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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 811-22321
MAINSTAY FUNDS TRUST
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
George S. Shively, Esq.
169 Lackawanna Avenue
Parsippany, NJ 07054
(Name and address of agent for service)
Registrant's telephone number, including area code: (973) 394-4435
Date of fiscal year end: October 31
Date of reporting period: April 30, 2010
ITEM 1. REPORTS TO STOCKHOLDERS.
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY 130/30 FUNDS
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay 130/30 International Fund
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY 130/30 FUNDS
SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay 130/30 International Fund
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
MAINSTAY 130/30 CORE FUND 5
- ---------------------------------------------
MAINSTAY 130/30 GROWTH FUND 27
- ---------------------------------------------
MAINSTAY 130/30 INTERNATIONAL FUND 44
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 68
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 81
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 81
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO EACH FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF EACH FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF EACH FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
MAINSTAY 130/30 CORE FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 6.88% 24.82% -12.48%
Excluding sales charges 13.10 32.09 -10.72
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 RUSSELL 1000(R)
CORE FUND INDEX
--------------- ---------------
6/29/07 9450 10000
4/30/08 8205 9386
4/30/09 5186 6073
4/30/10 6850 8515
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 7.14% 25.32% -12.32%
Excluding sales charges 13.37 32.61 -10.56
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 RUSSELL 1000(R)
CORE FUND INDEX
--------------- ---------------
6/29/07 23625 25000
4/30/08 20512 23465
4/30/09 12979 15182
4/30/10 17212 21287
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 11.70% 30.24% -11.37%
Excluding sales charges 12.70 31.24 -11.37
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 RUSSELL 1000(R)
CORE FUND INDEX
--------------- ---------------
6/29/07 10000 10000
4/30/08 8620 9386
4/30/09 5410 6073
4/30/10 7100 8515
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. Class C shares are sold with no initial sales
charge, are subject to a contingent deferred sales charge ("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 or individual 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. For information
on current fee waivers and/or expense limitations, please refer to the notes
to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
13.44% 32.86% -10.38%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 RUSSELL 1000(R)
CORE FUND INDEX
--------------- ---------------
6/29/07 10000 10000
4/30/08 8689 9386
4/30/09 5515 6073
4/30/10 7327 8515
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
Russell 1000(R) Index(3) 16.77% 40.21% -5.52%
Average Lipper extended U.S. large-cap core fund(4) 13.97 34.26 -9.58
</Table>
differences in certain contractual fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. The Russell 1000(R) Index measures the performance of the 1,000 largest
companies in the Russell 3000(R) Index, which represents approximately 92% of
the total market capitalization of the Russell 3000(R) Index. The Russell
3000(R) Index measures the performance of the 3,000 largest U.S. companies
based on total market capitalization, which represents approximately 98% of
the investable U.S. equity market. Total returns assume reinvestment of all
dividends and capital gains. The Russell 1000(R) Index is the Fund's broad-
based securities market index for comparison purposes. An investment cannot
be made directly in an index.
4. The average Lipper extended U.S. large-cap core fund is representative of
funds that combine long and short stock selection to invest in a diversified
portfolio of U.S. large-cap equities, with a target net exposure of 100%
long. Typical strategies vary between 110% long and 10% short to 160% long
and 60% short. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on average total
returns of similar funds with all dividend and capital gain distributions
reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay 130/30 Core Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY 130/30 CORE FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,131.00 $11.94 $1,013.60 $11.28
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,133.70 $10.58 $1,014.90 $ 9.99
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,127.00 $15.87 $1,009.90 $15.00
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,134.40 $ 9.37 $1,016.00 $ 8.85
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(2.26% for Investor Class, 2.00% for Class A, 3.01% for Class C and 1.77% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 (to reflect the one-half year period). The table
above represents the actual expenses incurred during the one-half year
period.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Oil, Gas & Consumable Fuels 8.1%
Insurance 6.7
Computers & Peripherals 5.7
Specialty Retail 5.2
Software 5.1
Health Care Providers & Services 5.0
Media 4.7
Pharmaceuticals 4.7
Chemicals 4.5
Energy Equipment & Services 4.4
Machinery 4.2
Commercial Banks 4.1
IT Services 4.0
Diversified Financial Services 3.9
Food & Staples Retailing 3.5
Semiconductors & Semiconductor
Equipment 3.0
Industrial Conglomerates 2.9
Diversified Telecommunication
Services 2.8
Capital Markets 2.7
Internet Software & Services 2.6
Communications Equipment 2.5
Aerospace & Defense 2.4
Electronic Equipment & Instruments 2.4
Multiline Retail 2.4
Health Care Equipment & Supplies 2.0
Household Durables 1.9
Hotels, Restaurants & Leisure 1.8
Metals & Mining 1.8
Electrical Equipment 1.6
Food Products 1.6
Multi-Utilities 1.6
Biotechnology 1.5
Household Products 1.3
Trading Companies & Distributors 1.3
Personal Products 1.2
Exchange Traded Fund 1.1
Paper & Forest Products 1.1
Wireless Telecommunication Services 1.1
Beverages 1.0
Real Estate Investment Trusts 1.0
Commercial Services & Supplies 0.9
Life Sciences Tools & Services 0.8
Diversified Consumer Services 0.8
Tobacco 0.8
Independent Power Producers & Energy
Traders 0.7
Internet & Catalog Retail 0.7
Consumer Finance 0.6
Road & Rail 0.6
Auto Components 0.5
Automobiles 0.5
Construction & Engineering 0.5
Containers & Packaging 0.4
Electric Utilities 0.3
Gas Utilities 0.3
Real Estate Management & Development 0.3
Textiles, Apparel & Luxury Goods 0.3
Airlines 0.2
Professional Services 0.2
Thrifts & Mortgage Finance 0.2
Air Freight & Logistics 0.0++
Building Products 0.0++
Leisure Equipment & Products 0.0++
Office Electronics 0.0++
Short-Term Investment 0.7
Other Assets, Less Liabilities -0.3
Investments Sold Short -30.4
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
++ Less than one-tenth of a percent.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Microsoft Corp.
2. Wells Fargo & Co.
3. International Business Machines Corp.
4. Bank of America Corp.
5. Apple, Inc.
6. JPMorgan Chase & Co.
7. Intel Corp.
8. AT&T, Inc.
9. Hewlett-Packard Co.
10. ExxonMobil Corp.
</Table>
TOP FIVE SHORT POSITIONS AS OF APRIL 30, 2010
<Table>
1. Old Republic International Corp.
2. O'Reilly Automotive, Inc.
3. Dresser-Rand Group, Inc.
4. Patterson Cos., Inc.
5. Carmax, Inc.
</Table>
8 MainStay 130/30 Core Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS HARVEY J. FRAM, CFA, AND MONA PATNI OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY 130/30 CORE FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay 130/30 Core Fund returned 13.10% for
Investor Class shares, 13.37% for Class A shares and 12.70% for Class C shares
for the six months ended April 30, 2010. Over the same period, Class I shares
returned 13.44%. All share classes underperformed the 13.97% return of the
average Lipper(1) extended U.S. large-cap core fund and the 16.77% return of the
Russell 1000(R) Index(2) for the six months ended April 30, 2010. The Russell
1000(R) Index is the Fund's broad-based securities-market index. See page 5 for
Fund returns with sales charges.
WHAT FACTORS WERE RESPONSIBLE FOR THE FUND'S RELATIVE PERFORMANCE DURING THE
REPORTING PERIOD?
For the six months ended April 30, 2010, the Fund underperformed the Russell
1000(R) Index primarily because it emphasized high-quality stocks in a period
when the market, especially in the financials sector, rewarded low-quality
stocks (stocks with low or negative earnings).
DURING THE REPORTING PERIOD, WHICH SECTORS WERE THE STRONGEST CONTRIBUTORS TO
THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS DETRACTED THE MOST?
During the reporting period, the Fund's top-contributing sectors relative to the
Russell 1000(R) Index were consumer staples, materials and utilities.
Underweight Fund positions in the consumer staples and utilities sectors were
beneficial, as these sectors, which typically are not economically sensitive,
underperformed the Index. Despite the conservative nature of these sectors, an
overweight position in meat products company Tyson Foods (in the consumer
staples sector) enhanced the Fund's relative performance, as the company's stock
gained more than 50% during the reporting period. In the materials sector, an
overweight position in chemical producer Ashland contributed positively to the
Fund's relative performance.
The most significant sector detractors relative to the Russell 1000(R) Index
included financials, information technology and health care. In a market that
generally preferred lower-quality stocks, the Fund's bias toward high-quality
stocks hurt relative performance. During the reporting period, short positions
in financial companies MBIA and Zions Bancorp and a long (but underweight)
position in Citigroup--all companies with negative or low earnings--outperformed
such blue chip companies as JP Morgan Chase and Travelers. In addition, the
market's concerns about new health care legislation caused a number of the
Fund's overweight positions in health care services stocks to underperform the
Index. One notable example was Aetna.
DURING THE REPORTING PERIOD, WHICH STOCKS
WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH
STOCKS WERE PARTICULARLY WEAK?
In absolute terms, the stocks that made the greatest positive contributions to
the Fund's performance were computers & peripherals company Apple, industrial
conglomerate General Electric and chemicals company Ashland. All three stocks
advanced significantly during the reporting period, led by Apple, which
continues to gain market share with the iPhone. Apple also benefited from the
introduction of the iPad. General Electric and Ashland performed well as the
economy rebounded.
Significant detractors from absolute performance included insurer MBIA, health
maintenance organization Health Net and insurance company Old Republic
International. All three were short positions in the Fund but had strong
positive returns during the reporting period. We think that the prospects at
MBIA and Old Republic improved dramatically with a stronger economic outlook.
While new health care legis-
lation hurt many health care stocks, Health Net ad- vanced on the perception
that new legislation would
have less adverse effects on the company than pre-viously anticipated.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During the reporting period, the Fund initiated a position in semiconductor
company Intel. Given the continued build-out of computer networks and smart
mobile devices, we purchased Intel as a conservative way to participate in this
trend. Intel had high earnings quality and benefited from positive reactions by
analysts to the company's earnings announcements.
During the reporting period, the Fund sold its positions in financial service
company Bank of New York Mellon and aerospace & defense company Lockheed Martin.
Bank of New York Mellon is a conservatively
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 1000(R) Index.
mainstayinvestments.com 9
run bank that had become expensive according to our valuation measures. In its
place, we purchased Bank of America, which our model deemed to be undervalued
and well positioned to benefit from a recovery in the U.S. economy. Lockheed
Martin was sold as most of our technical indicators on the stock turned
negative, as did our earnings-quality measure. We also sold a large part of the
Fund's position in ExxonMobil after the announcement of its pending merger with
XTO Energy. ExxonMobil's stock seemed expensive relative to others in the same
industry, and market sentiment about ExxonMobil has been negative in the wake of
the XTO Energy deal.
HOW DID THE FUND'S WEIGHTINGS CHANGE RELATIVE TO THE RUSSELL 1000(R) INDEX
DURING THE REPORTING PERIOD?
During the reporting period, we increased the Fund's exposure to the health care
and consumer staples sectors. In health care, we purchased pharmaceutical
companies (such as Abbot Laboratories) and service providers (such as Cardinal
Health) that we believed had become undervalued in the wake of the new health
care legislation. In consumer staples, we purchased stocks such as food products
company Conagra Foods and food & staples retailer Costco Wholesale, but the Fund
overall maintained an underweight position in the sector.
Relative to the Russell 1000(R) Index, the Fund reduced its exposure to the
energy and information technology sectors. Energy stocks advanced as the price
of oil rose during the reporting period, but many have exposure to natural gas,
which dropped dramatically in price. As a result, a number of energy stocks have
higher-than-average valuations. We also reduced the Fund's position in
ExxonMobil, as described above. Although we reduced the Fund's exposure to
information technology, the Fund remains overweight relative to the Index in
this sector. The weighting reduction in information technology was primarily a
risk-management decision.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010, AND HOW DID THIS
POSITIONING AFFECT THE FUND'S PERFORMANCE?
As of April 30, 2010, the most substantially overweight sectors in the Fund
relative to the Russell 1000(R) Index were consumer discretionary and
information technology. In the consumer discretionary sector, retailers used
tight inventory controls to beat profit expectations despite lackluster sales.
Our overweight position in information technology detracted from the Fund's
results because the sector underperformed the Index despite generally strong
earnings.
On the same date, the Fund's most substantially underweight sectors relative to
the Russell 1000(R) Index were financials and utilities. Within financials, as
in the Fund as a whole, we tended to avoid companies with low or negative
earnings ratios. This positioning hurt performance as investors sought to
benefit from companies with lower quality profiles. From an industry
perspective, the Fund was underweight real estate investment trusts (REITs) and
regional banks at the end of the reporting period but overweight insurance
companies. Utilities are typically a low-risk sector, and our underweight
position helped the Fund on a relative basis, as utilities lagged the Index as a
whole.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay 130/30 Core Fund
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 128.9%+
- -------------------------------------------------------
AEROSPACE & DEFENSE 2.4%
Alliant Techsystems, Inc. (a) 2,542 $ 205,673
Boeing Co. (The) 3,531 255,750
Honeywell International, Inc.
(b) 48,457 2,300,254
ITT Corp. (b) 2,456 136,480
L-3 Communications Holdings,
Inc. (b) 14,541 1,360,601
Lockheed Martin Corp. (b) 6,544 555,520
Northrop Grumman Corp. (b) 19,195 1,301,997
Raytheon Co. 18,793 1,095,632
United Technologies Corp. 907 67,980
------------
7,279,887
------------
AIR FREIGHT & LOGISTICS 0.0%++
UTI Worldwide, Inc. 3,334 52,844
------------
AIRLINES 0.2%
Copa Holdings S.A. Class A
(b) 9,711 550,420
Delta Air Lines, Inc. (a) 3,114 37,617
------------
588,037
------------
AUTO COMPONENTS 0.5%
Autoliv, Inc. (a)(b) 3,259 178,430
Goodyear Tire & Rubber Co.
(The) (a) 11,052 148,428
Johnson Controls, Inc. 19,395 651,478
TRW Automotive Holdings Corp.
(a)(b) 15,370 495,068
------------
1,473,404
------------
AUTOMOBILES 0.5%
Ford Motor Co. (a) 111,568 1,452,615
------------
BEVERAGES 1.0%
Coca-Cola Co. (The) (b) 32,474 1,735,736
PepsiCo, Inc. (b) 17,633 1,150,024
------------
2,885,760
------------
BIOTECHNOLOGY 1.5%
Amgen, Inc. (a)(b) 50,766 2,911,938
Cephalon, Inc. (a) 17,427 1,118,814
Genzyme Corp. (a) 8,160 434,438
Talecris Biotherapeutics
Holdings Corp. (a) 2,060 38,625
------------
4,503,815
------------
BUILDING PRODUCTS 0.0%++
Lennox International, Inc. 2,367 107,131
Owens Corning, Inc. (a) 853 29,667
------------
136,798
------------
CAPITAL MARKETS 2.7%
Ameriprise Financial, Inc. 2,644 122,576
BlackRock, Inc. (b) 2,656 488,704
Charles Schwab Corp. (The)
(b) 47,486 916,005
GLG Partners, Inc. (a) 1,083 3,509
Goldman Sachs Group, Inc.
(The) (b) 9,428 1,368,945
Investment Technology Group,
Inc. (a)(b) 48,910 849,567
Northern Trust Corp. (b) 32,140 1,767,057
Raymond James Financial, Inc.
(b) 14,750 451,940
State Street Corp. (b) 42,840 1,863,540
TD Ameritrade Holding Corp.
(a) 19,950 399,399
------------
8,231,242
------------
CHEMICALS 4.5%
Ashland, Inc. (b) 31,582 1,881,024
Cabot Corp. (b) 40,323 1,312,110
CF Industries Holdings, Inc. 16,344 1,367,503
Cytec Industries, Inc. (b) 27,566 1,324,822
E.I. du Pont de Nemours & Co. 18,038 718,634
Eastman Chemical Co. (b) 24,286 1,625,219
Huntsman Corp. (b) 99,564 1,136,025
Lubrizol Corp. (The) (b) 18,844 1,702,367
Nalco Holding Co. (b) 63,521 1,570,874
RPM International, Inc. (b) 39,246 866,552
Valspar Corp. 5,667 177,490
------------
13,682,620
------------
COMMERCIAL BANKS 4.1%
BB&T Corp. (b) 48,628 1,616,395
BOK Financial Corp. (b) 17,066 928,903
Fifth Third Bancorp 28,030 417,927
M&T Bank Corp. (b) 946 82,633
PNC Financial Services Group,
Inc. (b) 31,046 2,086,602
U.S. Bancorp (b) 48,321 1,293,553
V Wells Fargo & Co. (b) 178,694 5,916,558
------------
12,342,571
------------
COMMERCIAL SERVICES & SUPPLIES 0.9%
Cintas Corp. 40,793 1,111,609
R.R. Donnelley & Sons Co. (b) 73,226 1,573,627
------------
2,685,236
------------
COMMUNICATIONS EQUIPMENT 2.5%
Cisco Systems, Inc. (a)(b) 89,338 2,404,979
EchoStar Corp. (a) 20,220 388,426
Harris Corp. 19,336 995,417
QUALCOMM, Inc. (b) 71,944 2,787,111
Tellabs, Inc. 117,035 1,062,678
------------
7,638,611
------------
COMPUTERS & PERIPHERALS 5.7%
V Apple, Inc. (a)(b) 21,622 5,645,937
Dell, Inc. (a)(b) 143,917 2,328,577
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
COMPUTERS & PERIPHERALS (CONTINUED)
Diebold, Inc. 984 $ 30,848
EMC Corp. (a)(b) 121,121 2,302,510
V Hewlett-Packard Co. (b) 88,737 4,611,662
Lexmark International, Inc.
Class A (a) 861 31,900
Seagate Technology (a)(b) 28,680 526,852
Western Digital Corp. (a)(b) 41,078 1,687,895
------------
17,166,181
------------
CONSTRUCTION & ENGINEERING 0.5%
Fluor Corp. 1,786 94,372
Shaw Group, Inc. (The) (a)(b) 35,765 1,369,084
URS Corp. (a) 193 9,911
------------
1,473,367
------------
CONSUMER FINANCE 0.6%
American Express Co. (b) 8,063 371,866
Capital One Financial Corp. 2,834 123,024
Discover Financial Services
(b) 75,853 1,172,687
------------
1,667,577
------------
CONTAINERS & PACKAGING 0.4%
Crown Holdings, Inc. (a)(b) 47,812 1,243,112
------------
DIVERSIFIED CONSUMER SERVICES 0.8%
Apollo Group, Inc. Class A
(a)(b) 16,363 939,400
Brinks Home Security
Holdings, Inc. (a) 1,259 52,802
Career Education Corp. (a) 21,291 623,188
H&R Block, Inc. 38,380 702,738
------------
2,318,128
------------
DIVERSIFIED FINANCIAL SERVICES 3.9%
V Bank of America Corp. (b) 321,225 5,727,442
Citigroup, Inc. (a)(b) 133,199 582,080
V JPMorgan Chase & Co. (b) 131,152 5,584,452
------------
11,893,974
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.8%
V AT&T, Inc. (b) 182,509 4,756,184
tw telecom, Inc. (a) 4,780 85,084
Verizon Communications, Inc. 121,049 3,497,106
------------
8,338,374
------------
ELECTRIC UTILITIES 0.3%
Edison International (b) 1,577 54,201
Exelon Corp. (b) 8,520 371,387
Pinnacle West Capital Corp.
(b) 14,233 531,460
------------
957,048
------------
ELECTRICAL EQUIPMENT 1.6%
Emerson Electric Co. (b) 36,008 1,880,698
General Cable Corp. (a)(b) 15,028 429,350
Hubbel, Inc. Class B (b) 31,225 1,451,026
Thomas & Betts Corp. (a) 23,116 969,485
------------
4,730,559
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 2.4%
Arrow Electronics, Inc.
(a)(b) 52,699 1,607,319
Avnet, Inc. (a)(b) 51,184 1,636,352
AVX Corp. 22,393 345,972
Ingram Micro, Inc. Class A
(a)(b) 63,430 1,151,889
Jabil Circuit, Inc. (b) 51,385 787,218
Tech Data Corp. (a)(b) 29,273 1,255,812
Vishay Intertechnology, Inc.
(a) 57,641 600,043
------------
7,384,605
------------
ENERGY EQUIPMENT & SERVICES 4.4%
Exterran Holdings, Inc. (a) 16,712 487,155
Helix Energy Solutions Group,
Inc. (a)(b) 75,443 1,099,959
Helmerich & Payne, Inc. (b) 34,411 1,397,775
Nabors Industries, Ltd.
(a)(b) 49,044 1,057,879
National-Oilwell Varco, Inc.
(b) 37,721 1,660,856
Oceaneering International,
Inc. (a) 3,070 201,085
Oil States International,
Inc. (a)(b) 15,147 731,752
Patterson-UTI Energy, Inc.
(b) 83,983 1,284,100
Pride International, Inc.
(a)(b) 31,937 968,649
Rowan Cos., Inc. (a)(b) 20,086 598,563
SEACOR Holdings, Inc. (a)(b) 11,426 961,726
Seahawk Drilling, Inc. (a)(b) 40,803 679,778
Smith International, Inc. 11,570 552,583
Tidewater, Inc. 5,840 313,082
Unit Corp. (a) 26,115 1,247,513
------------
13,242,455
------------
FOOD & STAPLES RETAILING 3.5%
BJ's Wholesale Club, Inc. (a) 8,162 312,441
Costco Wholesale Corp. (b) 31,549 1,863,915
Kroger Co. (The) 6,453 143,450
Safeway, Inc. (b) 62,146 1,466,646
Wal-Mart Stores, Inc. (b) 83,141 4,460,515
Walgreen Co. (b) 65,819 2,313,538
Whole Foods Market, Inc.
(a)(b) 1,300 50,726
------------
10,611,231
------------
FOOD PRODUCTS 1.6%
Archer-Daniels-Midland Co.
(b) 12,900 360,426
ConAgra Foods, Inc. 28,645 700,943
Corn Products International,
Inc. 31,221 1,123,956
Dean Foods Co. (a) 920 14,444
Del Monte Foods Co. 8,595 128,409
Sara Lee Corp. 608 8,646
Smithfield Foods, Inc. (a)(b) 36,504 684,085
Tyson Foods, Inc. Class A (b) 92,782 1,817,600
------------
4,838,509
------------
</Table>
12 MainStay 130/30 Core 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)
GAS UTILITIES 0.3%
Atmos Energy Corp. (b) 27,600 $ 816,408
Energen Corp. 170 8,308
------------
824,716
------------
HEALTH CARE EQUIPMENT & SUPPLIES 2.0%
Baxter International, Inc. 1,369 64,644
Beckman Coulter, Inc. 2,971 185,390
Becton, Dickinson & Co. 1,431 109,286
CareFusion Corp. (a)(b) 41,306 1,139,220
Hill-Rom Holdings, Inc. (b) 44,371 1,407,004
Hologic, Inc. (a) 30,671 548,091
Hospira, Inc. (a)(b) 31,129 1,674,429
Medtronic, Inc. (b) 6,900 301,461
Stryker Corp. 4,464 256,412
Zimmer Holdings, Inc. (a) 4,376 266,542
------------
5,952,479
------------
HEALTH CARE PROVIDERS & SERVICES 5.0%
Aetna, Inc. (b) 57,470 1,698,238
AmerisourceBergen Corp. (b) 21,995 678,546
Cardinal Health, Inc. (b) 32,295 1,120,313
Community Health Systems,
Inc. (a)(b) 30 1,226
Coventry Health Care, Inc.
(a)(b) 62,574 1,485,507
Humana, Inc. (a)(b) 35,133 1,606,281
Laboratory Corp. of America
Holdings (a) 403 31,664
Lincare Holdings, Inc. (a)(b) 12,952 604,729
McKesson Corp. (b) 30,333 1,965,882
Medco Health Solutions, Inc.
(a)(b) 35,102 2,068,210
Omnicare, Inc. (b) 779 21,648
UnitedHealth Group, Inc. 64,338 1,950,085
WellPoint, Inc. (a)(b) 35,068 1,886,658
------------
15,118,987
------------
HOTELS, RESTAURANTS & LEISURE 1.8%
Brinker International, Inc. 23,351 432,461
Carnival Corp. 16,502 688,133
Darden Restaurants, Inc. 19,435 869,716
International Speedway Corp.
Class A 4,713 144,029
McDonald's Corp. (b) 6,011 424,317
Panera Bread Co. Class A (a) 7,443 580,107
Starbucks Corp. (b) 58,663 1,524,065
Wendy's/Arby's Group, Inc.
Class A 124,104 658,992
------------
5,321,820
------------
HOUSEHOLD DURABLES 1.9%
D.R. Horton, Inc. 20,003 293,844
Garmin, Ltd. (b) 35,111 1,312,449
Jarden Corp. 5,007 160,825
KB Home (b) 1,408 26,090
Leggett & Platt, Inc. (b) 73,642 1,806,438
Lennar Corp. Class A 11,881 236,432
M.D.C. Holdings, Inc. (b) 6,398 245,044
Mohawk Industries, Inc.
(a)(b) 4,146 264,266
Whirlpool Corp. 13,929 1,516,450
------------
5,861,838
------------
HOUSEHOLD PRODUCTS 1.3%
Kimberly-Clark Corp. 14,438 884,472
Procter & Gamble Co. (The)
(b) 50,960 3,167,673
------------
4,052,145
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.7%
Constellation Energy Group,
Inc. (b) 45,065 1,593,048
Mirant Corp. (a)(b) 39,076 455,626
NRG Energy, Inc. (a)(b) 2,181 52,715
------------
2,101,389
------------
INDUSTRIAL CONGLOMERATES 2.9%
3M Co. 33,559 2,975,676
Carlisle Cos., Inc. (b) 33,272 1,255,353
General Electric Co. (b) 232,039 4,376,256
Textron, Inc. 8,741 199,644
------------
8,806,929
------------
INSURANCE 6.7%
Aflac, Inc. (b) 10,584 539,361
Allied World Assurance
Holdings, Ltd./Bermuda (b) 29,952 1,305,009
American Financial Group,
Inc. (b) 53,391 1,571,297
Arch Capital Group, Ltd. (a) 2,734 206,636
Aspen Insurance Holdings,
Ltd. (b) 45,488 1,227,266
Assurant, Inc. 24,890 906,743
Axis Capital Holdings, Ltd.
