, due 4/15/11 2,811,000 3,014,069
Morgan Stanley Group, Inc.
6.875%, due 3/1/07 3,600,000 3,687,462
Pitney Bowes Credit Corp.
5.75%, due 8/15/08 874,000 896,492
SLM Corp.
3.625%, due 3/17/08 437,000 425,381
4.00%, due 1/15/09 437,000 424,103
4.37%, due 3/2/09 (e) 1,311,000 1,282,263
5.29%, due 1/31/14 (e) 874,000 866,466
5.625%, due 4/10/07 2,000,000 2,021,084
Toyota Motor Credit Corp.
5.50%, due 12/15/08 1,477,000 1,510,937
Wells Fargo Financial, Inc.
5.875%, due 8/15/08 2,316,000 2,374,011
6.85%, due 7/15/09 109,000 117,012
--------------
129,744,252
--------------
ELECTRIC (0.6%)
Consolidated Edison Co. of New York
7.50%, due 9/1/10 5,000,000 5,530,475
Interstate Power & Light Co.
6.625%, due 8/1/09 1,311,000 1,367,036
--------------
6,897,511
--------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.7%)
Emerson Electric Co.
5.00%, due 10/15/08 262,000 263,382
5.85%, due 3/15/09 2,386,000 2,457,146
7.125%, due 8/15/10 4,000,000 4,373,236
--------------
7,093,764
--------------
ELECTRONICS (0.2%)
Honeywell, Inc.
7.00%, due 3/15/07 2,376,000 2,443,338
7.125%, due 4/15/08 131,000 137,532
--------------
2,580,870
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOOD (2.9%)
Campbell Soup Co.
5.50%, due 3/15/07 $ 3,405,000 $ 3,432,993
6.75%, due 2/15/11 2,650,000 2,853,610
General Mills, Inc.
5.125%, due 2/15/07 437,000 437,581
Kellogg Co.
6.60%, due 4/1/11 4,500,000 4,820,558
Nabisco, Inc.
7.05%, due 7/15/07 2,028,000 2,096,960
7.55%, due 6/15/15 5,000,000 5,814,065
Sara Lee Corp.
6.00%, due 1/15/08 1,048,000 1,065,986
Sysco International Co.
6.10%, due 6/1/12 3,060,000 3,240,699
Unilever Capital Corp.
6.875%, due 11/1/05 961,000 961,000
7.125%, due 11/1/10 5,700,000 6,235,549
--------------
30,959,001
--------------
HEALTH CARE--PRODUCTS (0.2%)
Johnson & Johnson
6.625%, due 9/1/09 2,371,000 2,527,287
--------------
INSURANCE (0.5%)
Allstate Corp. (The)
7.20%, due 12/1/09 1,900,000 2,048,352
John Hancock Financial Services, Inc.
5.625%, due 12/1/08 2,640,000 2,695,055
Loews Corp.
6.75%, due 12/15/06 437,000 444,038
--------------
5,187,445
--------------
MACHINERY--CONSTRUCTION & MINING (0.8%)
Caterpillar, Inc.
6.55%, due 5/1/11 3,915,000 4,211,193
7.25%, due 9/15/09 4,347,000 4,686,662
--------------
8,897,855
--------------
MACHINERY--DIVERSIFIED (0.4%)
Deere & Co.
7.85%, due 5/15/10 3,608,000 4,025,052
--------------
MEDIA (0.2%)
Gannett Co., Inc.
5.50%, due 4/1/07 437,000 441,230
6.375%, due 4/1/12 2,095,000 2,227,337
--------------
2,668,567
--------------
MISCELLANEOUS--MANUFACTURING (0.7%)
Honeywell International, Inc.
7.50%, due 3/1/10 3,485,000 3,832,740
</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 213
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
- --------------------------------------------------------------------------------
MISCELLANEOUS--MANUFACTURING (CONTINUED)
Illinois Tool Works, Inc.
5.75%, due 3/1/09 $ 3,090,000 $ 3,181,958
--------------
7,014,698
--------------
OFFICE & BUSINESS EQUIPMENT (0.1%)
Pitney Bowes, Inc.
5.875%, due 5/1/06 1,131,000 1,136,213
--------------
OIL & GAS (1.3%)
ChevronTexaco Capital Co.
3.50%, due 9/17/07 706,000 691,307
ConocoPhillips
6.375%, due 3/30/09 2,160,000 2,264,706
8.75%, due 5/25/10 4,000,000 4,620,680
ConocoPhillips Holding Co.
6.35%, due 4/15/09 3,000,000 3,160,650
Texaco Capital, Inc.
5.50%, due 1/15/09 2,000,000 2,063,088
Tosco Corp.
7.25%, due 1/1/07 874,000 897,305
--------------
13,697,736
--------------
PHARMACEUTICALS (0.5%)
Abbott Laboratories
5.625%, due 7/1/06 874,000 880,279
6.40%, due 12/1/06 1,500,000 1,525,614
Eli Lilly & Co.
5.50%, due 7/15/06 655,000 659,161
Pharmacia Corp.
5.875%, due 12/1/08 437,000 450,332
Warner-Lambert Co.
6.00%, due 1/15/08 2,218,000 2,274,042
--------------
5,789,428
--------------
RETAIL (2.2%)
Home Depot, Inc. (The)
5.375%, due 4/1/06 1,118,000 1,121,216
Kohl's Corp.
6.30%, due 3/1/11 612,000 642,249
Target Corp.
5.375%, due 6/15/09 2,706,000 2,747,453
5.40%, due 10/1/08 1,700,000 1,726,534
5.50%, due 4/1/07 2,179,000 2,201,276
5.95%, due 5/15/06 306,000 307,893
7.50%, due 8/15/10 3,034,000 3,360,222
Wal-Mart Stores, Inc.
V 6.875%, due 8/10/09 10,088,000 10,764,431
7.25%, due 6/1/13 349,000 396,965
--------------
23,268,239
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SAVINGS & LOANS (0.1%)
Atlantic Richfield Co.
5.90%, due 4/15/09 $ 1,000,000 $ 1,037,073
--------------
SOFTWARE (0.4%)
First Data Corp.
5.625%, due 11/1/11 661,000 677,003
5.80%, due 12/15/08 1,725,000 1,773,667
6.375%, due 12/15/07 2,133,000 2,196,809
--------------
4,647,479
--------------
TELECOMMUNICATIONS (1.9%)
ALLTEL Corp.
7.00%, due 7/1/12 3,000,000 3,274,203
Ameritech Capital
Funding Corp.
6.15%, due 1/15/08 1,916,000 1,958,269
BellSouth Capital Funding Corp.
7.75%, due 2/15/10 4,500,000 4,939,200
BellSouth Corp.
6.00%, due 10/15/11 2,000,000 2,070,890
BellSouth Telecommunications, Inc.
5.875%, due 1/15/09 262,000 268,003
GTE North, Inc.
6.375%, due 2/15/10 437,000 446,411
New York Telephone Co.
6.125%, due 1/15/10 874,000 879,614
Pacific Bell
6.875%, due 8/15/06 437,000 444,198
Southwestern Bell
Telephone Corp.
6.375%, due 11/15/07 87,000 89,257
6.625%, due 7/15/07 1,100,000 1,128,753
Verizon Communications, Inc.
6.50%, due 9/15/11 5,000,000 5,161,740
--------------
20,660,538
--------------
TEXTILES (0.3%)
Cintas Corp. No. 2
6.00%, due 6/1/12 3,095,000 3,247,531
--------------
TRANSPORTATION (0.0%)++
Navigator Gas Transport PLC
10.50%, due 6/30/07 (b)(f) 89,000 97,010
--------------
Total Corporate Bonds
(Cost $417,183,902) 408,042,331
--------------
</Table>
214 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 (1.2%)
- --------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (0.1%)
2.25%, due 9/1/06 $ 437,000 $ 428,961
3.47%, due 10/3/07 437,000 427,581
3.80%, due 9/4/07 437,000 430,514
3.875%, due 5/7/10 655,000 631,123
--------------
1,918,179
--------------
FEDERAL HOME LOAN BANK (0.4%)
2.50%, due 3/15/06 875,000 869,250
3.375%, due 2/15/08 440,000 427,304
3.50%, due 2/11/08 875,000 848,905
3.75%, due 4/1/10 655,000 628,656
3.875%, due 2/12/10 220,000 212,576
6.21%, due 12/3/07 440,000 453,356
--------------
3,440,047
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.0%)++
3.25%, due 3/14/08 437,000 421,843
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.3%)
Series 2734, Class JC
3.50%, due 11/15/23 1,218,811 1,190,511
Series 2579, Class PG
4.00%, due 3/15/27 254,247 252,005
Series 2719, Class WB
4.50%, due 8/15/21 1,030,211 978,783
Series 2589, Class GD
5.00%, due 9/15/28 437,000 435,236
Series 2600, Class MJ
5.00%, due 9/15/29 437,000 427,705
--------------
3,284,240
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.1%)
4.308%, due 2/17/09 (e) 874,000 874,253
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.2%)
Series 2003-17, Class QT
5.00%, due 8/25/27 1,031,000 1,024,344
Series 2003-32, Class PG
5.00%, due 10/25/27 437,000 431,608
--------------
1,455,952
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(COLLATERALIZED MORTGAGE OBLIGATIONS) (0.1%)
Series 2003-19, Class BE
4.50%, due 11/20/28 $ 243,203 $ 242,079
Series 2003-50, Class PC
5.50%, due 3/16/32 874,000 870,586
--------------
1,112,665
--------------
Total Federal Agencies
(Cost $12,864,537) 12,507,179
--------------
Total Long-Term Bonds
(Cost $430,061,764) 420,549,528
--------------
<Caption>
SHARES
COMMON STOCKS (59.1%)
- --------------------------------------------------------------------------------
AGRICULTURE (1.5%)
Altria Group, Inc. 125,045 9,384,627
UST, Inc. (g) 155,451 6,434,117
--------------
15,818,744
--------------
AUTO MANUFACTURERS (0.6%)
Ford Motor Co. 833,372 6,933,655
--------------
AUTO PARTS & EQUIPMENT (0.6%)
Lear Corp. (g) 200,032 6,092,975
--------------
BANKS (3.7%)
Comerica, Inc. 123,603 7,141,781
Commerce Bancshares, Inc. 129,587 6,884,957
KeyCorp 56,173 1,811,018
M&T Bank Corp. 69,592 7,486,707
State Street Corp. 108,387 5,986,214
TCF Financial Corp. 248,899 6,745,163
U.S. Bancorp 140,674 4,161,137
--------------
40,216,977
--------------
BEVERAGES (0.5%)
PepsiAmericas, Inc. 221,246 5,159,457
--------------
BIOTECHNOLOGY (0.1%)
Biogen Idec, Inc. (a)(g) 30,653 1,245,431
--------------
BUILDING MATERIALS (0.0%)++
Masco Corp. 10,444 297,654
--------------
COMMERCIAL SERVICES (0.6%)
Equifax, Inc. 190,325 6,560,503
--------------
</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 215
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
COMPUTERS (0.2%)
Hewlett-Packard Co. 89,955 $ 2,522,338
--------------
DIVERSIFIED FINANCIAL SERVICES (8.0%)
A.G. Edwards, Inc. 116,075 4,912,294
AmeriCredit Corp. (a) 271,666 6,071,735
Bear Stearns Cos., Inc. (The) 71,072 7,519,418
CIT Group, Inc. 139,464 6,377,689
V Citigroup, Inc. 273,624 12,526,507
V Freddie Mac 162,679 9,980,357
Friedman, Billings, Ramsey Group, Inc. Class A (g) 173,345 1,537,570
Janus Capital Group, Inc. (g) 96,592 1,695,190
V Lehman Brothers
Holdings, Inc. (g) 84,295 10,087,583
V Merrill Lynch & Co., Inc. 200,037 12,950,395
V Morgan Stanley 221,325 12,042,293
--------------
85,701,031
--------------
ELECTRIC (4.0%)
American Electric
Power Co., Inc. 201,014 7,630,491
DPL, Inc. 246,987 6,364,855
Edison International 173,320 7,584,483
Entergy Corp. 110,024 7,780,897
NRG Energy, Inc. (a)(g) 145,551 6,260,149
Reliant Energy, Inc. (a) 461,707 5,863,679
Wisconsin Energy Corp. 32,173 1,217,105
--------------
42,701,659
--------------
ELECTRICAL COMPONENTS & EQUIPMENT (0.6%)
Energizer Holdings, Inc. (a) 119,673 6,042,290
--------------
ENVIRONMENTAL CONTROL (0.7%)
Republic Services, Inc. 197,223 6,971,833
--------------
FOOD (0.9%)
Hershey Co. (The) 112,143 6,373,087
Tyson Foods, Inc. Class A 185,246 3,297,379
--------------
9,670,466
--------------
HEALTH CARE--SERVICES (1.3%)
Aetna, Inc. 81,473 7,215,249
Community Health
Systems, Inc. (a) 111,488 4,137,320
Humana, Inc. (a)(g) 57,600 2,556,864
Skilled Healthcare
Group, Inc. (a)(d)(h)(i) 27 432
--------------
13,909,865
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
HOME BUILDERS (0.8%)
Meritage Homes Corp. (a) 71,199 $ 4,433,562
Ryland Group, Inc. 58,470 3,935,031
--------------
8,368,593
--------------
INSURANCE (10.3%)
Alleghany Corp. (a) 6,831 2,056,131
Allmerica Financial Corp. (a) 167,438 6,379,388
Allstate Corp. (The) 186,908 9,866,873
American National Insurance Co. 29,728 3,505,823
AmerUs Group Co. 116,324 6,877,075
CIGNA Corp. 68,029 7,882,520
Jefferson-Pilot Corp. (g) 137,063 7,522,017
Lincoln National Corp. 143,950 7,285,309
MetLife, Inc. 173,775 8,586,223
MGIC Investment Corp. (g) 99,924 5,919,498
Old Republic International Corp. 263,717 6,832,907
Progressive Corp. (The) 62,957 7,291,050
V Prudential Financial, Inc. 146,061 10,631,780
Radian Group, Inc. 24,046 1,252,797
SAFECO Corp. 131,874 7,345,382
StanCorp Financial Group, Inc. 79,874 7,356,395
Torchmark Corp. 80,935 4,275,796
--------------
110,866,964
--------------
INTERNET (0.0%)++
Globix Corp. (a)(d)(h)(i) 2,795 3,815
--------------
MACHINERY--DIVERSIFIED (0.0%)++
MMH Holdings, Inc. (a)(d)(h)(i) 197 1,044
--------------
MEDIA (3.1%)
Clear Channel
Communications, Inc. 238,753 7,262,866
Comcast Corp. Class A (a)(g) 307,025 8,544,506
Liberty Media Corp. Class A (a) 980,731 7,816,426
V Viacom, Inc. Class B 321,480 9,956,236
--------------
33,580,034
--------------
OIL & GAS (7.2%)
Amerada Hess Corp. 60,223 7,533,897
Anadarko Petroleum Corp. 97,566 8,850,212
Apache Corp. 116,051 7,407,535
Burlington Resources, Inc. 128,311 9,266,620
Chevron Corp. 131,133 7,483,760
ConocoPhillips 12,522 818,688
V ExxonMobil Corp. 517,417 29,047,790
Sunoco, Inc. 90,068 6,710,066
--------------
77,118,568
--------------
</Table>
216 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)
- --------------------------------------------------------------------------------
PHARMACEUTICALS (2.2%)
AmerisourceBergen Corp. 90,742 $ 6,920,892
V Merck & Co., Inc. 381,954 10,778,742
Pfizer, Inc. 286,400 6,226,336
--------------
23,925,970
--------------
PIPELINES (1.1%)
Equitable Resources, Inc. (g) 171,364 6,623,219
Kinder Morgan, Inc. (g) 10,149 922,544
Williams Cos., Inc. (The) 206,195 4,598,148
--------------
12,143,911
--------------
REAL ESTATE (2.1%)
Annaly Mortgage
Management, Inc. (g) 534,083 6,131,273
Crescent Real Estate Equities Co. 209,412 4,177,769
Equity Office Properties Trust 225,144 6,934,435
New Century Financial Corp. (g) 180,066 5,558,637
--------------
22,802,114
--------------
RETAIL (2.9%)
AutoNation, Inc. (a) 329,644 6,553,323
Circuit City Stores, Inc. 353,953 6,296,824
Dillard's, Inc. Class A 301,473 6,243,506
Federated Department Stores, Inc. 127,199 7,806,203
Sears Holdings Corp. (a)(g) 32,086 3,858,342
--------------
30,758,198
--------------
SAVINGS & LOANS (0.0%)++
Washington Mutual, Inc. 12,277 486,169
--------------
SEMICONDUCTORS (0.7%)
Freescale Semiconductor, Inc. Class B (a) 300,492 7,175,749
--------------
TELECOMMUNICATIONS (1.4%)
Alltel Corp. (g) 130,288 8,059,616
CenturyTel, Inc. (g) 199,255 6,521,616
ICO Global Communications Holdings Ltd. (a)(h) 371 1,494
--------------
14,582,726
--------------
THRIFTS & MORTGAGE FINANCE (0.7%)
Astoria Financial Corp. 257,147 7,187,259
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
TOBACCO (0.0%)++
North Atlantic
Trading Co., Inc. (a)(d)(h)(i) 130 $ 1
--------------
TOYS, GAMES & HOBBIES (0.6%)
Mattel, Inc. 422,144 6,226,624
--------------
TRANSPORTATION (2.1%)
Burlington Northern
Santa Fe Corp. 148,544 9,218,641
CSX Corp. 8,637 395,661
Laidlaw International, Inc. 278,593 6,335,205
Swift Transportation Co., Inc. (a) 372,621 6,800,333
--------------
22,749,840
--------------
TRUCKING & LEASING (0.6%)
GATX Corp. 175,376 6,553,801
--------------
Total Common Stocks
(Cost $604,170,553) 634,376,258
--------------
CONVERTIBLE PREFERRED STOCK (0.0%)++
- --------------------------------------------------------------------------------
INTERNET (0.0%)++
Globix Corp.
11.00% (a)(d)(h) 1,182 1,729
--------------
Total Convertible Preferred Stock
(Cost $3,240) 1,729
--------------
PREFERRED STOCK (0.0%)++
- --------------------------------------------------------------------------------
TRANSPORTATION (0.0%)++
Pacific & Atlantic Holdings, Inc.
7.50% (d)(h) 1,119 11
--------------
Total Preferred Stock
(Cost $0) (l) 11
--------------
INVESTMENT COMPANY (0.5%)
- --------------------------------------------------------------------------------
iShares Russell 1000
Index Fund (j) 80,000 5,233,600
--------------
Total Investment Company
(Cost $5,134,232) 5,233,600
--------------
</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 217
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
NUMBER OF
WARRANTS VALUE
WARRANT (0.0%)++
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.0%)++
UbiquiTel, Inc.