(b) 50,712 1,580,693
Chubb Corp. (The) (b) 36,160 1,911,779
Endurance Specialty Holdings,
Ltd. (b) 31,855 1,173,857
Everest Re Group, Ltd. (b) 10,012 767,420
Fidelity National Financial,
Inc. Class A (b) 20,542 311,828
First American Corp. 2,007 69,382
HCC Insurance Holdings, Inc.
(b) 29,253 795,389
PartnerRe, Ltd. (b) 9,604 745,078
Principal Financial Group,
Inc. (b) 24,811 724,977
Prudential Financial, Inc. 15,723 999,354
RenaissanceRe Holdings, Ltd.
(b) 27,714 1,550,598
Symetra Financial Corp. (a) 14,237 192,200
Torchmark Corp. 3,952 211,590
Travelers Cos., Inc. (The)
(b) 41,656 2,113,625
Validus Holdings, Ltd. (b) 41,960 1,072,917
White Mountains Insurance
Group, Ltd. 502 172,487
------------
20,149,486
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
INTERNET & CATALOG RETAIL 0.7%
Amazon.com, Inc. (a)(b) 9,319 $ 1,277,262
Expedia, Inc. (b) 19,524 460,962
NetFlix, Inc. (a)(b) 2,854 281,889
------------
2,020,113
------------
INTERNET SOFTWARE & SERVICES 2.6%
AOL, Inc. (a) 28,929 675,781
eBay, Inc. (a)(b) 76,491 1,821,251
Google, Inc. Class A (a)(b) 4,662 2,449,601
IAC/InterActiveCorp (a)(b) 39,817 892,697
Sohu.com, Inc. (a)(b) 20,807 1,001,857
VeriSign, Inc. (a) 40,591 1,106,917
------------
7,948,104
------------
IT SERVICES 4.0%
Amdocs, Ltd. (a) 13,669 436,588
Automatic Data Processing,
Inc. (b) 35,149 1,524,060
Broadridge Financial
Solutions LLC (b) 23,479 559,035
Computer Sciences Corp. (a) 7,240 379,303
Convergys Corp. (a) 42,276 534,369
Fiserv, Inc. (a) 2,101 107,340
Global Payments, Inc. (b) 30,686 1,313,668
Hewitt Associates, Inc. Class
A (a) 9,131 374,280
V International Business
Machines Corp. (b) 44,960 5,799,840
NeuStar, Inc. Class A (a)(b) 31,107 761,188
Total System Services, Inc. 21,875 350,219
Western Union Co. (The) 5,901 107,693
------------
12,247,583
------------
LEISURE EQUIPMENT & PRODUCTS 0.0%++
Mattel, Inc. 1,262 29,089
------------
LIFE SCIENCES TOOLS & SERVICES 0.8%
Bio-Rad Laboratories, Inc.
Class A (a)(b) 10,036 1,120,921
Millipore Corp. (a) 687 72,925
Pharmaceutical Product
Development, Inc. 49,991 1,374,752
------------
2,568,598
------------
MACHINERY 4.2%
Caterpillar, Inc. (b) 34,796 2,369,260
Eaton Corp. 1,915 147,761
Harsco Corp. (b) 19,469 602,760
Lincoln Electric Holdings,
Inc. 18,046 1,081,677
Navistar International Corp.
(a) 10,891 526,471
Oshkosh Corp. (a)(b) 39,154 1,512,128
Snap-On, Inc. 8,457 407,458
SPX Corp. 1,557 108,803
Timken Co. (The) (b) 54,767 1,926,703
Toro Co. (The) (b) 25,926 1,476,227
Trinity Industries, Inc. (b) 51,837 1,290,223
Valmont Industries, Inc. 12,339 1,027,715
WABCO Holdings, Inc. (a)(b) 10,378 344,446
------------
12,821,632
------------
MEDIA 4.7%
Comcast Corp. Class A (b) 157,345 3,105,990
CTC Media, Inc. (b) 6,397 108,045
DIRECTV Class A (a)(b) 67,312 2,438,714
DISH Network Corp. Class A 1,294 28,662
Gannett Co., Inc. 2,588 44,048
Interpublic Group of Cos.,
Inc. (The) (a)(b) 20,577 183,341
Liberty Media-Starz, Series A
(a)(b) 20,224 1,120,207
Madison Square Garden, Inc.
Class A (a) 18,114 375,866
McGraw-Hill Cos., Inc. (The)
(b) 5,915 199,454
Omnicom Group, Inc. (b) 45,922 1,959,033
Time Warner Cable, Inc. 8,210 461,812
Time Warner, Inc. 61,714 2,041,499
Walt Disney Co. (The) (b) 4,189 154,323
Warner Music Group Corp.
(a)(b) 92,389 632,865
Washington Post Co. Class B
(b) 2,521 1,278,550
------------
14,132,409
------------
METALS & MINING 1.8%
Carpenter Technology Corp. 10,052 394,742
Commercial Metals Co. (b) 67,209 1,000,070
Freeport-McMoRan Copper &
Gold, Inc. (b) 25,675 1,939,233
Nucor Corp. (b) 9,510 430,993
Reliance Steel & Aluminum Co.
(b) 32,100 1,566,801
Steel Dynamics, Inc. (b) 2,033 31,938
------------
5,363,777
------------
MULTI-UTILITIES 1.6%
Ameren Corp. (b) 45,051 1,169,524
Integrys Energy Group, Inc.
(b) 33,631 1,668,434
MDU Resources Group, Inc. (b) 71,352 1,512,662
NiSource, Inc. 27,415 446,865
------------
4,797,485
------------
MULTILINE RETAIL 2.4%
Big Lots, Inc. (a) 3,263 124,647
Dollar Tree, Inc. (a)(b) 21,148 1,284,106
J.C. Penney Co., Inc. (b) 15,152 441,984
Kohl's Corp. (a)(b) 24,700 1,358,253
Nordstrom, Inc. (b) 22,419 926,577
Sears Holdings Corp. (a)(b) 8,221 994,330
Target Corp. (b) 37,401 2,126,995
------------
7,256,892
------------
OFFICE ELECTRONICS 0.0%++
Xerox Corp. 12,194 132,915
------------
</Table>
14 MainStay 130/30 Core 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)
OIL, GAS & CONSUMABLE FUELS 8.1%
Chesapeake Energy Corp. (b) 58,977 $ 1,403,652
Chevron Corp. (b) 42,255 3,441,247
Cimarex Energy Co. 2,587 176,123
CNX Gas Corp. (a) 209 7,998
ConocoPhillips (b) 40,699 2,408,974
Denbury Resources, Inc. (a) 998 19,112
Devon Energy Corp. (b) 4,317 290,664
El Paso Corp. 20,363 246,392
V ExxonMobil Corp. (b) 67,316 4,567,390
Frontier Oil Corp. (b) 738 11,218
Marathon Oil Corp. (b) 64,554 2,075,411
Mariner Energy, Inc. (a) 10,068 240,424
Murphy Oil Corp. (b) 26,067 1,567,930
Newfield Exploration Co.
(a)(b) 22,746 1,323,590
Occidental Petroleum Corp.
(b) 3,007 266,601
Overseas Shipholding Group,
Inc. (b) 1,350 67,581
Peabody Energy Corp. (b) 3,246 151,653
Quicksilver Resources, Inc.
(a)(b) 13,268 184,027
St. Mary Land & Exploration
Co. (b) 25,626 1,031,190
Teekay Corp. 4,661 116,758
Tesoro Corp. 14,333 188,479
Williams Cos., Inc. (b) 78,377 1,850,481
XTO Energy, Inc. (b) 63,842 3,033,772
------------
24,670,667
------------
PAPER & FOREST PRODUCTS 1.1%
International Paper Co. (b) 63,924 1,709,328
MeadWestvaco Corp. (b) 58,296 1,583,902
------------
3,293,230
------------
PERSONAL PRODUCTS 1.2%
Alberto-Culver Co. 7,482 215,482
Estee Lauder Cos., Inc. (The)
Class A (b) 27,551 1,816,162
Herbalife, Ltd. (b) 35,772 1,725,999
------------
3,757,643
------------
PHARMACEUTICALS 4.7%
Abbott Laboratories (b) 50,454 2,581,227
Endo Pharmaceuticals
Holdings, Inc. (a)(b) 20,077 439,686
Forest Laboratories, Inc.
(a)(b) 53,526 1,459,119
Johnson & Johnson (b) 55,074 3,541,258
King Pharmaceuticals, Inc.
(a) 98,223 962,585
Merck & Co., Inc. (b) 39,094 1,369,854
Perrigo Co. 139 8,483
Pfizer, Inc. (b) 211,765 3,540,711
Valeant Pharmaceuticals
International (a) 10,438 469,710
------------
14,372,633
------------
PROFESSIONAL SERVICES 0.2%
FTI Consulting, Inc. (a) 2,086 85,797
Manpower, Inc. (b) 11,216 629,218
------------
715,015
------------
REAL ESTATE INVESTMENT TRUSTS 1.0%
Annaly Capital Management,
Inc. (b) 96,380 1,633,641
Duke Realty Corp. 53,161 719,268
Public Storage (b) 7,782 754,154
------------
3,107,063
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT 0.3%
Jones Lang LaSalle, Inc. 10,449 824,217
------------
ROAD & RAIL 0.6%
Con-Way, Inc. (b) 3,283 127,512
Hertz Global Holdings, Inc.
(a) 2,358 34,097
Landstar System, Inc. 7,468 330,235
Ryder System, Inc. (b) 29,860 1,389,087
------------
1,880,931
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 3.0%
Broadcom Corp. Class A 5,683 196,007
V Intel Corp. (b) 209,883 4,791,629
Micron Technology, Inc.
(a)(b) 169,715 1,586,835
Texas Instruments, Inc. 80,238 2,086,990
Xilinx, Inc. 16,551 426,685
------------
9,088,146
------------
SOFTWARE 5.1%
BMC Software, Inc. (a) 31 1,220
CA, Inc. (b) 70,610 1,610,614
Compuware Corp. (a)(b) 23,115 198,789
Intuit, Inc. (a)(b) 23,881 863,537
MICROS Systems, Inc. (a)(b) 18,187 675,829
V Microsoft Corp. (b) 245,166 7,487,370
Oracle Corp. (b) 57,697 1,490,890
Sybase, Inc. (a)(b) 34,491 1,496,220
Symantec Corp. (a)(b) 105,133 1,763,080
------------
15,587,549
------------
SPECIALTY RETAIL 5.2%
Abercrombie & Fitch Co. Class
A 8,235 360,117
Advance Auto Parts, Inc. (b) 30,565 1,378,481
Aeropostale, Inc. (a) 15,091 438,243
American Eagle Outfitters,
Inc. (b) 934 15,701
Barnes & Noble, Inc. 1,858 40,950
Best Buy Co., Inc. (b) 42,292 1,928,515
Dick's Sporting Goods, Inc.
(a) 294 8,558
Foot Locker, Inc. (b) 4,611 70,779
GameStop Corp. Class A (a) 8,151 198,151
Gap, Inc. (The) (b) 71,284 1,762,853
Limited Brands, Inc. (b) 50,201 1,345,387
Office Depot, Inc. (a)(b) 28,751 197,232
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
PetSmart, Inc. (b) 52,850 $ 1,747,749
Ross Stores, Inc. (b) 32,101 1,797,656
Signet Jewelers, Ltd. (a)(b) 33,889 1,085,126
Staples, Inc. (b) 74,121 1,744,067
TJX Cos., Inc. 14,380 666,369
Williams-Sonoma, Inc. (b) 36,966 1,064,621
------------
15,850,555
------------
TEXTILES, APPAREL & LUXURY GOODS 0.3%
Coach, Inc. 19,889 830,366
NIKE, Inc. Class B 1,023 77,656
------------
908,022
------------
THRIFTS & MORTGAGE FINANCE 0.2%
Hudson City Bancorp, Inc. 38,535 512,515
------------
TOBACCO 0.8%
Philip Morris International,
Inc. (b) 51,310 2,518,295
------------
TRADING COMPANIES & DISTRIBUTORS 1.3%
MSC Industrial Direct Co. (b) 14,492 789,669
W.W. Grainger, Inc. (b) 15,096 1,668,712
WESCO International, Inc.
(a)(b) 32,812 1,332,823
------------
3,791,204
------------
WIRELESS TELECOMMUNICATION SERVICES 1.1%
MetroPCS Communications, Inc.
(a) 54,944 419,223
NII Holdings, Inc. (a)(b) 4,351 184,569
Sprint Nextel Corp. (a)(b) 173,746 738,420
Telephone and Data Systems,
Inc. 45,933 1,592,038
United States Cellular Corp.
(a) 11,657 490,527
------------
3,424,777
------------
Total Common Stocks
(Cost $347,418,342) 390,629,408
------------
EXCHANGE TRADED FUND 1.1% (C)
- -------------------------------------------------------
S&P 500 Index-SPDR Trust
Series 1 28,977 3,444,206
------------
Total Exchange Traded Fund
(Cost $3,455,898) 3,444,206
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 0.7%
- -------------------------------------------------------
REPURCHASE AGREEMENT 0.7%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$1,939,802 (Collateralized
by a United States Treasury
Bill with a rate of 0.135%
and a maturity date of
5/27/10,
with a Principal Amount of
$1,980,000
and a Market Value of
$1,979,802) $1,939,800 $ 1,939,800
------------
Total Short-Term Investment
(Cost $1,939,800) 1,939,800
------------
Total Investments,
Before Investments Sold
Short
(Cost $352,814,040) (d) 130.7% 396,013,414
------------
<Caption>
SHARES
INVESTMENTS SOLD SHORT (30.4%)
COMMON STOCKS SOLD SHORT (30.4%)
- -------------------------------------------------------
AEROSPACE & DEFENSE (0.4%)
BE Aerospace, Inc. (a) (14,203) (421,971)
Spirit Aerosystems Holdings,
Inc. Class A (a) (39,136) (868,037)
------------
(1,290,008)
------------
AIR FREIGHT & LOGISTICS (0.2%)
C.H. Robinson Worldwide, Inc. (9,338) (563,081)
------------
AIRLINES (0.0%)++
Southwest Airlines Co. (3,982) (52,483)
------------
AUTOMOBILES (0.4%)
Harley-Davidson, Inc. (35,853) (1,212,907)
Thor Industries, Inc. (143) (5,107)
------------
(1,218,014)
------------
BEVERAGES (0.3%)
Central European Distribution
Corp. (a) (31,205) (1,081,253)
------------
BIOTECHNOLOGY (1.4%)
Abraxis Bioscience, Inc. (a) (27,213) (1,359,834)
Alexion Pharmaceuticals, Inc.
(a) (5,173) (283,894)
Amylin Pharmaceuticals, Inc.
(a) (10,242) (211,395)
BioMarin Pharmaceuticals,
Inc. (a) (682) (15,938)
Dendreon Corp. (a) (9,932) (538,513)
Myriad Genetics, Inc. (a) (6,859) (164,684)
OSI Pharmaceuticals, Inc. (a) (9,328) (547,274)
</Table>
16 MainStay 130/30 Core 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 SOLD SHORT (CONTINUED)
BIOTECHNOLOGY (CONTINUED)
United Therapeutics Corp. (a) (15,648) $ (890,215)
Vertex Pharmaceuticals, Inc.
(a) (9,348) (362,422)
------------
(4,374,169)
------------
BUILDING PRODUCTS (0.1%)
USG Corp. (a) (19,956) (470,962)
------------
CAPITAL MARKETS (0.5%)
Affiliated Managers Group,
Inc. (a) (1,815) (152,787)
Greenhill & Co., Inc. (8,077) (709,887)
Janus Capital Group, Inc. (4,511) (63,515)
Jefferies Group, Inc. (15,470) (421,093)
Lazard, Ltd. Class A (3,986) (154,099)
------------
(1,501,381)
------------
CHEMICALS (1.0%)
Air Products & Chemicals,
Inc. (3,570) (274,105)
FMC Corp. (16,633) (1,058,524)
Intrepid Potash, Inc. (a) (39,612) (1,040,211)
Monsanto Co. (2,797) (176,379)
Valhi, Inc. (13,963) (399,621)
------------
(2,948,840)
------------
COMMERCIAL BANKS (0.8%)
Associated Banc-Corp. (47,050) (683,636)
CapitalSource, Inc. (974) (5,815)
First Horizon National Corp.
(a) (1) (14)
Fulton Financial Corp. (1,708) (17,934)
Popular, Inc. (a) (5,021) (19,783)
Synovus Financial Corp. (41,587) (125,177)
Whitney Holding Corp. (86,701) (1,187,804)
Wilmington Trust Corp. (32,081) (555,964)
------------
(2,596,127)
------------
COMMERCIAL SERVICES & SUPPLIES (0.2%)
Pitney Bowes, Inc. (19,164) (486,766)
------------
COMMUNICATIONS EQUIPMENT (0.6%)
Brocade Communications
Systems, Inc. (a) (43,269) (280,816)
Ciena Corp. (a) (67,495) (1,247,982)
JDS Uniphase Corp. (a) (12,614) (163,856)
------------
(1,692,654)
------------
COMPUTERS & PERIPHERALS (0.2%)
NCR Corp. (a) (37,411) (492,329)
------------
CONSTRUCTION & ENGINEERING (0.8%)
Aecom Technology Corp. (a) (36,777) (1,105,884)
KBR, Inc. (64,163) (1,416,719)
------------
(2,522,603)
------------
CONSTRUCTION MATERIALS (0.4%)
Eagle Materials, Inc. (1,753) (55,868)
Martin Marietta Materials,
Inc. (5,396) (517,368)
Vulcan Materials Co. (8,977) (514,203)
------------
(1,087,439)
------------
CONSUMER FINANCE (0.2%)
AmeriCredit Corp. (a) (1,369) (32,774)
Student Loan Corp. (The) (16,815) (474,856)
------------
(507,630)
------------
CONTAINERS & PACKAGING (0.6%)
Greif, Inc. Class A (12,684) (750,639)
Pactiv Corp. (a) (42,262) (1,073,878)
------------
(1,824,517)
------------
DISTRIBUTORS (0.3%)
LKQ Corp. (a) (38,871) (818,623)
------------
DIVERSIFIED CONSUMER SERVICES (0.2%)
Education Management Corp.
(a) (3,086) (67,367)
Hillenbrand, Inc. (5,887) (144,702)
Strayer Education, Inc. (429) (104,299)
Weight Watchers
International, Inc. (17,243) (458,147)
------------
(774,515)
------------
DIVERSIFIED FINANCIAL SERVICES (0.5%)
Interactive Brokers Group,
Inc. (a) (69,332) (1,188,350)
MSCI, Inc. Class A (a) (12,115) (419,785)
------------
(1,608,135)
------------
ELECTRIC UTILITIES (0.4%)
Great Plains Energy, Inc. (30,972) (598,689)
Pepco Holdings, Inc. (41,618) (696,685)
------------
(1,295,374)
------------
ELECTRICAL EQUIPMENT (0.2%)
A123 Systems, Inc. (a) (8,653) (107,816)
SunPower Corp. Class A (a) (33,783) (559,109)
------------
(666,925)
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%)
Dolby Laboratories, Inc.
Class A (a) (8,947) (614,838)
Itron, Inc. (a) (5,605) (446,214)
National Instruments Corp. (2,484) (85,897)
------------
(1,146,949)
------------
ENERGY EQUIPMENT & SERVICES (0.6%)
Cameron International Corp.
(a) (4,637) (182,976)
Dresser-Rand Group, Inc. (a) (42,873) (1,512,559)
------------
(1,695,535)
------------
FOOD & STAPLES RETAILING (0.1%)
Rite Aid Corp. (a) (178,803) (264,628)
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS SOLD SHORT (CONTINUED)
FOOD PRODUCTS (0.6%)
Bunge, Ltd. (19,947) $ (1,056,194)
Green Mountain Coffee
Roasters, Inc. (a) (11,871) (862,547)
------------
(1,918,741)
------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.4%)
Edwards Lifesciences Corp.
(a) (11,180) (1,152,434)
Gen-Probe, Inc. (a) (1,410) (66,820)
------------
(1,219,254)
------------
HEALTH CARE PROVIDERS & SERVICES (1.1%)
Brookdale Senior Living, Inc.
(a) (18,814) (404,501)
Emdeon, Inc. (a) (52,716) (862,961)
Health Net, Inc. (a) (66) (1,453)
Patterson Cos., Inc. (45,232) (1,446,972)
Tenet Healthcare Corp. (a) (38,453) (240,331)
VCA Antech, Inc. (a) (18,335) (521,814)
------------
(3,478,032)
------------
HEALTH CARE TECHNOLOGY (0.1%)
Allscripts-Misys Healthcare
Solutions, Inc. (a) (17,538) (353,742)
------------
HOTELS, RESTAURANTS & LEISURE (1.1%)
Boyd Gaming Corp. (a) (74,850) (950,595)
Choice Hotels International,
Inc. (29,317) (1,064,500)
Hyatt Hotels Corp. Class A
(a) (6,775) (278,927)
Penn National Gaming, Inc.
(a) (7,766) (240,435)
WMS Industries, Inc. (a) (18,043) (902,511)
------------
(3,436,968)
------------
HOUSEHOLD DURABLES (0.2%)
Harman International
Industries, Inc. (a) (2,439) (96,292)
Stanley Black & Decker, Inc. (5,103) (317,151)
Toll Brothers, Inc. (a) (5,153) (116,303)
------------
(529,746)
------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.8%)
Dynegy, Inc. Class A (a) (586,294) (779,771)
Ormat Technologies, Inc. (35,035) (1,116,215)
RRI Energy, Inc. (a) (104,404) (424,924)
------------
(2,320,910)
------------
INDUSTRIAL CONGLOMERATES (0.2%)
McDermott International, Inc.
(a) (19,976) (547,542)
------------
INSURANCE (1.9%)
American National Insurance
Co. (9,473) (1,043,546)
CNA Financial Corp. (a) (1,028) (28,907)
Erie Indemnity Co. Class A (3,744) (173,385)
Lincoln National Corp. (5,966) (182,500)
Markel Corp. (a) (606) (232,001)
MBIA, Inc. (a) (13,949) (133,631)
Old Republic International
Corp. (116,207) (1,744,267)
OneBeacon Insurance Group,
Ltd. Class A (56,939) (923,551)
Unitrin, Inc. (2,816) (82,368)
XL Capital, Ltd. Class A (67,470) (1,200,966)
------------
(5,745,122)
------------
INTERNET SOFTWARE & SERVICES (0.4%)
Monster Worldwide, Inc. (a) (71,936) (1,253,845)
------------
IT SERVICES (0.3%)
Alliance Data Systems Corp.
(a) (4,116) (308,947)
Fidelity National Information
Services, Inc. (932) (24,502)
Genpact, Ltd. (a) (27,754) (468,487)
Mastercard, Inc. Class A (640) (158,746)
------------
(960,682)
------------
LEISURE EQUIPMENT & PRODUCTS (0.2%)
Hasbro, Inc. (14,789) (567,306)
------------
LIFE SCIENCES TOOLS & SERVICES (0.5%)
Illumina, Inc. (a) (4,399) (184,186)
PerkinElmer, Inc. (3,664) (91,783)
Techne Corp. (18,638) (1,234,768)
------------
(1,510,737)
------------
MACHINERY (0.4%)
AGCO Corp. (a) (9,961) (348,834)
Bucyrus International, Inc. (1,736) (109,385)
Flowserve Corp. (789) (90,404)
Joy Global, Inc. (2,469) (140,264)
Kennametal, Inc. (299) (9,825)
Terex Corp. (a) (16,307) (432,462)
------------
(1,131,174)
------------
MARINE (0.1%)
Alexander & Baldwin, Inc. (4,659) (165,767)
------------
MEDIA (1.3%)
CBS Corp. Class B (9,108) (147,641)
Central European Media
Enterprises, Ltd. Class A
(a) (29,536) (1,004,224)
Clear Channel Outdoor
Holdings, Inc. Class A (a) (240) (2,779)
DreamWorks Animation SKG,
Inc. Class A (a) (21,518) (854,049)
Interactive Data Corp. (11,980) (400,971)
Lamar Advertising Co. Class A
(a) (6,116) (227,638)
Liberty Media Corp. Capital
Class A (a) (3,657) (161,895)
Meredith Corp. (1,183) (42,505)
Morningstar, Inc. (a) (7,749) (364,280)
New York Times Co. (The)
Class A (a) (39,952) (396,324)
</Table>
18 MainStay 130/30 Core 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 SOLD SHORT (CONTINUED)
MEDIA (CONTINUED)
Scripps Networks Interactive
Class A (941) $ (42,665)
Viacom, Inc. (a) (4,852) (171,421)
------------
(3,816,392)
------------
METALS & MINING (1.0%)
AK Steel Holding Corp. (18,425) (308,619)
Allegheny Technologies, Inc. (662) (35,397)
Cliffs Natural Resources,
Inc. (1,345) (84,103)
Compass Minerals
International, Inc. (16,606) (1,250,598)
Royal Gold, Inc. (24,091) (1,232,977)
Titanium Metals Corp. (a) (10,515) (162,141)
United States Steel Corp. (381) (20,826)
------------
(3,094,661)
------------
MULTILINE RETAIL (0.1%)
Dollar General Corp. (a) (7,415) (211,847)
------------
OIL, GAS & CONSUMABLE FUELS (0.3%)
Cobalt International Energy,
Inc. (a) (15,568) (179,188)
Comstock Resources, Inc. (a) (2,247) (72,039)
Massey Energy Co. (422) (15,458)
Plains Exploration &
Production Co. (a) (1,039) (30,453)
Sandridge Energy, Inc. (a) (10,911) (81,941)
Sunoco, Inc. (13,682) (448,496)
------------
(827,575)
------------
PAPER & FOREST PRODUCTS (0.3%)
Weyerhaeuser Co. (17,262) (854,814)
------------
PROFESSIONAL SERVICES (0.3%)
Verisk Analytics, Inc. Class
A (a) (29,311) (821,294)
------------
REAL ESTATE INVESTMENT TRUSTS (0.7%)
Apartment Investment &
Management Co. Class A (4,783) (107,187)
Chimera Investment Corp. (326,444) (1,328,627)
Corporate Office Properties
Trust (12,028) (486,533)
Macerich Co. (The) (3,614) (161,582)
Regency Centers Corp. (2,152) (88,339)
------------
(2,172,268)
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.4%)
Forest City Enterprises, Inc.