Strike Price $22.74
Expire 4/15/10 (a)(f)(h) 65 $ 1
--------------
Total Warrant
(Total Cost $3,574) 1
--------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS (5.9%)
- --------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT (0.5%)
Skandinaviska Enskilda Banken AB
4.082%, due 2/22/06 (e)(k) $ 5,203,603 5,203,603
--------------
Total Certificate of Deposit
(Cost $5,203,603) 5,203,603
--------------
COMMERCIAL PAPER (0.3%)
Falcon Asset Securitization Corp.
4.026%, due 12/2/05 (k) 3,399,514 3,399,514
--------------
Total Commercial Paper
(Cost $3,399,514) 3,399,514
--------------
<Caption>
SHARES
INVESTMENT COMPANY (0.9%)
BGI Institutional Money
Market Fund (k) 9,588,636 9,588,636
--------------
Total Investment Company
(Cost $9,588,636) 9,588,636
--------------
<Caption>
PRINCIPAL
AMOUNT VALUE
TIME DEPOSITS (4.2%)
Bank of the West (The)
4.02%, due 12/8/05 (k) $ 6,938,137 $ 6,938,137
Barclays
3.92%, due 12/5/05 (k) 3,469,068 3,469,068
3.94%, due 11/28/05 (k) 3,469,068 3,469,068
Credit Suisse First Boston Corp.
3.74%, due 11/1/05 (k) 5,203,603 5,203,603
Deutsche Bank
3.95%, due 12/2/05 (k) 3,469,068 3,469,068
First Tennessee National Corp.
3.88%, due 11/14/05 (k) 3,469,068 3,469,068
HBOS Halifax Bank of Scotland
3.75%, due 11/1/05 (k) 3,469,068 3,469,068
Marshall & Ilsley Bank
3.97%, due 12/29/05 (k) 3,469,068 3,469,068
Societe Generale
3.77%, due 11/1/05 (k) 5,203,603 5,203,603
UBS AG
4.01%, due 12/13/05 (k) 3,469,069 3,469,069
Wells Fargo & Co.
4.00%, due 11/25/05 (k) 3,469,069 3,469,069
--------------
Total Time Deposits
(Cost $45,097,889) 45,097,889
--------------
Total Short-Term Investments
(Cost $63,289,642) 63,289,642
--------------
Total Investments
(Cost $1,102,663,005) (m) 104.7% 1,123,450,769(n)
Liabilities in Excess of
Cash and Other Assets (4.7) (50,639,115)
----------- --------------
Net Assets 100.0% $1,072,811,654
=========== ==============
</Table>
218 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>
++ Less than one tenth of a percent.
(a) Non-income producing security.
(b) Issue in default.
(c) Issuer in bankruptcy.
(d) Fair valued security. The total market value of these
securities at October 31, 2005 is $7,050, which
reflects less than one tenth of a percent of the Fund's
net assets.
(e) Floating rate. Rate shown is the rate in effect at
October 31, 2005.
(f) May be sold to institutional investors only.
(g) Represents security, or a portion thereof, which is out
on loan.
(h) Illiquid security. The total market value of these
securities at October 31, 2005 is $8,527, which
represents less than one tenth of a percent of the
Fund's net assets.
(i) Restricted security.
(j) Exchange Traded Fund--represents a basket of securities
that are traded on an exchange.
(k) Represents security, or a portion thereof, purchased
with cash collateral received for securities on loan.
(l) Less than one dollar.
(m) The cost for federal income tax purposes is
$1,103,974,991.
(n) At October 31, 2005 net unrealized appreciation was
$19,475,778, 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 $52,600,760 and
aggregate gross unrealized depreciation for all
investments on which there was an excess of cost over
market value of $33,124,982.
</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 219
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,102,663,005) including
$61,269,902 market value of securities
loaned $1,123,450,769
Cash 10,122,258
Receivables:
Dividends and interest 7,172,082
Fund shares sold 4,609,227
Other assets 77,867
--------------
Total assets 1,145,432,203
--------------
LIABILITIES:
Securities lending collateral 63,289,642
Payables:
Investment securities purchased 5,959,960
Fund shares redeemed 1,678,634
Manager 757,829
NYLIFE Distributors 351,797
Transfer agent 331,671
Shareholder communication 130,672
Custodian 12,580
Accrued expenses 107,764
--------------
Total liabilities 72,620,549
--------------
Net assets $1,072,811,654
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per share)
1 billion shares authorized
Class A $ 114,308
Class B 76,782
Class C 52,659
Class I 100,087
Class R1 28,743
Class R2 26,344
Additional paid-in capital 1,001,691,398
Accumulated undistributed net investment
income 513,722
Accumulated undistributed net realized gain
on investments 49,419,847
Net unrealized appreciation on investments 20,787,764
--------------
Net assets $1,072,811,654
==============
CLASS A
Net assets applicable to outstanding shares $ 307,537,831
==============
Shares of capital stock outstanding 11,430,786
==============
Net asset value per share outstanding $ 26.90
Maximum sales charge (5.50% of offering
price) 1.57
--------------
Maximum offering price per share outstanding $ 28.47
==============
CLASS B
Net assets applicable to outstanding shares $ 206,074,130
==============
Shares of capital stock outstanding 7,678,226
==============
Net asset value and offering price per share
outstanding $ 26.84
==============
CLASS C
Net assets applicable to outstanding shares $ 141,278,922
==============
Shares of capital stock outstanding 5,265,948
==============
Net asset value and offering price per share
outstanding $ 26.83
==============
CLASS I
Net assets applicable to outstanding shares $ 269,652,085
==============
Shares of capital stock outstanding 10,008,674
==============
Net asset value and offering price per share
outstanding $ 26.94
==============
CLASS R1
Net assets applicable to outstanding shares $ 77,396,534
==============
Shares of capital stock outstanding 2,874,292
==============
Net asset value and offering price per share
outstanding $ 26.93
==============
CLASS R2
Net assets applicable to outstanding shares $ 70,872,152
==============
Shares of capital stock outstanding 2,634,433
==============
Net asset value and offering price per share
outstanding $ 26.90
==============
</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.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 13,018,740
Dividends (a) 8,102,977
Income from securities loaned--net 87,526
------------
Total income 21,209,243
------------
EXPENSES:
Manager 6,023,561
Distribution--Class B 1,149,517
Distribution--Class C 626,232
Distribution/Service--Class A 547,342
Service--Class B 383,172
Service--Class C 208,744
Distribution/Service--Class R2 117,266
Transfer agent--Classes A, B and C 1,084,086
Transfer agent--Classes I, R1 and R2 96,232
Professional 176,202
Shareholder communication 173,012
Registration 126,590
Shareholder service--Class R1 61,395
Shareholder service--Class R2 46,906
Custodian 73,909
Directors 57,395
Miscellaneous 83,966
------------
Total expenses before waiver 11,035,527
Expense waiver from Manager (2,296)
------------
Net expenses 11,033,231
------------
Net investment income 10,176,012
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 49,334,339
Net change in unrealized appreciation on
investments (13,294,038)
------------
Net realized and unrealized gain on
investments 36,040,301
------------
Net increase in net assets resulting from
operations $ 46,216,313
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$17,209.
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
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<Table>
<Caption>
2005 2004
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 10,176,012 $ 3,066,558
Net realized gain on investments 49,334,339 8,778,292
Net change in unrealized
appreciation on investments (13,294,038) 6,424,053
------------------------------
Net increase in net assets
resulting from operations 46,216,313 18,268,903
------------------------------
Dividends and distributions to shareholders:
From net investment income:
Class A (2,660,744) (495,967)
Class B (832,311) (103,798)
Class C (471,286) (48,808)
Class I (3,761,336) (2,238,037)
Class R1 (976,758) (89,919)
Class R2 (577,711) (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) --
Class R2 (418,441) --
Service Class -- (294,664)
------------------------------
Total dividends and distributions
to shareholders (18,367,128) (5,445,735)
------------------------------
Capital share transactions:
Net proceeds from sale of shares:
Class A 215,741,323 119,218,441
Class B 117,703,587 64,952,107
Class C 118,059,512 29,648,295
Class I 125,506,409 102,363,134
Class R1 53,826,419 31,166,617
Class R2 82,957,162 23,330,209
Service Class -- 5,402,469
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 --
</Table>
<Table>
<Caption>
2005 2004
Net asset value of shares issued
to shareholders in reinvestment
of dividends and distributions:
Class A $ 4,224,161 $ 447,244
Class B 2,015,263 93,737
Class C 867,629 44,557
Class I 7,213,127 4,254,868
Class R1 1,737,461 89,919
Class R2 996,137 49,362
Service Class -- 369,947
------------------------------
785,802,154 381,430,906
Cost of shares redeemed:
Class A (43,786,775) (13,522,006)
Class B (18,580,184) (2,986,885)
Class C (10,546,082) (1,162,214)
Class I (54,517,852) (82,099,674)
Class R1 (10,443,471) (1,588,939)
Class R2 (33,381,158) (4,378,134)
Service Class -- (25,174,517)
------------------------------
(171,255,522) (130,912,369)
Increase in net assets derived
from capital share
transactions 614,546,632 250,518,537
------------------------------
Net increase in net assets 642,395,817 263,341,705
NET ASSETS:
Beginning of year 430,415,837 167,074,132
------------------------------
End of year $1,072,811,654 $ 430,415,837
==============================
Accumulated undistributed
(distributions in excess of) net
investment income at end of year $ 513,722 $ (5,773)
==============================
</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.
This page intentionally left blank
www.MAINSTAYfunds.com 223
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B
---------------------------- ----------------------------
JANUARY 2, JANUARY 2,
YEAR 2004** YEAR 2004**
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2005 2004
Net asset value at beginning of
period $ 25.41 $ 24.45 $ 25.37 $ 24.46
----------- ----------- ----------- -----------
Net investment income 0.35 0.19 0.18 0.08
Net realized and unrealized
gain on investments 1.91 0.96 1.89 0.93
----------- ----------- ----------- -----------
Total from investment
operations 2.26 1.15 2.07 1.01
----------- ----------- ----------- -----------
Less dividends and
distributions:
From net investment income (0.31) (0.19) (0.14) (0.10)
From net realized gain on
investments (0.46) -- (0.46) --
----------- ----------- ----------- -----------
Total dividends and
distributions (0.77) (0.19) (0.60) (0.10)
----------- ----------- ----------- -----------
Net asset value at end of
period $ 26.90 $ 25.41 $ 26.84 $ 25.37
=========== =========== =========== ===========
Total investment return (a) 8.96% 4.70%(b) 8.19% 4.13%(b)
Ratios (to average net assets)/
Supplemental Data:
Net investment income 1.32% 0.99%+ 0.57% 0.24%+
Net expenses 1.32% 1.34%+# 2.07% 2.09%+#
Expenses (before waiver) 1.32% 1.34%+# 2.07% 2.09%+#
Portfolio turnover rate 93% 42% 93% 42%
Net assets at end of period (in
000's) $307,538 $108,204 $206,074 $62,931
<Caption>
CLASS C
----------------------------------------------
DECEMBER 30,
YEAR 2002**
ENDED THROUGH
OCTOBER 31, OCTOBER 31,
2005 2004 2003
Net asset value at beginning of
period $ 25.37 $ 24.08 $20.27
----------- ----------- ------------
Net investment income 0.17 0.13 0.15(f)
Net realized and unrealized
gain on investments 1.89 1.62 3.76
----------- ----------- ------------
Total from investment
operations 2.06 1.75 3.91
----------- ----------- ------------
Less dividends and
distributions:
From net investment income (0.14) (0.14) (0.10)
From net realized gain on
investments (0.46) (0.32) --
----------- ----------- ------------
Total dividends and
distributions (0.60) (0.46) (0.10)
----------- ----------- ------------
Net asset value at end of
period $ 26.83 $ 25.37 $24.08
=========== =========== ============
Total investment return (a) 8.15% 7.30% 19.32%(b)
Ratios (to average net assets)/
Supplemental Data:
Net investment income 0.57% 0.24% 0.78%+
Net expenses 2.07% 2.09%# 1.98%+#
Expenses (before waiver) 2.07% 2.09%# 2.03%+#
Portfolio turnover rate 93% 42% 51%
Net assets at end of period (in
000's) $141,279 $29,301 $ 372
</Table>
<Table>
* The Fund changed its fiscal year end from December 31 to October 31.
** Commencement of operations.
# 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>
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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
- -----------------------------------------------------------------------------------------
JANUARY 1
2001*
THROUGH YEAR ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31,
2005 2004 2003 2002 2001 2000
$ 25.43 $ 24.07 $ 20.41 $ 20.78 $ 20.82 $ 19.53
-------- -------- -------- ------- ----------- ------------
0.45 0.34 0.38(f) 0.48 0.45 (e) 0.55
1.94 1.68 3.67 0.00(c) (0.08)(e) 1.29
-------- -------- -------- ------- ----------- ------------
2.39 2.02 4.05 0.48 0.37 1.84
-------- -------- -------- ------- ----------- ------------
(0.42) (0.34) (0.39) (0.44) (0.41) (0.55)
(0.46) (0.32) -- (0.41) -- --
-------- -------- -------- ------- ----------- ------------
(0.88) (0.66) (0.39) (0.85) (0.41) (0.55)
-------- -------- -------- ------- ----------- ------------
$ 26.94 $ 25.43 $ 24.07 $ 20.41 $ 20.78 $ 20.82
======== ======== ======== ======= =========== ============
9.46% 8.45% 20.13% 2.18% 1.80%(b) 9.64%
1.77% 1.42% 1.78% 2.30% 2.59%+(e) 2.77%
0.86% 0.91%# 0.99%# 0.96%# 1.03%+#(d) 0.95%#
0.86% 0.91%# 1.03%# 1.02%# 1.05%+#(d) 0.95%#
93% 42% 51% 62% 48% 73%
$269,652 $180,262 $147,519 $83,906 $64,086 $65,309
</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
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R1 CLASS R2
---------------------------- ----------------------------
JANUARY 2,
YEAR 2004** YEAR JANUARY 2,
ENDED THROUGH ENDED 2004**
OCTOBER 31, OCTOBER 31, OCTOBER 31, THROUGH
2005 2004 2005 OCTOBER 31,
Net asset value at beginning
of period $ 25.43 $ 24.45 $ 25.41 $ 24.45
----------- ----------- ----------- -----------
Net investment income 0.43 0.23 0.39 0.18
Net realized and unrealized
gain on investments 1.93 0.98 1.90 0.97
----------- ----------- ----------- -----------
Total from investment
operations 2.36 1.21 2.29 1.15
----------- ----------- ----------- -----------
Less dividends and
distributions:
From net investment income (0.40) (0.23) (0.34) (0.19)
From net realized gain on
investments (0.46) -- (0.46) --
----------- ----------- ----------- -----------
Total dividends and
distributions (0.86) (0.23) (0.80) (0.19)
=========== =========== =========== ===========
Net asset value at end of
period $ 26.93 $ 25.43 $ 26.90 $ 25.41
=========== =========== =========== ===========
Total investment return (a) 9.33% 4.96%(b) 9.05% 4.71%(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.68% 1.32%+ 1.43% 1.07%+
Net expenses 0.96% 1.01%+# 1.21% 1.26%+#
Expenses (before waiver) 0.96% 1.01%+# 1.21% 1.26%+#
Portfolio turnover rate 93% 42% 93% 42%
Net assets at end of period
(in 000's) $77,397 $30,394 $70,872 $19,324
</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.
MAINSTAY CONSERVATIVE ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -3.15%
Excluding sales charges 2.49
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
CONSERVATIVE CONSERVATIVE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 9450 10000 10000 10000 10000
10/31/05 9685 10246 10365 10731 10129
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -2.98%
Excluding sales charges 2.02
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
CONSERVATIVE CONSERVATIVE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 9702 10246 10365 10731 10129
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges 1.02%
Excluding sales charges 2.02
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
CONSERVATIVE CONSERVATIVE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10102 10246 10365 10731 10129
</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 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 227
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
2.57%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
CONSERVATIVE CONSERVATIVE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10257 10246 10365 10731 10129
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- ------------------------------------------------
Conservative Allocation Benchmark(1) 2.46%
S&P 500(R) Index(2) 3.65
MSCI EAFE(R) Index(3) 7.31
Lehman Brothers(R) Aggregate Bond
Index(4) 1.29
</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 a 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 the following other unmanaged Lehman Brothers(R) indices: the
Government Index, Corporate Index, Mortgage-Backed Securities Index, and
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.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
228 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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/30/05 PERIOD ACTUAL EXPENSES) PERIOD
CLASS A SHARES $1,000.00 $1,035.00 $3.08 $1,022.00 $3.06
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,031.45 $6.91 $1,018.25 $6.87
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,031.45 $6.91 $1,018.25 $6.87
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,036.15 $1.28 $1,023.75 $1.28
- -------------------------------------------------------------------------------------------------------------------------
</Table>
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.60% for Class A, 1.35% 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 184 (to reflect the since-inception period).
www.MAINSTAYfunds.com 229
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Affiliated Investment Companies 99.0
Cash and Other Assets (less liabilities) 1.0
</Table>
See Portfolio of Investments on page 234 for specific holdings within these
categories.
230 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 Fund 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 OCTOBER 31, 2005?
The stock and bond markets generated mixed returns during the reporting period.
The major stock-market indexes had negative returns in April and October 2005,
but provided positive results for most of the months in between.
Mid-capitalization stocks provided the strongest overall returns, followed by
small-caps and then large-cap stocks. In general, international stocks
outperformed their U.S. counterparts.
In the wake of continued interest-rate increases by the Federal Open Market
Committee, bond-market performance was mixed and generally down for the
reporting period. Investment-grade bonds, however, were up slightly and
outperformed most other sectors of the bond market--especially high-yield bonds,
which were relatively weak from April 4 through October 31, 2005.
The biggest market movements, however, were in commodity prices. Energy markets,
in particular, recorded large monthly gains and losses during the reporting
period, and at the end of October 2005 were slightly ahead of where they were on
April 4, 2005. The price swings were largely driven by sharply rising crude-oil
and natural-gas prices and by damage to U.S. oil refineries during a severe
hurricane season. The general increase in commodity prices was tempered somewhat
by a decline in food-based commodities, such as grains, livestock, and meat.
Precious metals saw healthy price increases, while prices declined for many base
metals.
The U.S. housing market, which advanced broadly over the past several years,
appeared to soften toward the end of the reporting period.
HOW DO YOU DETERMINE HOW TO ALLOCATE THE FUND'S PORTFOLIO AMONG THE UNDERLYING
FUNDS?
For the equity portion of MainStay Conservative Allocation Fund, we forecast
expected returns for each Underlying Fund in our investable universe by
measuring the Underlying Fund on the basis of its holdings in stocks, bonds, or
both at a point in time. This forecast is driven by quantitative measures of the
companies and securities in which the Underlying Fund invests and by our
expectations of general economic factors and trends. The model combines risk and
return forecasts for each Underlying Fund and seeks to develop optimal
portfolios at risk levels consistent with the Fund's investment objective.
The five-year outperformance of value stocks over growth stocks seemed to have
reversed itself during the reporting period. With the market's focus shifting
toward growth and the U.S. economy providing fairly strong performance, we
favored Underlying Funds that invest primarily in growth stocks. As a hedge
against volatility and downside risk in an uncertain market, the Fund showed a
preference for larger-cap stocks. Given the strength of the U.S. economy
relative to foreign economies, we remained comfortable with a modestly
underweighted position in the Fund's allocation to Underlying Funds with
international exposure.
We also use quantitative methods to determine the Fund's fixed-income
allocation. Since as a category, fixed-income securities seek to provide
stability and principal protection, our model emphasizes measures that seek to
minimize downside risk under various possible market scenarios. These
"stress-tests" indicated that the fixed-income portion of the Fund would be best
allocated among four Underlying Fixed-Income Funds in proportions that reflected
the Fund's benchmark.
THE DISCLOSURE AND FOOTNOTES ON PAGE 233 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
www.MAINSTAYfunds.com 231
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE REPORTING PERIOD?
In the equity portion of the Fund, the Underlying Fund with the highest total
return during the reporting period was MainStay All Cap Growth Fund. The
Underlying Fund's performance reflected the skill of the Underlying Fund's
portfolio managers and the return to favor of growth-oriented stocks. On the
basis of impact, which takes weightings and total returns into consideration,
the greatest positive contributor to the Fund's performance during the reporting
period was MainStay Large Cap Growth Fund.
From a total-return perspective, the Fund's worst-performing Underlying Stock
Fund was MainStay Small Cap Value Fund. The Underlying Fund's performance
reflected the shift in market focus away from value-oriented stocks and a shift
in the market's preference from smaller- to larger-capitalization companies. On
the basis of impact, which takes weightings and total returns into account, the
greatest negative contribution to the equity portion of the Fund during the
reporting period came from MainStay International Equity Fund, which
underperformed international stocks in general.
In the fixed-income portion of the Fund, the best-performing Underlying Fund on
the basis of total return was MainStay High Yield Corporate Bond Fund. This
Underlying Fund was also the greatest positive contributor to the Fund's
fixed-income performance because the Underlying Fund outperformed high-yield
securities in general during the reporting period. This contribution reflected
the skill of the Underlying Fund's portfolio managers and, except during the
latter part of the reporting period, credit spreads that remained very tight
compared to higher-quality issues.
On the basis of total return, the Fund's worst-performing Underlying
Fixed-Income Fund was MainStay Short Term Bond Fund. This was largely because of
successive moves by the Federal Reserve to raise short-term interest rates and
because long-term rates remained relatively stable. During the reporting period,
the greatest negative contribution to the fixed-income portion of the Fund came
from MainStay Indexed Bond Fund.
AS OF OCTOBER 31, 2005, HOW WAS THE FUND ALLOCATED AMONG THE UNDERLYING FUNDS?
The Portfolio of Investments page of this annual report contains a more complete
description of the Fund's holdings as of October 31, 2005. The Portfolio of
Investments page shows the amount invested in each Underlying Fund and
summarizes the Fund's cash position at the end of the reporting period.
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 PAGE 233 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
232 MainStay Conservative Allocation Fund
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 Underlying 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.
INFORMATION ABOUT MAINSTAY CONSERVATIVE ALLOCATION FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 233
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES (99.0%)+
- -------------------------------------------------------------------------------
EQUITY FUNDS (40.2%)
MainStay All Cap Growth Fund (a) 57,794 $ 1,309,614
MainStay Common Stock Fund (a) 335,316 4,251,810
MainStay International Equity Fund 80,853 1,099,603
MainStay Large Cap Growth Fund (a) 338,961 1,806,665
MainStay MAP Fund 14,219 504,775
MainStay Mid Cap Growth Fund (a) 29,726 339,769
MainStay S&P 500 Index Fund 15,218 428,384
MainStay Small Cap Opportunity Fund 23,121 457,567
-----------
10,198,187
-----------
FIXED INCOME FUNDS (58.8%)
MainStay Floating Rate Fund 197,957 1,977,594
MainStay High Yield Corporate Bond Fund 314,488 1,956,113
MainStay Indexed Bond Fund 831,328 8,886,900
MainStay Intermediate Term Bond Fund 213,907 2,079,172
-----------
14,899,779
-----------
Total Affiliated Investments
(Cost $25,178,031) (b) 99.0% 25,097,966(c)
Cash and Other Assets,
Less Liabilities 1.0 261,883
------------- -----------
Net Assets 100.0% $25,359,849
============= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
(a) Non-income producing security.
(b) The cost for federal income tax purposes is $25,179,099.
(c) At October 31, 2005 net unrealized depreciation was $81,133 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 $180,852 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $261,985.
</Table>
234 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 ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in affiliated investment companies,
at value (identified cost $25,178,031) $25,097,966
Cash 619,890
Receivables:
Fund shares sold 286,731
Dividends and interest 59,842
Unamortized offering costs 20,271
Other assets 8,911
------------
Total assets 26,093,611
------------
LIABILITIES:
Payables:
Investment securities purchased 679,356
Professional 16,572
NYLIFE Distributors 11,922
Shareholder communication 10,982
Manager 8,373
Transfer agent 2,824
Custodian 1,190
Fund shares redeemed 1,033
Accrued expenses 1,510
------------
Total liabilities 733,762
------------
Net assets $25,359,849
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 1,308
Class B 894
Class C 285
Class I 1
Additional paid-in capital 25,316,560
Accumulated undistributed net investment income 116,513
Accumulated net realized gain on investments 4,353
Net unrealized depreciation on investments (80,065)
------------
Net assets $25,359,849
============
CLASS A
Net assets applicable to outstanding shares $13,349,790
============
Shares of capital stock outstanding 1,308,155
============
Net asset value per share outstanding $ 10.21
Maximum sales charge (5.50% of offering price) 0.59
------------
Maximum offering price per share outstanding $ 10.80
============
CLASS B
Net assets applicable to outstanding shares $ 9,099,711
============
Shares of capital stock outstanding 893,701
============
Net asset value and offering price per share
outstanding $ 10.18
============
CLASS C
Net assets applicable to outstanding shares $ 2,900,089
============
Shares of capital stock outstanding 284,786
============
Net asset value and offering price per share
outstanding $ 10.18
============
CLASS I
Net assets applicable to outstanding shares $ 10,259
============
Shares of capital stock outstanding 1,005
============
Net asset value and offering price per share
outstanding $ 10.21
============
</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 235
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from affiliated
investment companies $204,575
Interest 1,020
---------
Total income 205,595
---------
EXPENSES:
Offering 39,581
Distribution--Class B 19,498
Distribution--Class C 5,020
Professional 18,345
Shareholder communication 11,378
Distribution/Service--Class A 8,826
Service--Class B 6,499
Service--Class C 1,673
Transfer agent--Classes A, B and C 6,550
Registration 6,536
Custodian 3,804
Directors 301
Miscellaneous 1,926
---------
Total expenses before reimbursement 129,937
Expense reimbursement from Manager (64,895)
---------
Net expenses 65,042
---------
Net investment income 140,553
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from affiliated investment
company transactions 4,353
Net unrealized depreciation on investments (80,065)
---------
Net realized and unrealized loss on investments (75,712)
---------
Net increase in net assets resulting from
operations $ 64,841
=========
</Table>
236 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 CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 140,553
Net realized gain on investments 4,353
Net change in unrealized depreciation on
investments (80,065)
-----------
Net increase in net assets resulting from
operations 64,841
-----------
Dividends to shareholders:
From net investment income:
Class A (42,116)
Class B (16,565)
Class C (4,892)
Class I (48)
-----------
Total dividends to shareholders (63,621)
-----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 13,659,478
Class B 9,356,234
Class C 2,973,430
Class I 10,086
Net asset value of shares issued to
shareholders in reinvestment of dividends:
Class A 39,643
Class B 15,826
Class C 4,207
Class I 48
-----------
26,058,952
Cost of shares redeemed:
Class A (352,445)
Class B (281,606)
Class C (66,198)
Class I (74)
-----------
(700,323)
Increase in net assets derived from capital
share transactions 25,358,629
-----------
Net increase in net assets 25,359,849
NET ASSETS:
Beginning of period --
-----------
End of period $25,359,849
===========
Accumulated undistributed net investment income
at end of period $ 116,513
===========
</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 237
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2005 2005 2005
Net asset value at beginning
of period $ 10.00 $10.00 $10.00 $10.00
----------- ----------- ----------- -----------
Net investment income (a) 0.14 0.10 0.10 0.15
Net realized and unrealized
gain on investments (b) 0.11 0.10 0.10 0.11
----------- ----------- ----------- -----------
Total from investment
operations 0.25 0.20 0.20 0.26
----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.04) (0.02) (0.02) (0.05)
----------- ----------- ----------- -----------
Net asset value at end of
period $ 10.21 $10.18 $10.18 $10.21
=========== =========== =========== ===========
Total investment return (c) 2.49%(d) 2.02%(d) 2.02%(d) 2.57%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.43%+ 1.68%+ 1.68%+ 2.78%+
Net expenses (e) 0.60%+ 1.35%+ 1.35%+ 0.25%+
Expenses (before
reimbursement) (e) 1.55%+ 2.30%+ 2.30%+ 1.20%+
Portfolio turnover rate 3% 3% 3% 3%
Net assets at end of period
(in 000's) $13,350 $9,100 $2,900 $ 10
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) The amount shown for a share outstanding does not correspond with aggregate net realized
and unrealized gain (loss) on investments due to the timing of purchases and redemptions
of Fund shares in relation to fluctuating market values of the investments of the Fund
during the period.
(c) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(d) Total return is not annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly
bears a pro-rata share of the fees and expenses of the underlying funds in which it
invests. Such indirect expenses are not included in the above reported expense ratios.
</Table>
238 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.
MAINSTAY GROWTH ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -0.68%
Excluding sales charges 5.10
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY GROWTH GROWTH ALLOCATION
ALLOCATION FUND INDEX S&P 500 INDEX MSCI EAFE INDEX
--------------- ----------------- ------------- ---------------
4/4/05 9450 10000 10000 10000
10/31/05 9932 10440 10365 10731
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -0.30%
Excluding sales charges 4.70
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY GROWTH GROWTH ALLOCATION
ALLOCATION FUND INDEX S&P 500 INDEX MSCI EAFE INDEX
--------------- ----------------- ------------- ---------------
4/4/05 10000 10000 10000 10000
10/31/05 9970 10440 10365 10731
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges 3.60%
Excluding sales charges 4.60
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY GROWTH GROWTH ALLOCATION
ALLOCATION FUND INDEX S&P 500 INDEX MSCI EAFE INDEX
--------------- ----------------- ------------- ---------------
4/4/05 10000 10000 10000 10000
10/31/05 10360 10440 10365 10731
</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 graph assumes 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 239
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
5.20%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH GROWTH ALLOCATION
ALLOCATION FUND INDEX S&P 500 INDEX MSCI EAFE INDEX
--------------- ----------------- ------------- ---------------
4/4/05 10000 10000 10000 10000
10/31/05 10520 10440 10365 10731
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- ------------------------------------------------
Growth Allocation Benchmark(1) 4.40%
S&P 500(R) Index(2) 3.65
MSCI EAFE(R) Index(3) 7.31
</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 a 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.
240 MainStay Growth Allocation Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD ACTUAL EXPENSES) PERIOD
CLASS A SHARES $1,000.00 $1,077.80 $3.25 $1,021.90 $3.16
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,074.05 $7.16 $1,018.15 $6.97
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,072.95 $7.16 $1,018.15 $6.97
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,079.05 $1.31 $1,023.75 $1.28
- -------------------------------------------------------------------------------------------------------------------------
</Table>
2. Expenses are equal to the Fund's annualized expense ratio of each class
(0.62% for Class A, 1.37% 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 184 (to reflect the since-inception period).
www.MAINSTAYfunds.com 241
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Affiliated Investment Companies 99.1
Cash and Other Assets (less liabilities) 0.9
</Table>
See Portfolio of Investments on page 246 for specific holdings within these
categories.
242 MainStay Growth 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 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 OCTOBER 31, 2005?
The stock and bond markets generated mixed returns during the reporting period.
The major stock-market indexes had negative returns in April and October 2005,
but provided positive results for most of the months in between.
Mid-capitalization stocks provided the strongest overall returns, followed by
small-caps and then large-cap stocks. In general, international stocks
outperformed their U.S. counterparts.
The biggest market movements, however, were in commodity prices. Energy markets,
in particular, recorded large monthly gains and losses during the reporting
period, and at the end of October 2005 were slightly ahead of where they were on
April 4, 2005. The price swings were largely driven by sharply rising crude-oil
and natural-gas prices and by damage to U.S. oil refineries during a severe
hurricane season. The general increase in commodity prices was tempered somewhat
by a decline in food-based commodities, such as grains, livestock, and meat.
Precious metals saw healthy price increases, while prices declined for many base
metals.
The U.S. housing market, which advanced broadly over the past several years,
appeared to soften toward the end of the reporting period.
HOW DO YOU DETERMINE HOW TO ALLOCATE THE FUND'S PORTFOLIO AMONG THE UNDERLYING
FUNDS?
For MainStay Growth Allocation Fund, we forecast expected returns for each
Underlying Fund in our investable universe by measuring the Underlying Fund on
the basis of its holdings in stocks, bonds, or both at a point in time. This
forecast is driven by quantitative measures of the companies and securities in
which the Underlying Fund invests and by our expectations of general economic
factors and trends. The model combines risk and return forecasts for each
Underlying Fund and seeks to develop optimal portfolios at risk levels
consistent with the Fund's investment objective.
The five-year outperformance of value stocks over growth stocks seemed to have
reversed itself during the reporting period. With the market's focus shifting
toward growth and the U.S. economy providing fairly strong performance, we
favored Underlying Funds that invest primarily in growth stocks. As a hedge
against volatility and downside risk in an uncertain market, the Fund showed a
preference for larger-cap stocks. Given the strength of the U.S. economy
relative to foreign economies, we remained comfortable with a modestly
underweighted position in the Fund's allocation to Underlying Funds with
international exposure.
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE REPORTING PERIOD?
The Underlying Fund with the highest total return during the reporting period
was MainStay All Cap Growth Fund. The Underlying Fund's performance reflected
the skill of the Underlying Fund's portfolio managers and the return to favor of
growth-oriented stocks. On the basis of impact, which takes weightings and total
returns into consideration, the greatest positive contributor to performance
during the reporting period was MainStay Large Cap Growth Fund.
From a total-return perspective, the Fund's worst performing Underlying Stock
Fund was MainStay Small Cap Value Fund. The Underlying Fund's performance
reflected the shift in market focus away from value-oriented stocks and a shift
in the market's preference from smaller- to larger-capitalization companies. On
the basis of impact, which takes weightings and total returns into account, the
greatest negative contribution to the Fund during the reporting period came from
MainStay International Equity Fund, which underperformed international stocks in
general.
THE DISCLOSURE AND FOOTNOTES ON PAGE 245 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
www.MAINSTAYfunds.com 243
AS OF OCTOBER 31, 2005, HOW WAS THE FUND ALLOCATED AMONG THE UNDERLYING FUNDS?
The Portfolio of Investments page of this annual report contains a more complete
description of the Fund's holdings as of October 31, 2005. The Portfolio of
Investments page shows the amount invested in each Underlying Fund and
summarizes the Fund's cash position at the end of the reporting period.
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 PAGE 245 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
244 MainStay Growth Allocation Fund
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 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.
- - The principal risk of growth stocks is that investors expect growth companies
to increase their earnings at a certain rate that is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed
an absolute increase.
- - 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.
Before making an investment in the Fund, you should consider all the risks
associated with it.
INFORMATION ABOUT MAINSTAY GROWTH ALLOCATION FUND ON THIS PAGE AND THE PRECEDING
PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 245
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES (99.1)%+
- --------------------------------------------------------------------------
EQUITY FUNDS (99.1%)
MainStay All Cap Growth Fund (a) 121,964 $ 2,763,695
MainStay Common Stock Fund (a) 278,460 3,530,868
MainStay International Equity Fund 274,842 3,737,848
MainStay Large Cap Growth Fund (a) 844,257 4,499,890
MainStay MAP Fund 39,203 1,391,704
MainStay Mid Cap Growth Fund (a) 108,460 1,239,702
MainStay S&P 500 Index Fund 40,440 1,138,374
MainStay Small Cap Opportunity Fund 65,458 1,295,413
-----------
19,597,494
-----------
Total Affiliated Investments
(Cost $19,344,963) (b) 99.1% 19,597,494(c)
Cash and Other Assets, Less Liabilities 0.9 168,887
-------- -----------
Net Assets 100.0% $19,766,381
======== ===========
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
(a) Non-income producing security.
(b) The cost for federal income tax purposes is $19,347,506.
(c) At October 31, 2005 net unrealized appreciation was $249,988 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 $281,532 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $31,544.
</Table>
246 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 OCTOBER 31, 2005
<Table>
ASSETS:
Investment in affiliated investment companies,
at value (identified cost $19,344,963) $19,597,494
Cash 85,898
Receivables:
Fund shares sold 191,364
Interest 268
Unamortized offering costs 20,271
Other assets 6,175
------------
Total assets 19,901,470
------------
LIABILITIES:
Payables:
Investment securities purchased 85,898
Professional 16,252
Shareholder communication 10,855
NYLIFE Distributors 8,853
Manager 8,158
Transfer agent 2,268
Custodian 1,162
Fund shares redeemed 165
Accrued expenses 1,478
------------
Total liabilities 135,089
------------
Net assets $19,766,381
============
COMPOSITION OF NET ASSETS:
Capital Stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 1,019
Class B 778
Class C 86
Class I 1
Additional paid-in capital 19,383,444
Accumulated net realized gain on investments 128,522
Net unrealized appreciation on investments 252,531
------------
Net assets $19,766,381
============
CLASS A
Net assets applicable to outstanding shares $10,709,398
============
Shares of capital stock outstanding 1,019,010
============
Net asset value per share outstanding $ 10.51
Maximum sales charge (5.50% of offering price) 0.61
------------
Maximum offering price per share outstanding $ 11.12
============
CLASS B
Net assets applicable to outstanding shares $ 8,142,430
============
Shares of capital stock outstanding 778,027
============
Net asset value and offering price per share
outstanding $ 10.47
============
CLASS C
Net assets applicable to outstanding shares $ 904,029
============
Shares of capital stock outstanding 86,390
============
Net asset value and offering price per share
outstanding $ 10.46
============
CLASS I
Net assets applicable to outstanding shares $ 10,524
============
Shares of capital stock outstanding 1,000
============
Net asset value and offering price per share
outstanding $ 10.52
============
</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 247
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 710
---------
EXPENSES:
Offering 39,581
Professional 18,005
Distribution--Class B 16,572
Distribution--Class C 1,240
Shareholder communication 11,286
Distribution/Service--Class A 7,821
Service--Class B 5,524
Service--Class C 413
Transfer agent--Classes A, B and C 6,614
Registration 6,559
Custodian 3,262
Directors 244
Miscellaneous 1,921
---------
Total expenses before reimbursement 119,042
Expense reimbursement from Manager (67,081)
---------
Net expenses 51,961
---------
Net investment loss (51,251)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from affiliated investment
company transactions 140,192
Net unrealized appreciation on investments 252,531
---------
Net realized and unrealized gain on investments 392,723
---------
Net increase in net assets resulting from
operations $341,472
=========
</Table>
248 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 OCTOBER 31, 2005
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment loss $ (51,251)
Net realized gain on investments 140,192
Net change in unrealized appreciation on
investments 252,531
-----------
Net increase in net assets resulting from
operations 341,472
-----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 10,648,023
Class B 8,106,966
Class C 963,872
Class I 10,106
-----------
19,728,967
Cost of shares redeemed:
Class A (157,473)
Class B (77,214)
Class C (69,298)
Class I (73)
-----------
(304,058)
Increase in net assets derived from capital
share transactions 19,424,909
-----------
Net increase in net assets 19,766,381
NET ASSETS:
Beginning of period --
-----------
End of period $19,766,381
===========
</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 249
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2005 2005 2005
Net asset value at beginning of period $ 10.00 $10.00 $10.00 $10.00
----------- ----------- ----------- -----------
Net investment loss (a) (0.04) (0.08) (0.08) (0.01)
Net realized and unrealized gain on investments (b) 0.55 0.55 0.54 0.53
----------- ----------- ----------- -----------
Total from investment operations 0.51 0.47 0.46 0.52
----------- ----------- ----------- -----------
Net asset value at end of period $ 10.51 $10.47 $10.46 $10.52
=========== =========== =========== ===========
Total investment return (c) 5.10%(d) 4.70%(d) 4.60%(d) 5.20%(d)
Ratios (to average net assets)/Supplemental Data:
Net investment loss (0.61%)+ (1.36%)+ (1.36%)+ (0.24%)+
Net expenses (e) 0.62%+ 1.37% + 1.37% + 0.25% +
Expenses (before reimbursement) (e) 1.84%+ 2.59% + 2.59% + 1.47% +
Portfolio turnover rate 21% 21% 21% 21%
Net assets at end of period (in 000's) $10,709 $8,142 $ 904 $ 11
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) The amount shown for a share outstanding does not correspond with aggregate net realized
and unrealized gain (loss) on investments due to the timing of purchases and redemptions
of Fund shares in relation to fluctuating market values of the investments of the Fund
during the period.