Class A (a) (49,058) (757,946)
St. Joe Co. (The) (a) (14,027) (463,452)
------------
(1,221,398)
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.3%)
Atmel Corp. (a) (211,002) (1,147,851)
Integrated Device Technology,
Inc. (a) (257) (1,699)
International Rectifier Corp.
(a) (52,168) (1,200,907)
Lam Research Corp. (a) (5,464) (221,565)
Linear Technology Corp. (3,889) (116,903)
LSI Corp. (a) (9,697) (58,376)
MEMC Electronic Materials,
Inc. (a) (96,297) (1,248,972)
Novellus Systems, Inc. (a) (48,047) (1,258,832)
PMC-Sierra, Inc. (a) (97,679) (864,459)
Rambus, Inc. (a) (16,635) (401,403)
Teradyne, Inc. (a) (7,506) (91,798)
Varian Semiconductor
Equipment Associates, Inc.
(a) (7,180) (236,509)
------------
(6,849,274)
------------
SOFTWARE (1.1%)
Autodesk, Inc. (a) (8,683) (295,309)
Cadence Design Systems, Inc.
(a) (175,224) (1,307,171)
Electronic Arts, Inc. (a) (65,864) (1,275,785)
Novell, Inc. (a) (56,931) (319,383)
Rovi Corp. (a) (4,005) (156,115)
------------
(3,353,763)
------------
SPECIALTY RETAIL (1.4%)
AutoNation, Inc. (a) (55,891) (1,128,998)
Carmax, Inc. (a) (58,654) (1,441,129)
O'Reilly Automotive, Inc. (a) (32,978) (1,612,294)
Penske Auto Group, Inc. (a) (418) (6,262)
RadioShack Corp. (7,977) (171,904)
Urban Outfitters, Inc. (a) (772) (28,958)
------------
(4,389,545)
------------
THRIFTS & MORTGAGE FINANCE (1.3%)
Capitol Federal Financial (28,611) (1,078,349)
First Niagara Financial
Group, Inc. (96,328) (1,338,959)
People's United Financial,
Inc. (808) (12,548)
TFS Financial Corp. (42,883) (606,366)
Washington Federal, Inc. (38,327) (788,386)
------------
(3,824,608)
------------
WATER UTILITIES (0.5%)
Aqua America, Inc. (76,969) (1,410,842)
------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
Clearwire Corp. Class A (a) (128,156) (989,364)
SBA Communications Corp.
Class A (a) (2,503) (88,531)
------------
(1,077,895)
------------
Total Common Stocks Sold
Short
(Proceeds $82,232,518) (92,046,684)
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS SOLD SHORT (CONTINUED)
Total Investments Sold Short
(Proceeds $82,232,518) (30.4)%$(92,046,684)
------------
Total Investments,
Net of Investments Sold
Short
(Cost $270,581,522) 100.3 303,966,730
Other Assets, Less
Liabilities (0.3) (868,567)
---------- ------------
Net Assets 100.0% $303,098,163
========== ============
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
++ Less than one-tenth of a percent.
(a) Non-income producing security.
(b) Security, or a portion thereof, is
maintained in a segregated account at the
Fund's custodian as collateral for
securities sold short (See Note 2(I)).
(c) Exchange Traded Fund--An investment
vehicle that represents a basket of
securities that is traded on an exchange.
(d) At April 30, 2010, cost is $362,704,653
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $37,399,365
Gross unrealized depreciation (4,090,604)
-----------
Net unrealized appreciation $33,308,761
===========
</Table>
20 MainStay 130/30 Core Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets and liabilities.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $390,629,408 $ -- $ -- $390,629,408
Exchange Traded Fund 3,444,206 -- -- 3,444,206
Short-Term Investment
Repurchase Agreement -- 1,939,800 -- 1,939,800
------------ ---------- -------- ------------
Total Investments in Securities $394,073,614 $1,939,800 $-- $396,013,414
============ ========== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
LIABILITY VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments Sold Short (a)
Common Stocks Sold Short $(92,046,684) $ -- $ -- $(92,046,684)
------------ -------- -------- ------------
Total Investments Sold Short $(92,046,684) $-- $-- $(92,046,684)
============ ======== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities before
investments sold short, at value
(identified cost $352,814,040) $396,013,414
Cash collateral on deposit at
broker 293
Receivables:
Dividends and interest 298,482
Fund shares sold 68,781
Other assets 163,036
------------
Total assets 396,544,006
------------
LIABILITIES:
Investments sold short (proceeds
$82,232,518) 92,046,684
Payables:
Investment securities purchased 1,005,465
Manager (See Note 3) 250,764
Shareholder communication 46,174
Fund shares redeemed 45,560
Professional fees 24,028
Custodian 15,627
Dividends on investments sold
short 6,880
Transfer agent (See Note 3) 1,960
NYLIFE Distributors (See Note 3) 402
Trustees 167
Accrued expenses 2,132
------------
Total liabilities 93,445,843
------------
Net assets $303,098,163
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) 800 million shares
authorized $ 41,741
Additional paid-in capital 293,775,209
------------
293,816,950
Accumulated undistributed net
investment income 286,496
Accumulated net realized loss on
investments and investments sold
short (24,390,491)
Net unrealized appreciation on
investments 43,199,374
Net unrealized depreciation on
investments sold short (9,814,166)
------------
Net assets $303,098,163
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 73,619
============
Shares of beneficial interest
outstanding 10,178
============
Net asset value per share
outstanding $ 7.23
Maximum sales charge (5.50% of
offering price) 0.42
------------
Maximum offering price per share
outstanding $ 7.65
============
CLASS A
Net assets applicable to
outstanding shares $ 353,742
============
Shares of beneficial interest
outstanding 48,815
============
Net asset value per share
outstanding $ 7.25
Maximum sales charge (5.50% of
offering price) 0.42
------------
Maximum offering price per share
outstanding $ 7.67
============
CLASS C
Net assets applicable to
outstanding shares $ 414,039
============
Shares of beneficial interest
outstanding 58,317
============
Net asset value and offering price
per share outstanding $ 7.10
============
CLASS I
Net assets applicable to
outstanding shares $302,256,763
============
Shares of beneficial interest
outstanding 41,623,200
============
Net asset value and offering price
per share outstanding $ 7.26
============
</Table>
22 MainStay 130/30 Core Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 2,969,180
Interest 132
------------
Total income 2,969,312
------------
EXPENSES:
Manager (See Note 3) 1,287,405
Dividends on investments sold
short 496,086
Broker fees and charges on short
sales 366,950
Professional fees 35,645
Custodian 29,651
Registration 27,996
Shareholder communication 16,712
Transfer agent (See Note 3) 6,015
Trustees 3,797
Distribution/Service--Investor
Class (See Note 3) 78
Distribution/Service--Class A
(See Note 3) 192
Distribution/Service--Class C
(See Note 3) 1,953
Miscellaneous 6,949
------------
Total expenses 2,279,429
------------
Net investment income 689,883
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on:
Security transactions 26,196,455
Investments sold short (13,965,267)
------------
Net realized gain on investments
and investments sold short 12,231,188
------------
Net change in unrealized
appreciation (depreciation) on:
Investments 23,244,162
Investments sold short (5,865,314)
------------
Net change in unrealized
appreciation (depreciation) on
investments and investments sold
short 17,378,848
------------
Net realized and unrealized gain on
investments and investments sold
short 29,610,036
------------
Net increase in net assets
resulting from operations $ 30,299,919
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
23
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 689,883 $ 912,961
Net realized gain (loss)
on investments and
investments sold short 12,231,188 (21,476,763)
Net change in unrealized
appreciation
(depreciation) on
investments and
investments sold short 17,378,848 39,433,075
--------------------------
Net increase in net assets
resulting from operations 30,299,919 18,869,273
--------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (65) --
Class A (320) (354)
Class I (1,164,352) (192,082)
--------------------------
Total dividends to
shareholders (1,164,737) (192,436)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 95,718,066 92,953,584
Net asset value of shares
issued to shareholders in
reinvestment of dividends 1,084,478 161,068
Cost of shares redeemed (13,245,749) (6,906,219)
--------------------------
Increase in net assets
derived from capital
share transactions 83,556,795 86,208,433
--------------------------
Net increase in net
assets 112,691,977 104,885,270
NET ASSETS:
Beginning of period 190,406,186 85,520,916
--------------------------
End of period $303,098,163 $190,406,186
==========================
Accumulated undistributed
net investment income at
end of period $ 286,496 $ 761,350
==========================
</Table>
24 MainStay 130/30 Core Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2010
<Table>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net increase in net assets
resulting from operations $ 30,299,919
Adjustments to reconcile net
increase in net assets resulting
from operations to net cash used
for operating activities:
Investments purchased (316,229,453)
Investments sold 216,831,789
Purchases to cover securities
sold short (76,669,959)
Securities sold short 93,369,014
Purchase of short term
investments, net 514,336
Decrease in investment securities
sold receivable 440,810
Increase in dividends and
interest receivable (88,578)
Increase in cash collateral on
deposit at broker (17)
Increase in other assets (145,997)
Decrease in investment securities
purchased payable (1,152,566)
Decrease in dividends payable for
securities sold short (843)
Decrease in professional fees
payable (3,857)
Decrease in custodian payable (1,437)
Decrease in shareholder
communication payable (7,956)
Decrease in due to trustees (348)
Increase in due to manager 89,008
Decrease in due to transfer agent (46)
Increase in due to NYLIFE
Distributors 36
Decrease in accrued expenses and
other liabilities (1,970)
Net change in unrealized
appreciation on investments (23,244,162)
Net realized gain from
investments (26,196,455)
Net change in unrealized
depreciation on securities
sold short 5,865,314
Net realized loss from securities
sold short 13,965,267
-------------
Net cash used in operating
activities (82,368,151)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold 95,666,661
Payment on shares redeemed (13,218,251)
Cash distributions paid (80,259)
-------------
Net cash from financing activities 82,368,151
-------------
NET INCREASE (DECREASE) IN CASH: --
Cash at beginning of year --
-------------
Cash at end of period $ --
=============
</Table>
Non cash financing activities not included herein consist of all reinvestment of
dividends and distributions of $1,084,478
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
25
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
INVESTOR CLASS ------------------------
------------------------------------------------- YEAR
FEBRUARY 28, ENDED
SIX MONTHS 2008** SIX MONTHS OCTO-
ENDED YEAR ENDED THROUGH ENDED BER
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, 31,
2010* 2009 2008 2010* 2009
Net asset value at beginning of
period $ 6.40 $6.00 $ 8.68 $ 6.41 $ 6.00
------ ----- ------- ------ ------
Net investment income (loss) (a) 0.00 ++ 0.02 (0.02) 0.01 0.05
Net realized and unrealized gain
(loss) on investments 0.84 0.38 (2.66) 0.85 0.37
------ ----- ------- ------ ------
Total from investment operations 0.84 0.40 (2.68) 0.86 0.42
------ ----- ------- ------ ------
Less dividends:
From net investment income (0.01) -- -- (0.02) (0.01)
------ ----- ------- ------ ------
Net asset value at end of period $ 7.23 $6.40 $ 6.00 $ 7.25 $ 6.41
====== ===== ======= ====== ======
Total investment return (b) 13.10%(c) 6.67%(d) (30.76%)(c) 13.37%(c) 6.77%
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.04%++ 0.38% (0.37%)++ 0.28%++ 0.83%
Net expenses (excluding short
sale expenses) 1.59%++ 1.60% 1.59% ++ 1.35%++ 1.46%
Expenses (including short sales
expenses, before waiver) 2.26%++ 2.57% 2.59% ++ 2.00%++ 2.40%
Short sale expenses 0.67%++ 0.87% 0.82% ++ 0.65%++ 0.94%
Portfolio turnover rate 66% 163% 244% 66% 163%
Net assets at end of period (in
000's) $ 74 $ 53 $ 41 $ 354 $ 138
<Caption>
CLASS A
--------------------------
YEAR JUNE 29,
ENDED 2007**
OCTOBER THROUGH
31, OCTOBER 31,
2008 2007
Net asset value at beginning of
period $ 9.64 $10.00
------- ------
Net investment income (loss) (a) (0.02) (0.00) ++
Net realized and unrealized gain
(loss) on investments (3.61) (0.36)
------- ------
Total from investment operations (3.63) (0.36)
------- ------
Less dividends:
From net investment income (0.01) --
------- ------
Net asset value at end of period $ 6.00 $ 9.64
======= ======
Total investment return (b) (37.57%) (3.60%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.20%) (0.14%)++
Net expenses (excluding short
sale expenses) 1.50% 1.50% ++
Expenses (including short sales
expenses, before waiver) 2.60% 2.90% ++
Short sale expenses 0.85% 0.53% ++
Portfolio turnover rate 244% 59%
Net assets at end of period (in
000's) $ 390 $ 356
</Table>
<Table>
<Caption>
CLASS C
---------------------------------------------------------- CLASS I
JUNE 29, ----------
SIX MONTHS 2007** SIX MONTHS
ENDED YEAR ENDED OCTOBER THROUGH ENDED
APRIL 30, 31, OCTOBER 31, APRIL 30,
2010* 2009 2008 2007 2010*
Net asset value at beginning of
period $ 6.30 $ 5.95 $ 9.61 $10.00 $ 6.43
------ ------ ------- ------ --------
Net investment loss (a) (0.02) (0.02) (0.09) (0.03) 0.02
Net realized and unrealized gain
(loss) on investments 0.82 0.37 (3.57) (0.36) 0.84
------ ------ ------- ------ --------
Total from investment operations 0.80 0.35 (3.66) (0.39) 0.86
------ ------ ------- ------ --------
Less dividends:
From net investment income -- -- -- -- (0.03)
------ ------ ------- ------ --------
Net asset value at end of period $ 7.10 $ 6.30 $ 5.95 $ 9.61 $ 7.26
====== ====== ======= ====== ========
Total investment return (b) 12.70%(c) 5.88% (38.15%) (3.80%)(c) 13.44%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.68%)++ (0.41%) (1.12%) (0.86%)++ 0.54%++
Net expenses (excluding short
sale expenses) 2.34%++ 2.35% 2.33% 2.25%++ 1.10%++
Expenses (including short sales
expenses, before waiver) 3.01%++ 3.31% 3.41% 3.65%++ 1.77%++
Short sale expenses 0.67%++ 0.86% 0.81% 0.53%++ 0.67%++
Portfolio turnover rate 66% 163% 244% 59% 66%
Net assets at end of period (in
000's) $ 414 $ 370 $ 228 $ 35 $302,257
<Caption>
CLASS I
------------------------------------------
JUNE 29,
2007**
THROUGH
YEAR ENDED OCTOBER 31, OCTOBER 31,
2009 2008 2007
Net asset value at beginning of
period $ 6.02 $ 9.65 $ 10.00
-------- ------- -------
Net investment loss (a) 0.04 0.01 0.01
Net realized and unrealized gain
(loss) on investments 0.38 (3.62) (0.36)
-------- ------- -------
Total from investment operations 0.42 (3.61) (0.35)
-------- ------- -------
Less dividends:
From net investment income (0.01) (0.02) --
-------- ------- -------
Net asset value at end of period $ 6.43 $ 6.02 $ 9.65
======== ======= =======
Total investment return (b) 7.05% (37.48%) (3.50%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.69% 0.07% 0.27%++
Net expenses (excluding short
sale expenses) 1.22% 1.25% 1.25%++
Expenses (including short sales
expenses, before waiver) 2.08% 2.16% 2.52%++
Short sale expenses 0.86% 0.81% 0.53%++
Portfolio turnover rate 163% 244% 59%
Net assets at end of period (in
000's) $189,845 $84,861 $24,123
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
26 MainStay 130/30 Core Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY 130/30 GROWTH FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 0.87% 17.13% -9.71%
Excluding sales charges 6.74 23.94 -7.89
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30
GROWTH RUSSELL 1000(R)
FUND GROWTH INDEX
--------------- ---------------
6/29/07 9450 10000
4/30/08 9280 9776
4/30/09 6039 6690
4/30/10 7484 9243
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 0.87% 17.31% -9.71%
Excluding sales charges 6.74 24.14 -7.89
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30
GROWTH RUSSELL 1000(R)
FUND GROWTH INDEX
--------------- ---------------
6/29/07 23625 25000
4/30/08 23153 24440
4/30/09 15073 16725
4/30/10 18711 23107
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 5.32% 21.86% -8.63%
Excluding sales charges 6.32 22.86 -8.63
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30
GROWTH RUSSELL 1000(R)
FUND GROWTH INDEX
--------------- ---------------
6/29/07 10000 10000
4/30/08 9740 9776
4/30/09 6300 6690
4/30/10 7740 9243
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the Mainstay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. Class C shares are sold with no initial sales
charge, are subject to a contingent deferred sales charge ("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 or individual 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. For information
on current fee waivers and/or expense limitations, please refer to the notes
to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 27
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
6.82% 24.26% -7.60%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 RUSSELL 1000(R)
GROWTH FUND GROWTH INDEX
--------------- ---------------
6/29/07 10000 10000
4/30/08 9820 9776
4/30/09 6430 6690
4/30/10 7990 9243
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
Russell 1000(R) Growth Index(3) 15.79% 38.16% -2.74%
Average Lipper long/short equity fund(4) 6.45 22.52 -4.59
</Table>
differences in certain contractual fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. The Russell 1000(R) Growth Index 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 measures the performance of the
1,000 largest companies in the Russell 3000(R) Index, which represents
approximately 92% of the total market capitalization of the Russell 3000(R)
Index. The Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Total returns assume
reinvestment of all dividends and capital gains. The Russell 1000(R) Growth
Index is the Fund's broad-based securities market index for comparison
purposes. An investment cannot be made directly in an index.
4. The average Lipper long/short equity fund is representative of funds that
employ portfolio strategies combining long holdings of equities with short
sales of equity, equity options, or equity index options. The funds may be
either net long or net short, depending on the portfolio manager's view of
the market. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on average total
returns of similar funds with all dividend and capital gain distributions
reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
28 MainStay 130/30 Growth Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY 130/30 GROWTH FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,067.40 $13.12 $1,012.10 $12.77
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,067.40 $12.56 $1,012.60 $12.23
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,063.20 $16.88 $1,008.40 $16.43
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,068.20 $11.49 $1,013.70 $11.18
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(2.56% for Investor Class, 2.45% for Class A, 3.30% for Class C and 2.24% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 (to reflect the one-half year period). The table
above represents the actual expenses incurred during the one-half year
period.
mainstayinvestments.com 29
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
IT Services 9.3%
Computers & Peripherals 8.5
Software 8.5
Machinery 6.6
Health Care Providers & Services 5.6
Capital Markets 5.3
Energy Equipment & Services 5.2
Communications Equipment 5.1
Pharmaceuticals 4.9
Food & Staples Retailing 3.9
Aerospace & Defense 3.8
Exchange Traded Funds 3.7
Specialty Retail 3.7
Biotechnology 3.6
Internet Software & Services 3.5
Beverages 3.4
Hotels, Restaurants & Leisure 3.4
Internet & Catalog Retail 3.3
Health Care Equipment & Supplies 2.8
Semiconductors & Semiconductor
Equipment 2.7
Oil, Gas & Consumable Fuels 2.4
Road & Rail 2.3
Household Products 1.9
Multiline Retail 1.8
Media 1.6
Diversified Financial Services 1.5
Metals & Mining 1.5
Commercial Banks 1.4
Textiles, Apparel & Luxury Goods 1.3
Wireless Telecommunication Services 1.3
Containers & Packaging 1.2
Electrical Equipment 1.1
Electronic Equipment & Instruments 1.1
Construction & Engineering 1.0
Consumer Finance 0.9
Household Durables 0.9
Food Products 0.8
Thrifts & Mortgage Finance 0.5
Professional Services 0.4
Chemicals 0.3
Office Electronics 0.3
Short-Term Investment 1.0
Other Assets, Less Liabilities -0.7
Investments Sold Short -22.6
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 33 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Microsoft Corp.
2. Apple, Inc.
3. Hewlett-Packard Co.
4. International Business Machines Corp.
5. Oracle Corp.
6. S&P 500 Index--SPDR Trust Series 1
7. PepsiCo, Inc.
8. Abbott Laboratories
9. Union Pacific Corp.
10. McDonald's Corp.
</Table>
TOP FIVE SHORT POSITIONS AS OF APRIL 30, 2010
<Table>
1. iShares Russell 2000 Index Fund
2. Pitney Bowes, Inc.
3. Goldcorp, Inc.
4. St. Joe Co. (The)
5. Toyota Motor Corp.
</Table>
30 MainStay 130/30 Growth Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGER HARISH KUMAR, PHD, CFA, OF MADISON
SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY 130/30 GROWTH FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay 130/30 Growth Fund returned 6.74% for
Investor Class shares, 6.74% for Class A shares and 6.32% for Class C shares for
the six months ended April 30, 2010. Over the same period, the Fund's Class I
shares returned 6.82%. With the exception of Class C shares, all share classes
out-performed the 6.45% return of the average Lipper(1) long/short equity fund
for the six months ended April 30, 2010. All share classes underperformed the
15.79% return of the Russell 1000(R) Growth Index(2) over the same period. The
Russell 1000(R) Growth Index is the Fund's broad-based securities-market index.
See page 27 for Fund returns with sales charges.
WHAT FACTORS WERE RESPONSIBLE FOR THE FUND'S RELATIVE PERFORMANCE DURING THE
REPORTING PERIOD?
The Fund underperformed the Russell 1000(R) Growth Index primarily because of
stock selection in the health care and consumer staples sectors. An over-weight
position in health care and an underweight position in consumer staples also
detracted from the Fund's relative performance.
DURING THE REPORTING PERIOD, WHICH INDUSTRIES WERE THE STRONGEST CONTRIBUTORS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH INDUSTRIES WERE PARTICULARLY WEAK?
On an absolute basis, the strongest-contributing industries to the Fund's
performance were computers & peripherals, software and machinery. The weakest
industry contributions on an absolute basis came from food & staples retailing,
multiline retail and life sciences tools & services.
DURING THE REPORTING PERIOD, WHICH STOCKS WERE THE FUND'S STRONGEST PERFORMERS
AND WHICH STOCKS WERE PARTICULARLY WEAK?
On an absolute basis, the strongest contributors to the Fund's performance were
computers & peripherals company Apple, railroad operator Union Pacific and
software company Oracle. Major detractors from the Fund's absolute performance
included pharmaceutical retailer CVS Caremark and communications equipment
company Qualcomm. Both stocks produced negative returns, and CVS Caremark was
sold during the reporting period. Although Qualcomm was a negative performer the
Fund continued to hold the stock. Shares of semiconductor company Novell
advanced during the reporting period, but since the Fund had sold the stock
short, the position detracted from the Fund's performance.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During the reporting period, the Fund initiated long positions in consumer
staples company Procter & Gamble and Internet company Yahoo! and short positions
in real estate development company St. Joe and office supply retailer Office
Depot. Significant sales during the reporting period included education and
training service company Apollo Group, grocery store operator Whole Foods
Market, biotechnology company Illumina and pharmaceutical retailer CVS Caremark.
HOW DID THE FUND'S INDUSTRY WEIGHTINGS CHANGE RELATIVE TO THE RUSSELL 1000(R)
GROWTH INDEX DURING THE REPORTING PERIOD?
During the reporting period, the Fund increased its weightings relative to the
Russell 1000(R) Growth Index in health care and materials. Over the same period,
the Fund decreased its weightings relative to the Index in consumer
discretionary and financials.
1. See footnote on page 28 for more information on Lipper Inc.
2. See footnote on page 28 for more information on the Russell 1000(R) Growth
Index.
mainstayinvestments.com 31
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010, AND HOW DID THIS
POSITIONING AFFECT THE FUND'S PERFORMANCE?
As of April 30, 2010, the Fund was overweight relative to the Russell 1000(R)
Growth Index in energy and telecommunication services. This positioning
contributed positively to the Fund's performance relative to the benchmark. On
the same date, the Fund was underweight in materials and consumer staples. Both
of these positions hurt the Fund's relative performance.
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.
32 MainStay 130/30 Growth Fund
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 118.6%+
- ------------------------------------------------------
AEROSPACE & DEFENSE 3.8%
Boeing Co. (The) 2,371 $ 171,733
General Dynamics Corp. 2,326 177,613
Northrop Grumman Corp. 2,317 157,162
Precision Castparts Corp. (a) 847 108,704
Rockwell Collins, Inc. 3,166 205,790
-----------
821,002
-----------
BEVERAGES 3.4%
Coca-Cola Co. (The) 4,041 215,992
V PepsiCo, Inc. (a) 8,056 525,412
-----------
741,404
-----------
BIOTECHNOLOGY 3.6%
Amgen, Inc. (a)(b) 4,309 247,164
Celgene Corp. (a)(b) 4,475 277,227
Gilead Sciences, Inc. (a)(b) 6,639 263,369
-----------
787,760
-----------
CAPITAL MARKETS 5.3%
Affiliated Managers Group,
Inc. (a)(b) 2,453 206,493
Ameriprise Financial, Inc. 3,628 168,194
Blackstone Group L.P. (The)
(a) 15,917 222,520
Evercore Partners, Inc. Class
A 9,540 341,913
Goldman Sachs Group, Inc.