(c) Total return is calculated exclusive of sales charge. Class I is not subject to sales
charges.
(d) Total return is not annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly
bears a pro-rata share of the fees and expenses of the underlying funds in which it
invests. Such indirect expenses are not included in the above reported expense ratios.
</Table>
250 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 (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -1.98%
Excluding sales charges 3.73
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
MODERATE MODERATE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 9802 10312 10365 10731 10129
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -1.74%
Excluding sales charges 3.26
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
MODERATE MODERATE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 9826 10312 10365 10731 10129
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges 2.26%
Excluding sales charges 3.26
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
MODERATE MODERATE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10226 10312 10365 10731 10129
</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 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 251
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
3.80%
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MAINSTAY LEHMAN BROTHERS
MODERATE MODERATE MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10380 10312 10365 10731 10129
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- -------------------------------------------------
Moderate Allocation Benchmark(1) 3.12%
S&P 500(R) Index(2) 3.65
MSCI EAFE(R) Index(3) 7.31
Lehman Brothers(R) Aggregate Bond
Index(4) 1.29
</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 the following other unmanaged Lehman Brothers(R) indices: the
Government Index, Corporate Index, Mortgage-Backed Securities Index, and
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.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
252 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 six-month period from May 1 through October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,048.85 $2.84 $1,022.25 $2.80
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,044.20 $6.70 $1,018.50 $6.61
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,044.20 $6.70 $1,018.50 $6.61
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,048.55 $1.29 $1,023.75 $1.28
- -------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.55% for Class A, 1.30% 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 184 (to reflect the since-inception period).
www.MAINSTAYfunds.com 253
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Affiliated Investment Companies 98.4
Cash and Other Assets (less liabilities) 1.6
</Table>
See Portfolio of Investments on page 258 for specific holdings within these
categories.
254 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 OCTOBER 31, 2005?
The stock and bond markets generated mixed returns during the reporting period.
The major stock-market indexes had negative returns in April and October 2005,
but provided positive results for most of the months in between.
Mid-capitalization stocks provided the strongest overall returns, followed by
small-caps and then large-cap stocks. In general, international stocks
outperformed their U.S. counterparts.
In the wake of continued interest-rate increases by the Federal Open Market
Committee, bond-market performance was mixed and generally down for the
reporting period. Investment-grade bonds, however, were up slightly and
outperformed most other sectors of the bond market--especially high-yield bonds,
which were relatively weak from April 4 through October 31, 2005.
The biggest market movements, however, were in commodity prices. Energy markets,
in particular, recorded large monthly gains and losses during the reporting
period, and at the end of October 2005 were slightly ahead of where they were on
April 4, 2005. The price swings were largely driven by sharply rising crude-oil
and natural-gas prices and by damage to U.S. oil refineries during a severe
hurricane season. The general increase in commodity prices was tempered somewhat
by a decline in food-based commodities, such as grains, livestock, and meat.
Precious metals saw healthy price increases, while prices declined for many base
metals.
The U.S. housing market, which advanced broadly over the past several years,
appeared to soften toward the end of the reporting period.
HOW DO YOU DETERMINE HOW TO ALLOCATE THE FUND'S PORTFOLIO AMONG THE UNDERLYING
FUNDS?
For the equity portion of MainStay Moderate Allocation Fund, we forecast
expected returns for each Underlying Fund in our investable universe by
measuring the Underlying Fund on the basis of its holdings in stocks, bonds, or
both at a point in time. This forecast is driven by quantitative measures of the
companies and securities in which the Underlying Fund invests and by our
expectations of general economic factors and trends. The model combines risk and
return forecasts for each Underlying Fund and seeks to develop optimal
portfolios at risk levels consistent with the Fund's investment objective.
The five-year outperformance of value stocks over growth stocks seemed to have
reversed itself during the reporting period. With the market's focus shifting
toward growth and the U.S. economy providing fairly strong performance, we
favored Underlying Funds that invest primarily in growth stocks. As a hedge
against volatility and downside risk in an uncertain market, the Fund showed a
preference for larger-cap stocks. Given the strength of the U.S. economy
relative to foreign economies, we remained comfortable with a modestly
underweighted position in the Fund's allocation to Underlying Funds with
international exposure.
We also use quantitative methods to determine the Fund's fixed-income
allocation. Since as a category, fixed-income securities seek to provide
stability and principal protection, our model emphasizes measures that seek to
minimize downside risk under various possible market scenarios. These
"stress-tests" indicated that the fixed-income portion of the Fund would be best
allocated among four Underlying Fixed-Income Funds in proportions that reflected
the Fund's benchmark.
THE DISCLOSURE AND FOOTNOTES ON PAGE 257 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
www.MAINSTAYfunds.com 255
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE REPORTING PERIOD?
In the equity portion of the Fund, the Underlying Fund with the highest total
return during the reporting period was MainStay All Cap Growth Fund. The
Underlying Fund's performance reflected the skill of the Underlying Fund's
portfolio managers and the return to favor of growth-oriented stocks. On the
basis of impact, which takes weightings and total returns into consideration,
the greatest positive contributor to performance during the reporting period was
MainStay Large Cap Growth Fund.
From a total-return perspective, the Fund's worst-performing Underlying Stock
Fund was MainStay Small Cap Value Fund. The Underlying Fund's performance
reflected the shift in market focus away from value-oriented stocks and a shift
in the market's preference from smaller- to larger-capitalization companies. On
the basis of impact, which takes weightings and total returns into account, the
greatest negative contribution to the equity portion of the Fund during the
reporting period came from MainStay International Equity Fund, which
underperformed international stocks in general.
In the fixed-income portion of the Fund, the Underlying Fund with the highest
total return was MainStay High Yield Corporate Bond Fund. This Underlying Fund
was also the greatest positive contributor to the Fund's fixed-income
performance because the Underlying Fund outperformed high-yield securities in
general during the reporting period. This contribution reflected the skill of
the Underlying Fund's portfolio managers and, except during the latter part of
the reporting period, credit spreads that remained very tight compared to
higher-quality issues.
On the basis of total return, the Fund's worst-performing Underlying
Fixed-Income Fund was MainStay Short Term Bond Fund. This was largely because of
successive moves by the Federal Reserve to raise short-term interest rates and
because long-term rates remained relatively stable. During the reporting period,
the greatest negative contributors to the fixed-income portion of the Fund were
MainStay Floating Rate Fund and MainStay Indexed Bond Fund.
AS OF OCTOBER 31, 2005, HOW WAS THE FUND ALLOCATED AMONG THE UNDERLYING FUNDS?
The Portfolio of Investments page of this annual report contains a more complete
description of the Fund's holdings as of October 31, 2005. The Portfolio of
Investments page shows the amount invested in each Underlying Fund and
summarizes the Fund's cash position at the end of the reporting period.
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 PAGE 257 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
256 MainStay Moderate Allocation Fund
The Fund's performance depends on the advisor's skill in determining the
asset-class allocations, the mix of Under-lying MainStay Funds, as well as the
performance of these 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 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 Underlying 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.
INFORMATION ABOUT MAINSTAY MODERATE ALLOCATION FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 257
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES (98.4%)+
- ---------------------------------------------------------------------------
EQUITY FUNDS (59.6%)
MainStay All Cap Growth Fund (a) 151,257 $ 3,427,483
MainStay Common Stock Fund (a)(b) 743,321 9,425,310
MainStay International Equity Fund 343,328 4,669,257
MainStay Large Cap Growth Fund (a) 950,131 5,064,195
MainStay MAP Fund 48,103 1,707,666
MainStay Mid Cap Growth Fund (a) 81,315 929,429
MainStay S&P 500 Index Fund 36,911 1,039,049
MainStay Small Cap
Opportunity Fund 81,458 1,612,054
-----------
27,874,443
-----------
FIXED INCOME FUNDS (38.8%)
MainStay Floating Rate Fund 227,861 2,276,329
MainStay High Yield Corporate
Bond Fund 352,939 2,195,281
MainStay Indexed Bond Fund 1,041,913 11,138,048
MainStay Intermediate Term
Bond Fund 258,440 2,512,040
-----------
18,121,698
-----------
Total Affiliated Investments
(Cost $45,836,291) (c) 98.4% 45,996,141(d)
Cash and Other Assets,
Less Liabilities 1.6 727,655
--------- -----------
Net Assets 100.0% $46,723,796
========= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
(a) Non-income producing security.
(b) The Fund's ownership exceeds 5% of the outstanding shares of the underlying
fund.
(c) The cost for federal income tax purposes is $45,836,881.
(d) At October 31, 2005 net unrealized appreciation was $159,260 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 $498,776 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $339,516.
</Table>
258 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 ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
<Table>
ASSETS:
Investment in affiliated investment companies,
at value
(identified cost $45,836,291) $45,996,141
Cash 392,364
Receivables:
Fund shares sold 758,300
Dividends and interest 73,705
Unamortized offering costs 20,271
Other assets 17,883
------------
Total assets 47,258,664
------------
LIABILITIES:
Payables:
Investment securities purchased 465,356
NYLIFE Distributors 21,676
Professional 17,546
Shareholder communication 11,696
Manager 8,965
Fund shares redeemed 3,931
Transfer agent 2,804
Custodian 1,232
Accrued expenses 1,662
------------
Total liabilities 534,868
------------
Net assets $46,723,796
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 2,326
Class B 1,907
Class C 287
Class I 1
Additional paid-in capital 46,418,774
Accumulated undistributed net investment income 125,114
Accumulated net realized gain on investments 15,537
Net unrealized appreciation on investments 159,850
------------
Net assets $46,723,796
============
CLASS A
Net assets applicable to outstanding shares $24,079,723
============
Shares of capital stock outstanding 2,326,423
============
Net asset value per share outstanding $ 10.35
Maximum sales charge (5.50% of offering price) 0.60
------------
Maximum offering price per share outstanding $ 10.95
============
CLASS B
Net assets applicable to outstanding shares $19,676,070
============
Shares of capital stock outstanding 1,906,711
============
Net asset value and offering price per share
outstanding $ 10.32
============
CLASS C
Net assets applicable to outstanding shares $ 2,957,619
============
Shares of capital stock outstanding 286,632
============
Net asset value and offering price per share
outstanding $ 10.32
============
CLASS I
Net assets applicable to outstanding shares $ 10,384
============
Shares of capital stock outstanding 1,003
============
Net asset value and offering price per share
outstanding $ 10.35
============
</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 259
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from affiliated
investment companies $255,284
Interest 1,792
---------
Total income 257,076
---------
EXPENSES:
Offering 39,581
Distribution--Class B 38,540
Distribution--Class C 4,180
Professional 19,428
Distribution/Service--Class A 17,878
Service--Class B 12,847
Service--Class C 1,393
Shareholder communication 12,132
Registration 8,466
Transfer agent--Classes A, B and C 6,530
Custodian 4,018
Directors 582
Miscellaneous 1,959
---------
Total expenses before reimbursement 167,534
Expense reimbursement from Manager (54,074)
---------
Net expenses 113,460
---------
Net investment income 143,616
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from affiliated investment
company transactions 15,537
Net unrealized appreciation on investments 159,850
---------
Net realized and unrealized gain on investments 175,387
---------
Net increase in net assets resulting from
operations $319,003
=========
</Table>
260 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 CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 143,616
Net realized gain on investments 15,537
Net change in unrealized appreciation on
investments 159,850
-----------
Net increase in net assets resulting from
operations 319,003
-----------
Dividends to shareholders:
From net investment income:
Class A (48,100)
Class B (8,842)
Class C (1,110)
Class I (31)
-----------
Total dividends to shareholders (58,083)
-----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 25,154,433
Class B 20,068,287
Class C 3,008,034
Class I 10,087
Net asset value of shares issued to shareholders in
reinvestment of dividends:
Class A 42,995
Class B 8,663
Class C 855
Class I 31
-----------
48,293,385
-----------
Cost of shares redeemed:
Class A (1,271,773)
Class B (500,588)
Class C (58,074)
Class I (74)
-----------
(1,830,509)
Increase in net assets derived from capital
share transactions 46,462,876
-----------
Net increase in net assets 46,723,796
NET ASSETS:
Beginning of period --
-----------
End of period $46,723,796
===========
Accumulated undistributed net investment income
at end of period $ 125,114
===========
</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 261
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2005 2005 2005
Net asset value at beginning
of period $ 10.00 $ 10.00 $10.00 $10.00
----------- ----------- ----------- -----------
Net investment income (a) 0.09 0.04 0.04 0.10
Net realized and unrealized
gain on investments (b) 0.28 0.29 0.29 0.28
----------- ----------- ----------- -----------
Total from investment
operations 0.37 0.33 0.33 0.38
----------- ----------- ----------- -----------
Less dividends:
From net investment income (0.02) (0.01) (0.01) (0.03)
----------- ----------- ----------- -----------
Net asset value at end of
period $ 10.35 $ 10.32 $10.32 $10.35
=========== =========== =========== ===========
Total investment return (c) 3.73%(d) 3.26%(d) 3.26%(d) 3.80%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.42%+ 0.67%+ 0.67%+ 1.72%+
Net expenses (e) 0.55%+ 1.30%+ 1.30%+ 0.25%+
Expenses (before
reimbursement) (e) 0.97%+ 1.72%+ 1.72%+ 0.67%+
Portfolio turnover rate 2% 2% 2% 2%
Net assets at end of period
(in 000's) $24,080 $19,676 $2,958 $ 10
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average.
(b) The amount shown for a share outstanding does not correspond with aggregate net realized
and unrealized gain (loss) on investments due to the timing of purchases and redemptions
of Fund shares in relation to fluctuating market values of the investments of the Fund
during the period.
(c) Total return is calculated exclusive of sales charges. Class I is not subject to a sales
charge.
(d) Total return is not annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly
bears a pro-rata share of the fees and expenses of the underlying funds in which it
invests. Such indirect expenses are not included in the above reported expense ratios.
</Table>
262 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.
MAINSTAY MODERATE GROWTH ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE 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 CALL 1-800-MAINSTAY (1-800-624-6782) OR VISIT
WWW.MAINSTAYFUNDS.COM. PERFORMANCE DATA SHOWN EXCLUDING SALES CHARGES DOES NOT
REFLECT THE DEDUCTION OF ANY SALES LOAD, WHICH IF REFLECTED, WOULD REDUCE
PERFORMANCE QUOTED.
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -1.15%
Excluding sales charges 4.60
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MODERATE MODERATE LEHMAN BROTHERS
GROWTH GROWTH MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 9450 10000 10000 10000 10000
10/31/05 9885 10377 10365 10731 10129
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges -0.80%
Excluding sales charges 4.20
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MODERATE MODERATE LEHMAN BROTHERS
GROWTH GROWTH MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 9920 10377 10365 10731 10129
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
With sales charges 3.20%
Excluding sales charges 4.20
</Table>
(PERFORMANCE GRAPH) (With sales charges)
<Table>
<Caption>
MODERATE MODERATE LEHMAN BROTHERS
GROWTH GROWTH MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10320 10377 10365 10731 10129
</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 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 263
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL INCEPTION
TOTAL RETURNS (4/4/05)
- ----------------------------------
4.70%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MODERATE MODERATE LEHMAN BROTHERS
GROWTH GROWTH MSCI EAFE AGGREGATE BOND
ALLOCATION FUND ALLOCATION INDEX S&P 500 INDEX INDEX INDEX
--------------- ---------------- ------------- --------- ---------------
4/4/05 10000 10000 10000 10000 10000
10/31/05 10470 10377 10365 10731 10129
</Table>
<Table>
<Caption>
SINCE
BENCHMARK PERFORMANCE INCEPTION
- -------------------------------------------------
Moderate Growth Allocation
Benchmark(1) 3.77%
S&P 500(R) Index(2) 3.65
MSCI EAFE(R) Index(3) 7.31
Lehman Brothers(R) Aggregate Bond
Index(4) 1.29
</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 is an unmanaged index that
includes the following other unmanaged Lehman Brothers(R) indices: the
Government Index, Corporate Index, Mortgage-Backed Securities Index, and
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.
THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE
TABLES AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
264 MainStay Moderate Growth Allocation Fund
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 six-month period from May 1, 2005, to October 31, 2005,
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 purchases, 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 six-month period and held for the entire period from May 1
through October 31, 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 during the six months ended October 31, 2005. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund 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
BEGINNING ON ACTUAL EXPENSES ON HYPOTHETICAL EXPENSES
ACCOUNT RETURNS AND PAID 5% ANNUALIZED PAID
VALUE EXPENSES) DURING RETURN AND DURING
SHARE CLASS 5/1/05 10/31/05 PERIOD(1) ACTUAL EXPENSES) PERIOD(1)
CLASS A SHARES $1,000.00 $1,065.20 $2.92 $1,022.20 $2.85
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,061.35 $6.81 $1,018.45 $6.66
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,061.35 $6.81 $1,018.45 $6.66
- -------------------------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,066.25 $1.30 $1,023.75 $1.28
- -------------------------------------------------------------------------------------------------------------------------
</Table>
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.56% for Class A, 1.31% 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 184 (to reflect the since-inception period).
www.MAINSTAYfunds.com 265
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 2005
(COMPOSITION PIE CHART)
<Table>
Affiliated Investment Companies 98.5
Cash and Other Assets (less liabilities) 1.5
</Table>
See Portfolio of Investments on page 270 for specific holdings within these
categories.