(The) 1,408 204,442
-----------
1,143,562
-----------
CHEMICALS 0.3%
Celanese Corp. Series A 1,989 63,628
-----------
COMMERCIAL BANKS 1.4%
CapitalSource, Inc. 14,071 84,004
Comerica, Inc. 5,072 213,024
-----------
297,028
-----------
COMMUNICATIONS EQUIPMENT 5.1%
Cisco Systems, Inc. (a)(b) 16,872 454,194
Juniper Networks, Inc. (a)(b) 8,909 253,105
QUALCOMM, Inc. (a) 10,369 401,695
-----------
1,108,994
-----------
COMPUTERS & PERIPHERALS 8.5%
V Apple, Inc. (a)(b) 3,514 917,575
Dell, Inc. (b) 8,322 134,650
EMC Corp. (a)(b) 7,113 135,218
V Hewlett-Packard Co. (a) 12,542 651,808
-----------
1,839,251
-----------
CONSTRUCTION & ENGINEERING 1.0%
URS Corp. (a)(b) 4,256 218,546
-----------
CONSUMER FINANCE 0.9%
American Express Co. (a) 4,109 189,507
-----------
CONTAINERS & PACKAGING 1.2%
Owens-Illinois, Inc. (b) 4,351 154,199
Packaging Corp. of America 4,183 103,446
-----------
257,645
-----------
DIVERSIFIED FINANCIAL SERVICES 1.5%
Bank of America Corp. 3,389 60,426
JPMorgan Chase & Co. 6,410 272,938
-----------
333,364
-----------
ELECTRICAL EQUIPMENT 1.1%
ABB, Ltd., Sponsored ADR
(b)(c) 12,372 237,047
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 1.1%
Arrow Electronics, Inc. (b) 3,456 105,408
Jabil Circuit, Inc. 7,914 121,242
-----------
226,650
-----------
ENERGY EQUIPMENT & SERVICES 5.2%
Cal Dive International, Inc.
(b) 11,355 74,489
FMC Technologies, Inc. (b) 3,744 253,431
Halliburton Co. 6,666 204,313
Schlumberger, Ltd. 5,449 389,168
Transocean, Ltd. (b) 2,639 191,195
-----------
1,112,596
-----------
FOOD & STAPLES RETAILING 3.9%
Costco Wholesale Corp. (a) 3,455 204,121
Wal-Mart Stores, Inc. (a) 7,455 399,961
Walgreen Co. (a) 6,661 234,134
-----------
838,216
-----------
FOOD PRODUCTS 0.8%
General Mills, Inc. 2,463 175,316
-----------
HEALTH CARE EQUIPMENT & SUPPLIES 2.8%
Baxter International, Inc. (a) 4,495 212,254
CareFusion Corp. (b) 3,299 90,986
Hospira, Inc. (a)(b) 4,486 241,302
Inverness Medical Innovations,
Inc. (b) 1,704 67,785
-----------
612,327
-----------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
33
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES 5.6%
AmerisourceBergen Corp. 9,785 $ 301,867
DaVita, Inc. (a)(b) 4,682 292,298
Medco Health Solutions, Inc.
(a)(b) 6,389 376,440
UnitedHealth Group, Inc. 7,994 242,298
-----------
1,212,903
-----------
HOTELS, RESTAURANTS & LEISURE 3.4%
V McDonald's Corp. (a) 6,884 485,942
Starbucks Corp. 3,824 99,347
Starwood Hotels & Resorts
Worldwide, Inc. 2,678 145,978
-----------
731,267
-----------
HOUSEHOLD DURABLES 0.9%
Fortune Brands, Inc. 2,179 114,223
KB Home 3,792 70,266
-----------
184,489
-----------
HOUSEHOLD PRODUCTS 1.9%
Procter & Gamble Co. (The) (a) 6,737 418,772
-----------
INTERNET & CATALOG RETAIL 3.3%
Amazon.com, Inc. (a)(b) 3,062 419,678
Priceline.com, Inc. (a)(b) 1,078 282,490
-----------
702,168
-----------
INTERNET SOFTWARE & SERVICES 3.5%
Google, Inc. Class A (a)(b) 732 384,622
IAC/InterActiveCorp (b) 2,767 62,036
Yahoo!, Inc. (b) 18,807 310,880
-----------
757,538
-----------
IT SERVICES 9.3%
Accenture PLC Class A (a) 7,825 341,483
Automatic Data Processing,
Inc. 2,813 121,972
Cognizant Technology Solutions
Corp. Class A (b) 6,874 351,811
Hewitt Associates, Inc. Class
A (a)(b) 2,828 115,920
V International Business
Machines Corp. (a) 4,728 609,912
MasterCard, Inc. Class A 904 224,228
Visa, Inc. Class A (a) 2,800 252,644
-----------
2,017,970
-----------
MACHINERY 6.6%
Cummins, Inc. 2,906 209,900
Danaher Corp. (a) 3,400 286,552
Deere & Co. (a) 3,970 237,485
Donaldson Co., Inc. 1,240 57,412
Flowserve Corp. (a) 2,449 280,607
Ingersoll-Rand PLC (a) 4,217 155,945
Joy Global, Inc. 3,309 187,984
-----------
1,415,885
-----------
MEDIA 1.6%
Discovery Communications, Inc.
Class A (b) 2,546 98,530
News Corp. Class A 16,271 250,899
-----------
349,429
-----------
METALS & MINING 1.5%
Freeport-McMoRan Copper &
Gold, Inc. (a) 2,142 161,785
United States Steel Corp. 2,904 158,733
-----------
320,518
-----------
MULTILINE RETAIL 1.8%
Target Corp. 7,017 399,057
-----------
OFFICE ELECTRONICS 0.3%
Xerox Corp. 6,232 67,929
-----------
OIL, GAS & CONSUMABLE FUELS 2.4%
EXCO Resources, Inc. 7,618 141,314
Occidental Petroleum Corp. 2,588 229,452
Southwestern Energy Co. (b) 3,810 151,181
-----------
521,947
-----------
PHARMACEUTICALS 4.9%
V Abbott Laboratories (a) 9,996 511,395
Merck & Co., Inc. (a) 6,012 210,661
Perrigo Co. 2,511 153,246
Teva Pharmaceutical
Industries, Ltd., Sponsored
ADR (a)(c) 3,187 187,173
-----------
1,062,475
-----------
PROFESSIONAL SERVICES 0.4%
Towers Watson & Co. Class A 1,818 87,264
-----------
ROAD & RAIL 2.3%
V Union Pacific Corp. (a) 6,598 499,205
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.7%
Lam Research Corp. (a)(b) 5,357 217,226
Teradyne, Inc. (a)(b) 10,387 127,033
Texas Instruments, Inc. (a) 8,759 227,822
-----------
572,081
-----------
SOFTWARE 8.5%
Electronic Arts, Inc. (b) 7,465 144,597
V Microsoft Corp. (a) 31,843 972,485
V Oracle Corp. (a) 22,395 578,687
Parametric Technology Corp.
(b) 3,382 62,871
Sybase, Inc. (b) 1,862 80,774
-----------
1,839,414
-----------
SPECIALTY RETAIL 3.7%
GameStop Corp. Class A (b) 9,519 231,407
Monro Muffler Brake, Inc. 2,979 106,827
</Table>
34 MainStay 130/30 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)
SPECIALTY RETAIL (CONTINUED)
O'Reilly Automotive, Inc. (b) 5,486 $ 268,210
Tiffany & Co. (a) 3,937 190,866
-----------
797,310
-----------
TEXTILES, APPAREL & LUXURY GOODS 1.3%
NIKE, Inc. Class B 2,393 181,653
Warnaco Group, Inc. (The)
(a)(b) 2,211 105,774
-----------
287,427
-----------
THRIFTS & MORTGAGE FINANCE 0.5%
Hudson City Bancorp, Inc. (a) 7,444 99,005
-----------
WIRELESS TELECOMMUNICATION SERVICES 1.3%
American Tower Corp. Class A
(a)(b) 5,031 205,315
Leap Wireless International,
Inc. (a)(b) 4,229 77,475
-----------
282,790
-----------
Total Common Stocks
(Cost $23,830,640) 25,630,686
-----------
EXCHANGE TRADED FUNDS 3.7% (D)
- ------------------------------------------------------
iShares Russell 1000 Growth
Index Fund (a) 4,382 230,099
V S&P 500 Index--SPDR Trust
Series 1 4,688 557,215
-----------
Total Exchange Traded Funds
(Cost $781,899) 787,314
-----------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 1.0%
- ------------------------------------------------------
REPURCHASE AGREEMENT 1.0%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$223,180
(Collateralized by a United
States Treasury Bill with a
rate of 0.135%
and a maturity date of
5/27/10,
with a Principal Amount of
$230,00
and a Market Value of
$229,977) $223,180 223,180
-----------
Total Short-Term Investment
(Cost $223,180) 223,180
-----------
Total Investments,
Before Investments Sold
Short
(Cost $24,835,719) (e) 123.3% 26,641,180
-----------
<Caption>
SHARES
INVESTMENTS SOLD SHORT (22.6%)
COMMON STOCKS SOLD SHORT (21.8%)
- ------------------------------------------------------
AUTO COMPONENTS (0.2%)
Goodyear Tire & Rubber Co.
(The) (b) (3,284) $ (44,104)
-----------
AUTOMOBILES (0.8%)
Harley-Davidson, Inc. (2,151) (72,768)
Toyota Motor Corp., Sponsored
ADR (c) (1,331) (102,607)
-----------
(175,375)
-----------
BEVERAGES (0.5%)
Central European Distribution
Corp. (b) (1,620) (56,133)
Constellation Brands, Inc.
Class A (b) (2,896) (52,910)
-----------
(109,043)
-----------
BIOTECHNOLOGY (0.2%)
Vertex Pharmaceuticals, Inc.
(b) (1,012) (39,235)
-----------
BUILDING PRODUCTS (0.3%)
Masco Corp. (3,374) (54,760)
-----------
CAPITAL MARKETS (0.9%)
Charles Schwab Corp. (The) (3,442) (66,396)
Federated Investors, Inc.
Class B (2,868) (69,176)
Northern Trust Corp. (1,197) (65,811)
-----------
(201,383)
-----------
CHEMICALS (1.4%)
Ecolab, Inc. (1,732) (84,591)
Intrepid Potash, Inc. (b) (3,230) (84,820)
Mosaic Co. (The) (1,121) (57,328)
Sigma-Aldrich Corp. (1,429) (84,739)
-----------
(311,478)
-----------
COMMERCIAL BANKS (0.3%)
SunTrust Banks, Inc. (1,852) (54,819)
-----------
COMMERCIAL SERVICES & SUPPLIES (1.0%)
Clean Harbors, Inc. (b) (1,396) (88,548)
Pitney Bowes, Inc. (5,431) (137,948)
-----------
(226,496)
-----------
COMMUNICATIONS EQUIPMENT (0.6%)
Nokia Oyj, Sponsored ADR
(b)(c) (4,305) (52,349)
Research In Motion, Ltd. (b) (1,067) (75,960)
-----------
(128,309)
-----------
CONSTRUCTION & ENGINEERING (0.4%)
Quanta Services, Inc. (b) (4,662) (93,846)
-----------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
35
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS SOLD SHORT (CONTINUED)
CONTAINERS & PACKAGING (0.7%)
Pactiv Corp. (b) (3,010) $ (76,484)
Sealed Air Corp. (2,965) (63,748)
-----------
(140,232)
-----------
DIVERSIFIED FINANCIAL SERVICES (0.3%)
MSCI, Inc. Class A (b) (2,129) (73,770)
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
AT&T, Inc. (3,360) (87,562)
-----------
ELECTRIC UTILITIES (0.3%)
Southern Co. (1,914) (66,148)
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.7%)
Trimble Navigation, Ltd. (b) (2,158) (70,588)
Universal Display Corp. (b) (6,206) (82,850)
-----------
(153,438)
-----------
ENERGY EQUIPMENT & SERVICES (0.3%)
Dril-Quip, Inc. (b) (1,166) (67,546)
-----------
FOOD & STAPLES RETAILING (0.3%)
Safeway, Inc. (2,610) (61,596)
-----------
FOOD PRODUCTS (0.2%)
ConAgra Foods, Inc. (2,163) (52,929)
-----------
HEALTH CARE EQUIPMENT & SUPPLIES (0.3%)
St. Jude Medical, Inc. (b) (1,349) (55,066)
-----------
HEALTH CARE PROVIDERS & SERVICES (0.7%)
Quest Diagnostics, Inc. (1,292) (73,851)
VCA Antech, Inc. (b) (2,846) (80,997)
-----------
(154,848)
-----------
HOTELS, RESTAURANTS & LEISURE (0.7%)
Bally Technologies, Inc. (b) (1,800) (83,016)
Life Time Fitness, Inc. (b) (1,674) (61,536)
-----------
(144,552)
-----------
HOUSEHOLD DURABLES (0.4%)
Toll Brothers, Inc. (b) (3,845) (86,782)
-----------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.4%)
Ormat Technologies, Inc. (2,843) (90,578)
-----------
INSURANCE (1.6%)
Brown & Brown, Inc. (2,602) (52,404)
Everest Re Group, Ltd. (933) (71,514)
Principal Financial Group,
Inc. (1,928) (56,336)
RLI Corp. (1,501) (87,058)
XL Capital, Ltd. Class A (3,932) (69,990)
-----------
(337,302)
-----------
INTERNET SOFTWARE & SERVICES (0.8%)
Equinix, Inc. (b) (765) (76,997)
Sohu.com, Inc. (b) (1,858) (89,463)
-----------
(166,460)
-----------
LIFE SCIENCES TOOLS & SERVICES (0.3%)
Illumina, Inc. (b) (1,527) (63,936)
-----------
MACHINERY (1.0%)
Caterpillar, Inc. (1,254) (85,385)
Pall Corp. (1,897) (73,964)
Valmont Industries, Inc. (619) (51,556)
-----------
(210,905)
-----------
MEDIA (0.6%)
CTC Media, Inc. (3,128) (52,832)
DISH Network Corp. Class A (3,098) (68,621)
-----------
(121,453)
-----------
METALS & MINING (0.9%)
Compass Minerals
International, Inc. (1,079) (81,260)
Goldcorp, Inc. (2,728) (117,931)
-----------
(199,191)
-----------
MULTI-UTILITIES (0.2%)
Consolidated Edison, Inc. (964) (43,573)
-----------
OIL, GAS & CONSUMABLE FUELS (1.0%)
BP PLC, Sponsored ADR (c) (1,821) (94,965)
Chesapeake Energy Corp. (2,501) (59,524)
Royal Dutch Shell PLC, ADR (c) (925) (56,129)
-----------
(210,618)
-----------
PHARMACEUTICALS (0.9%)
GlaxoSmithKline PLC, Sponsored
ADR (c) (1,609) (59,999)
Novartis A.G., ADR (c) (1,348) (68,546)
Pfizer, Inc. (4,268) (71,361)
-----------
(199,906)
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.5%)
St. Joe Co. (The) (b) (3,452) (114,054)
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%)
Novellus Systems, Inc. (b) (3,546) (92,905)
-----------
SOFTWARE (1.3%)
Activision Blizzard, Inc. (4,336) (48,043)
FactSet Research Systems, Inc. (1,025) (77,100)
</Table>
36 MainStay 130/30 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 SOLD SHORT (CONTINUED)
SOFTWARE (CONTINUED)
SAP A.G., Sponsored ADR (c) (2,019) $ (95,802)
Sourcefire, Inc. (b) (2,909) (65,074)
-----------
(286,019)
-----------
Total Common Stocks Sold Short
(Proceeds $4,401,875) (4,720,217)
-----------
EXCHANGE TRADED FUND SOLD SHORT (0.8%) (D)
- ------------------------------------------------------
iShares Russell 2000 Index
Fund (2,502) (179,093)
-----------
Total Exchange Traded Fund
Sold Short
(Proceeds $148,961) (179,093)
-----------
Total Investments Sold Short
(Proceeds $4,550,836) (22.6)% (4,899,310)
-----------
Total Investments,
Net of Investments Sold
Short
(Cost $20,284,883) 100.7 21,741,870
Other Assets, Less Liabilities (0.7) (137,384)
-------- -----------
Net Assets 100.0% $21,604,486
======== ===========
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
(a) Security, or a portion thereof, is
maintained in a segregated account at the
Fund's custodian as collateral for
securities sold short (See Note 2(I)).
(b) Non-income producing security.
(c) ADR--American Depositary Receipt.
(d) Exchange Traded Fund--An investment
vehicle that represents a basket of
securities that is traded on an exchange.
(e) At April 30, 2010, cost is $26,458,341
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 2,319,509
Gross unrealized depreciation (2,136,670)
-----------
Net unrealized appreciation $ 182,839
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
37
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets and liabilities.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $25,630,686 $ -- $ -- $25,630,686
Exchange Traded Funds 787,314 -- -- 787,314
Short-Term Investment
Repurchase Agreement -- 223,180 -- 223,180
----------- -------- -------- -----------
Total Investments in Securities $26,418,000 $223,180 $-- $26,641,180
=========== ======== ======== ===========
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
LIABILITY VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments Sold Short (a)
Common Stocks Sold Short $(4,720,217) $ -- $ -- $(4,720,217)
Exchange Traded Funds Sold Short (179,093) -- -- (179,093)
----------- -------- -------- -----------
Total Investments Sold Short $(4,899,310) $-- $-- $(4,899,310)
=========== ======== ======== ===========
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
38 MainStay 130/30 Growth Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities before
investments sold short, at value
(identified cost $24,835,719) $26,641,180
Cash collateral on deposit at broker 788
Cash 7
Receivables:
Fund shares sold 34,500
Dividends and interest 21,897
Other assets 32,248
-----------
Total assets 26,730,620
-----------
LIABILITIES:
Investments sold short (proceeds
$4,550,836) 4,899,310
Payables:
Investment securities purchased 118,283
Broker fees and charges on short
sales 42,807
Professional fees 22,452
Shareholder communication 17,846
Manager (See Note 3) 11,432
Dividends on investments sold
short 5,840
Transfer agent (See Note 3) 1,975
Custodian 1,737
Fund shares redeemed 1,119
Trustees 616
NYLIFE Distributors (See Note 3) 244
Accrued expenses 2,473
-----------
Total liabilities 5,126,134
-----------
Net assets $21,604,486
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 2,706
Additional paid-in capital 23,014,826
-----------
23,017,532
Accumulated net investment loss (147,582)
Accumulated net realized loss on
investments, investments sold
short and foreign currency
transactions (2,722,451)
Net unrealized appreciation on
investments 1,805,461
Net unrealized depreciation on
investments sold short (348,474)
-----------
Net assets $21,604,486
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 112,991
===========
Shares of beneficial interest
outstanding 14,266
===========
Net asset value per share
outstanding $ 7.92
Maximum sales charge (5.50% of
offering price) 0.46
-----------
Maximum offering price per share
outstanding $ 8.38
===========
CLASS A
Net assets applicable to outstanding
shares $ 354,399
===========
Shares of beneficial interest
outstanding 44,769
===========
Net asset value per share
outstanding $ 7.92
Maximum sales charge (5.50% of
offering price) 0.46
-----------
Maximum offering price per share
outstanding $ 8.38
===========
CLASS C
Net assets applicable to outstanding
shares $ 257,243
===========
Shares of beneficial interest
outstanding 33,225
===========
Net asset value and offering price
per share outstanding $ 7.74
===========
CLASS I
Net assets applicable to outstanding
shares $20,879,853
===========
Shares of beneficial interest
outstanding 2,614,205
===========
Net asset value and offering price
per share outstanding $ 7.99
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
39
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 298,171
Interest 62
-----------
Total income 298,233
-----------
EXPENSES:
Manager (See Note 3) 199,014
Broker fees and charges on short
sales 118,048
Dividends on investments sold
short 78,323
Registration 26,851
Professional fees 23,524
Custodian 9,577
Shareholder communication 8,790
Transfer agent (See Note 3) 5,724
Distribution/Service--Investor
Class (See Note 3) 134
Distribution/Service--Class A (See
Note 3) 241
Distribution/Service--Class C (See
Note 3) 890
Trustees 1,130
Miscellaneous 4,135
-----------
Total expenses before waiver 476,381
Expense waiver from Manager (See
Note 3) (30,566)
-----------
Net expenses 445,815
-----------
Net investment loss (147,582)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions 15,399,982
Investments sold short (3,544,258)
Foreign currency transactions 7
-----------
Net realized gain on investments,
investments sold short and foreign
currency transactions 11,855,731
-----------
Net change in unrealized
appreciation (depreciation) on:
Investments (8,635,526)
Investments sold short 797,800
-----------
Net change in unrealized
appreciation on investments and
investments sold short (7,837,726)
-----------
Net realized and unrealized gain on
investments, investments sold
short and foreign currency
transactions 4,018,005
-----------
Net increase in net assets resulting
from operations $ 3,870,423
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of $2,418.
40 MainStay 130/30 Growth Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss $ (147,582) $ (56,166)
Net realized gain (loss) on
investments, investments
sold short and foreign
currency transactions 11,855,731 (3,013,267)
Net change in unrealized
appreciation
(depreciation) on
investments and
investments sold short (7,837,726) 17,908,553
--------------------------
Net increase in net assets
resulting from operations 3,870,423 14,839,120
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 1,552,332 42,156,937
Cost of shares redeemed (49,881,727) (37,707,421)
--------------------------
Increase (decrease) in
net assets derived from
capital share
transactions (48,329,395) 4,449,516
--------------------------
Net increase (decrease)
in net assets (44,458,972) 19,288,636
NET ASSETS:
Beginning of period 66,063,458 46,774,822
--------------------------
End of period $ 21,604,486 $ 66,063,458
==========================
Accumulate net investment
loss at end of period $ (147,582) $ --
==========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
41
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2010
<Table>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net increase in net assets
resulting from operations $ 3,870,423
Adjustments to reconcile net
increase in net assets resulting
from operations to net cash used
for operating activities:
Investments purchased (41,520,759)
Investments sold 101,230,271
Purchases to cover securities
sold short (30,282,436)
Securities sold short 16,991,168
Purchase of short term
investments, net 1,675,148
Decrease in investment securities
sold receivable 2,134,542
Decrease in dividends and
interest receivable 26,099
Increase in other assets (16,023)
Decrease in investment securities
purchased payable (1,704,541)
Increase in broker fees and
charges on short sales 42,807
Decrease in dividends payable for
securities sold short (12,831)
Decrease in professional fees
payable (1,538)
Decrease in custodian payable (2,858)
Increase in shareholder
communication payable 325
Increase in due to trustees 389
Decrease in due to manager (49,606)
Decrease in due to transfer agent (87)
Increase in due to NYLIFE
Distributors 43
Decrease in accrued expenses and
other liabilities (891)
Net change in unrealized
(appreciation) depreciation on
investments 8,635,526
Net realized gain from
investments (15,399,982)
Net change in unrealized
appreciation on securities
sold short (797,800)
Net realized loss from securities
sold short 3,544,258
------------
Net cash provided by operating
activities 48,361,647
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold 1,518,968
Payment on shares redeemed (49,880,608)
------------
Net cash used in financing
activities (48,361,640)
------------
NET INCREASE IN CASH: 7
Cash at beginning of period --
------------
Cash at end of period $ 7
============
</Table>
42 MainStay 130/30 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>
INVESTOR CLASS CLASS A
----------------------------------------- ----------------------------------------------
FEBRUARY 28, JUNE 29,
SIX MONTHS 2008** SIX MONTHS 2007**
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2010* 2009 2008 2007
Net asset value at beginning of
period $ 7.42 $ 6.69 $ 9.68 $ 7.42 $ 6.68 $ 10.63 $10.00
------ ------ ------- ------ ------ ------- ------
Net investment loss (a) (0.04) (0.02) (0.07) (0.04) (0.00)++ (0.10) (0.03)
Net realized and unrealized gain
(loss) on investments 0.54 0.75 (2.92) 0.54 0.74 (3.85) 0.66
------ ------ ------- ------ ------ ------- ------
Total from investment operations 0.50 0.73 (2.99) 0.50 0.74 (3.95) 0.63
------ ------ ------- ------ ------ ------- ------
Net asset value at end of period $ 7.92 $ 7.42 $ 6.69 $ 7.92 $ 7.42 $ 6.68 $10.63
====== ====== ======= ====== ====== ======= ======
Total investment return (b) 6.74%(c) 10.91% (30.89%)(c) 6.74%(c) 11.08% (37.16%) 6.40%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment loss (1.09%)++ (0.33%) (1.20%)++ (1.03%)++ (0.06%) (1.09%) (0.91%)++
Net expenses (excluding short
sale expenses) 1.60% ++ 1.60% 1.60% ++ 1.50% ++ 1.50% 1.50% 1.50% ++
Expenses (including short sales
expenses, before waiver) 2.77% ++ 2.58% 2.73% ++ 2.61% ++ 2.30% 2.77% 3.68% ++
Short sale expenses 0.96% ++ 0.79% 0.69% ++ 0.95% ++ 0.79% 0.70% 0.47% ++
Portfolio turnover rate 85% 203% 311% 85% 203% 311% 137%
Net assets at end of period (in
000's) $ 113 $ 93 $ 60 $ 354 $ 166 $ 239 $ 477
</Table>
<Table>
<Caption>
CLASS C
---------------------------------------------------------- CLASS I
JUNE 29, ----------
SIX MONTHS 2007** SIX MONTHS
ENDED YEAR ENDED THROUGH ENDED
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30,
2010* 2009 2008 2007 2010*
Net asset value at beginning of
period $ 7.28 $ 6.61 $ 10.61 $10.00 $ 7.47
------ ------ ------- ------ -------
Net investment loss (a) (0.07) (0.06) (0.17) (0.05) (0.03)
Net realized and unrealized gain
(loss) on investments 0.53 0.73 (3.83) 0.66 0.55
------ ------ ------- ------ -------
Total from investment operations 0.46 0.67 (4.00) 0.61 0.52
------ ------ ------- ------ -------
Net asset value at end of period $ 7.74 $ 7.28 $ 6.61 $10.61 $ 7.99
====== ====== ======= ====== =======
Total investment return (b) 6.32%(c) 10.14%(d) (37.70%) 6.10%(c) 6.96%(c)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment loss (1.84%)++ (0.96%) (1.88%) (1.54%)++ (0.73%)++
Net expenses (excluding short
sale expenses) 2.35% ++ 2.35% 2.32% 2.25% ++ 1.25% ++
Expenses (including short sales
expenses, before waiver) 3.52% ++ 3.32% 3.56% 4.43% ++ 2.39% ++
Short sale expenses 0.95% ++ 0.79% 0.69% 0.47% ++ 0.99% ++
Portfolio turnover rate 85% 203% 311% 137% 85%
Net assets at end of period (in
000's) $ 257 $ 172 $ 165 $ 71 $20,880
<Caption>
CLASS I
-----------------------------------------
JUNE 29,
2007**
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31,
2009 2008 2007
Net asset value at beginning of
period $ 6.71 $ 10.65 $ 10.00
------- ------- -------
Net investment loss (a) (0.01) (0.07) (0.02)
Net realized and unrealized gain
(loss) on investments 0.77 (3.87) 0.67
------- ------- -------
Total from investment operations 0.76 (3.94) 0.65
------- ------- -------
Net asset value at end of period $ 7.47 $ 6.71 $ 10.65
======= ======= =======
Total investment return (b) 11.33%(d) (37.00%) 6.50%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment loss (0.08%) (0.73%) (0.56%)++
Net expenses (excluding short
sale expenses) 1.25% 1.25% 1.25% ++
Expenses (including short sales
expenses, before waiver) 2.05% 2.28% 3.38% ++
Short sale expenses 0.79% 0.65% 0.47% ++
Portfolio turnover rate 203% 311% 137%
Net assets at end of period (in
000's) $65,632 $46,311 $18,320
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
43
MAINSTAY 130/30 INTERNATIONAL FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (9/28/07)
- --------------------------------------------------------
With sales charges -3.64% 25.11% -17.35%
Excluding sales charges 1.96 32.39 -15.53
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 MSCI EAFE
INTERNATIONAL FUND (R) INDEX
------------------ ---------
9/28/07 9450 10000
4/30/08 8445 9436
4/30/09 4611 5401
4/30/10 6105 7260
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (9/28/07)
- --------------------------------------------------------
With sales charges -3.72% 25.46% -17.33%
Excluding sales charges 1.89 32.77 -15.50
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 MSCI EAFE
INTERNATIONAL FUND (R) INDEX
------------------ ---------
9/28/07 23625.00 25000.00
4/30/08 21088.00 23589.00
4/30/09 11505.00 13502.00
4/30/10 15274.00 18151.00
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (9/28/07)
- --------------------------------------------------------
With sales charges 0.63% 30.55% -16.24%
Excluding sales charges 1.63 31.55 -16.24
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 MSCI EAFE
INTERNATIONAL FUND (R) INDEX
------------------ ---------
9/28/07 10000.00 10000.00
4/30/08 8887.00 9436.00
4/30/09 4804.00 5401.00
4/30/10 6320.00 7260.00
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividends and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. Class C shares are sold with no initial sales
charge, are subject to a contingent deferred sales charge ("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 or individual 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. For information
on current fee waivers and/or expense limitations, please refer to the notes
to the financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
44 MainStay 130/30 International Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (9/28/07)
- -----------------------------------------------
2.08% 32.89% -15.33%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY 130/30 MSCI EAFE(R)
INTERNATIONAL FUND INDEX
------------------ ------------
9/28/07 10000.00 10000.00
4/30/08 8939.00 9436.00
4/30/09 4892.00 5401.00
4/30/10 6501.00 7260.00
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
MSCI EAFE Index(3) 2.48% 34.43% -11.66%
Average Lipper long/short equity fund(4) 6.45 22.52 -5.85
</Table>
differences in certain contractual fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--is considered to be representative of the
international stock market. Results assume reinvestment of all income and
capital gains. The MSCI EAFE(R) Index is the Fund's broad-based securities
market index for comparison purposes. An investment cannot be made directly
in an index.
4. The average Lipper long/short equity fund is representative of funds that
employ portfolio strategies combining long holdings of equities with short
sales of equity, equity options, or equity index options. The funds may be
either net long or net short, depending on the portfolio manager's view of
the market. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on average total
returns of similar funds with all dividend and capital gain distributions
reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 45
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY 130/30 INTERNATIONAL FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,019.60 $14.12 $1,010.80 $14.06
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,018.90 $13.37 $1,011.60 $13.32
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,016.30 $17.85 $1,007.10 $17.77
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,020.80 $12.33 $1,012.60 $12.28
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(2.82% for Investor Class, 2.67% for Class A, 3.57% for Class C and 2.46% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 (to reflect the one-half year period). The table
above represents the actual expenses incurred during the one-half year
period.
46 MainStay 130/30 International Fund
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
Common Stocks 126.7
Short-Term Investment 1.5
Exchange Traded Fund 1.0
Preferred Stock 0.3
Convertible Preferred Stock 0.2
Rights 0.0
Warrants 0.0
Other Liabilities in Excess of Cash and
Other Assets (0.2)
Investments Sold Short (29.5)
</Table>
See Portfolio of Investments beginning on page 50 for specific holdings within
these categories.
++ Less than one-tenth of a percent.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. iShares MSCI EAFE Index Fund
2. BP PLC
3. Nestle S.A. Registered
4. Vodafone Group PLC
5. BHP Billiton, Ltd.
6. Novartis A.G. Registered
7. Sanofi-Aventis
8. AstraZeneca PLC
9. BNP Paribas S.A.
10. ENI S.p.A.
</Table>
TOP FIVE SHORT POSITIONS AS OF APRIL 30, 2010
<Table>
1. DNO International ASA
2. Haseko Corp.
3. Point, Inc.
4. EBARA Corp.
5. SGL Carbon SE
</Table>
mainstayinvestments.com 47
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGER ANDREW VER PLANCK, CFA, OF MADISON
SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY 130/30 INTERNATIONAL FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay 130/30 International Fund returned 1.96%
for Investor Class shares, 1.89% for Class A shares and 1.63% for Class C shares
for the six months ended April 30, 2010. Over the same period, Class I shares
returned 2.08%. All share classes underperformed the 6.45% return of the average
Lipper(1) long/short equity fund and the 2.48% return of the Morgan Stanley
Capital International Europe, Australasia and Far East Index (the MSCI EAFE(R)
Index)(2) for the six months ended April 30, 2010. The MSCI EAFE(R) Index is the
Fund's broad-based securities market index. See page 44 for Fund returns with
sales charges.
WHAT FACTORS AFFECTED THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund underperformed the MSCI EAFE(R) Index during the reporting period.
Exposure to Greece and Spain detracted from the Fund's results. The Fund
initially held overweight positions in Greece, Spain and Portugal but moved to
underweight positions in each of these countries as concerns increased about
possible defaults of government-issued debt.
DURING THE REPORTING PERIOD, WHICH INDUSTRY GROUPS WERE THE STRONGEST
CONTRIBUTORS TO THE FUND'S RELATIVE PERFORMANCE AND WHICH INDUSTRY GROUPS WERE
PARTICULARLY WEAK?
During the reporting period, the industry groups that made the strongest
contributions to the Fund's performance relative to the MSCI EAFE(R) Index were
capital goods, media and technology hardware & equipment. From an industry group
perspective, the most significant detractors from the Fund's performance
relative to the MSCI EAFE(R) Index were banks and utilities (both of which
underperformed the Index) and retailing (which outperformed the Index). Although
the Fund was, on average, overweight among retailers, poor stock selection
caused the Fund's retail holdings to underperform industry-group-related stocks
in the benchmark.
WHICH COUNTRIES WERE THE STRONGEST CON-TRIBUTORS TO THE FUND'S RELATIVE
PERFORMANCE AND WHICH COUNTRIES WERE PARTICULARLY WEAK?
The weakest-contributing countries included Australia (where poor stock
selection caused the Fund to lag an otherwise outperforming country) and Spain
and Greece (which significantly underperformed the Index). The strongest-
contributing countries were Germany, Hong Kong and Italy, all of which
outperformed the Index.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL FUND HOLDINGS WERE STRONG
CONTRIBUTORS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH HOLDINGS WERE WEAK?
On an absolute basis, the strongest contributors to the Fund's performance were
long positions in Norwegian oil field service company Acergy S.A., Australian
mining company BHP Billiton, Ltd., and British engineering solutions company IMI
PLC. In addition, short positions in the Austrian biotechnology company
Intercell A.G. and German pay-television provider Sky Deutschland A.G.
contributed positively to performance.
The Fund's weakest-contributing long positions included National Bank of Greece
S.A. and two Spanish commercial banks, Banco Santander S.A. and Banco Bilbao
Vizcaya Argentaria S.A. Short positions in Australian mining companies
Riversdale Mining LTD and Iluka Resources LTD detracted from performance.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
In February 2010, we initiated positions in Japanese capacitor manufacturer
Nichicon and marine transport company Kawasaki Kisen Kaisha Ltd. We reduced the
Fund's positions in National Bank of Greece and Banco Santander in early
February 2010, in response to the escalating risk of default by Greece and the
potential effects elsewhere in Europe. During the reporting period, we
established short positions in German pay-television provider Sky Deutsch-
land A.G. and Danish biotechnology company Genmab A/S.
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, the Fund's weightings relative to the MSCI EAFE(R)
Index increased in the industrials and consumer discretionary sectors. Over the
same period, the Fund's weightings declined in the financials and consumer
staples sectors.
1. See footnote on page 45 for more information on Lipper Inc.
2. See footnote on page 45 for more information on the MSCI EAFE(R) Index.
48 MainStay 130/30 International Fund
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010, AND HOW DID THIS
POSITIONING AFFECT THE FUND'S PERFORMANCE?
As of April 30, 2010, the Fund held overweight positions relative to the MSCI
EAFE(R) Index in the materials and consumer discretionary sectors. These
overweight positions contributed positively to the Fund's performance during the
reporting period. As of the same date, the Fund was underweight in financials
and utilities. This positioning improved the Fund's performance in April.
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.
mainstayinvestments.com 49
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 128.0%+
- -------------------------------------------------------
AUSTRALIA 12.5%
Ansell, Ltd. (Health Care
Equipment & Supplies) (a) 55,473 $ 651,873
Australia & New Zealand
Banking Group, Ltd.
(Commercial Banks) (a) 14,825 327,038
Beach Petroleum, Ltd. (Oil,
Gas & Consumable Fuels) 251,945 180,211
BGP Holdings PLC
(Diversified Financial
Services) (b) 106,339 10
V BHP Billiton, Ltd.
(Metals & Mining) (a) 59,196 2,162,576
BlueScope Steel, Ltd.
(Metals & Mining) (c) 9,798 23,515
Brambles, Ltd. (Commercial
Services & Supplies) (a) 47,277 314,807
Caltex Australia, Ltd. (Oil,
Gas & Consumable Fuels)
(a) 75,107 798,124
Centennial Coal Co., Ltd.
(Oil, Gas & Consumable
Fuels) (a) 175,331 679,791
Commonwealth Bank of
Australia (Commercial
Banks) (a) 25,750 1,378,063
Computershare, Ltd. (IT
Services) (a) 1,539 16,697
Consolidated Media Holdings,
Ltd. (Media) (a) 55,420 160,374
Goodman Fielder, Ltd. (Food
Products) (a) 626,063 841,836
GWA International, Ltd.
(Building Products) 23,721 69,732
Harvey Norman Holdings, Ltd.
(Multiline Retail) 197,837 617,169
Independence Group NL
(Metals & Mining) 19,188 80,891
Kingsgate Consolidated, Ltd.
(Metals & Mining) (a) 91,133 717,736
Macquarie Airports
(Transportation
Infrastructure) (a) 321,385 920,529
Macquarie Group, Ltd.
(Capital Markets) (a) 14,528 662,776
Macquarie Infrastructure
Group (Transportation
Infrastructure) (a) 807,490 839,168
Monadelphous Group, Ltd.
(Construction &
Engineering) (a) 52,662 749,282
National Australia Bank,
Ltd. (Commercial Banks)
(a) 43,013 1,099,342
OZ Minerals, Ltd. (Metals &
Mining) (c) 37,150 38,869
Rio Tinto, Ltd. (Metals &
Mining) (a) 15,407 1,002,324
Seven Group Holdings, Ltd.
(Media) 18,070 123,617
Sigma Pharmaceuticals, Ltd.
(Health Care Providers &
Services) 194,717 80,186
Spotless Group, Ltd.
(Commercial Services &
Supplies) (a) 76,557 199,663
TABCORP Holdings, Ltd.
(Hotels, Restaurants &
Leisure) (a) 12,781 80,731
Telstra Corp, Ltd.
(Diversified
Telecommunication
Services) 9,537 27,917
Wesfarmers, Ltd. (Food &
Staples Retailing) 1,759 47,099
Westpac Banking Corp.
(Commercial Banks) (a) 15,535 386,087
------------
15,278,033
------------
AUSTRIA 1.9%
Andritz A.G. (Machinery) (a) 11,965 738,619
OMV A.G. (Oil, Gas &
Consumable Fuels) (a) 18,176 654,167
Strabag SE (Construction &
Engineering) (a) 5,624 148,429
Voestalpine A.G. (Metals &
Mining) (a) 19,620 740,695
Zumtobel A.G. (Electrical
Equipment) (a)(c) 1,046 22,736
------------
2,304,646
------------
BELGIUM 0.9%
Bekaert S.A. (Electrical
Equipment) 1,847 328,730
D'ieteren S.A.
(Distributors) 350 164,523
Nyrstar (Metals & Mining)
(a)(c) 50,365 653,525
------------
1,146,778
------------
BERMUDA 2.4%
Cosco International
Holdings, Ltd.
(Construction &
Engineering) 476,000 269,773
First Pacific Co., Ltd./Hong
Kong (Diversified
Financial Services) 196,000 132,278
GuocoLeisure, Ltd. (Hotels,
Restaurants & Leisure) 224,000 104,328
Jardine Matheson Holdings,
Ltd. (Industrial
Conglomerates) (a) 16,000 584,276
Johnson Electric Holdings,
Ltd. (Electrical
Equipment) (c) 600,500 341,129
Mongolia Energy Co., Ltd.
(Oil, Gas & Consumable
Fuels) (c) 21,000 9,586
NWS Holdings, Ltd.
(Industrial Conglomerates)
(a) 118,000 205,578
Skyworth Digital Holdings,
Ltd. (Household Durables) 60,000 53,525
Texwinca Holdings, Ltd.
(Textiles, Apparel &
Luxury Goods) (a) 160,000 171,437
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
50 MainStay 130/30 International 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)
BERMUDA (CONTINUED)
VTech Holdings, Ltd.
(Communications Equipment)
(a) 68,000 $ 757,309
Yue Yuen Industrial
Holdings, Ltd. (Textiles,
Apparel & Luxury Goods)
(a) 73,500 255,178
------------
2,884,397
------------
CAYMAN ISLANDS 1.6%
Chaoda Modern Agriculture
Holdings, Ltd. (Food
Products) (a) 66,000 74,260
Ju Teng International
Holdings, Ltd. (Electronic
Equipment & Instruments) 160,000 146,741
Kingboard Chemical Holdings,
Ltd. (Electronic Equipment
& Instruments) (a) 114,000 615,716
Kingboard Laminates
Holdings, Ltd. (Electronic
Equipment & Instruments)
(a) 269,000 285,511
Lonking Holdings, Ltd.
(Machinery) 377,000 282,318
Minth Group, Ltd. (Auto
Components) (a) 106,000 149,364
Polytec Asset Holdings, Ltd.
(Capital Markets) 485,000 94,216
Truly International Holdings
(Electronic Equipment &
Instruments) (a) 96,000 177,219
XTEP International Holdings
(Textiles, Apparel &
Luxury Goods) 94,500 71,811
------------
1,897,156
------------
DENMARK 1.4%
Coloplast A/S (Health Care
Equipment & Supplies) (a) 1,513 169,171
D/S Norden (Marine) (a) 6,018 274,080
Danisco A/S (Food Products)
(a) 7,275 524,713
East Asiatic Co., Ltd. A/S
(Food Products) 475 13,160
H Lundbeck A/S
(Pharmaceuticals) (a) 7,987 130,781
Novo-Nordisk A/S Class B
(Pharmaceuticals) (a) 7,138 583,013
------------
1,694,918
------------
FINLAND 2.6%
Amer Sports Oyj (Leisure
Equipment & Products) 2,942 34,909
Cargotec Oyj (Machinery) (a) 14,006 450,272
Cramo Oyj (Trading Companies
& Distributors) (a)(c) 8,390 168,657
Metso Oyj (Machinery) (a) 14,516 560,251
Nokia Oyj (Communications
Equipment) (a)(c) 91,113 1,108,864
Wartsila Oyj (Machinery) (a) 2,118 108,740
YIT Oyj (Construction &
Engineering) (a) 31,812 677,376
------------
3,109,069
------------
FRANCE 11.5%
Arkema S.A. (Chemicals) 7,195 302,686
V BNP Paribas S.A.
(Commercial Banks) (a) 24,231 1,665,424
Bouygues S.A. (Construction
& Engineering) (a)(c) 8,571 426,978
Bull S.A. (Computers &
Peripherals) (c) 2,426 11,305
CNP Assurances (Insurance)
(a)(c) 4,931 412,878
Compagnie Generale des
Etablissements Michelin
(Auto Components) 2,385 172,565
Credit Agricole S.A.
(Commercial Banks) (a) 54,716 780,547
France Telecom S.A.
(Diversified
Telecommunication
Services) (a) 22,867 501,252
Havas S.A. (Media) (a) 139,104 744,620
Legrand S.A. (Electrical
Equipment) (a) 31,553 1,023,580
Nexity (Household Durables)
(a) 6,627 242,631
Peugeot S.A. (Automobiles)
(a)(c) 21,381 637,548
Rallye S.A. (Food & Staples
Retailing) (a) 10,929 403,420
Renault S.A. (Automobiles)
(a)(c) 11,895 559,234
Safran S.A. (Aerospace &
Defense) 15,394 393,928
V Sanofi-Aventis
(Pharmaceuticals) (a)(c) 26,017 1,781,472
SEB S.A. (Household
Durables) (a) 8,619 652,391
Total S.A. (Oil, Gas &
Consumable Fuels) (a) 26,163 1,417,693
Valeo S.A. (Auto Components)
(a)(c) 11,499 384,215
Vinci S.A. (Construction &
Engineering) (a) 8,988 503,375
Vivendi S.A. (Media) (a) 39,590 1,041,994
------------
14,059,736
------------
GERMANY 10.6%
Aareal Bank A.G. (Thrifts &
Mortgage Finance) (a)(c) 14,776 324,662
Allianz SE (Insurance)
(a)(c) 11,301 1,297,374
Asian Bamboo A.G. (Food
Products) (a) 4,744 222,295
Aurubis A.G. (Metals &
Mining) (a) 13,588 685,152
BASF A.G. (Chemicals) (a) 25,712 1,503,392
Bayer A.G. (Pharmaceuticals)
(a) 2,668 170,699
Bechtle A.G. (IT Services) 1,180 35,033
Bijou Brigitte A.G.
(Textiles, Apparel &
Luxury Goods) (a) 532 92,915
Bilfinger Berger A.G.
(Construction &
Engineering) (a) 10,270 683,111
CTS Eventim A.G. (Media) 636 33,561
Deutsche Bank A.G. (Capital
Markets) (a) 20,193 1,395,503
E.ON A.G. (Electric
Utilities) (a) 14,481 534,744
Hannover Rueckversicherung
A.G. (Insurance) (a)(c) 18,241 856,523
Infineon Technologies A.G.
(Semiconductors &
Semiconductor Equipment)
(a)(c) 70,612 500,813
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
51
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
Kloeckner & Co. SE (Trading
Companies & Distributors)
(a)(c) 20,228 $ 539,149
Lanxess A.G. (Chemicals) (a) 15,781 748,815
MTU Aero Engines Holding
A.G. (Aerospace & Defense)
(a) 12,739 703,652
Muenchener
Rueckversicherungs-
Gesellschaft A.G.
Registered (Insurance) (a) 5,486 775,300
Praktiker Bau-und
Heimwerkermaerkte Holding
A.G. (Specialty Retail)
(a) 27,006 275,245
RWE A.G. (Multi-Utilities)
(a) 2,902 237,464
Siemens A.G. (Industrial
Conglomerates) (a) 12,863 1,271,671
Wincor Nixdorf A.G.
(Computers & Peripherals)
(a) 513 34,881
------------
12,921,954
------------
GREECE 0.0%++
Motor Oil Hellas Corinth
Refineries S.A. (Oil, Gas
& Consumable Fuels) 4,555 55,427
------------
HONG KONG 1.8%
BOC Hong Kong Holdings, Ltd.
(Commercial Banks) (a) 80,500 194,745
China Pharmaceutical Group,
Ltd. (Pharmaceuticals) 480,000 349,549
CNOOC, Ltd. (Oil, Gas &
Consumable Fuels) (a) 422,000 744,759
Comba Telecom Systems
Holdings, Ltd.
(Communications Equipment)
(a) 330,000 467,124
Dah Chong Hong Holdings,
Ltd. (Distributors) 90,000 58,789
Hutchison Whampoa, Ltd.
(Industrial Conglomerates)
(a) 13,000 89,077
Industrial and Commercial
Bank of China Asia, Ltd.
(Commercial Banks) (a) 50,000 125,208
Shougang Concord
International Enterprises
Co., Ltd. (Metals &
Mining) 624,000 112,714
Tianjin Development Holdings
(Industrial Conglomerates) 118,000 74,114
------------
2,216,079
------------
ITALY 4.0%
Amplifon S.p.A. (Health Care
Providers & Services) (c) 29,751 155,782
Autostrada Torino-Milano
S.p.A. (Transportation
Infrastructure) 11,964 168,001
Danieli & C Officine
Meccaniche S.p.A.
(Machinery) (a) 15,260 388,299
Enel S.p.A. (Electric
Utilities) (a) 192,004 1,001,364
V ENI S.p.A. (Oil, Gas &
Consumable Fuels) (a) 72,486 1,624,949
Indesit Co. S.p.A.
(Household Durables)
(a)(c) 35,909 486,356
MediaSet S.p.A. (Media) (a) 92,653 735,835
Piaggio & C S.p.A.
(Automobiles) 27,332 85,723
Prysmian S.p.A. (Electrical
Equipment) (a) 10,558 189,685
Societa Iniziative
Autostradali e Servizi
S.p.A. (Transportation
Infrastructure) (a) 8,467 77,880
------------
4,913,874
------------
JAPAN 30.9%
Acom Co., Ltd. (Consumer
Finance) (a) 30,140 475,247
Aichi Steel Corp. (Metals &
Mining) 14,000 61,006
Aisin Seiki Co., Ltd. (Auto
Components) (a) 10,300 310,204
Alps Electric Co., Ltd.
(Electronic Equipment &
Instruments) (a)(c) 85,900 627,921
AOYAMA TRADING Co., Ltd.
(Specialty Retail) 10,300 179,612
Asahi Diamond Industrial
Co., Ltd. (Machinery) 22,000 227,263
Astellas Pharma, Inc.
(Pharmaceuticals) (a) 15,000 526,421
Bank of Okinawa, Ltd. (The)
(Commercial Banks) 1,200 49,369
Canon, Inc. (Office
Electronics) (a) 4,500 205,447
Cawachi, Ltd. (Food &
Staples Retailing) 1,800 36,645
Citizen Holdings Co., Ltd.
(Electronic Equipment &
Instruments) (a) 64,900 449,135
Dai-ichi Life Insurance Co.,
Ltd. (The) (Insurance) 95 162,320
Daifuku Co., Ltd.
(Machinery) 18,500 138,683
Daiichikosho Co., Ltd.
(Media) (a) 18,900 251,094
Dydo Drinco, Inc. (Food
Products) 1,900 70,642
EDION Corp. (Specialty
Retail) (a) 73,000 744,868
Fuji Machine Manufacturing
Co., Ltd. (Machinery) (a) 800 13,574
FUJIFILM Holdings Corp.
(Electronic Equipment &
Instruments) (a) 12,600 432,548
Fujikura, Ltd. (Electrical
Equipment) (a) 117,000 625,119
Furukawa-Sky Aluminum Corp.
(Metals & Mining) (a) 64,000 150,337
Fuyo General Lease Co., Ltd.
(Diversified Financial
Services) 5,000 143,996
Geo Corp. (Specialty Retail) 125 135,996
Hanwa Co., Ltd. (Trading
Companies & Distributors)
(a) 89,000 381,142
Hino Motors, Ltd.
(Machinery) (a) 12,000 60,168
Hitachi Kokusai Electric,
Inc. (Communications
Equipment) (a) 14,000 146,588
</Table>
52 MainStay 130/30 International 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)
JAPAN (CONTINUED)
Hitachi, Ltd. (Electronic
Equipment & Instruments)
(a)(c) 56,000 $ 245,753
Honda Motor Co., Ltd.
(Automobiles) (a) 39,100 1,321,200
IBJ Leasing Co., Ltd.
(Diversified Financial
Services) 1,500 30,888
Idemitsu Kosan Co., Ltd.
(Oil, Gas & Consumable
Fuels) (a) 12,100 1,008,480
INPEX Corp. (Oil, Gas &
Consumable Fuels) (a) 66 466,556
Itochu Corp. (Trading
Companies & Distributors) 21,500 186,995
Japan Petroleum Exploration
Co. (Oil, Gas & Consumable
Fuels) (a) 3,200 163,885
JTEKT Corp. (Machinery) (a) 20,300 234,141
Jupiter Telecommunications
Co., Ltd. (Media) 278 280,593
JX Holdings, Inc. (Oil, Gas
& Consumable Fuels) (a)(c) 26,730 149,109
Kansai Electric Power Co.,
Inc. (The) (Electric
Utilities) (a) 3,100 68,963
Kanto Auto Works, Ltd. (Auto
Components) 9,800 80,033
Kawasaki Kisen Kaisha, Ltd.
(Marine) (a)(c) 250,000 1,072,276
Kayaba Industry Co., Ltd.
(Auto Components) (a)(c) 60,000 227,717
KDDI Corp. (Wireless
Telecommunication
Services) (a) 235 1,139,340
Makino Milling Machine Co.,
Ltd. (Machinery) (a)(c) 105,000 719,582
Marubeni Corp. (Trading
Companies & Distributors)
(a) 142,000 841,300
Marui Group Co., Ltd.