266 MainStay Moderate Growth 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 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 OCTOBER 31, 2005?
The stock and bond markets generated mixed returns during the reporting period.
The major stock-market indexes had negative returns in April and October 2005,
but provided positive results for most of the months in between.
Mid-capitalization stocks provided the strongest overall returns, followed by
small-caps and then large-cap stocks. In general, international stocks
outperformed their U.S. counterparts.
In the wake of continued interest-rate increases by the Federal Open Market
Committee, bond-market performance was mixed and generally down for the
reporting period. Investment-grade bonds, however, were up slightly and
outperformed most other sectors of the bond market--especially high-yield bonds,
which were relatively weak from April 4 through October 31, 2005.
The biggest market movements, however, were in commodity prices. Energy markets,
in particular, recorded large monthly gains and losses during the reporting
period, and at the end of October 2005 were slightly ahead of where they were on
April 4, 2005. The price swings were largely driven by sharply rising crude-oil
and natural-gas prices and by damage to U.S. oil refineries during a severe
hurricane season. The general increase in commodity prices was tempered somewhat
by a decline in food-based commodities, such as grains, livestock, and meat.
Precious metals saw healthy price increases, while prices declined for many base
metals.
The U.S. housing market, which advanced broadly over the past several years,
appeared to soften toward the end of the reporting period.
HOW DO YOU DETERMINE HOW TO ALLOCATE THE FUND'S PORTFOLIO AMONG THE UNDERLYING
FUNDS?
For the equity portion of MainStay Moderate Growth Allocation Fund, we forecast
expected returns for each Underlying Fund in our investable universe by
measuring the Underlying Fund on the basis of its holdings in stocks, bonds, or
both at a point in time. This forecast is driven by quantitative measures of the
companies and securities in which the Underlying Fund invests and by our
expectations of general economic factors and trends. The model combines risk and
return forecasts for each Underlying Fund and seeks to develop optimal
portfolios at risk levels consistent with the Fund's investment objective.
The five-year outperformance of value stocks over growth stocks seemed to have
reversed itself during the reporting period. With the market's focus shifting
toward growth and the U.S. economy providing fairly strong performance, we
favored Underlying Funds that invest primarily in growth stocks. As a hedge
against volatility and downside risk in an uncertain market, the Fund showed a
preference for larger-cap stocks. Given the strength of the U.S. economy
relative to foreign economies, we remained comfortable with a modestly
underweighted position in the Fund's allocation to Underlying Funds with
international exposure.
We also use quantitative methods to determine the Fund's fixed-income
allocation. Since as a category, fixed-income securities seek to provide
stability and principal protection, our model emphasizes measures that seek to
minimize downside risk under various possible market scenarios. These
"stress-tests" indicated that the fixed-income portion of the Fund would be best
allocated among four Underlying Fixed-Income Funds in proportions that reflected
the Fund's benchmark.
THE DISCLOSURE AND FOOTNOTES ON PAGE 269 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
www.MAINSTAYfunds.com 267
HOW DID THE UNDERLYING FUNDS PERFORM DURING THE REPORTING PERIOD?
In the equity portion of the Fund, the Underlying Fund with the highest total
return during the reporting period was MainStay All Cap Growth Fund. The
Underlying Fund's performance reflected the skill of the Underlying Fund's
portfolio managers and the return to favor of growth-oriented stocks. On the
basis of impact, which takes weightings and total returns into consideration,
the greatest positive contributor to performance during the reporting period was
MainStay Large Cap Growth Fund.
From a total-return perspective, the Fund's worst performing Underlying Stock
Fund was MainStay Small Cap Value Fund. The Underlying Fund's performance
reflected the shift in market focus away from value-oriented stocks and a shift
in the market's preference from smaller- to larger-capitalization companies. On
the basis of impact, which takes weightings and total returns into account, the
greatest negative contribution to the equity portion of the Fund during the
reporting period came from MainStay International Equity Fund, which
underperformed international stocks in general.
In the fixed-income portion of the Fund, the Underlying Fund with the highest
total return was MainStay High Yield Corporate Bond Fund. This Underlying Fund
was also the greatest positive contributor to the Fund's fixed-income
performance because the Underlying Fund outperformed high-yield securities in
general during the reporting period. This contribution reflected the skill of
the Underlying Fund's portfolio managers and, except during the latter part of
the reporting period, credit spreads that remained very tight compared to
higher-quality issues.
On the basis of total return, the Fund's worst-performing Underlying
Fixed-Income Fund was MainStay Short-Term Bond Fund. This was largely because of
successive moves by the Federal Reserve to raise short-term interest rates and
because long-term rates remained relatively stable. During the reporting period,
the greatest negative contribution to the fixed-income portion of the Fund came
from MainStay Floating Rate Fund.
AS OF OCTOBER 31, 2005, HOW WAS THE FUND ALLOCATED AMONG THE UNDERLYING FUNDS?
The Portfolio of Investments page of this annual report contains a more complete
description of the Fund's holdings as of October 31, 2005. The Portfolio of
Investments page shows the amount invested in each Underlying Fund and
summarizes the Fund's cash position at the end of the reporting period.
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 PAGE 269 ARE AN INTEGRAL PART OF THE PORTFOLIO
MANAGEMENT DISCUSSION AND ANALYSIS AND SHOULD BE CAREFULLY READ IN CONJUNCTION
WITH IT.
268 MainStay Moderate Growth Allocation Fund
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 these 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 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.
- - The principal risk of growth stocks is that investors expect growth companies
to increase their earnings at a certain rate that is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed
an absolute increase.
- - 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 Underlying 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.
INFORMATION ABOUT MAINSTAY MODERATE GROWTH ALLOCATION FUND ON THIS PAGE AND THE
PRECEDING PAGES HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 269
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2005
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES (98.5%)+
- ---------------------------------------------------------------------------
EQUITY FUNDS (79.7%)
MainStay All Cap Growth Fund (a) 210,976 $ 4,780,724
MainStay Common Stock Fund (a) 788,477 9,997,890
MainStay International Equity Fund 443,598 6,032,938
MainStay Large Cap Growth Fund (a) 1,306,408 6,963,157
MainStay MAP Fund 58,822 2,088,178
MainStay Mid Cap Growth Fund (a) 142,842 1,632,679
MainStay S&P 500 Index Fund 41,082 1,156,464
MainStay Small Cap Opportunity Fund 98,256 1,944,496
-----------
34,596,526
-----------
FIXED INCOME FUNDS (18.8%)
MainStay Floating Rate Fund 204,800 2,045,955
MainStay High Yield Corporate
Bond Fund 325,559 2,024,977
MainStay Indexed Bond Fund 322,765 3,450,357
MainStay Intermediate Term
Bond Fund 67,965 660,620
-----------
8,181,909
-----------
Total Affiliated Investments
(Cost $42,359,416) (b) 98.5% 42,778,435(c)
Cash and Other Assets,
Less Liabilities 1.5 649,104
--------- -----------
Net Assets 100.0% $43,427,539
========= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund net assets.
(a) Non-income producing security.
(b) The cost stated also represents the aggregate cost for federal income tax
purposes.
(c) At October 31, 2005 net unrealized appreciation was $419,019 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 $567,142 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $148,123.
</Table>
270 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 OCTOBER 31, 2005
<Table>
ASSETS:
Investment in affiliated investment companies,
at value
(identified cost $42,359,416) $42,778,435
Cash 262,811
Receivables:
Fund shares sold 687,942
Dividends and interest 36,540
Unamortized offering costs 20,271
Other assets 8,830
------------
Total assets 43,794,829
------------
LIABILITIES:
Payables:
Investment securities purchased 298,694
NYLIFE Distributors 19,953
Professional 17,374
Shareholder communication 11,579
Manager 9,484
Fund shares redeemed 4,562
Transfer agent 2,804
Custodian 1,218
Accrued expenses 1,622
------------
Total liabilities 367,290
------------
Net assets $43,427,539
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized:
Class A $ 2,162
Class B 1,675
Class C 321
Class I 1
Additional paid-in capital 42,929,949
Accumulated undistributed net investment income 56,775
Accumulated net realized gain on investments 17,637
Net unrealized appreciation on investments 419,019
------------
Net assets $43,427,539
============
CLASS A
Net assets applicable to outstanding shares $22,616,616
============
Shares of capital stock outstanding 2,161,513
============
Net asset value per share outstanding $ 10.46
Maximum sales charge (5.50% of offering price) 0.61
------------
Maximum offering price per share outstanding $ 11.07
============
CLASS B
Net assets applicable to outstanding shares $17,453,167
============
Shares of capital stock outstanding 1,675,254
============
Net asset value and offering price per share
outstanding $ 10.42
============
CLASS C
Net assets applicable to outstanding shares $ 3,347,282
============
Shares of capital stock outstanding 321,283
============
Net asset value and offering price per share
outstanding $ 10.42
============
CLASS I
Net assets applicable to outstanding shares $ 10,474
============
Shares of capital stock outstanding 1,000
============
Net asset value and offering price per share
outstanding $ 10.47
============
</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 271
STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 4, 2005 THROUGH OCTOBER 31, 2005
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from affiliated
investment companies $117,202
Interest 1,815
---------
Total income 119,017
---------
EXPENSES:
Offering 39,581
Distribution--Class B 33,050
Distribution--Class C 5,538
Professional 19,208
Distribution/Service--Class A 15,513
Service--Class B 11,017
Service--Class C 1,846
Shareholder communication 12,048
Registration 7,586
Transfer agent--Classes A, B and C 6,531
Custodian 3,744
Directors 486
Miscellaneous 1,943
---------
Total expenses before reimbursement 158,091
Expense reimbursement from Manager (56,268)
---------
Net expenses 101,823
---------
Net investment income 17,194
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on affiliated investment company
transactions 17,637
Net unrealized appreciation on investments 419,019
---------
Net realized and unrealized gain on investments 436,656
---------
Net increase in net assets resulting from
operations $453,850
=========
</Table>
272 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 OCTOBER 31, 2005
<Table>
<Caption>
2005
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 17,194
Net realized gain on investments 17,637
Net change in unrealized appreciation on
investments 419,019
-----------
Net increase in net assets resulting from
operations 453,850
-----------
Capital share transactions:
Net proceeds from sale of shares:
Class A 22,822,836
Class B 17,556,999
Class C 3,379,583
Class I 10,087
-----------
43,769,505
Cost of shares redeemed:
Class A (498,588)
Class B (240,874)
Class C (56,281)
Class I (73)
-----------
(795,816)
Increase in net assets derived from capital
share transactions 42,973,689
-----------
Net increase in net assets 43,427,539
NET ASSETS:
Beginning of period --
-----------
End of period $43,427,539
===========
Accumulated undistributed net investment income
at end of period $ 56,775
===========
</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 273
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2005 2005 2005
Net asset value at beginning of period $ 10.00 $ 10.00 $10.00 $10.00
----------- ----------- ----------- -----------
Net investment income (a) 0.03 (0.01) (0.01) 0.04
Net realized and unrealized gain on investments (b) 0.43 0.43 0.43 0.43
----------- ----------- ----------- -----------
Total from investment operations 0.46 0.42 0.42 0.47
----------- ----------- ----------- -----------
Net asset value at end of period $ 10.46 $ 10.42 $10.42 $10.47
=========== =========== =========== ===========
Total investment return (c) 4.60%(d) 4.20%(d) 4.20%(d) 4.70%(d)
Ratios (to average net assets)/Supplemental Data:
Net investment income 0.48%+ (0.27%)+ (0.27%)+ 0.79%+
Net expenses (e) 0.56%+ 1.31%+ 1.31% + 0.25%+
Expenses (before reimbursement) (e) 1.05%+ 1.80%+ 1.80% + 0.74%+
Portfolio turnover rate 2% 2% 2% 2%
Net assets at end of period (in 000's) $22,617 $17,453 $3,347 $ 10
</Table>
<Table>
* Commencement of operations.
+ Annualized.
(a) Per share data based on average outstanding shares during the period.
(b) The amount shown for a share outstanding does not correspond with aggregate net realized
and unrealized gain (loss) on investments due to the timing of purchases and redemptions
of Fund shares in relation to fluctuating market values of the investments of the Fund
during the period.
(c) Total return is calculated exclusive of sales charges. Class I is not subject to sales
charges.
(d) Total return is not annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly
bears a pro-rata share of the fees and expenses of the underlying funds in which it
invests. Such indirect expenses are not included in the above reported expense ratios.
</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.
NOTES TO FINANCIAL STATEMENTS
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
eighteen separate investment portfolios (collectively, referred as the "Funds"
and individually, referred to as a "Fund") are offered. These notes relate only
to the Funds listed below.
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>
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
- -----------------------------------------------------------
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 are offered without an initial
sales charge, although a declining contingent deferred sales charge may be
imposed on redemptions made within up to six years of purchase of Class B shares
(four years for Floating Rate) 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 L shares of Mid Cap Opportunity Fund, Small Cap Opportunity Fund, Asset
Manager 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 has 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.
The investment objective for each of the Funds is 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.
www.MAINSTAYfunds.com 275
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 BIG 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 Conservative Allocation, Growth Allocation, Moderate Allocation and Moderate
Growth Allocation Funds (collectively the "Asset Allocation Funds") operate as
"fund-of funds". The Asset Allocation Funds may invest in other Funds of the
Company and/or Trust as well as funds of The MainStay Funds Trust, a
Massachusetts business for which NYLIM also serves as manager ("underlying
funds").
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.
The Funds also invest in foreign securities which carry certain risks that are
in addition to the usual risks inherent in domestic instruments. These risks
include those resulting from currency fluctuations, future adverse political and
economic developments and possible imposition of currency exchange blockages or
other foreign governmental laws or restrictions. Foreign securities may also be
less liquid and more volatile than U.S. securities. There may also be difficulty
in invoking legal proceedings across borders. These risks are likely to be
greater in emerging markets than in developed markets.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Funds prepare their financial statements in accordance with accounting
principles generally accepted in the United States of America 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 electronic data processing techniques, as long as such
prices are deemed by the Fund's Manager to be representative of market values,
at the regular close of business of the New York Stock Exchange. Investments in
Underlying Funds are valued at their net asset value at the close of business
each day. Loans are valued at the average of bid quotations obtained from a
pricing service. Options contracts are valued at the last posted settlement
price on the market where such options are principally traded. Futures contracts
are valued at the last posted settlement price on the market where such futures
are principally traded. Foreign currency forward contracts are valued at their
fair market values determined on the basis of the mean between the last current
bid and asked prices based on dealer or exchange quotations. In determining the
Funds' daily NAV ("Net Asset Value") short-term debt instruments acquired with
more than 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. Short-term debt instruments maturing 60 days or less are
valued at amortized cost, which approximates market value. Pursuant to Rule 2a-7
of the Investment Company Act, securities of Cash Reserves Fund are valued at
their amortized cost, which approximates market value. Securities for which
market quotations are not readily available are valued by methods deemed in good
faith by the Funds' Board of Trustees/Directors 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. At
October 31, 2005, the Balanced Fund held securities with a value of $7,050 that
were valued in such manner.
Certain events 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. These events may include, but are not
276 MainStay Funds
limited to, situations relating to a single issue in a market sector,
significant fluctuations in U.S. or foreign markets, natural disasters, armed
conflicts, governmental actions or other developments not tied directly to the
securities markets. Should the Manager or Subadvisor conclude that such events
may have effected the accuracy of the last price reported on the local foreign
market, the Manager or Subadvisor may, pursuant to procedures adopted by the
Funds, 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 taxable income to the shareholders of each Fund
within the allowable time limits. By so doing, the Funds will be relieved from
all or substantially all of federal and state income and excise taxes.
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, Conservative Allocation, Growth Allocation, Moderate Allocation and
Moderate Growth Allocation Funds, 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 dividends,
substantially all of its net investment income at least once a year, as
distributions, and net realized capital gains no more than once a year.
Effective January 2, 2006, Asset Manager Fund (which will change its name to
Income Manager Fund) will declare and pay dividends quarterly. All dividends and
distributions are reinvested in shares of the Fund, at net asset value, unless
the shareholder elects otherwise. Income dividends and capital gain
distributions are determined in accordance with federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States of America. 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.
The following table discloses the current year reclassifications between
accumulated undistributed net investment income (loss), accumulated
undistributed net realized gain (loss) on investments and paid-in capital
arising from permanent differences; net assets at October 31, 2005 are not
affected.
<Table>
<Caption>
ACCUMULATED
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED NET REALIZED ADDITIONAL
NET INVESTMENT GAIN (LOSS) ON PAID-IN
INCOME (LOSS) INVESTMENTS CAPITAL
All Cap Growth Fund $ 1,147,966 $ -- $(1,147,966)
- -----------------------------------------------------------------------------
Mid Cap Opportunity Fund 160,429 (160,430) 1
- -----------------------------------------------------------------------------
S&P 500 Index Fund (2,805) 2,803 2
- -----------------------------------------------------------------------------
Small Cap Opportunity Fund 887,774 (989,319) 101,545
- -----------------------------------------------------------------------------
Floating Rate Fund (16,137) -- 16,137
- -----------------------------------------------------------------------------
Indexed Bond Fund 390,509 (390,509) --
- -----------------------------------------------------------------------------
Intermediate Term Bond Fund 64,918 (64,918) --
- -----------------------------------------------------------------------------
Short Term Bond Fund 13,579 178,565 (192,144)
- -----------------------------------------------------------------------------
Asset Manager Fund 150,102 (150,108) 6
- -----------------------------------------------------------------------------
Balanced Fund (3,611,020) 3,393,177 217,843
- -----------------------------------------------------------------------------
Conservative Allocation Fund 39,581 -- (39,581)
- -----------------------------------------------------------------------------
Growth Allocation Fund 51,251 (11,670) (39,581)
- -----------------------------------------------------------------------------
Moderate Allocation Fund 39,581 -- (39,581)
- -----------------------------------------------------------------------------
Moderate Growth Allocation
Fund 39,581 -- (39,581)
- -----------------------------------------------------------------------------
</Table>
The reclassifications for the Funds are primarily due to paydown gain (loss),
real estate investment trusts gain (loss), acquisition adjustments, foreign
currency gain (loss), reclassifications of distributions, the expiration of
capital loss carryforwards, premium amortization adjustments, excise tax
payments and net operating losses.
(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.
Dividends and distributions received by the Asset Allocation Funds from the
underlying funds are recorded on the ex-dividend date.
www.MAINSTAYfunds.com 277
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Discounts and premiums on securities, other than short-term securities,
purchased for the 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 pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses 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 transfer agent expenses and incurred under the
Shareholder Services Plans and the Distribution Plans) are allocated to separate
classes of shares pro rata based upon their relative net assets on the date the
expenses are incurred. The expenses borne by each Fund, including those of
related parties to the Funds, are shown on each Fund's Statement of Operations.