(Multiline Retail) (a) 37,100 293,532
Matsuda Sangyo Co., Ltd.
(Commercial Services &
Supplies) 2,200 39,324
Melco Holdings, Inc.
(Computers & Peripherals)
(a) 5,300 147,294
Mitsubishi Chemical Holdings
Corp. (Chemicals) 76,000 405,460
Mitsubishi UFJ Financial
Group, Inc. (Commercial
Banks) (a) 39,800 207,076
MITSUI & Co., Ltd. (Trading
Companies & Distributors)
(a) 80,300 1,211,662
Mitsui Chemicals, Inc.
(Chemicals) (a) 167,000 552,766
Nichicon Corp. (Electronic
Equipment & Instruments)
(a) 60,000 805,142
Nippon Chemi-Con Corp.
(Electronic Equipment &
Instruments) (c) 82,000 337,645
Nippon Electric Glass Co.,
Ltd. (Electronic Equipment
& Instruments) (a) 21,000 320,416
Nippon Light Metal Co., Ltd.
(Metals & Mining) (a)(c) 446,000 650,361
Nippon Soda Co., Ltd.
(Chemicals) (a) 20,000 89,712
Nippon Synthetic Chemical
Industry Co., Ltd. (The)
(Chemicals) 5,000 35,212
Nippon Telegraph & Telephone
Corp. (Diversified
Telecommunication
Services) (a) 29,800 1,209,613
Nishi-Nippon City Bank, Ltd.
(The) (Commercial Banks)
(a) 108,000 310,900
Nissan Motor Co., Ltd.
(Automobiles) (a)(c) 146,100 1,279,662
Nissan Shatai Co., Ltd.
(Auto Components) (a) 19,000 142,806
Nisshin Oillio Group, Ltd.
(The) (Food Products) (a) 106,000 557,873
Nisshinbo Holdings, Inc.
(Textiles, Apparel &
Luxury Goods) (a) 100,000 1,065,832
NKSJ Holdings, Inc.
(Insurance) (c) 17,000 123,426
NOF Corp. (Chemicals) (a) 5,000 19,502
NTT DoCoMo, Inc. (Wireless
Telecommunication
Services) (a) 589 916,181
Oiles Corp. (Machinery) 3,300 54,120
Okinawa Electric Power Co.,
Inc. (The) (Electric
Utilities) (a) 5,300 299,313
Omron Corp. (Electronic
Equipment & Instruments)
(a) 29,600 689,190
Pacific Golf Group
International Holdings KK
(Hotels, Restaurants &
Leisure) 96 68,133
Ricoh Leasing Co., Ltd.
(Diversified Financial
Services) 5,600 141,609
San-In Godo Bank, Ltd. (The)
(Commercial Banks) (a) 11,000 84,479
Seino Holdings Corp. (Road &
Rail) (a) 11,000 79,307
SHIMACHU Co., Ltd.
(Specialty Retail) (a) 25,000 519,051
Sony Corp. (Household
Durables) (a) 39,500 1,350,307
Sumitomo Corp. (Trading
Companies & Distributors)
(a) 14,000 169,426
Sumitomo Electric
Industries, Ltd.
(Electrical Equipment) (a) 12,800 158,042
Sumitomo Metal Mining Co,
Ltd. (Metals & Mining) (a) 28,000 414,931
Takeda Pharmaceutical Co.,
Ltd. (Pharmaceuticals) (a) 23,500 1,011,343
Takefuji Corp. (Consumer
Finance) (a) 173,260 694,711
Toagosei Co., Ltd.
(Chemicals) (a) 110,000 504,889
Toho Zinc Co., Ltd. (Metals
& Mining) (a) 71,000 331,929
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
53
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
Tokai Rika Co., Ltd. (Auto
Components) (a) 5,900 $ 126,423
Tokai Rubber Industries,
Inc. (Auto Components) 15,200 186,802
Tokai Tokyo Securities Co.,
Ltd. (Capital Markets) (a) 88,000 341,321
Tokio Marine Holdings, Inc.
(Insurance) (a) 31,700 944,111
Tokyo Gas Co., Ltd. (Gas
Utilities) (a) 29,000 123,035
Tokyo Steel Manufacturing
Co., Ltd. (Metals &
Mining) (a) 55,800 750,740
Toyo Ink Manufacturing Co.,
Ltd. (Chemicals) (a) 114,000 481,845
Toyota Motor Corp.
(Automobiles) (a) 34,500 1,332,393
Toyota Tsusho Corp. (Trading
Companies & Distributors)
(a) 54,100 810,449
Unipres Corp. (Auto
Components) 1,400 20,462
Yamaguchi Financial Group,
Inc. (Commercial Banks)
(a) 18,000 180,200
Yodogawa Steel Works, Ltd.
(Metals & Mining) (a) 52,000 229,894
------------
37,662,008
------------
NETHERLANDS 3.1%
BinckBank N.V. (Capital
Markets) (a) 13,039 182,156
Brit Insurance Holdings N.V.
(Insurance) (a) 7,555 92,146
Heineken Holding N.V.
(Beverages) (a) 15,716 644,015
Koninklijke Ahold N.V. (Food
& Staples Retailing) (a) 6,497 89,203
Koninklijke DSM N.V.
(Chemicals) (a) 6,544 291,730
Koninklijke Philips
Electronics N.V.
(Industrial Conglomerates)
(a) 39,748 1,343,154
STMicroelectronics N.V.
(Semiconductors &
Semiconductor Equipment)
(c) 29,033 271,579
Unilever N.V. (Food
Products) 1,529 46,550
Unilever N.V., CVA (Food
Products) (a) 28,195 861,663
------------
3,822,196
------------
NORWAY 2.6%
Aker Solutions ASA (Energy
Equipment & Services) (a) 44,992 752,622
Atea ASA (IT Services) (a) 29,252 240,188
Austevoll Seafood A.S.A.
(Food Products) (c) 17,221 137,816
Cermaq ASA (Food Products)
(c) 9,726 108,956
DnB NOR ASA (Commercial
Banks) (a) 25,200 296,536
Sparebank 1 SR Bank
(Commercial Banks) 5,000 45,771
StatoilHydro ASA (Oil, Gas &
Consumable Fuels) (a) 38,450 928,187
TGS Nopec Geophysical Co.
ASA (Energy Equipment &
Services) (a)(c) 34,111 654,637
------------
3,164,713
------------
SINGAPORE 0.8%
Hong Leong Asia, Ltd.
(Industrial Conglomerates)
(a) 115,000 397,620
SembCorp Industries, Ltd.
(Industrial Conglomerates)
(a) 35,000 106,469
Venture Corp., Ltd.
(Electronic Equipment &
Instruments) (a)(c) 67,000 479,421
------------
983,510
------------
SPAIN 4.1%
Almirall S.A.
(Pharmaceuticals) (a) 944 10,189
Banco Bilbao Vizcaya
Argentaria S.A.
(Commercial Banks) (a) 107,990 1,414,024
Banco Popular Espanol S.A.
(Commercial Banks) (a) 3,958 27,967
Banco Santander S.A.
(Commercial Banks) (a) 91,540 1,150,064
Endesa S.A. (Electric
Utilities) (a) 23,384 664,429
Promotora de Informaciones
S.A. (Media) (a)(c) 131,100 548,888
Repsol YPF, S.A. (Oil, Gas &
Consumable Fuels) (a) 3,213 75,414
Telefonica S.A. (Diversified
Telecommunication
Services) (a) 47,886 1,075,366
------------
4,966,341
------------
SWEDEN 3.5%
Atlas Copco AB (a) 59,176 923,149
Betsson AB (Hotels,
Restaurants & Leisure)
(a)(c) 9,793 159,405
Billerud AB (Paper & Forest
Products) (a)(c) 42,935 335,254
Boliden AB (Metals & Mining)
(a) 48,666 676,038
Cardo AB (Machinery) (a) 2,211 70,813
Electrolux AB (Household
Durables) (a) 15,453 399,472
Hoganas AB (Metals & Mining)
(a) 7,220 216,030
KappAhl Holding AB
(Specialty Retail) (a) 63,145 569,402
Securitas AB (Commercial
Services & Supplies) (a) 32,577 344,679
Svenska Handelsbanken Class
A (Commercial Banks) (a) 18,619 524,910
------------
4,219,152
------------
SWITZERLAND 8.7%
Clariant A.G. (Chemicals)
(a)(c) 28,933 399,344
EMS-Chemie Holding A.G.
(Chemicals) 434 60,494
GAM Holding, Ltd. (Capital
Markets) (a)(c) 56,651 704,346
Helvetia Holding A.G.
(Insurance) (a) 648 196,928
</Table>
54 MainStay 130/30 International 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)
SWITZERLAND (CONTINUED)
V Nestle S.A. Registered
(Food Products) (a) 55,176 $ 2,692,837
V Novartis A.G. Registered
(Pharmaceuticals) (a) 38,043 1,941,000
Roche Holding A.G.,
Genusscheine
(Pharmaceuticals) (a) 9,860 1,557,220
Sulzer A.G. (Machinery) (a) 7,070 701,936
Swiss Life Holding
(Insurance) (a)(c) 7,913 963,399
Valora Holding A.G.
(Specialty Retail) 321 80,794
Zurich Financial Services
A.G. (Insurance) (a) 5,910 1,317,663
------------
10,615,961
------------
UNITED KINGDOM 23.1%
Anglo American PLC (Metals &
Mining) (a)(c) 30,965 1,326,196
Antofagasta PLC (Metals &
Mining) (a) 16,991 259,091
V AstraZeneca PLC
(Pharmaceuticals) (a) 38,993 1,724,073
Aviva PLC (Insurance) (a) 42,262 223,648
Barclays PLC (Commercial
Banks) (a) 307,883 1,576,365
BBA Aviation PLC
(Transportation
Infrastructure) (a) 98,394 311,697
Beazley PLC (Insurance) (a) 85,962 149,806
BHP Billiton PLC (Metals &
Mining) (a) 26,032 799,767
Bodycote PLC (Machinery) 28,846 98,511
V BP PLC (Oil, Gas &
Consumable Fuels) (a) 321,739 2,802,868
British American Tobacco PLC
(Tobacco) (a) 41,608 1,306,827
Britvic PLC (Beverages) (a) 73,084 537,342
Cable & Wireless Worldwide
PLC (Diversified
Telecommunication
Services) (c) 30,589 40,438
Close Brothers Group PLC
(Capital Markets) (a) 2,329 25,960
Dairy Crest Group PLC (Food
Products) (a) 63,407 348,421
Dialog Semiconductor PLC
(Semiconductors &
Semiconductor Equipment)
(a)(c) 45,858 676,455
Dimension Data Holdings PLC
(IT Services) (a) 200,067 279,201
DS Smith PLC (Containers &
Packaging) (a) 120,456 248,749
Enterprise Inns PLC (Hotels,
Restaurants & Leisure) (c) 123,524 240,925
Filtrona PLC (Chemicals) 15,279 53,626
Game Group PLC (Specialty
Retail) 116,710 169,754
GlaxoSmithKline PLC
(Pharmaceuticals) (a) 87,028 1,611,749
Halfords Group PLC
(Specialty Retail) 32,381 250,066
HSBC Holdings PLC
(Commercial Banks) (a) 132,630 1,351,155
IMI PLC (Machinery) (a) 73,742 795,482
International Personal
Finance PLC (Consumer
Finance) 29,232 120,524
JKX Oil & Gas PLC (Oil, Gas
& Consumable Fuels) 19,182 76,779
Legal & General Group PLC
(Insurance) 57,470 74,439
Melrose PLC (Machinery) (a) 29,343 106,679
Micro Focus International
PLC (Software) (a) 25,523 204,937
Morgan Crucible Co. PLC
(Machinery) (a) 79,163 258,144
Next PLC (Multiline Retail)
(a) 12,784 448,487
Paragon Group of Cos. PLC
(Thrifts & Mortgage
Finance) (a) 67,534 169,111
Persimmon PLC (Household
Durables) (a)(c) 97,079 706,569
Rio Tinto PLC (Metals &
Mining) (a) 7,531 379,897
Royal Dutch Shell PLC Class
A (Oil, Gas & Consumable
Fuels) (a) 37,049 1,159,200
Royal Dutch Shell PLC Class
B (Oil, Gas & Consumable
Fuels) (a) 49,884 1,505,294
Senior PLC (Machinery) (a) 92,174 163,505
Standard Chartered PLC
(Commercial Banks) (a) 3,071 81,860
Tate & Lyle PLC (Food
Products) (a) 80,673 563,363
Tesco PLC (Food & Staples
Retailing) (a) 30,741 204,493
Trinity Mirror PLC (Media)
(a)(c) 129,497 312,021
Tullett Prebon PLC (Capital
Markets) (a) 134,693 721,419
Vedanta Resources PLC
(Metals & Mining) 1,251 48,207
V Vodafone Group PLC
(Wireless
Telecommunication
Services) (a) 1,056,324 2,348,213
Weir Group PLC (The)
(Machinery) 23,593 353,714
WH Smith PLC (Specialty
Retail) (a) 47,661 365,932
Xstrata PLC (Metals &
Mining) (a) 36,333 601,667
------------
28,182,626
------------
Total Common Stocks
(Cost $145,846,978) 156,098,574
------------
CONVERTIBLE PREFERRED STOCK 0.0%++
- -------------------------------------------------------
GERMANY 0.0%++
KSB A.G.
2.73% (Machinery) 69 44,589
------------
Total Convertible Preferred
Stock
(Cost $42,254) 44,589
------------
EXCHANGE TRADED FUND 2.4% (D)
- -------------------------------------------------------
UNITED STATES 2.4%
V iShares MSCI EAFE Index
Fund (Capital Markets) (a) 52,723 2,869,713
------------
Total Exchange Traded Fund
(Cost $2,943,931) 2,869,713
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
55
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
UNAFFILIATED INVESTMENT COMPANY 0.2%
- -------------------------------------------------------
AUSTRALIA 0.2%
Australian Infrastructure
Fund (Transportation
Infrastructure) (a) 156,902 $ 284,008
------------
Total Unaffiliated
Investment Company
(Cost $283,124) 284,008
------------
<Caption>
NUMBER OF
WARRANTS
WARRANTS 0.0%++
- -------------------------------------------------------
AUSTRALIA 0.0%++
Beach Petroleum, Ltd.
Strike Price A$2.00
Expires 6/30/10 (Oil, Gas
& Consumable Fuels) (c) 3,503 3
------------
CAYMAN ISLANDS 0.0%++
Kingboard Chemicals Holdings
Strike Price HK$40.00
Expires 10/31/12
(Electronic Equipment &
Instruments) (c)(e) 11,400 28,197
------------
Total Warrants
(Cost $0) 28,200
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 1.6%
- -------------------------------------------------------
REPURCHASE AGREEMENT 1.6%
UNITED STATES 1.6%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$1,924,202
(Collateralized by a
United States Treasury
Bill with a rate of 0.135%
and a maturity date of
5/27/10, with a Principal
Amount of $1,965,000 and a
Market Value of
$1,964,804)
(Capital Markets) $ 1,924,200 1,924,200
------------
Total Short-Term Investment
(Cost $1,924,200) 1,924,200
------------
Total Investments,
Before Investments Sold
Short
(Cost $151,040,487) (f) 132.2% 161,249,284
------------
<Caption>
SHARES VALUE
INVESTMENTS SOLD SHORT (32.0%)
COMMON STOCKS SOLD SHORT (32.0%)
- -------------------------------------------------------
AUSTRALIA (5.7%)
Andean Resources, Ltd.
(Metals & Mining) (c) (28,955) $ (85,105)
Atlas Iron, Ltd. (Metals &
Mining) (c) (3,282) (7,449)
Ausenco, Ltd. (Construction
& Engineering) (29,722) (132,468)
Austar United
Communications, Ltd.
(Media) (c) (263,418) (282,124)
Boart Longyear Group
(Construction &
Engineering) (c) (2,285,279) (682,779)
Crane Group, Ltd. (Building
Products) (59,782) (495,316)
Cudeco, Ltd. (Metals &
Mining) (c) (22,990) (93,184)
Eastern Star Gas, Ltd. (Oil,
Gas & Consumable Fuels)
(c) (346,251) (287,658)
Elders, Ltd. (Food Products)
(c) (243,627) (266,457)
Gindalbie Metals, Ltd.
(Metals & Mining) (c) (90,218) (95,894)
GrainCorp, Ltd. (Food
Products) (23,035) (121,508)
Gunns, Ltd. (Paper & Forest
Products) (48,188) (23,258)
Iluka Resources, Ltd.
(Metals & Mining) (c) (137,897) (591,605)
iSOFT Group, Ltd. (Health
Care Technology) (87,382) (43,812)
Karoon Gas Australia, Ltd.
(Oil, Gas & Consumable
Fuels) (c) (107,537) (742,685)
Linc Energy, Ltd. (Oil, Gas
& Consumable Fuels) (c) (125,228) (175,809)
Lynas Corp, Ltd. (Metals &
Mining) (c) (858,970) (418,447)
Medusa Mining, Ltd. (Metals
& Mining) (c) (71,557) (310,890)
Murchison Metals, Ltd.
(Metals & Mining) (c) (21,152) (43,544)
Pacific Brands, Ltd.
(Distributors) (c) (446,562) (486,193)
Pharmaxis, Ltd.
(Pharmaceuticals) (c) (18,189) (51,575)
Riversdale Mining, Ltd.
(Oil, Gas & Consumable
Fuels) (c) (84,541) (705,290)
Transfield Services, Ltd.
(Commercial Services &
Supplies) (59,668) (216,519)
Transpacific Industries
Group, Ltd. (Commercial
Services & Supplies) (c) (160,205) (186,028)
Virgin Blue Holdings, Ltd.
(Airlines) (c) (658,097) (357,171)
------------
(6,902,768)
------------
AUSTRIA (1.1%)
Intercell A.G.
(Biotechnology) (c) (25,509) (678,773)
RHI A.G. (Construction
Materials) (c) (11,847) (398,331)
Schoeller-Bleckmann Oilfield
Equipment A.G. (Energy
Equipment & Services) (4,153) (218,971)
------------
(1,296,075)
------------
</Table>
56 MainStay 130/30 International 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 SOLD SHORT (CONTINUED)
BELGIUM (0.4%)
Hansen Transmissions
International N.V.
(Machinery) (c) (128,180) $ (195,880)
RHJ International
(Diversified Financial
Services) (c) (13,802) (117,682)
Tessenderlo Chemie N.V.
(Chemicals) (4,358) (139,539)
------------
(453,101)
------------
BERMUDA (0.4%)
Ports Design, Ltd.
(Textiles, Apparel &
Luxury Goods) (223,500) (549,733)
------------
CAYMAN ISLANDS (0.6%)
China Mengniu Dairy Co.,
Ltd. (Food Products) (c) (150,000) (447,359)
China State Construction
International Holdings,
Ltd. (Construction &
Engineering) (202,000) (69,732)
Wasion Group Holdings, Ltd.
(Electronic Equipment &
Instruments) (244,000) (161,301)
------------
(678,392)
------------
DENMARK (0.6%)
ALK-Abello A/S
(Pharmaceuticals) (2,977) (229,090)
Genmab A/S (Biotechnology)
(c) (43,314) (477,293)
------------
(706,383)
------------
FINLAND (0.6%)
F-Secure Oyj (Software) (13,466) (41,745)
Kemira Oyj (Chemicals) (c) (22,662) (279,182)
Poyry Oyj (Professional
Services) (1,423) (19,757)
Ramirent Oyj (Trading
Companies & Distributors) (16,294) (188,690)
Ruukki Group Oyj (Industrial
Conglomerates) (c) (59,559) (143,665)
Talvivaara Mining Co. PLC
(Metals & Mining) (c) (3,562) (24,857)
------------
(697,896)
------------
FRANCE (0.8%)
Altran Technologies S.A. (IT
Services) (c) (4,947) (23,721)
Areva S.A. (Electrical
Equipment) (117) (57,793)
Carbone Lorraine S.A.
(Electrical Equipment) (3,923) (143,332)
Derichebourg S.A.
(Commercial Services &
Supplies) (c) (15,011) (66,302)
Eurofins Scientific (Life
Sciences Tools & Services) (1,034) (45,790)
NicOx S.A. (Biotechnology)
(c) (4,696) (48,367)
UbiSoft Entertainment S.A.
(Software) (c) (50,642) (649,022)
------------
(1,034,327)
------------
GERMANY (2.8%)
Centrotherm Photovoltaics
A.G. (Electrical
Equipment) (c) (6,764) (281,869)
Demag Cranes A.G.
(Machinery) (c) (5,387) (186,748)
Hamburger Hafen und Logistik
A.G. (Transportation
Infrastructure) (11,740) (428,675)
Kontron A.G. (Semiconductors
& Semiconductor Equipment) (35,647) (339,756)
Nordex A.G. (Electrical
Equipment) (c) (64,203) (667,985)
SGL Carbon SE (Electrical
Equipment) (c) (23,441) (761,763)
Sky Deutschland A.G. (Media)
(c) (302,836) (647,669)
Solar Millennium A.G.
(Construction &
Engineering) (c) (4,376) (122,291)
------------
(3,436,756)
------------
HONG KONG (0.8%)
China Insurance
International Holdings
Co., Ltd. (Insurance) (c) (57,200) (188,087)
Dah Sing Financial Holdings,
Ltd. (Commercial Banks)
(c) (14,800) (84,259)
Fushan International Energy
Group, Ltd. (Metals &
Mining) (976,000) (681,290)
------------
(953,636)
------------
ITALY (0.7%)
Arnoldo Mondadori Editore
S.p.A. (Media) (c) (14,761) (57,484)
Geox S.p.A. (Textiles,
Apparel & Luxury Goods) (35,039) (226,177)
Landi Renzo S.p.A. (Auto
Components) (27,473) (113,185)
Milano Assicurazioni S.p.A.
(Insurance) (103,729) (246,143)
Trevi Finanziaria S.p.A.
(Construction &
Engineering) (12,871) (213,803)
------------
(856,792)
------------
JAPAN (9.2%)
Akebono Brake Industry Co.,
Ltd. (Auto Components) (20,800) (110,245)
Capcom Co., Ltd. (Software) (37,500) (754,822)
Cedyna Financial Corp.
(Consumer Finance) (c) (122,600) (209,448)
Century Tokyo Leasing Corp.
(Diversified Financial
Services) (800) (10,529)
CSK Holdings Corp. (IT
Services) (c) (42,300) (214,222)
Daiseki Co., Ltd.
(Commercial Services &
Supplies) (27,700) (608,302)
EBARA Corp. (Machinery) (c) (150,000) (775,983)
Gree, Inc. (Internet
Software & Services) (12,700) (701,038)
Haseko Corp. (Household
Durables) (c) (754,500) (787,365)
Hitachi Zosen Corp.
(Machinery) (522,500) (736,587)
Iseki & Co., Ltd.
(Machinery) (c) (54,000) (170,883)
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
57
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS SOLD SHORT (CONTINUED)
JAPAN (CONTINUED)
Japan Airport Terminal Co.,
Ltd. (Transportation
Infrastructure) (8,700) $ (138,648)
kabu.com Securities Co.,
Ltd. (Capital Markets) (23,000) (119,002)
Kakaku.com, Inc. (Internet
Software & Services) (43) (162,056)
Maruha Nichiro Holdings,
Inc. (Food Products) (65,000) (91,454)
Meidensha Corp. (Machinery) (160,000) (731,919)
MISUMI Group, Inc. (Trading
Companies & Distributors) (100) (1,989)
Mitsubishi Rayon Co., Ltd.
(Chemicals) (c) (31,000) (129,716)
Monex Group, Inc. (Capital
Markets) (720) (346,009)
Nachi-Fujikoshi Corp.
(Machinery) (73,000) (220,532)
Nanto Bank, Ltd. (The)
(Commercial Banks) (7,000) (37,556)
Nichi-iko Pharmaceutical
Co., Ltd.
(Pharmaceuticals) (10,700) (336,936)
Nippon Suisan Kaisha, Ltd.
(Food Products) (8,400) (24,144)
Nishimatsuya Chain Co., Ltd.
(Specialty Retail) (2,200) (24,777)
Park24 Co., Ltd. (Commercial
Services & Supplies) (23,200) (260,788)
Point, Inc. (Specialty
Retail) (12,160) (787,164)
Sanden Corp. (Auto
Components) (57,000) (213,532)
Shima Seiki Manufacturing,
Ltd. (Machinery) (3,100) (80,499)
Shochiku Co., Ltd. (Media) (10,000) (85,679)
Sotetsu Holdings, Inc. (Road
& Rail) (19,000) (79,056)
Start Today Co., Ltd.
(Internet & Catalog
Retail) (58) (137,379)
Sugi Holdings Co., Ltd.
(Food & Staples Retailing) (26,500) (597,209)
Torishima Pump Manufacturing
Co., Ltd. (Machinery) (20,000) (413,952)
Toyo Tanso Co., Ltd.
(Electrical Equipment) (5,100) (270,058)
Unicharm Petcare Corp. (Food
Products) (3,300) (109,956)
Wacom Co., Ltd/Japan
(Computers & Peripherals) (461) (720,866)
------------
(11,200,300)
------------
NETHERLANDS (0.5%)
Brunel International N.V.
(Professional Services) (2,864) (104,735)
Crucell N.V. (Biotechnology)
(c) (15,999) (335,097)
Draka Holding N.V.
(Electrical Equipment) (c) (6,032) (118,276)
------------
(558,108)
------------
NORWAY (1.8%)
DNO International ASA (Oil,
Gas & Consumable Fuels)
(c) (546,795) (811,761)
Norwegian Air Shuttle ASA
(Airlines) (c) (9,200) (205,923)
Norwegian Energy Co. ASA
(Oil, Gas & Consumable
Fuels) (c) (147,000) (412,949)
Pronova BioPharma AS
(Pharmaceuticals) (c) (8,500) (27,138)
Sevan Marine ASA (Energy
Equipment & Services) (c) (456,000) (668,073)
Tomra Systems ASA
(Commercial Services &
Supplies) (23,411) (112,690)
------------
(2,238,534)
------------
PORTUGAL (0.1%)
Zon Multimedia Servicos de
Telecomunicacoes e
Multimedia SGPS S.A.
(Media) (29,885) (131,671)
------------
SINGAPORE (0.1%)
Hong Leong Finance, Ltd.
(Consumer Finance) (5,000) (11,318)
Oceanus Group, Ltd.
(Distributors) (c) (505,000) (141,181)
------------
(152,499)
------------
SPAIN (0.5%)
NH Hoteles S.A. (Hotels,
Restaurants & Leisure) (c) (100,989) (469,558)
Tubacex S.A. (Metals &
Mining) (22,527) (86,490)
------------
(556,048)
------------
SWEDEN (0.7%)
Axis Communications AB
(Communications Equipment) (25,848) (416,703)
Eniro AB (Media) (c) (78,296) (227,994)
Lindab International AB
(Building Products) (17,907) (203,590)
Niscayah Group AB
(Commercial Services &
Supplies) (c) (25,246) (47,354)
------------
(895,641)
------------
SWITZERLAND (0.8%)
Basilea Pharmaceutica
Registered (Biotechnology)
(c) (6,651) (489,329)
Kaba Holding A.G. (Building
Products) (15) (4,259)
Meyer Burger Technology A.G.
(Machinery) (c) (17,767) (436,238)
Orascom Development Holding
A.G. (Hotels, Restaurants
& Leisure) (c) (633) (39,346)
</Table>
58 MainStay 130/30 International 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 SOLD SHORT (CONTINUED)
SWITZERLAND (CONTINUED)
Panalpina Welttransport
Holding A.G. (Air Freight
& Logistics) (187) $ (16,944)
------------
(986,116)
------------
UNITED KINGDOM (3.8%)
Afren PLC (Oil, Gas &
Consumable Fuels) (c) (80,689) (112,864)
ASOS PLC (Internet & Catalog
Retail) (c) (13,827) (132,694)
BTG PLC (Life Sciences Tools
& Services) (c) (70,955) (190,680)
Connaught PLC (Commercial
Services & Supplies) (72,625) (334,290)
DSG International PLC
(Specialty Retail) (c) (784,466) (396,552)
Forth Ports PLC
(Transportation
Infrastructure) (7,769) (159,883)
Imagination Technologies
Group PLC (Computers &
Peripherals) (c) (26,563) (111,888)
Jazztel PLC (Diversified
Telecommunication
Services) (c) (100,415) (403,660)
Kalahari Minerals PLC
(Metals & Mining) (c) (33,560) (92,579)
Kier Group PLC (Construction
& Engineering) (4,153) (72,352)
Mothercare PLC (Multiline
Retail) (11,833) (104,056)
National Express Group PLC
(Road & Rail) (74,460) (274,070)
Premier Foods PLC (Food
Products) (c) (279,566) (111,967)
Punch Taverns PLC (Hotels,
Restaurants & Leisure) (c) (188,443) (255,901)
Redrow PLC (Household
Durables) (c) (125,802) (286,752)
Shanks Group PLC (Commercial
Services & Supplies) (86,388) (136,779)
SIG PLC (Trading Companies &
Distributors) (c) (375,016) (755,299)
St. James's Place PLC
(Insurance) (196) (793)
VT Group PLC (Commercial
Services & Supplies) (5,610) (64,148)
Wellstream Holdings PLC
(Energy Equipment &
Services) (73,469) (673,986)
Xchanging PLC (IT Services) (8,022) (25,668)
------------
(4,696,861)
------------
Total Common Stocks Sold
Short
(Proceeds $39,229,049) (38,981,637)
------------
Total Investments Sold Short
(Proceeds $39,229,049) (32.0)% (38,981,637)
------------
Total Investments,
Net of Investments Sold
Short
(Cost $111,811,438) 100.2 122,267,647
Other Assets, Less
Liabilities (0.2) (294,062)
----------- ------------
Net Assets 100.0% $121,973,585
=========== ============
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
++ Less than one-tenth of a percent.
(a) Security, or a portion thereof, is
maintained in a segregated account at the
Fund's custodian as collateral for
securities sold short (See Note 2(I)).
(b) Fair valued security--The total market
value of this security at April 30, 2010
is $10, which represents less than one-
tenth of a percent of the Fund's net
assets.
(c) Non-income producing security.
(d) Exchange Traded Fund--An investment
vehicle that represents a basket of
securities that is traded on an exchange.
(e) Illiquid security--The total market value
of this security at April 30, 2010 is
$28,197, which represents less than one-
tenth of a percent of the Fund's net
assets.
(f) At April 30, 2010, cost is $152,334,568
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $15,238,950
Gross unrealized depreciation (6,324,234)
-----------
Net unrealized appreciation $ 8,914,716
===========
</Table>
The following abbreviation is used in the above portfolio:
A$--Australian Dollar
HK$--Hong Kong Dollar
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
59
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The table below sets forth the diversification of MainStay 130/30 International
Fund investments by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT+
Aerospace & Defense $ 1,097,580 0.9%
Auto Components 1,800,591 1.5
Automobiles 5,215,760 4.3
Beverages 1,181,357 1.0
Building Products 69,732 0.1
Capital Markets 6,997,410 7.3
Chemicals 5,449,473 4.5
Commercial Banks 13,257,130 10.9
Commercial Services &
Supplies 898,473 0.7
Communications Equipment 2,479,885 2.0
Computers & Peripherals 193,480 0.2
Construction & Engineering 3,458,324 2.8
Consumer Finance 1,290,482 1.1
Containers & Packaging 248,749 0.2
Distributors 223,312 0.2
Diversified Financial
Services 448,781 0.4
Diversified Telecommunication
Services 2,854,586 2.3
Electric Utilities 2,568,813 2.1
Electrical Equipment 2,689,021 2.2
Electronic Equipment &
Instruments 5,640,555 4.6
Energy Equipment & Services 1,407,259 1.1
Food & Staples Retailing 780,860 0.6
Food Products 7,064,385 5.8
Gas Utilities 123,035 0.1
Health Care Equipment &
Supplies 821,044 0.7
Health Care Providers &
Services 235,968 0.2
Hotels, Restaurants & Leisure 653,523 0.5
Household Durables 3,891,251 3.2
Industrial Conglomerates 4,071,958 3.3
Insurance 7,589,961 6.2
IT Services 571,119 0.5
Leisure Equipment & Products 34,909 0.0++
Machinery 7,492,552 6.1
Marine 1,346,356 1.1
Media 4,232,597 3.5
Metals & Mining 13,114,088 10.7
Multiline Retail 1,359,188 1.1
Multi-Utilities 237,464 0.2
Office Electronics 205,447 0.2
Oil, Gas & Consumable Fuels 14,500,482 11.9
Paper & Forest Products 335,254 0.3
Pharmaceuticals 11,397,509 9.3
Road & Rail 79,307 0.1
Semiconductors &
Semiconductor Equipment 1,448,847 1.2
Software 204,937 0.2
Specialty Retail 3,290,720 2.7
Textiles, Apparel & Luxury
Goods 1,657,173 1.4
Thrifts & Mortgage Finance 493,773 0.4
Tobacco 1,306,827 1.1
Trading Companies &
Distributors 4,308,780 3.5
Transportation Infrastructure 2,601,283 2.1
Wireless Telecommunication
Services 4,403,734 3.6
------------ -----
161,249,284 132.2
Other Assets, Less
Liabilities (39,275,699) (32.2)
------------ -----
Net Assets $121,973,585 100.0%
============ =====
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
++ Less than one-tenth of a percent.
</Table>
The table below sets forth the diversification of MainStay 130/30 International
Fund investments sold short by industry.
<Table>
<Caption>
VALUE PERCENT+
Air Freight & Logistics $ (16,944) (0.0)%++
Airlines (563,094) (0.5)
Auto Components (436,962) (0.4)
Biotechnology (2,028,859) (1.7)
Building Products (703,165) (0.6)
Capital Markets (465,011) (0.4)
Chemicals (548,437) (0.4)
Commercial Banks (121,815) (0.1)
Commercial Services &
Supplies (2,033,200) (1.7)
Communications Equipment (416,703) (0.3)
Computers & Peripherals (832,754) (0.7)
Construction & Engineering (1,293,425) (1.1)
Construction Materials (398,331) (0.3)
Consumer Finance (220,766) (0.2)
Distributors (627,374) (0.5)
Diversified Financial
Services (128,211) (0.1)
Diversified Telecommunication
Services (403,660) (0.3)
Electrical Equipment (2,301,076) (1.9)
Electronic Equipment &
Instruments (161,301) (0.1)
Energy Equipment & Services (1,561,030) (1.3)
Food & Staples Retailing (597,209) (0.5)
Food Products (1,172,845) (1.0)
Health Care Technology (43,812) (0.0)++
Hotels, Restaurants & Leisure (764,805) (0.6)
Household Durables (1,074,117) (0.9)
Industrial Conglomerates (143,665) (0.1)
Insurance (435,023) (0.3)
Internet & Catalog Retail (270,073) (0.2)
Internet Software & Services (863,094) (0.7)
IT Services (263,611) (0.2)
Life Sciences Tools &
Services (236,470) (0.2)
Machinery (3,949,221) (3.2)
Media (1,432,621) (1.2)
Metals & Mining (2,531,334) (2.1)
Multiline Retail (104,056) (0.1)
Oil, Gas & Consumable Fuels (3,249,016) (2.7)
Paper & Forest Products (23,258) (0.0)++
Pharmaceuticals (644,739) (0.5)
Professional Services (124,492) (0.1)
Road & Rail (353,126) (0.3)
Semiconductors &
Semiconductor Equipment (339,756) (0.3)
Software (1,445,589) (1.2)
Specialty Retail (1,208,493) (1.0)
Textiles, Apparel & Luxury
Goods (775,910) (0.6)
Trading Companies &
Distributors (945,978) (0.8)
Transportation Infrastructure (727,206) (0.6)
------------ -----
$(38,981,637) (32.0)%
============ =====
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
++ Less than one-tenth of a percent.
</Table>
60 MainStay 130/30 International Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets and liabilities.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks (b)(c) $ 584,276 $155,514,288 $10 $156,098,574
Convertible Preferred Stocks -- 44,589 -- 44,589
Exchange Traded Fund 2,869,713 -- -- 2,869,713
Unaffiliated Investment Companies -- 284,008 -- 284,008
Warrants -- 28,200 -- 28,200
Short-Term Investment
Repurchase Agreement -- 1,924,200 -- 1,924,200
---------- ------------ --- ------------
Total Investments in Securities $3,453,989 $157,795,285 $10 $161,249,284
========== ============ === ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 1 assets represents securities listed under Bermuda and United States.
(c) The level 3 security valued at $10 is held in Australia within the Common
Stock section of the Portfolio of Investments.
LIABILITY VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments Sold Short (a)
Common Stocks Sold Short $ -- $(38,981,637) $ -- $(38,981,637)
-------- ------------ -------- ------------
Total Investments Sold Short $-- $(38,981,637) $-- $(38,981,637)
======== ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
As of the six-month period ending April 30, 2010, securities with a total value
of $141,545,384 transferred from Level 1 to Level 2 due to certain international
equities being fair valued at period end by applying factors provided by a third
party vendor in accordance with the Fund's policies and procedures. Fair values
for these instruments at the reporting date are based on quoted market prices or
binding dealer price quotations
The Fund recognizes transfers between the levels as of the beginning of the
period.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
61
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining value:
<Table>
<Caption>
BALANCE
AS OF ACCRUED REALIZED
OCTOBER 31, DISCOUNTS GAIN
INVESTMENTS IN SECURITIES 2009 (PREMIUMS) (LOSS)
Common Stock
Australia $ 14 $-- $--
Rights Sold Short Australia (7,845) -- --
------- --- ---
Total $(7,831) $-- $--
======= === ===
<Caption>
CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
INVESTMENTS
CHANGE IN NET NET BALANCE STILL
UNREALIZED TRANSFERS TRANSFERS AS OF HELD AT
APPRECIATION NET NET IN TO OUT OF APRIL 30, APRIL 30,
INVESTMENTS IN SECURITIES (DEPRECIATION) PURCHASES SALES LEVEL 3 LEVEL 3 2010 2010 (A)
Common Stock
Australia $ (4) $-- $-- $-- $-- $10 $(4)
Rights Sold Short Australia 7,845 -- -- -- -- -- --
------ --- --- --- --- --- ---
Total $7,841 $-- $-- $-- $-- $10 $(4)
====== === === === === === ===
</Table>
(a) Included in "Net change in unrealized appreciation (depreciation) on
investments" in the Statement of Operations.
62 MainStay 130/30 International Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities before
investments sold short, at value
(identified cost $151,040,487) $161,249,284
Cash denominated in foreign
currencies (identified cost
$60,404) 60,703
Cash collateral on deposit at
broker 2,028
Receivables:
Dividends 653,347
Fund shares sold 516,036
Other assets 47,281
------------
Total assets 162,528,679
------------
LIABILITIES:
Investments sold short (proceeds
$39,229,049) 38,981,637
Payables:
Investment securities purchased 1,359,853
Manager (See Note 3) 103,259
Dividends on investments sold
short 66,263
Professional fees 23,207
Shareholder communication 16,338
Transfer agent (See Note 3) 1,868
Custodian 1,398
Trustees 449
NYLIFE Distributors (See Note 3) 129
Fund shares redeemed 56
Accrued expenses 637
------------
Total liabilities 40,555,094
------------
Net assets $121,973,585
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 19,289
Additional paid-in capital 148,772,746
------------
148,792,035
Accumulated undistributed net
investment income 510,803
Accumulated net realized loss on
investments, investments sold
short and foreign currency
transactions (37,783,116)
Net unrealized appreciation on
investments 10,208,797
Net unrealized appreciation on
investments sold short 247,412
Net unrealized depreciation on
translation of other assets and
liabilities in foreign currencies (2,346)
------------
Net assets $121,973,585
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 148,821
============
Shares of beneficial interest
outstanding 23,610
============
Net asset value per share
outstanding $ 6.30
Maximum sales charge (5.50% of
offering price) 0.37
------------
Maximum offering price per share
outstanding $ 6.67
============
CLASS A
Net assets applicable to
outstanding shares $ 71,626
============
Shares of beneficial interest
outstanding 11,365
============
Net asset value per share
outstanding $ 6.30
Maximum sales charge (5.50% of
offering price) 0.37
------------
Maximum offering price per share
outstanding $ 6.67
============
CLASS C
Net assets applicable to
outstanding shares $ 98,093
============
Shares of beneficial interest
outstanding 15,815
============
Net asset value and offering price
per share outstanding $ 6.20
============
CLASS I
Net assets applicable to
outstanding shares $121,655,045
============
Shares of beneficial interest
outstanding 19,238,568
============
Net asset value and offering price
per share outstanding $ 6.32
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
63
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 1,977,991
-----------
EXPENSES:
Manager (See Note 3) 635,442
Broker fees and charges on short
sales 446,872
Dividends on investments sold
short 192,124
Custodian 80,873
Professional fees 29,385
Registration 26,962
Shareholder communication 13,974
Transfer agent (See Note 3) 5,613
Trustees 2,044
Distribution/Service--Investor
Class (See Note 3) 160
Distribution/Service--Class A (See
Note 3) 102
Distribution/Service--Class C (See
Note 3) 430
Miscellaneous 7,516
-----------
Total expenses before waiver 1,441,497
Expense waiver from Manager (See
Note 3) (24,326)
-----------
Net expenses 1,417,171
-----------
Net investment income 560,820
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions $ 8,159,913
Investments sold short (5,555,960)
Foreign currency transactions (81,191)
-----------
Net realized gain on investments,
investments sold short and foreign
currency transactions 2,522,762
-----------
Net change in unrealized
appreciation (depreciation) on:
Investments (4,529,547)
Investments sold short 4,155,440
Translation of other assets and
liabilities in foreign
currencies (2,516)
-----------
Net change in unrealized
appreciation (depreciation) on
investments, investments sold
short and foreign currency
transactions (376,623)
-----------
Net realized and unrealized gain on
investments, investments sold
short and foreign currency
transactions 2,146,139
-----------
Net increase in net assets resulting
from operations $ 2,706,959
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$181,904.
64 MainStay 130/30 International Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 560,820 $ 1,476,881
Net realized gain (loss)
on investments,
investments sold short
and foreign currency
transactions 2,522,762 (28,634,912)
Net change in unrealized
appreciation
(depreciation) on
investments, investments
sold short and foreign
currency transactions (376,623) 49,235,101
--------------------------
Net increase in net assets
resulting from operations 2,706,959 22,077,070
--------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (2,434) --
Class A (2,160) --
Class C (1,314) --
Class I (2,760,270) --
--------------------------
Total dividends to
shareholders (2,766,178) --
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 18,254,212 35,739,312
Net asset value of shares
issued to shareholders in
reinvestment of dividends 2,765,719 --
Cost of shares redeemed (11,087,884) (21,823,619)
--------------------------
Increase in net assets
derived from capital
share transactions 9,932,047 13,915,693
--------------------------
Net increase in net
assets 9,872,828 35,992,763
NET ASSETS:
Beginning of period 112,100,757 76,107,994
--------------------------
End of period $121,973,585 $112,100,757
==========================
Accumulated undistributed
net investment income at
end of period $ 510,803 $ 2,716,161
==========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
65
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2010
<Table>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net increase in net assets
resulting from operations $ 2,706,959
Adjustments to reconcile net
increase in net assets resulting
from operations to net cash used
for operating activities:
Investments purchased (117,910,673)
Investments sold 105,961,741
Purchases to cover securities
sold short (39,012,912)
Securities sold short 43,481,648
Purchase of short term
investments, net (181,816)
Decrease in investment securities
sold receivable 24,365,185
Increase in dividends and
interest receivable (250,081)
Increase in cash collateral on
deposit at broker (2,028)
Increase in other assets (30,928)
Decrease in investment securities
purchased payable (23,648,213)
Decrease in broker fees and
charges on short sales (1,581)
Increase in dividends payable for
securities sold short 49,396
Decrease in professional fees
payable (1,637)
Decrease in custodian payable (36,620)
Decrease in shareholder
communication payable (510)
Increase in due to trustees 116
Increase in due to manager 30,693
Decrease in due to transfer agent (50)
Increase in due to NYLIFE
Distributors 24
Decrease in accrued expenses and
other liabilities (2,806)
Net change in unrealized
(appreciation) depreciation on
investments 4,529,547
Net realized gain from
investments (8,159,913)
Net change in unrealized
appreciation on securities
sold short (4,155,440)
Net realized loss from securities
sold short 5,555,960
-------------
Net cash used in operating
activities (6,713,939)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold 17,840,206
Payment on shares redeemed (11,087,828)
Cash distributions paid (459)
-------------
Net cash from financing activities 6,751,919
-------------
NET INCREASE IN CASH: 37,980
Cash at beginning of year 22,723
-------------
Cash at end of period $ 60,703
-------------
-------------
Non cash financing activities not
included herein consist of all
reinvestment of dividends and
distributions of $ 2,765,719
-------------
</Table>
66 MainStay 130/30 International 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>
INVESTOR CLASS CLASS A
----------------------------------------- -------------------------------------------------
FEBRUARY 28, SEPTEMBER 28,
SIX MONTHS 2008** SIX MONTHS 2007**
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31,
----------------------------------------------------------------------------------------------
2010* 2009 2008 2010* 2009 2008 2007
Net asset value at
beginning of period $ 6.31 $ 5.20 $ 8.74 $ 6.31 $ 5.19 $ 10.32 $10.00
------ ------ ------- ------ ------ ------- ------
Net investment income
(a) 0.02 0.07 0.04 0.01 0.07 0.08 0.05
Net realized and
unrealized gain (loss)
on investments 0.10 1.04 (3.58) 0.12 1.05 (5.17) 0.27
------ ------ ------- ------ ------ ------- ------
Total from investment
operations 0.12 1.11 (3.54) 1.13 1.12 (5.09) 0.32
------ ------ ------- ------ ------ ------- ------
Less dividends and
distributions:
From net investment
income (0.13) -- -- (0.14) -- (0.02) --
From net realized gain
on investments -- -- -- -- -- (0.02) --
------ ------ ------- ------ ------ ------- ------
Total dividends and
distributions (0.13) -- -- (0.14) -- (0.04) --
------ ------ ------- ------ ------ ------- ------
Net asset value at end
of period $ 6.30 $ 6.31 $ 5.20 $ 6.30 $ 6.31 $ 5.19 $10.32
====== ====== ======= ====== ====== ======= ======
Total investment return
(b) 1.96%(c) 21.35% (40.50%)(c) 1.89%(c) 21.58%(d) (49.50%) 3.20%(c)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income 0.72%++ 1.37% 0.82%++ 0.38% ++ 1.27% 0.96% 6.17%++
Net expenses
(excluding short
sale expenses) 1.70%++ 1.70% 1.70%++ 1.60% ++ 1.60% 1.60% 1.60%++
Expenses (including
short sales
expenses, before
waiver) 2.89%++ 3.28% 3.40%++ 2.71% ++ 3.13% 3.11% 7.37%++
Short sale expenses 1.12%++ 1.37% 1.19%++ 1.07% ++ 1.32% 1.05% 0.98%++
Portfolio turnover rate 72% 143% 204% 72% 143% 204% 26%
Net assets at end of
period (in 000's) $ 149 $ 111 $ 90 $ 72 $ 97 $ 61 $ 32
</Table>
<Table>
<Caption>
CLASS C CLASS I
------------------------------------------------ --------------------------------------------------
SEPTEMBER 28, SEPTEMBER 28,
SIX MONTHS 2007** SIX MONTHS 2007**
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED OCTOBER THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, 31, OCTOBER 31,
------------------------------------------------------------------------------------------------------
2010* 2009 2008 2007 2010* 2009 2008 2007
Net asset value at
beginning of period $ 6.20 $ 5.15 $ 10.32 $10.00 $ 6.34 $ 5.21 $ 10.32 $ 10.00
------ ------ ------- ------ -------- -------- ------- -------
Net investment income
(loss) (a) (0.00)++ 0.02 (0.01) 0.05 0.03 0.09 0.22 0.06
Net realized and
unrealized gain (loss)
on investments 0.10 1.03 (5.13) 0.27 0.10 1.04 (5.29) 0.26
------ ------ ------- ------ -------- -------- ------- -------
Total from investment
operations: 0.10 1.05 (5.14) 0.32 0.13 1.13 (5.07) 0.32
------ ------ ------- ------ -------- -------- ------- -------
Less dividends and
distributions:
From net investment
income (0.10) -- (0.01) -- (0.15) -- (0.02) --
From net realized gain
on investments -- -- (0.02) -- -- -- (0.02) --
------ ------ ------- ------ -------- -------- ------- -------
Total dividends and
distributions (0.10) -- (0.03) -- (0.15) -- (0.04) --
------ ------ ------- ------ -------- -------- ------- -------
Net asset value at end
of period $ 6.20 $ 6.20 $ 5.15 $10.32 $ 6.32 $ 6.34 $ 5.21 $ 10.32
====== ====== ======= ====== ======== ======== ======= =======
Total investment return
(b) 1.63%(c) 20.39% (49.90%) 3.10%(c) 2.08%(c) 21.69% (49.29%) 3.20%(c)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income
(loss) (0.06%)++ 0.36% (0.08%) 5.75%++ 0.97%++ 1.74% 2.80% 6.78%++
Net expenses
(excluding short
sale expenses) 2.45%++ 2.45% 2.41% 2.35%++ 1.35%++ 1.35% 1.35% 1.35%++
Expenses (including
short sales
expenses, before
waiver) 3.64%++ 3.98% 3.94% 8.12%++ 2.49%++ 2.92% 2.73% 7.12%++
Short sale expenses 1.12%++ 1.32% 1.01% 0.98%++ 1.11%++ 1.36% 0.98% 0.98%++
Portfolio turnover rate 72% 143% 204% 26% 72% 143% 204% 26%
Net assets at end of
period (in 000's) $ 98 $ 69 $ 44 $ 27 $121,655 $111,823 $75,912 $11,905
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
67
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds" and each individually,
referred to as a "Fund"). These financial statements and notes relate to the
MainStay 130/30 Core Fund, MainStay 130/30 Growth Fund and MainStay 130/30
International Fund (collectively, referred to as the "130/30 Funds" and each
individually referred to as a "130/30 Fund"). Each is a diversified fund. A
130/30 fund is a fund that invests up to approximately 130 percent of its assets
in long positions (either directly or indirectly through derivatives), while up
to approximately 30 percent of its assets are sold short (either directly or
indirectly through derivatives). The proceeds from the short strategies may be
used to purchase all or a portion of the additional 30% of the long positions.
Each 130/30 Fund is the successor of a series of Eclipse Funds Inc. with the
same name (each a "Predecessor Fund"). The reorganizations of the Predecessor
Funds with and into the respective 130/30 Funds, which were not subject to
shareholder approval under applicable law, occurred on February 26, 2010. All
information regarding and references to periods prior to the commencement of
operations of each 130/30 Fund relate to the respective Predecessor Fund.
The 130/30 Funds commenced operations as follows:
<Table>
<Caption>
COMMENCEMENT
OF OPERATIONS FUNDS
June 29, 2007 MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
- ------------------------------------------------------------
September 28, 2007 MainStay 130/30 International Fund
- ------------------------------------------------------------
</Table>
Investor Class shares for the 130/30 Funds commenced operations on February 28,
2008.
The 130/30 Funds each currently offer four classes of shares, Investor Class,
Class A, Class C and Class I. Investor Class and Class A shares are offered at
net asset value ("NAV") per share plus an initial sales charge. No sales charge
applies on investments of $1 million or more (and certain other qualified
purchases) in Investor Class and Class A shares, but a contingent deferred sales
charge is imposed on certain redemptions of such shares within one year of the
date of purchase. Class C shares are offered at NAV without an initial sales
charge, although a 1.00% contingent deferred sales charge may be imposed on
redemptions made within one year of purchase of Class C shares. Class I shares
are offered at NAV without imposition of a front-end sales charge or a
contingent deferred sales charge. Depending upon eligibility, Investor Class
shares may convert to Class A shares and Class A shares may convert to Investor
Class shares. The four classes of shares have the same voting (except for issues
that relate solely to one class), dividend, liquidation and other rights, and
the same terms and conditions, except that Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The investment objective for each of the 130/30 Funds is as follows:
The MAINSTAY 130/30 CORE FUND seeks long-term growth of capital, with income as
a secondary consideration.