In addition, each Asset Allocation Fund bears a pro rata share of the fees and
expenses of the underlying funds in which they invest. Because the underlying
funds have varied expense and fee levels and the Asset Allocation Funds may own
different proportions of the underlying funds at different times, the amount of
fees and expenses incurred indirectly by each Asset Allocation Fund will vary.
(F) USE OF ESTIMATES. The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America
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, and unrealized appreciation and depreciation is recorded 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 cancelled in closing purchase transactions
are added to the proceeds or netted against the amount paid on the 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. A
Fund may purchase call options to protect against an increase in the price of
the security it anticipates purchasing. A Fund may purchase put options on its
securities to protect against a decline in the value of the security 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 held by the Fund and the prices of
options relating to the securities 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) LOAN 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, the Selling Participant and
any other persons interpositioned between the Fund and the Borrower
("Intermediate Participants"). In the event that the Borrower, Selling
Participant or Intermediate Participants becomes insolvent or enters into
bankruptcy, the Fund may incur certain costs and
278 MainStay Funds
delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the
borrower. At any point in time, up to the maturity date of the issue, the
borrower may demand the unfunded portion. These unfunded amounts are recorded in
memorandum accounts (see Note 6).
(I) FOREIGN CURRENCY FORWARD CONTRACTS. Certain Funds may enter into foreign
currency forward contracts which are agreements to buy or sell currencies of
different countries on a specified future date at a specified rate. 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. A Fund enters 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 a 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. Certain Funds may enter into futures contracts which are
agreements to purchase or sell a specified quantity of an underlying instrument
at a specified future date and price, or to make or receive a cash payment based
on the value of a 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. The use of futures contracts involves, to varying
degrees, elements of market risk in excess of the amount recognized in the
Statement of Assets and Liabilities. The contract or notional amounts and
variation margin reflect the extent of the Fund's involvement in open futures
positions. Risks arise from the possible imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged assets,
and the possible inability of counterparties to meet the terms of their
contracts. However, the Fund's activities in futures contracts are conducted
through regulated exchanges which minimize counterparty credit risks. Futures
contracts are used for hedging purposes or to seek to enhance returns (see Note
5).
(K) REPURCHASE AGREEMENTS. When a Fund invests in Repurchase Agreements, the
Fund's custodian takes possession of the collateral pledged for investments in
such repurchase agreements. The underlying collateral is valued daily on a
mark-to-market basis to determine that the value, including accrued interest,
exceeds the repurchase price. In the event of the seller's default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings.
(L) FOREIGN CURRENCY TRANSACTIONS. The books and records of the Funds are kept
in U.S. dollars. Prices of securities denominated in foreign currencies 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 are presented at the exchange rates and market values
at the close of the period. The realized and unrealized changes in net assets
arising from fluctuations in exchange rates and market prices of securities are
not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the Fund's books, and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing such foreign currency
denominated assets and liabilities, other than investments at valuation date
exchange rates, are reflected in unrealized foreign exchange gains or losses.
(M) 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
www.MAINSTAYfunds.com 279
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. During the roll period, a Fund
forgoes principal and interest paid on the securities. A Fund is compensated by
the difference between the current sales price and the forward price for the
future purchase as well as by the earnings on the cash proceeds of the initial
sale. MDRs may be renewed without physical delivery of the securities subject to
the contract. The Fund maintains 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. In order to realize additional income a 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 Funds may bear the risk of delay in recovery
of, or loss of rights in, the securities loaned should the borrower of the
securities experience financial difficulty. The Funds receive 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 Funds also continue to
receive interest and dividends on the securities loaned and any gain or loss in
the market price of the securities loaned that may occur during the term of the
loan will be for the account of the Funds. (See Note 7).
(O) RESTRICTED SECURITIES. Under certain conditions the Funds may purchase
restricted securities. A restricted security is a security which has been
purchased through a private offering and cannot be resold to the general public
without prior registration under the Securities Act of 1933 (the "1933 Act").
The Fund does not have the right to demand that such securities be registered.
Disposal of these securities may involve time-consuming negotiations and expense
and prompt sale at an acceptable price may be difficult. (See Note 7).
(P) REDEMPTION FEE. The Floating Rate Fund imposes 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 Floating Rate Fund for the year ended October 31, 2005 totaled $28,546.
(Q) OFFERING COSTS. Costs incurred by a Fund in connection with the
commencement of the Funds operations are being amortized on a strait line basis
over twelve months.
(R) INDEMNIFICATIONS. In the normal course of business the Funds enter into
contracts with third party service providers that contain a variety of
representations and warranties and which provide general indemnifications. The
Funds' maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Funds that have not yet
occurred. Based on experience, management is of the view that the risk of loss
in connection with these potential indemnification obligations is remote;
however, there can be no assurance that material liabilities related to such
obligations will not arise in the future that could adversely impact the Funds.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or
the "Manager"), an indirect wholly-owned subsidiary of New York Life Insurance
Company ("New York Life"), serves as the Funds' Manager. The Manager provides
offices, conducts clerical, recordkeeping and bookkeeping services, and keeps
the financial and accounting records required for the Funds. The Manager also
pays the salaries and expenses of all personnel affiliated with the Funds and
all the operational expenses that are not the responsibility of the Funds.
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
pursuant to a Sub-Advisory Agreement with the Manager.
Each Fund is contractually obligated to pay the Manager a monthly fee for the
services performed and facilities
280 MainStay Funds
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(1) .25%
- --------------------------------------------------------------
Small Cap Opportunity Fund 1.00%
- --------------------------------------------------------------
Cash Reserves Fund(2) .45%
- --------------------------------------------------------------
Floating Rate Fund .60%
- --------------------------------------------------------------
Indexed Bond Fund(3) .35%
- --------------------------------------------------------------
Intermediate Term Bond Fund(4) .60%
- --------------------------------------------------------------
Short Term Bond Fund .60%
- --------------------------------------------------------------
Asset Manager Fund .65%
- --------------------------------------------------------------
Balanced Fund(5) .75%
- --------------------------------------------------------------
Conservative Allocation Fund .00%
- --------------------------------------------------------------
Growth Allocation Fund .00%
- --------------------------------------------------------------
Moderate Allocation Fund .00%
- --------------------------------------------------------------
Moderate Growth Allocation Fund .00%
- --------------------------------------------------------------
</Table>
1. .25% on assets to $1 billion; .225% on next $2 billion; .20% on remainder of
assets. Prior to May 15, 2005, the Manager was paid .50%.
2. .45% on assets to $500 million; .40% on remainder of assets. Prior to May 15,
2005, the Manager was paid .50%.
3. The manager has contractually agreed to reduce the fee from 0.50% as follows:
.35% on assets to $1 billion; .30% on remainder of assets. Prior to May 15,
2005, the Manager had contractually agreed to reduce its fee to .40% from
.50%. In connection with these waivers, the Manager waived $366,337 of its
fee.
4. Prior to May 15, 2005, the Manager was paid .75%.
5. Effective May 15, 2005, .75% on assets to $1 billion; .73% on remainder of
assets.
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 entered into a written expense limitation agreement to waive a
portion of a Fund's management fee or reimburse a Fund so that each Fund's Class
I total ordinary expenses (excluding service fees and distribution fees) on an
annualized basis do not exceed the indicated percentages for its Class I shares.
An equivalent reduction will apply to Class A, Class B, Class C, Class R1 and
Class R2 shares as well as Sweep Class shares for the Cash Reserves Fund. These
expense limitations may be modified or terminated only with the approval of the
Board of Directors/Trustees. Prior to May 15, 2005, all expense limitations were
voluntary (except for the S&P 500 Index Fund) and could have been revised or
terminated at any time.
<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 .43%*
- --------------------------------------------------------------
Intermediate Term Bond Fund .70%*
- --------------------------------------------------------------
Short Term Bond Fund .60%
- --------------------------------------------------------------
Asset Manager Fund .94%*
- --------------------------------------------------------------
Balanced Fund .94%
- --------------------------------------------------------------
</Table>
* Prior to May 15, 2005, the expense limitations were .50%, .75% and .83% for
Indexed Bond Fund, Intermediate Term Bond Fund and Asset Manager Fund,
respectively.
The Manager, until October 31, 2005, has also contractually agreed to assume a
portion of a Fund's operating expenses for the following Funds so that each
Fund's Class I total ordinary expenses (excluding service fees and distribution
fees) on an annualized basis do not exceed the indicated percentages for its
Class I shares. An equivalent reduction will apply to Class A, Class B and Class
C shares:
<Table>
Conservative Allocation Fund .25%
- --------------------------------------------------------------
Growth Allocation Fund .25%
- --------------------------------------------------------------
Moderate Allocation Fund .25%
- --------------------------------------------------------------
Moderate Growth Allocation Fund .25%
- --------------------------------------------------------------
</Table>
For the year ended October 31, 2005 the accrual amounts for the contractual and
expense limitations described above are as follows:
<Table>
All Cap Growth Fund $ 123,402
- -------------------------------------------------------------
All Cap Value Fund 156,248
- -------------------------------------------------------------
Mid Cap Opportunity Fund 178,665
- -------------------------------------------------------------
S&P 500 Index Fund 2,020,606
- -------------------------------------------------------------
Cash Reserves Fund 431,544
- -------------------------------------------------------------
Indexed Bond Fund 528,248
- -------------------------------------------------------------
Intermediate Term Bond Fund 205,171
- -------------------------------------------------------------
Short Term Bond Fund 164,075
- -------------------------------------------------------------
Asset Manager Fund 288,200
- -------------------------------------------------------------
Balanced Fund 2,296
- -------------------------------------------------------------
Conservative Allocation Fund 64,895
- -------------------------------------------------------------
Growth Allocation Fund 67,081
- -------------------------------------------------------------
Moderate Allocation Fund 54,074
- -------------------------------------------------------------
Moderate Growth Allocation Fund 56,268
- -------------------------------------------------------------
</Table>
www.MAINSTAYfunds.com 281
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
It was not necessary for the Manager to reimburse the Small Cap Opportunity or
the Floating Rate Funds for expenses for the year ended October 31, 2005.
Effective May 15, 2005, the Manager has also entered into a written expense
limitation agreement, under which it agreed to reimburse the transfer agent
expense of Class A, B and C shares of the following Funds so that total ordinary
operating expenses of each Fund's Class A shares (excluding taxes, interest,
litigation, extraordinary expenses, brokerage and other transaction expenses
relating to the purchase or sale of portfolio securities) do not exceed the
following annualized percentages. The Manager will apply an equivalent
reimbursement, in an equal amount of basis points, to each Fund's Class B and C
shares. These expense limitations may be modified or terminated only with the
approval of the Board of Directors/Trustees.
<Table>
Mid Cap Opportunity Fund 1.35%
- --------------------------------------------------------------
Small Cap Opportunity Fund 1.70%
- --------------------------------------------------------------
Intermediate Term Bond Fund 1.10%
- --------------------------------------------------------------
Short Term Bond Fund .90%
- --------------------------------------------------------------
</Table>
For the year ended October 31, 2005 NYLIM reimbursed the Funds' as follows
pursuant to these expense limitations:
<Table>
Mid Cap Opportunity Fund $28,014
- -------------------------------------------------------------
Intermediate Term Bond Fund 25,051
- -------------------------------------------------------------
Short Term Bond Fund 7,001
- -------------------------------------------------------------
</Table>
It was not necessary for the Manager to reimburse the Small Cap Opportunity Fund
for transfer agent expenses for the year ended October 31, 2005.
Under these expense limitations, the Manager may recoup the amount of any
management fee waivers or expense reimbursements from a Fund (except for the
Conservative Allocation Fund, Growth Allocation Fund, Moderate Allocation Fund,
and Moderate Growth Allocation Fund) if such action does not cause the Fund to
exceed existing expense limitations and the recoupment is made within three
years after the year in which the Manager incurred the expense.
The amount of recoupment available at October 31, 2005 was as follows:
<Table>
<Caption>
AVAILABLE
AMOUNT THROUGH
All Cap Growth Fund $ 27,750 10/31/2008
- --------------------------------------------------------------
All Cap Value Fund 34,914 10/31/2008
- --------------------------------------------------------------
Mid Cap Opportunity Fund 128,658 10/31/2008
- --------------------------------------------------------------
S&P 500 Index Fund 13,575 10/31/2008
- --------------------------------------------------------------
Cash Reserves Fund 164,717 10/31/2008
- --------------------------------------------------------------
Indexed Bond Fund 89,759 10/31/2008
- --------------------------------------------------------------
Intermediate Term Bond Fund 39,854 10/31/2008
- --------------------------------------------------------------
Short-Term Bond Fund 76,647 10/31/2008
- --------------------------------------------------------------
Asset Manager Fund 1,664 10/31/2008
- --------------------------------------------------------------
</Table>
The Small Cap Opportunity, Floating Rate and Balanced Funds had no amount
available for recoupment at October 31, 2005.
(B) DISTRIBUTION AND SERVICE FEES. NYLIFE Distributors LLC (the "Distributor")
serves as the Funds' distributor and principal underwriter to the Funds. 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 as well as 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 Cash Reserves 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
282 MainStay Funds
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.
(C) SALES CHARGES. The Funds were advised by the Distributor that the amount of
sales charges retained on sales of Class A shares was $1,166,845 for the year
ended October 31, 2005. The Fund was also advised that the Distributor retained
contingent deferred sales charges on redemptions of Class A, Class B and Class C
shares of $193,617, $360,456 and $207,182, respectively, for the year ended
October 31, 2005.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC ("NYLIM Service"), an affiliate of NYLIM, is the Fund's
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 incurred by the Funds, for the year ended
October 31, 2005, were as follows:
<Table>
All Cap Growth Fund $ 177,808
- -------------------------------------------------------------
All Cap Value Fund 191,700
- -------------------------------------------------------------
Mid Cap Opportunity Fund 260,758
- -------------------------------------------------------------
S&P 500 Index Fund 603,086
- -------------------------------------------------------------
Small Cap Opportunity Fund 569,569
- -------------------------------------------------------------
Cash Reserves Fund 48,371
- -------------------------------------------------------------
Floating Rate Fund 406,464
- -------------------------------------------------------------
Indexed Bond Fund 87,323
- -------------------------------------------------------------
Intermediate Term Bond Fund 87,053
- -------------------------------------------------------------
Short Term Bond Fund 48,098
- -------------------------------------------------------------
Asset Manager Fund 698,774
- -------------------------------------------------------------
Balanced Fund 1,180,318
- -------------------------------------------------------------
Conservative Allocation Fund 6,550
- -------------------------------------------------------------
Growth Allocation Fund 6,614
- -------------------------------------------------------------
Moderate Allocation Fund 6,530
- -------------------------------------------------------------
Moderate Growth Allocation Fund 6,531
- -------------------------------------------------------------
</Table>
(E) INDEPENDENT DIRECTORS AND TRUSTEES FEES. As of October 31, 2005,
non-interested Directors and Trustees are paid an annual retainer of $62,000
plus reimbursement for travel and out-of-pocket expenses. As of October 31,
2005, 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.
(F) CAPITAL. At October 31, 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 $ 256,186,172 81.3%
- -----------------------------------------------------------------
All Cap Value Fund 91,475,315 65.0
- -----------------------------------------------------------------
Mid Cap Opportunity Fund 271,384 0.2
- -----------------------------------------------------------------
S&P 500 Index Fund 1,378,829,324 88.7
- -----------------------------------------------------------------
Small Cap Opportunity Fund 136,222,116 22.4
- -----------------------------------------------------------------
Cash Reserves Fund 164,220,514 32.6
- -----------------------------------------------------------------
Floating Rate Fund 46,140,878 6.2
- -----------------------------------------------------------------
Indexed Bond Fund 235,273,297 71.4
- -----------------------------------------------------------------
Intermediate Term Bond Fund 98,913,560 76.5
- -----------------------------------------------------------------
Short Term Bond Fund 72,885,258 79.0
- -----------------------------------------------------------------
Asset Manager Fund 227,945,932 64.2
- -----------------------------------------------------------------
Balanced Fund 268,391,094 25.0
- -----------------------------------------------------------------
Conservative Allocation Fund 256,134 1.0
- -----------------------------------------------------------------
Growth Allocation Fund 262,690 1.3
- -----------------------------------------------------------------
Moderate Allocation Fund 259,231 0.6
- -----------------------------------------------------------------
Moderate Growth Allocation Fund 261,440 0.6
- -----------------------------------------------------------------
</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.
(G) OTHER. Pursuant to the Management Agreement between the Funds and NYLIM,
the cost of legal services provided to the Funds are payable directly by the
Funds. For year ended October 31, 2005, these fees, which are included in
Professional fees shown on the Statement of Operations, were as follows:
<Table>
All Cap Growth Fund $18,241
- -------------------------------------------------------------
All Cap Value Fund 8,751
- -------------------------------------------------------------
Mid Cap Opportunity Fund 5,211
- -------------------------------------------------------------
S&P 500 Index Fund 92,087
- -------------------------------------------------------------
Small Cap Opportunity Fund 26,238
- -------------------------------------------------------------
Cash Reserves Fund 31,365
- -------------------------------------------------------------
Floating Rate Fund 38,134
- -------------------------------------------------------------
Indexed Bond Fund 16,059
- -------------------------------------------------------------
Intermediate Term Bond Fund 8,816
- -------------------------------------------------------------
Short Term Bond Fund 5,843
- -------------------------------------------------------------
Asset Manager Fund 21,435
- -------------------------------------------------------------
Balanced Fund 52,837
- -------------------------------------------------------------
Conservative Allocation Fund 613
- -------------------------------------------------------------
Growth Allocation Fund 489
- -------------------------------------------------------------
Moderate Allocation Fund 1,151
- -------------------------------------------------------------
Moderate Growth Allocation Fund 1,030
- -------------------------------------------------------------
</Table>
www.MAINSTAYfunds.com 283
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--FEDERAL INCOME TAXES:
As of October 31, 2005, the components of accumulated earnings on a tax basis
were as follows:
<Table>
<Caption>
ACCUMULATED OTHER UNREALIZED TOTAL
ORDINARY CAPITAL TEMPORARY APPRECIATION ACCUMULATED
INCOME GAINS (LOSSES) DIFFERENCES (DEPRECIATION) GAIN (LOSS)
All Cap Growth Fund $ -- $ (42,678,420) $ -- $ 82,563,712 $ 39,885,292
- -------------------------------------------------------------------------------------------------------------------------
All Cap Value Fund 1,123,798 (7,768,816) (18,413) 16,290,087 9,626,656
- -------------------------------------------------------------------------------------------------------------------------
Mid Cap Opportunity
Fund 2,433,598 3,728,140 -- 3,971,293 10,133,031
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 Index Fund 18,362,847 (31,516,953) 94,685 151,622,364 138,562,943
- -------------------------------------------------------------------------------------------------------------------------
Small Cap
Opportunity Fund 35,367,872 28,164,184 -- 30,889,664 94,421,720
- -------------------------------------------------------------------------------------------------------------------------
Cash Reserves Fund -- (3,497) -- -- (3,497)
- -------------------------------------------------------------------------------------------------------------------------
Floating Rate Fund 790,910 (3,394,736) (1,201,095) 919,864 (2,885,057)
- -------------------------------------------------------------------------------------------------------------------------
Indexed Bond Fund 82,276 (3,307,890) 20,499 (4,075,171) (7,280,286)
- -------------------------------------------------------------------------------------------------------------------------
Intermediate Term
Bond Fund 319,563 (8,591,092) (93,851) (1,400,581) (9,765,961)
- -------------------------------------------------------------------------------------------------------------------------
Short Term Bond Fund 45,669 (3,066,449) (138,553) (1,037,742) (4,197,075)
- -------------------------------------------------------------------------------------------------------------------------
Asset Manager Fund 5,637,042 (34,183,372) (95,786) 38,942,459 10,300,343
- -------------------------------------------------------------------------------------------------------------------------
Balanced Fund 18,081,448 33,164,107 -- 19,475,778 68,701,333
- -------------------------------------------------------------------------------------------------------------------------
Conservative
Allocation Fund 121,934 -- -- (81,133) 40,801
- -------------------------------------------------------------------------------------------------------------------------
Growth Allocation
Fund 131,065 -- -- 249,988 381,053
- -------------------------------------------------------------------------------------------------------------------------
Moderate Allocation
Fund 141,241 -- -- 159,260 300,501
- -------------------------------------------------------------------------------------------------------------------------
Moderate Growth
Allocation Fund 74,412 -- -- 419,019 493,431
- -------------------------------------------------------------------------------------------------------------------------
</Table>
At October 31, 2005, 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 $13,987
2010 17,488
2011 2,904
2012 8,299
- ------------------------------------------------------------
$42,678
- ------------------------------------------------------------
All Cap Value Fund 2010 $ 897
2011 6,872
- ------------------------------------------------------------
$ 7,769
- ------------------------------------------------------------
S&P 500 Index Fund 2010 $26,182
2013 5,335
- ------------------------------------------------------------
$31,517
- ------------------------------------------------------------
Cash Reserves Fund 2012 $ 3
2013 1
- ------------------------------------------------------------
$ 4
- ------------------------------------------------------------
Floating Rate Fund 2012 $ 229
2013 3,166
- ------------------------------------------------------------
$ 3,395
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
CAPITAL LOSS
AVAILABLE AMOUNT
THROUGH (000'S)
Indexed Bond Fund 2007 $ 1,410
2008 1,793
2009 105
- ------------------------------------------------------------
$ 3,308
- ------------------------------------------------------------
Intermediate Term Bond Fund 2007 $ 4,032
2008 3,661
2010 898
- ------------------------------------------------------------
$ 8,591
- ------------------------------------------------------------
Short Term Bond Fund 2006 $ 63
2007 572
2008 758
2009 159
2010 35
2011 --(a)
2012 296
2013 1,183
- ------------------------------------------------------------
$ 3,066
- ------------------------------------------------------------
Asset Manager Fund 2011 $34,183
- ------------------------------------------------------------
</Table>
(a) Less than one thousand.
The All Cap Growth, All Cap Value, Indexed Bond, Intermediate Term Bond and
Asset Manager Funds utilized
284 MainStay Funds
$10,156,504, $10,989,463, $210,127, $894,519 and $19,969,747, respectively, of
capital loss carryforwards during the year ended October 31, 2005. In addition,
the Short Term Bond Fund had $192,144 of capital loss carryforwards that
expired.
The Balanced Fund acquired $131,759 in capital loss carryforwards as a result of
acquisition of Strategic Value Fund. There is no limitation to the utilization
of this capital loss carryover.
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 years ended October 31, 2005 and 2004 represent 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>
2005 2004
----------------------------- -----------------------------
TAX-BASED TAX-BASED TAX-BASED TAX-BASED
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FROM FROM FROM FROM
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME GAINS INCOME GAINS
Mid Cap Opportunity $ 232,682 $ 1,159,326 $ -- $ 109,583
- ---------------------------------------------------------------------------------------------------------------------------
Small Cap Opportunity Fund 17,781,133 22,870,569 422,312 8,952,827
- ---------------------------------------------------------------------------------------------------------------------------
Cash Reserves Fund 10,727,700 -- 2,455,778 --
- ---------------------------------------------------------------------------------------------------------------------------
Balanced Fund 9,280,146 9,086,982 3,948,204 1,497,531
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
NOTE 5--FINANCIAL INSTRUMENTS:
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:
At October 31, 2005, the Floating Rate Fund had unfunded loan commitments
pursuant to the following loan agreements:
<Table>
<Caption>
UNFUNDED
BORROWER COMMITMENT
American Seafoods Group LLC, due 9/30/12 $ 181,717
- ------------------------------------------------------------------------------
Hanley Wood LLC, due 12/31/06 423,841
- ------------------------------------------------------------------------------
Warner Chilcott Corp., due 1/31/06 552,050
- ------------------------------------------------------------------------------
Warner Chilcott Corp., due 6/30/06 110,410
- ------------------------------------------------------------------------------
</Table>
Each of these commitments are available until the maturity date of the security.
www.MAINSTAYfunds.com 285
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--FUND SECURITIES LOANED, FOREIGN CURRENCY, FOREIGN CURRENCY FORWARD
CONTRACTS, WRITTEN OPTIONS AND RESTRICTED SECURITIES:
As of October 31, 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 $ 40,391,438 $ 41,479,939
- ---------------------------------------------------------------------------------
All Cap Value Fund 13,874,697 14,589,904
- ---------------------------------------------------------------------------------
Mid Cap Opportunity Fund 13,565,335 14,027,743
- ---------------------------------------------------------------------------------
S&P 500 Index Fund 115,816,857 119,640,748
- ---------------------------------------------------------------------------------
Small Cap Opportunity Fund 100,916,164 105,122,493
- ---------------------------------------------------------------------------------
Indexed Bond Fund 50,200,092 51,288,491
- ---------------------------------------------------------------------------------
Intermediate Term Bond Fund 2,257,699 2,309,675
- ---------------------------------------------------------------------------------
Short Term Bond Fund 3,238,018 3,325,050
- ---------------------------------------------------------------------------------
Asset Manager Fund 26,049,444 26,832,976
- ---------------------------------------------------------------------------------
Balanced Fund 61,269,902 63,289,642
- ---------------------------------------------------------------------------------
</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.
As of October 31, 2005, the Asset Manager Fund held the following currencies:
<Table>
<Caption>
CURRENCY COST VALUE
Canadian Dollar C$ 351,024 $ 293,065 $ 297,201
Euro E 842,192 1,029,516 1,009,325
Hong Kong Dollar HK$ 4,812,000 619,213 620,735
Pound Sterling L 92,571 164,064 163,851
- -------------------------------------------------------------------------------------
$2,105,858 $2,091,112
- -------------------------------------------------------------------------------------
</Table>
As of October 31, 2005, the Intermediate Term Bond Fund had the following open
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 1/6/06 E 9,100 $ 10,922 $ (23)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation on foreign currency forward contracts:
$ (23)
- -----------------------------------------------------------------------------------------------
</Table>
During the year ended October 31, 2005, the All Cap Growth and All Cap Value
Funds had the following transactions in Written Options:
<Table>
<Caption>
NUMBER OF
ALL CAP GROWTH FUND CONTRACTS PREMIUM
Options outstanding at October 31, 2004 0 $ 0
- -------------------------------------------------------------------------
Options--written (48) (9,696)
- -------------------------------------------------------------------------
Options--expired 48 9,696
- -------------------------------------------------------------------------
Options outstanding at October 31, 2005 0 $ 0
- -------------------------------------------------------------------------
</Table>
<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 October 31, 2005 0 $ 0
- -------------------------------------------------------------------------
</Table>
As of October 31, 2005, the Balanced Fund held restricted securities as follows:
<Table>
<Caption>
PRINCIPAL
DATE(S) OF AMOUNT/ 10/31/2005 PERCENTAGE OF
SECURITY ACQUISITION SHARES COST VALUE NET ASSETS
Skilled Healthcare Group, Inc.
Common Stock 3/1/05 27 $ 0(a) $ 432 0.0%(b)
- -----------------------------------------------------------------------------------------------------------------------
Globix Corp.
Common Stock 12/3/02 2,795 22 3,815 0.0(b)
- -----------------------------------------------------------------------------------------------------------------------
North Atlantic Trading Co., Inc.
Common Stock 4/21/04 130 1 1 0.0(b)
- -----------------------------------------------------------------------------------------------------------------------
MMH Holdings, Inc.
Common Stock 3/5/99-6/4/02 197 202 1,044 0.0(b)
- -----------------------------------------------------------------------------------------------------------------------
$225 $ 5,292 0.0%(b)
- -----------------------------------------------------------------------------------------------------------------------
</Table>
(a) Less than $0.50.
(b) Less than one tenth of a percent.
286 MainStay Funds
NOTE 8--FUND ACQUISITIONS:
(A) On February 11, 2005, Balanced Fund acquired the assets, including the
investments, and assumed the identified liabilities of Strategic Value Fund, a
series of the Mainstay Funds Trust.
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 were $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>
MainStay Strategic Value Fund's net assets after adjustments for any permanent
book-to-tax differences at the acquisition date were as follows, which include
the following amounts of capital stock, unrealized appreciation, accumulated net
realized loss and undistributed net investment loss:
<Table>
<Caption>
ACCUMULATED UNDISTRIBUTED
TOTAL NET UNREALIZED NET REALIZED NET INVESTMENT
ASSETS CAPITAL STOCK APPRECIATION LOSS LOSS
MainStay Strategic Value Fund $54,953,964 $49,992,302 $ 5,174,475 $ (211,049) $ (1,764)
- ------------------------------------------------------------------------------------------------------------------------------
</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>
www.MAINSTAYfunds.com 287
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, Intermediate Term Bond Fund (formerly Eclipse Bond
Fund) acquired the of the following: 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 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 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:
Investors Bank & Trust Company is the 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 the Fund and the number of certain cash
transactions incurred by each Fund. Formerly, The Bank of New York acted as
custodian.
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 year
ended October 31, 2005.
288 MainStay Funds
This page intentionally left blank
www.MAINSTAYfunds.com 289
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--PURCHASE AND SALES OF SECURITIES (IN 000'S):
During the year ended October 31, 2005, purchase 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 $ -- $ -- $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------
All Others 89,588 91,856 53,633 55,180 186,735 114,090
- --------------------------------------------------------------------------------------------
Total $89,588 $91,856 $53,633 $55,180 $186,735 $114,090
- --------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INTERMEDIATE TERM ASSET MANAGER
BOND FUND SHORT TERM BOND FUND FUND
-------------------- -------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government $225,825 $234,737 $140,487 $130,942 $106,400 $105,481
- ----------------------------------------------------------------------------------------------
All Others 34,285 61,795 -- 12,758 208,365 204,119
- ----------------------------------------------------------------------------------------------
Total $260,110 $296,532 $140,487 $143,700 $314,765 $309,600
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MODERATE GROWTH
ALLOCATION FUND
-----------------
PURCHASES SALES
U.S. Government $ -- $ --
- ---------------------------------------------------------------------------------------
All Others 41,905 347
- ---------------------------------------------------------------------------------------
Total $41,905 $347
- ---------------------------------------------------------------------------------------
</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
------- ------- ------- ------- ------- ------- -------
JANUARY 2, 2004*
YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004
Shares sold 411 301 89 1,811 786 198 31
- ---------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
411 301 89 1,811 786 198 31
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (449) (50) (12) (2,494) (92) (8) (2)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) (38) 251 77 (683) 694 190 29
- ---------------------------------------------------------------------------------------------------------
<Caption>
ALL CAP GROWTH FUND
-----------------------------------
CLASS I SERVICE CLASS+
---------------- ----------------
NOVEMBER 1, 2003
YEAR ENDED THROUGH
OCTOBER 31, 2004 JANUARY 9, 2004
Shares sold 1,736 20
- -------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions -- --
- -------------------------------------------------------------------------
1,736 20
- -------------------------------------------------------------------------
Shares redeemed (6,663) (602)
- -------------------------------------------------------------------------
Net increase (decrease) (4,927) (582)
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MID CAP OPPORTUNITY FUND
-------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- -------
JANUARY 2, 2004*
YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004
Shares sold 1,468 820 732 405 298 259 220
- ----------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions 10 10 7 22 -- -- --(a)
- ----------------------------------------------------------------------------------------------------------
1,478 830 739 427 298 259 220
- ----------------------------------------------------------------------------------------------------------
Shares redeemed (139) (100) (66) (324) (18) (10) (6)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,339 730 673 103 280 249 214
- ----------------------------------------------------------------------------------------------------------
<Caption>
MID CAP OPPORTUNITY FUND
-----------------------------------
CLASS I SERVICE CLASS+
---------------- ----------------
NOVEMBER 1, 2003
YEAR ENDED THROUGH
OCTOBER 31, 2004 JANUARY 9, 2004
Shares sold 398 1
- --------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions 5 --(a)
- --------------------------------------------------------------------------
403 1
- --------------------------------------------------------------------------
Shares redeemed (266) (1)
- --------------------------------------------------------------------------
Net increase (decrease) 137 --(a)
- --------------------------------------------------------------------------
</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
INDEX FUND OPPORTUNITY FUND FUND BOND FUND
------------------- -------------------- ------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
$ -- $ -- $ -- $ -- $ -- $ -- $514,632 $432,179
- -------------------------------------------------------------------------------------------
320,998 78,486 940,597 633,623 554,458 69,608 35,724 10,599
- -------------------------------------------------------------------------------------------
$320,998 $78,486 $940,597 $633,623 $554,458 $69,608 $550,356 $442,778
- -------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
BALANCED CONSERVATIVE GROWTH
FUND ALLOCATION FUND ALLOCATION FUND MODERATE ALLOCATION FUND
--------------------- ----------------- ------------------ -------------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
$ -- $ 875 $ -- $ -- $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------
1,327,440 729,286 25,159 412 21,192 2,207 45,783 485
- ----------------------------------------------------------------------------------------------
$1,327,440 $730,161 $25,159 $412 $21,192 $2,207 $45,783 $485
- ----------------------------------------------------------------------------------------------
</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
YEAR ENDED THROUGH YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2004 JANUARY 9, 2004
383 344 72 1,310 842 315 83 1,925 37
- -------------------------------------------------------------------------------------------------------------
6 1 -- 97 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------
389 345 72 1,407 842 315 83 2,097 41
- -------------------------------------------------------------------------------------------------------------
(186) (73) (20) (2,094) (99) (9) (11) (7,122) (521)
- -------------------------------------------------------------------------------------------------------------
203 272 52 (687) 743 306 72 (5,025) (480)
- -------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
S&P 500 INDEX FUND SMALL CAP OPPORTUNITY FUND
--------------------------------------------------------------------- -------------------------------------
CLASS A CLASS I CLASS A CLASS I SERVICE CLASS+ CLASS A CLASS B CLASS C CLASS I
------- ------- ---------------- ----------- ---------------- ------- ------- ------- -------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
YEAR ENDED THROUGH OCTOBER 31, THROUGH YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 2004 JANUARY 9, 2004 OCTOBER 31, 2005
4,823 16,052 13,266 12,887 652 9,644 1,764 2,342 8,155
- -----------------------------------------------------------------------------------------------------------------
124 588 -- 382 81 206 164 49 1,634
- -----------------------------------------------------------------------------------------------------------------
4,947 16,640 13,266 13,269 733 9,850 1,928 2,391 9,789
- -----------------------------------------------------------------------------------------------------------------
(4,578) (9,684) (2,530) (7,821) (8,845) (1,245) (211) (173) (4,157)
- -----------------------------------------------------------------------------------------------------------------
369 6,956 10,736 5,448 (8,112) 8,605 1,717 2,218 5,632
- -----------------------------------------------------------------------------------------------------------------
<Caption>
SMALL CAP OPPORTUNITY FUND
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ----------------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
THROUGH OCTOBER 31, THROUGH
OCTOBER 31, 2004 2004 JANUARY 9, 2004
1,473 874 311 6,894 9
- -------------------------------------------------------------
--(a) -- --(a) 538 4
- -------------------------------------------------------------
1,473 874 311 7,432 13
- -------------------------------------------------------------
(148) (63) (11) (7,065) (79)
- -------------------------------------------------------------
1,325 811 300 367 (66)
- -------------------------------------------------------------
</Table>
www.MAINSTAYfunds.com 291
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CAPITAL SHARE TRANSACTIONS (IN 000'S) (CONTINUED):
<Table>
<Caption>
CASH RESERVE FUND
--------------------------------------------------------------------------------
CLASS I SWEEP SHARES CLASS CLASS I SWEEP SHARES CLASS SERVICE CLASS+
-------- ------------------ -------- ------------------ ----------------
NOVEMBER 1, 2003
YEAR ENDED YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004 JANUARY 9, 2004
Shares sold 625,554 283,633 506,073 136,262 2,796
- ---------------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends and
distributions 5,646 5,082 1,742 544 6
- ---------------------------------------------------------------------------------------------------------------------------------
631,200 288,715 507,815 136,806 2,802
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (645,555) (278,490) (482,326) (148,842) (20,300)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (14,355) 10,225 25,489 (12,036) (17,498)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
INTERMEDIATE TERM BOND FUND
-------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- -------
JANUARY 2, 2004*
YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004
Shares sold 380 275 140 1,933 948 313 114
- ---------------------------------------------------------------------------------------------------------
Shares issued in connection with
acquisition of Core Bond Plus or
Ultra Short Duration Fund (b) -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of
dividends and distributions 23 8 3 401 15 3 1
- ---------------------------------------------------------------------------------------------------------
403 283 143 2,334 963 316 115
- ---------------------------------------------------------------------------------------------------------
Shares redeemed (384) (109) (61) (5,955) (153) (42) (21)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) 19 174 82 (3,621) 810 274 94
- ---------------------------------------------------------------------------------------------------------
<Caption>
INTERMEDIATE TERM BOND FUND
-----------------------------------
CLASS I SERVICE CLASS+
---------------- ----------------
NOVEMBER 1, 2003
YEAR ENDED THROUGH
OCTOBER 31, 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>
BALANCED FUND
---------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS R1 CLASS R2 CLASS A CLASS B CLASS C CLASS I
------- ------- ------- ------- -------- -------- ------- ------- ------- -------
JANUARY 2, 2004* YEAR ENDED
YEAR ENDED THROUGH OCTOBER 31,
OCTOBER 31, 2005 OCTOBER 31, 2004 2004
Shares sold 8,053 4,414 4,412 4,686 2,002 3,078 4,783 2,597 1,184 4,080
- --------------------------------------------------------------------------------------------------------------------------------
Share issued in connection
with acquisition of
Strategic Value Fund (b) 593 1,401 60 -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of dividends
and distributions 157 75 32 269 65 37 18 4 2 172
- --------------------------------------------------------------------------------------------------------------------------------
8,803 5,890 4,504 4,955 2,067 3,115 4,801 2,601 1,186 4,252
- --------------------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,630) (693) (393) (2,033) (388) (1,242) (543) (120) (46) (3,293)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 7,173 5,197 4,111 2,922 1,679 1,873 4,258 2,481 1,140 959
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
BALANCED FUND
--------------------------------------
CLASS R1 CLASS R2 SERVICE CLASS+
-------- -------- ----------------
NOVEMBER 1, 2003
THROUGH
JANUARY 9, 2004
Shares sold 1,255 933 222
- --------------------------------------------------------------------
Share issued in connection
with acquisition of
Strategic Value Fund (b) -- -- --
- --------------------------------------------------------------------
Shares issued in
reinvestment of dividends
and distributions 4 2 15
- --------------------------------------------------------------------
1,259 935 237
- --------------------------------------------------------------------
Shares redeemed (64) (174) (1,033)
- --------------------------------------------------------------------
Net increase (decrease) 1,195 761 (796)
- --------------------------------------------------------------------
</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>
FLOATING RATE FUND INDEXED BOND FUND
----------------------------------------------------------------------------- ------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I CLASS A CLASS I CLASS A
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ----------------
MAY 3, 2004* JANUARY 2, 2004*
YEAR ENDED THROUGH YEAR ENDED THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
44,145 4,013 12,798 744 26,911 4,259 8,981 228 3,351 9,555 6,085
- ------------------------------------------------------------------------------------------------------------------------
933 140 280 18 130 27 38 2 206 925 98
- ------------------------------------------------------------------------------------------------------------------------
45,078 4,153 13,078 762 27,041 4,286 9,019 230 3,557 10,480 6,183
- ------------------------------------------------------------------------------------------------------------------------
(19,862) (1,739) (4,814) (62) (1,615) (475) (467) (1) (1,877) (4,488) (1,840)
- ------------------------------------------------------------------------------------------------------------------------
25,216 2,414 8,264 700 25,426 3,811 8,552 229 1,680 5,992 4,343
- ------------------------------------------------------------------------------------------------------------------------
<Caption>
INDEXED BOND FUND
------------------------------------
CLASS I SERVICE CLASS+
---------------- -----------------
NOVEMBER 1, 2003
YEAR ENDED THROUGH
OCTOBER 31, 2004 JANUARY 9, 2004
5,664 466
- -----------------------------------------
577 14
- -----------------------------------------
6,241 480
- -----------------------------------------
(4,342) (3,312)
- -----------------------------------------
1,899 (2,832)
- -----------------------------------------
</Table>
<Table>
<Caption>
SHORT TERM BOND FUND ASSET MANAGER FUND
--------------------------------------------------------------------- -------------------------------------
CLASS A CLASS I CLASS A CLASS I SERVICE CLASS+ CLASS A CLASS B CLASS C CLASS I
------- ------- ---------------- ----------- ---------------- ------- ------- ------- -------
YEAR ENDED JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
OCTOBER 31, THROUGH OCTOBER 31, THROUGH YEAR ENDED
2005 OCTOBER 31, 2004 2004 JANUARY 9, 2004 OCTOBER 31, 2005
352 878 2,158 2,000 25 2,069 1,305 295 2,327
- -----------------------------------------------------------------------------------------------------------------
-- -- 23 7,984 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
12 110 10 100 --(a) 65 20 3 267
- -----------------------------------------------------------------------------------------------------------------
364 988 2,191 10,084 25 2,134 1,325 298 2,594
- -----------------------------------------------------------------------------------------------------------------
(254) (1,787) (1,628) (3,598) (84) (1,009) (297) (103) (3,241)
- -----------------------------------------------------------------------------------------------------------------
110 (799) 563 6,486 (59) 1,125 1,028 195 (647)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
ASSET MANAGER FUND
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I SERVICE CLASS+
------- ------- ------- ------- ----------------
JANUARY 2, 2004* YEAR ENDED NOVEMBER 1, 2003
THROUGH OCTOBER 31, THROUGH
OCTOBER 31, 2004 2004 JANUARY 9, 2004
5,079 1,655 268 2,819 72
- -------------------------------------------------------------
-- -- -- -- --
- -------------------------------------------------------------
-- -- --(a) 437 53
- -------------------------------------------------------------
5,079 1,655 268 3,256 125
- -------------------------------------------------------------
(676) (53) (15) (6,750) (3,132)
- -------------------------------------------------------------
4,403 1,602 253 (3,494) (3,007)
- -------------------------------------------------------------
</Table>
<Table>
<Caption>
CONSERVATIVE ALLOCATION FUND GROWTH ALLOCATION FUND MODERATE ALLOCATION FUND
------------------------------------- ------------------------------------- -------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
APRIL 4, 2005* APRIL 4, 2005* APRIL 4, 2005*
THROUGH THROUGH THROUGH
OCTOBER 31, 2005 OCTOBER 31, 2005 OCTOBER 31, 2005
1,339 920 291 1 1,034 785 93 1 2,445 1,954 292 1
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
4 2 -- -- -- -- -- -- 4 1 -- --
- -------------------------------------------------------------------------------------------------------------------------
1,343 922 291 1 1,034 785 93 1 2,449 1,955 292 1
- -------------------------------------------------------------------------------------------------------------------------
(34) (28) (6) -- (15) (7) (7) -- (123) (48) (6) --
- -------------------------------------------------------------------------------------------------------------------------
1,309 894 285 1 1,019 778 86 1 2,326 1,907 286 1
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
MODERATE GROWTH ALLOCATION FUND
-------------------------------------
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
APRIL 4, 2005*
THROUGH
OCTOBER 31, 2005
2,209 1,698 327 1
- ------------------------------------------
- ------------------------------------------
-- -- -- --
- ------------------------------------------
2,209 1,698 327 1
- ------------------------------------------
(47) (23) (5) --
- ------------------------------------------
2,162 1,675 322 1
- ------------------------------------------
</Table>
www.MAINSTAYfunds.com 293
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--SUBSEQUENT EVENT:
On November 4, 2005, the MainStay Growth Equity Fund, a series of Eclipse Funds
Inc. commenced operations.
NOTE 14--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 and completed 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.
In a separate matter, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Eclipse Funds Inc. and the Board of Trustees and Shareholders of
Eclipse Funds:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Eclipse Funds Inc., comprising the MainStay
All Cap Growth, MainStay All Cap Value, MainStay S&P 500 Index, MainStay Cash
Reserves, MainStay Floating Rate, MainStay Indexed Bond, MainStay Intermediate
Term Bond, MainStay Short Term Bond, MainStay Asset Manager, MainStay
Conservative Allocation, MainStay Growth Allocation, MainStay Moderate
Allocation and MainStay Moderate Growth Allocation Funds, and Eclipse Funds,
comprising the MainStay Mid Cap Opportunity, MainStay Small Cap Opportunity and
MainStay Balanced Funds, (each a "Fund" and collectively, the "Funds"), as of
October 31, 2005, and the related statements of operations for the year or
period then ended, the statements of changes in net assets for each of the years
or periods in the two-year period then ended, and the financial highlights for
each of the years or periods in the three-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the periods presented through October 31, 2002 were audited by
other auditors, whose report dated December 17, 2002, expressed an unqualified
opinion thereon.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2005, by correspondence with custodians and
brokers. As to securities purchased or sold but not yet received or delivered,
we performed other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios constituting the Funds as of October 31, 2005, the results of
their operations for the year or period then ended, the changes in their net
assets for each of the years or periods in the two-year period then ended, and
the financial highlights for each of the years or periods in the three-year
period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
Philadelphia, Pennsylvania
December 23, 2005
www.MAINSTAYfunds.com 295
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.
The Statements of Additional Information applicable to the Funds include
additional information about the Board Members and is available, without charge,
upon request, by calling 1-800-MAINSTAY (1-800-624-6782).
<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 FIVE YEARS BOARD MEMBER BOARD MEMBER
---------------------------------------------------------------------------------------------------------------------
LAWRENCE GLACKEN Director since Retired. 18 None
10/22/27 1991 and Trustee
since 2000
---------------------------------------------------------------------------------------------------------------------
PETER MEENAN(1) Director and Consultant; President and Chief Executive 18 Trustee, The
12/5/41 Trustee since Officer of Babson-United, Inc. (2000 to 2004); Vantagepoint
2002 Head of Global Funds, Citicorp (1995 to 1999). Funds.
---------------------------------------------------------------------------------------------------------------------
ROBERT P. Director since Retired. 18 None
MULHEARN 1991 and Trustee
3/11/47 since 2000
---------------------------------------------------------------------------------------------------------------------
SUSAN B. Director since President, Strategic Management Advisors LLC. 18 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 FIVE YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
ROBERT A. Chief Legal Senior Managing Director, General Counsel, and 64 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., and McMorgan Funds;
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).
-------------------------------------------------------------------------------------------------------------------------
ARPHIELA Treasurer and Director and Manager of Fund Accounting and 64 None
ARIZMENDI Principal Administration, New York Life Investment
10/26/56 Financial and Management LLC (since March 2003); Treasurer
Accounting and Principal Financial and Accounting
Officer since Officer, The MainStay Funds, MainStay VP
2005 Series Fund, Inc., and McMorgan Funds (since
December 2005); Assistant Treasurer, The
MainStay Funds, Eclipse Funds, Eclipse Funds
Inc., MainStay VP Series Fund, Inc. and
McMorgan Funds (1992 to December 2005).
-------------------------------------------------------------------------------------------------------------------------
</Table>
1. Mr. Meenan has been appointed Chairman of the Audit Committee.
2. Ms. Kerley has been designated the Lead Independent Trustee/Director.
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 FIVE YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
CHRISTOPHER O. President since Executive Vice President, New York Life 37 None
BLUNT 2005 Investment Management LLC and New York Life
5/13/62 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 (1999 to 2001); President, Mercury
Funds Distributors (1999 to 2001).
-------------------------------------------------------------------------------------------------------------------------
PATRICK G. BOYLE Executive Vice Executive Vice President, New York Life 18 New York Life
11/24/53 President since Investment Management LLC (including Trust Company;
2003 predecessor advisory organizations) (2002 to Madison Capital
present); Senior Managing Director, New York Funding LLC.
Life Investment Management 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 18 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).
-------------------------------------------------------------------------------------------------------------------------
SCOTT T. Vice President-- Director, New York Life Investment Management 58 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 58 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 58 None
MORRISON 2004 Counsel, New York Life Investment Management
3/26/56 LLC (since June 2004); Managing Director and
Secretary, NYLIFE Distributors LLC; Secretary,
The MainStay Funds and MainStay VP Series
Fund, Inc.; Chief Legal Officer--Mutual Funds
and Vice President and Corporate Counsel, The
Prudential Insurance Company of America (2000
to June 2004).
-------------------------------------------------------------------------------------------------------------------------
</Table>
www.MAINSTAYfunds.com 297
<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 FIVE YEARS OVERSEEN BY OFFICER HELD BY OFFICER
-------------------------------------------------------------------------------------------------------------------------
GARY E. Chief Executive Chief Executive Officer, Chairman, and 58 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;
Executive Vice President and Manager, NYLIFE
LLC; Chairman, McMorgan & Company LLC, Madison
Capital Funding LLC, and 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.; (21 portfolios); Chairman, Chief
Executive Officer, and Trustee, The MainStay
Funds (19 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 58 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>
298 MainStay Funds
FEDERAL INCOME TAX INFORMATION -- UNAUDITED
The Funds are required by the Internal Revenue Code to advise shareholders
within 60 days of the Funds' fiscal year end (October 31, 2005) as to the
federal tax status of dividends paid by the Funds during such fiscal year.
Accordingly, the following Funds paid long-term capital gain distributions of:
<Table>
<Caption>
Mid Cap Opportunity Fund $ 1,159,326
- ----------------------------------------------------------
Small Cap Opportunity Fund $22,870,569
- ----------------------------------------------------------
Balanced Fund $ 9,086,982
- ----------------------------------------------------------
</Table>
A portion of the dividends paid by the following Funds during the fiscal year
ended October 31, 2005 which are not designated as capital gain distributions
should be multiplied by the following percentages to arrive at the amount
eligible for qualified dividend income and for the corporate dividend-received
deduction.
<Table>
<Caption>
QDI% DRD%
All Cap Value 98.1% 98.3%
- ------------------------------------------------------------
Mid Cap Opportunity 11.3 84.5
- ------------------------------------------------------------
S&P 500 Index 100.0 100.0
- ------------------------------------------------------------
Small Cap Opportunity 9.5 9.6
- ------------------------------------------------------------
Asset Manager 60.9 61.8
- ------------------------------------------------------------
Balanced 22.5 27.8
- ------------------------------------------------------------
</Table>
In January 2006, shareholders will receive an IRS Form 1099-DIV or substitute
Form 1099, as to the federal tax status of the distributions received by
shareholders in calendar year 2005. The amounts that will be reported on such
1099-DIV will be the amounts you are to use on your federal income tax return
and will differ from the amounts which we must report for the Funds' fiscal year
end October 31, 2005.
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.
INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
www.MAINSTAYfunds.com 299
This page intentionally left blank
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay All Cap Growth Fund
MainStay All Cap Value Fund
MainStay Capital Appreciation Fund
MainStay Common Stock Fund
MainStay Equity Index Fund(1)
MainStay Growth Equity Fund(2)
MainStay Large Cap Growth Fund
MainStay Large Cap Opportunity Fund(3)
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(4)
New York, 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. Commenced operations as of November 4, 2005. Offered only to residents of
Connecticut, New Jersey, and New York.
3. Offered only to residents of Connecticut, New Jersey, and New York.
4. 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-AO8110 (RECYCLE LOGO) MS473-05 MS11g-12/05
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the Registrant has
adopted a code of ethics (the "Code") that applies to the Registrant's principal
executive officer ("PEO") and principal financial officer ("PFO"). The Code was
amended during the period covered by the report to designate new individuals as
the PEO and PFO; a copy of the amended Code is filed herewith. The Registrant
did not grant any waivers, including implicit waivers, from any provisions of
the Code to the PEO or PFO during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has at least one
audit committee financial expert serving on its Audit Committee. The Audit
Committee financial expert is Peter Meenan. Mr. Meenan is "independent" within
the meaning of that term under the Investment Company Act of 1940.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for the fiscal year ended October 31, 2005 for
professional services rendered by KPMG LLP ("KPMG") for the audit of the
Registrant's annual financial statements or services that are normally provided
by KPMG in connection with statutory and regulatory filings or engagements for
that fiscal year were $83,575. The aggregate fees billed for the fiscal period
ended October 31, 2004 for professional services rendered by KPMG for the audit
of the Registrant's annual financial statements or services that were normally
provided by the KPMG in connection with the statutory and regulatory filings or
engagements for that fiscal year were $72,383.
(b) Audit Related Fees
The aggregate fees billed for the fiscal year ended October 31, 2005 for
assurance and related services by KPMG that are reasonably related to the
performance of the audit of the Registrant's financial statements and are not
reported under paragraph (a) of this Item were $0. The aggregate fees billed for
the fiscal year ended October 31, 2004 for assurance and related services by
KPMG that are reasonably related to the performance of the audit of the
Registrant's financial statements and are not reported under paragraph (a) of
this Item were $7,500. These audit-related services include review of financial
highlights for the Registrant's registration statements and issuance of consents
to use KPMG's reports.
(c) Tax Fees
The aggregate fees billed for professional services rendered by KPMG for tax
compliance, tax advice, and tax planning were (i) $9,500 during the fiscal year
ended October 31, 2005, and (ii) $19,250, during the fiscal year ended October
31, 2004. The aggregate fees billed for professional services rendered by the
Registrant's predecessor auditor for tax compliance, tax advice, and tax
planning were $1,500 during the fiscal year ended October 31, 2005. These
services included preparation of and advice relating to federal, state and local
income tax returns and excise tax returns, as well as services relating to
excise tax distribution requirements.
(d) All Other Fees
The aggregate fees billed for the fiscal year ended October 31, 2005 for
products and services provided by KPMG, other than the services reported in
paragraphs (a) through (c) of this Item were $0. The aggregate fees billed
for the fiscal year ended October 31, 2004 for products and services provided by
KPMG, other than the services reported in paragraphs (a) through (c) of this
Item were $0.
(e) Pre-Approval Policies and Procedures
(1) The Registrant's Audit Committee has adopted pre-approval policies and
procedures (the "Procedures") to govern the Committee's pre-approval of (i)
all audit services and permissible non-audit services to be provided to the
Registrant by its independent accountant, and (ii) all permissible
non-audit services to be provided by such independent accountant to the
Registrant's investment adviser and to any entity controlling, controlled
by or under common control with the investment adviser that provides
ongoing services to the Registrant (collectively, the "Service Affiliates")
if the services directly relate to the Registrant's operations and
financial reporting. In accordance with the Procedures, the Audit Committee
is responsible for the engagement of the independent accountant to certify
the Registrant's financial statements for each fiscal year. With respect to
the pre-approval of non-audit services provided to the Registrant and its
Service Affiliates, the Procedures provide that the Audit Committee may
annually pre-approve a list of the types of services that may be provided
to the Registrant or its Service Affiliates, or the Audit Committee may
pre-approve such services on a project-by-project basis as they arise.
Unless a type of service has received general pre-approval, it will require
specific pre-approval by the Audit Committee if it is to be provided by the
independent accountant. The Procedures also permit the Audit Committee to
delegate authority to one or more of its members to pre-approve any
proposed non-audit services that have not been previously pre-approved by
the Audit Committee, subject to the ratification by the full Audit
Committee no later than its next scheduled meeting. To date, the Audit
Committee has not delegated such authority.
(2) With respect to the services described in paragraphs (b) through (d) of
this Item 4, no amount was approved by the Audit Committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None of the hours expended on KPMG's engagement to audit the Registrant's
financial statements for the most recent fiscal year were attributed to work
performed by persons other than KPMG's full-time, permanent employees.
(g) All non-audit fees billed by KPMG for services rendered to the Registrant
for the fiscal years ended October 31, 2005 and October 31, 2004 are disclosed
in 4(b)-(d) above.
The aggregate non-audit fees billed by KPMG for services rendered to the
Registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant for
each of the last two fiscal years of the Registrant were approximately $15,000
for 2005 and $0 for 2004.
(h) The Registrant's Audit Committee of the Board of Trustees has considered
whether the provision of non-audit services that were rendered to the
Registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining KPMG's independence.
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, summarized and
reported by the Filing Date, including ensuring that information required to be
disclosed in the Report is accumulated and communicated to the Registrant's
management, including the Registrant's principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940
that occurred during the second fiscal quarter of the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ECLIPSE FUNDS
By: /s/ Christopher O. Blunt
---------------------------------
CHRISTOPHER O. BLUNT
President
Date: January 6, 2006
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/ Christopher O. Blunt
---------------------------------
CHRISTOPHER O. BLUNT
President
Date: January 6, 2006
By: /s/ Arphiela Arizmendi
---------------------------------
ARPHIELA ARIZMENDI
Treasurer and Principal Financial
and Accounting Officer
Date: January 6, 2006
EXHIBIT INDEX
(a)(1) Code of Ethics
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(b) Certification of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.