The MAINSTAY 130/30 GROWTH FUND seeks long-term growth of capital.
The MAINSTAY 130/30 INTERNATIONAL FUND seeks to provide long-term growth of
capital with income as a secondary objective.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The 130/30 Funds prepare their financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") and follow the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the 130/30 Funds' Manager (as defined in
Note 3(A)) in consultation with the 130/30 Funds' Subadvisor, if any, whose
prices reflect broker/dealer supplied valuations and electronic data processing
techniques, if such prices are deemed by the 130/30 Funds' Manager in
consultation with the 130/30 Funds' Subadvisor, if any, to be representative of
market values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day a 130/30 Fund is
open for business ("valuation date").
Equity securities are valued at the latest quoted sales prices as of the close
of regular trading on the Exchange on each valuation date. Securities that are
not traded on the valuation date are valued at the mean of the latest quoted bid
and asked prices. Prices normally are taken from the principal market in which
each security trades. Investments in other mutual funds are valued at their NAVs
as of the close of the Exchange on the valuation date. Foreign currency forward
contracts are valued at their fair market values determined on the basis of the
mean between the last current bid and ask prices based on dealer or exchange
quotations.
Loan assignments, participations and commitments are valued at the average of
bid quotations obtained from a pricing service. The Trust has engaged an
independent pricing service to provide market value quotations from dealers in
loans.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using
68 MainStay 130/30 Funds
valuations based on a matrix system (which considers such factors as security
prices, yields, maturities, and ratings), both as furnished by independent
pricing services. Other temporary cash investments which mature in 60 days or
less ("short-term investments") are valued at amortized cost. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between the principal amount due at maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the 130/30 Funds' Board to represent fair value.
Equity and non-equity securities which may be valued in this manner include, but
are not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the 130/30 Fund's Manager, as defined in Note 3(A), reflect the
security's market value; and (vi) a security where the trading on that
security's principal market is temporarily closed at a time when, under normal
conditions, it would be open. At April 30, 2010, the MainStay 130/30
International Fund held a security with a value of $10, that were valued in such
a manner, while none of the other 130/30 Funds held any such securities.
Certain events may occur between the time that foreign markets close, on which
securities held by the 130/30 Funds principally trade, and the time at which
each 130/30 Fund's NAV is calculated. These events may include, but are not
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, as defined in Note 3(A),
conclude that such events may have affected the accuracy of the last price
reported on the local foreign market, the Manager or Subadvisor may, pursuant to
procedures adopted by the 130/30 Funds' Board, adjust the value of the local
price to reflect the impact on the price of such securities as a result of such
events. Additionally, international equity securities are also fair valued
whenever the movement of a particular index exceeds certain thresholds. In such
cases, the securities are fair valued by applying factors provided by a third
party vendor in accordance with each 130/30 Fund's policies and procedures. At
April 30, 2010, certain foreign equity securities held by the Fund were fair
valued.
"Fair value" is defined as the price that the 130/30 Fund would receive upon
selling an investment in an orderly transaction to an independent buyer in the
principal or most advantageous market of the investment. Fair value measurements
are determined within a frame work that has established a three-tier hierarchy
which maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the 130/30 Fund's own
assumptions about the assumptions that market participants would use in
determining the fair value of investments)
The aggregate value by input level, as of April 30, 2010, for each 130/30 Fund's
investments is included at the end of each 130/30 Fund's Portfolio of
Investments.
The valuation techniques used by the 130/30 Funds to measure fair value during
the six-month period ended April 30, 2010 maximized the use of observable inputs
and minimized the use of unobservable inputs. The 130/30 Funds may have utilized
some of the following fair value techniques: multi-dimensional relational
pricing models, option adjusted spread pricing and estimating the price that
would have prevailed in a liquid market for an international equity security
given information available at the time of evaluation, when there are
significant events after the close of local foreign markets. For the six-month
period ended April 30, 2010, there have been no changes to the fair value
methodologies.
Generally, a security is considered illiquid if it cannot be sold or disposed of
in the ordinary course of business at approximately the price at which it is
valued. Its illiquidity might prevent the sale of such security at a time when
the Manager or Subadvisor, if any, as defined in Note 3(A)
mainstayinvestments.com 69
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
might wish to sell, and these securities could have the effect of decreasing the
overall level of a 130/30 Fund's liquidity. Further, the lack of an established
secondary market may make it more difficult to value illiquid securities,
requiring the 130/30 Fund to rely on judgments that may be somewhat subjective
in determining value, which could vary from the amount that the 130/30 Fund
could realize upon disposition. Difficulty in selling illiquid securities may
result in a loss or may be costly to the 130/30 Fund. Under the supervision of
the Board, the Manager or Subadvisor, if any, determines the liquidity of a
130/30 Fund's investments; in doing so, the Manager or Subadvisor, if any, may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers, (3) the dealer
undertakings to make a market, and (4) the nature of the security and the market
in which it trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). Illiquid securities
generally will be valued in such manner, as the Board in good faith deems
appropriate to reflect their fair market value.
(B) FEDERAL INCOME TAXES. Each of the 130/30 Funds is treated as a separate
entity for federal income tax purposes. The 130/30 Funds' policy is to comply
with the requirements of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") applicable to regulated investment companies and to
distribute all of the taxable income to the shareholders of each 130/30 Fund
within the allowable time limits. Therefore, no federal income tax provision is
required.
Investment income received by the 130/30 Funds from foreign sources may be
subject to foreign income taxes. These foreign income taxes are generally
withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the 130/30 Funds' tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the 130/30 Funds' financial statements. The 130/30
Funds' federal and state income and federal excise tax returns for tax years for
which the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The 130/30 Funds intend to declare and pay
dividends of net investment income and distributions of net realized capital
gains, if any, annually. Unless the shareholder elects otherwise, all dividends
and distributions are reinvested in the same class of shares of the respective
130/30 Fund, at NAV. Dividends and distributions to shareholders are determined
in accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The 130/30 Funds record
security transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the 130/30 Funds are allocated to separate classes of shares pro rata based upon
their relative net assets on the date the income is earned or realized and
unrealized gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual 130/30
Funds in proportion to the net assets of the respective 130/30 Funds when the
expenses are incurred, except where direct allocations of expenses can be made.
Expenses (other than transfer agent expenses and fees incurred under the
shareholder services plans and the distribution plans further discussed in Note
3(B)) are allocated to separate classes of shares pro rata based upon their
relative NAV on the date the expenses are incurred. The expenses borne by each
130/30 Fund, including those of related parties to the 130/30 Funds, are shown
in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The 130/30 Funds may enter into repurchase
agreements to earn income. The 130/30 Funds may enter into repurchase agreements
only with financial institutions that are deemed by the Manager or Subadvisor to
be creditworthy, pursuant to guidelines established by the 130/30 Funds' Board.
Repurchase agreements are considered under the Investment Company Act to be
collateralized loans by a Fund to the seller secured by the securities
transferred to the Fund.
When the 130/30 Funds invest in repurchase agreements, the 130/30 Funds'
custodian takes possession of the collateral pledged for investments in such
repurchase agreements. The underlying collateral is valued daily on a mark-to-
market basis to determine that the value, including accrued interest, exceeds
the repurchase price. In the event of the seller's default of the obligation to
repurchase, the
70 MainStay 130/30 Funds
130/30 Funds have the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
(H) SWAP AGREEMENTS. The MainStay 130/30 International Fund enters into credit
default, interest rate, index and currency exchange rate swap agreements
("swaps") for purposes of attempting to obtain a particular desired return at a
lower cost to the 130/30 Fund than if the 130/30 Fund had invested directly in
an instrument that yielded the desired return or for other portfolio management
purposes. In a standard swaps transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the parties are calculated with respect to a "notional
amount." Credit default swaps are contracts whereby one party makes periodic
payments to a counterparty in exchange for the right to receive a specified
return in the event of a default by a third party on its obligation. Credit
default swaps may be used to provide a measure of protection against defaults of
sovereign or corporate issuers. In connection with these agreements, cash or
securities may be set aside as collateral in accordance with the terms of the
swap agreement.
The MainStay 130/30 International Fund enters into total return swap agreements
for the purpose of attempting to obtain a particular desired return at a lower
cost to the Fund than if the Fund had invested directly in an instrument that
yielded the desired return or for other portfolio management purposes. Total
return swap agreements are two party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than one
year. In a standard "total return swap" transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested in a particular foreign currency, or in a "basket" of
securities representing a particular index. The "notional amount" of the total
return swap agreement is only a fictive basis on which to calculate the
obligations that the parties to a swap agreement have agreed to exchange. Most
swap agreements entered into by the MainStay 130/30 International Fund would
calculate the obligations of the parties to the agreements on a "net" basis.
Consequently, a 130/30 Fund's obligations (or rights) under a swap agreement
will generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The MainStay 130/30 International Fund's
obligation under a swap agreement will be accrued daily (offset against any
amounts owing to the MainStay 130/30 International Fund).
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an agreed-
upon level, while the seller of an interest rate floor is obligated to make
payments to the extent that a specified interest rate falls below an agreed-upon
level. An interest rate collar combines elements of buying a cap and selling a
floor.
The 130/30 International Fund bears the risk of loss of the amount expected to
be received under a swap agreement in the event of the default or bankruptcy of
a swap agreement counterparty. The 130/30 International Fund may be able to
eliminate its exposure under a swap agreement either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
Swaps are marked to market daily based upon quotations from market makers and
vendors and the change in value, if any, is recorded as unrealized gain or loss.
Payments received or made on swap contracts are recorded as realized gain or
loss. Gains or losses are realized upon early termination of the swap
agreements. These financial instruments are not actively traded on financial
markets. Entering into these agreements involves elements of credit, market and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements may
default on its obligation to perform or disagree as to the meaning of the
contractual terms in the agreements and that there may be unfavorable changes in
interest rates or the price of the index or security underlying these
transactions.
(I) SECURITIES SOLD SHORT. The 130/30 Funds typically engage in short sales as
part of their investment strategies. When a Fund enters into a short sale, it
must segregate the cash proceeds from the security sold short or other
securities, as collateral for its obligation to deliver the security upon
conclusion of the sale. A gain, limited to the price at which the 130/30 Funds
sold the security short, or a loss, unlimited as to dollar amount, will be
recognized upon termination of a short sale if the market price on the date the
short position is closed out is less or greater, respectively, than the proceeds
originally received. Any such gain or loss may be offset, completely or in part,
by the change in the value of the hedged investments. Accrued interest income
and dividends declared on short positions existing on the record date are
recorded on the ex-dividend date as an interest expense and dividend expense,
respectively, on the Statement of Operations.
mainstayinvestments.com 71
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
(J) STATEMENT OF CASH FLOWS. The cash amount shown in the Statement of Cash
Flows of each 130/30 Fund is the amount included in the 130/30 Fund's Statement
of Assets and Liabilities and represents the cash on hand at its custodian and
does not include any short-term investments or deposit at brokers for securities
sold short. Cash may include domestic and foreign currency.
(K) FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward contract is
an agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. During the period the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. When the forward
contract is closed, the 130/30 Funds record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the 130/30 Funds' basis in the contract. The 130/30 Funds enter into foreign
currency forward contracts primarily to hedge their foreign currency denominated
investments and receivables and payables against adverse movements in future
foreign exchange rates or to try to enhance the 130/30 Funds' returns.
The use of foreign currency forward contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The contract amount reflects a extent of a 130/30 Fund's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. While the
130/30 Funds may enter into forward contracts to reduce currency exchange risks,
changes in currency exchange rates may result in poorer overall performance for
the 130/30 Funds than if they had not engaged in such transactions. Exchange
rate movements can be large, depending on the currency, and can last for
extended periods of time, affecting the value of the 130/30 Funds' assets.
Moreover, there may be an imperfect correlation between the 130/30 Funds'
holdings of securities denominated in a particular currency and the forward
contracts entered into by the 130/30 Funds. Such imperfect correlation may
prevent the 130/30 Funds from achieving the intended hedge or expose the 130/30
Funds to the risk of currency exchange loss. The unrealized appreciation
(depreciation) on forward contracts reflects a 130/30 Fund's exposure at period
end to credit loss in the event of a counterparty's failure to perform its
obligations. (See Note 5.)
(L) FOREIGN CURRENCY TRANSACTIONS. The books and records of the 130/30 Funds
are kept in U.S. dollars. Prices of securities denominated in foreign currency
amounts are translated into U.S. dollars at the mean between the buying and
selling exchange rates last quoted by any major U.S. bank at the following
dates:
(i) market value of investment securities, other assets and liabilities--at the
valuation date, and
(ii) purchases and sales of investment securities, income and expenses--at the
date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are
presented at the exchange rates and market values at the close of the period.
The realized and unrealized changes in net assets arising from fluctuations in
exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the 130/30 Funds' books, and the U.S. dollar equivalent amount actually
received or paid. Net currency gains or losses from valuing such foreign
currency denominated assets and liabilities, other than investments at valuation
date exchange rates, are reflected in unrealized foreign exchange gains or
losses.
(M) RIGHTS/WARRANTS. A right is a certificate that permits the holder to
purchase a certain number of shares, or a fractional share, of a new stock from
the issuer at a specific price. A warrant is an instrument that entitles the
holder to buy an equity security at a specific price for a specific period of
time. The 130/30 Funds enter into rights and warrants when securities are
acquired through a corporate action. With respect to warrants in international
markets, the securities are only purchased when the underlying security can not
be purchased due to the many restrictions an industry and/or country might place
on foreign investors. These investments can provide a greater potential for
profit or loss than an equivalent investment in the underlying security. Prices
of these investments do not necessarily move in tandem with the prices of the
underlying securities, and are speculative investments.
There is risk involved in the purchase of rights and warrants in that these
investments are speculative investments. The 130/30 Funds could also lose the
entire value of the investment in warrants if the warrant is not exercised by
the date of its expiration. The 130/30 Funds invest in warrants only if received
as part of a corporate action. The securities are sold as soon as the
opportunity becomes available. The 130/30 Funds are exposed to risk until each
sale is completed.
(N) REDEMPTION FEE. Prior to April 1, 2010, the MainStay 130/30 International
Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of Fund
shares made within 60 days of their date of purchase for any class. The
redemption fee was designed to offset
72 MainStay 130/30 Funds
brokerage commissions and other costs associated with short-term trading and was
not assessed on shares acquired through the reinvestment of dividends or
distributions paid by the Fund. The redemption fees are included in the
Statement of Changes in Net Assets' shares redeemed amount and are retained by
the Fund.
(O) CONCENTRATION OF RISK. The MainStay 130/30 International Fund invests in
foreign securities, which carry certain risks that are in addition to the usual
risks inherent in domestic instruments. These risks include those resulting from
currency fluctuations, future adverse political and economic developments and
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions. These risks are likely to be greater in emerging markets
than in developed markets. The ability of issuers of debt securities held by the
MainStay 130/30 International Fund to meet its obligations may be affected by
economic or political developments in a specific country, industry or region.
(P) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the 130/30 Funds enter into contracts with third-party service
providers that contain a variety of representations and warranties and which
provide general indemnifications. The 130/30 Funds' maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the 130/30 Funds that have not yet occurred. Based on experience,
management is of the view that the risk of loss in connection with these
potential indemnification obligations is remote. However, there can be no
assurance that material liabilities related to such obligations will not arise
in the future, which could adversely impact the 130/30 Funds.
(Q) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the 130/30 Funds' derivative and hedging
activities, including how such activities are accounted for and their effect on
the 130/30 Funds' financial positions, performance and cash flows. These
derivatives are not accounted for as hedging instruments.
MAINSTAY 130/30 CORE FUND
The effect of derivative instruments on the Statement of Operations for the six
months ended April 30, 2010.
REALIZED GAIN (LOSS)
<Table>
<Caption>
STATEMENT OF EQUITY
OPERATIONS CONTRACTS
LOCATION RISK TOTAL
Net realized gain
(loss) on investments
Rights Sold Short sold short $(58,523) $(58,523)
-------------------
Total Realized Loss $(58,523) $(58,523)
===================
</Table>
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights Sold Short (2) (111,712) (111,712)
===================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
MAINSTAY 130/30 INTERNATIONAL FUND
ASSET DERIVATIVES
<Table>
<Caption>
STATEMENT OF
ASSETS AND EQUITY
LIABILITIES CONTRACTS
LOCATION RISK TOTAL
Investment in
Warrants securities, at value $28,200 $28,200
------------------
Total Fair Value $28,200 $28,200
==================
</Table>
The effect of derivative instruments on the Statement of Operations for the six
months ended April 30, 2010.
REALIZED GAIN (LOSS)
<Table>
<Caption>
STATEMENT OF EQUITY
OPERATIONS CONTRACTS
LOCATION RISK TOTAL
Net realized gain
(loss) on security
Rights transactions $(105,610) $(105,610)
Net realized gain
(loss) on investments
Rights Sold Short sold short (5,392) (5,392)
--------------------
Total Realized
Loss $(111,002) $(111,002)
====================
</Table>
CHANGE IN APPRECIATION (DEPRECIATION)
<Table>
<Caption>
STATEMENT OF EQUITY
OPERATIONS CONTRACTS
LOCATION RISK TOTAL
Net change in
unrealized appreciation
(depreciation) on
Rights security transactions $ 2,200 $ 2,200
Net change in
unrealized appreciation
(depreciation) on
Warrants security transactions 28,153 28,153
Net change in
unrealized appreciation
(depreciation) on
Rights Sold Short investments sold short 7,845 7,845
------------------
Total Change in
Appreciation
(Depreciation) $38,198 $38,198
==================
</Table>
mainstayinvestments.com 73
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights (2) 436,832 436,832
Warrants (2) 5,403 5,403
Rights Sold Short (2) (4,696) (4,696)
==================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the 130/30 Funds' Manager, pursuant to a Management Agreement,
as amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the 130/30 Funds.
Except for the portion of salaries and expenses that are the responsibility of
the 130/30 Funds, the Manager also pays the salaries and expenses of all
personnel affiliated with the 130/30 Funds and the operational expenses of the
130/30 Funds. Madison Square Investors LLC ("Madison Square Investors" or
"Subadvisor"), a registered investment adviser and an indirect, wholly-owned
subsidiary of New York Life, serves as subadvisor to and manages the day-to-day
investment operations of the 130/30 Funds. Pursuant to the terms of a
Subadvisory Agreement ("Subadvisory Agreement") between New York Life
Investments and Madison Square Investors, New York Life Investments pays for the
Subadvisor's services.
Each 130/30 Fund is contractually obligated to pay the Manager a monthly fee for
services performed and facilities furnished at an annual rate of average daily
net assets of that 130/30 Fund as follows:
<Table>
MainStay 130/30 Core Fund 1.00%
- ---------------------------------------------
MainStay 130/30 Growth Fund 1.00
- ---------------------------------------------
MainStay 130/30 International Fund 1.10
- ---------------------------------------------
</Table>
Effective August 1, 2009, New York Life Investments entered into written expense
limitation agreements under which it has agreed to waive a portion of the
management fee or reimburse expenses of the appropriate class of the 130/30
Funds to the extent necessary to ensure that the total ordinary operating
expenses (total ordinary operating expenses excludes taxes, interest,
litigation, dividends and interest expense on securities sold short,
extraordinary expenses, brokerage, other transaction expenses relating to the
purchase or sale of portfolio investments and the fees and expenses of any other
funds in which a 130/30 Fund invests) do not exceed the percentages of average
daily net assets for Class A as set forth in the table below. New York Life
investments will apply an equivalent waiver or reimbursement, in an equal number
of basis points, to the other share classes of each 130/30 Fund. This agreement
expires on July 31, 2010 and is reviewed annually by the Board in connection
with its review of each 130/30 Fund's investment advisory agreements. Based on
its review, the Board may agree to maintain, modify or terminate the agreement.
<Table>
<Caption>
CLASS A
MainStay 130/30 Core Fund 1.50%
- ----------------------------------------------
MainStay 130/30 Growth Fund 1.50
- ----------------------------------------------
MainStay 130/30 International Fund 1.60
- ----------------------------------------------
</Table>
Additionally, effective August 1, 2009, New York Life Investments has agreed to
voluntarily waive or reimburse the expenses of the appropriate class of each
130/30 Fund so that the total ordinary operating expenses of a class do not
exceed the following percentages:
<Table>
<Caption>
INVESTOR
CLASS CLASS C
MainStay 130/30 Core Fund 1.60% 2.35%
- ---------------------------------------------------
MainStay 130/30 Growth Fund 1.60 2.35
- ---------------------------------------------------
MainStay 130/30 International
Fund 1.70 2.45
- ---------------------------------------------------
</Table>
These voluntary waivers or reimbursements may be discontinued at any time
without notice.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the 130/30 Funds and waived/reimbursed such amounts pursuant to the
contractual expense limitations described above as follows:
<Table>
<Caption>
WAIVED
FEES FEES
MainStay 130/30 Core Fund $1,287,405 $ --
- ----------------------------------------------------
MainStay 130/30 Growth Fund 199,014 30,566
- ----------------------------------------------------
MainStay 130/30 International
Fund 635,442 24,326
- ----------------------------------------------------
</Table>
State Street Bank & Trust ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the 130/30 Funds pursuant to an agreement with New York Life Investments. These
services include calculating the daily NAVs of the 130/30 Funds, maintaining the
general ledger and sub-ledger accounts for the calculation of the 130/30 Funds'
respective NAVs, and assisting New York Life Investments in conducting various
aspects of the 130/30 Funds' administrative operations. For providing these
services to the 130/30 Funds, State Street is compensated by New York Life
Investments.
74 MainStay 130/30 Funds
(B) DISTRIBUTION, SERVICE AND SHAREHOLDER SERVICE FEES. The Trust, on behalf of
the 130/30 Funds, has entered into a Distribution Agreement with NYLIFE
Distributors LLC (the "Distributor"), an indirect, wholly-owned subsidiary of
New York Life. The 130/30 Funds have adopted distribution plans, (the "Plans")
in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from applicable Investor Class and Class A shares at an
annual rate of 0.25% of the average daily net assets of the Investor Class and
Class A shares for distribution or service activities as designated by the
Distributor. Pursuant to the Class C Plans, applicable Class C shares pay the
Distributor a monthly distribution fee at an annual rate of 0.75% of the average
daily net assets of the Class C shares, along with a service fee at an annual
rate of 0.25% of the average daily net assets of the Class C shares of the
130/30 Funds for a total 12b-1 fee of 1.00%. Class I shares are not subject to a
distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the 130/30 Funds' shares and service activities.
(C) SALES CHARGES. The 130/30 Funds were advised by the Distributor that the
amount of sales charges retained on sales of Investor Class and Class A shares
for the six-month period ended April 30, 2010 were the following:
<Table>
<Caption>
MAINSTAY 130/30 CORE FUND
Investor Class $83
- --------------------------------------------
Class A 30
- --------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY 130/30 GROWTH FUND
Investor Class $116
- ---------------------------------------------
Class A 205
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY 130/30 INTERNATIONAL FUND
Investor Class $285
- ---------------------------------------------
Class A 13
- ---------------------------------------------
</Table>
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the 130/30
Funds' transfer, dividend disbursing and shareholder servicing agent pursuant to
an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service
Company LLC has entered into an agreement with Boston Financial Data Services,
Inc. ("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
130/30 Funds for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY 130/30 CORE FUND TOTAL
Investor Class $ 76
- ----------------------------------------------
Class A 3
- ----------------------------------------------
Class C 478
- ----------------------------------------------
Class I 5,458
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY 130/30 GROWTH FUND TOTAL
Investor Class $ 99
- ----------------------------------------------
Class A 30
- ----------------------------------------------
Class C 165
- ----------------------------------------------
Class I 5,430
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY 130/30 INTERNATIONAL FUND TOTAL
Investor Class $ 91
- ----------------------------------------------
Class A 4
- ----------------------------------------------
Class C 61
- ----------------------------------------------
Class I 5,457
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the 130/30 Funds have implemented a small account fee
on certain types of accounts. Certain shareholders with an account balance of
less than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the 130/30 Funds with the following values and percentages of net
assets as follows:
<Table>
<Caption>
MAINSTAY 130/30 CORE FUND
Investor Class $ 20,848 28.3%
- ---------------------------------------------------
Class A 18,125 5.1
- ---------------------------------------------------
Class C 17,750 4.3
- ---------------------------------------------------
Class I 18,113,700 6.0
- ---------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY 130/30 GROWTH FUND
Investor Class $ 20,455 18.1%
- --------------------------------------------------
Class A 19,800 5.6
- --------------------------------------------------
Class C 19,350 7.5
- --------------------------------------------------
Class I 3,986,759 19.1
- --------------------------------------------------
</Table>
mainstayinvestments.com 75
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
MAINSTAY 130/30 INTERNATIONAL FUND
Investor Class $ 18,404 12.4%
- --------------------------------------------------
Class A 16,163 22.6
- --------------------------------------------------
Class C 15,800 16.1
- --------------------------------------------------
Class I 1,913,449 1.6
- --------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the 130/30 Funds by the Office of the General Counsel of
New York Life Investments is payable directly by the 130/30 Funds. For the six-
month period ended April 30, 2010, these fees, which are included in
professional fees shown on the Statement of Operations, were as follows:
<Table>
MainStay 130/30 Core Fund $6,101
- ----------------------------------------------
MainStay 130/30 Growth Fund 1,244
- ----------------------------------------------
MainStay 130/30 International Fund 2,908
- ----------------------------------------------
</Table>
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $23,727,153 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
130/30 Core 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
MAINSTAY 130/30 CORE FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2015 $ 509
2016 5,936
2017 17,282
- ---------------------------------- -----
Total $23,727
- ---------------------------------- -----
</Table>
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $12,898,362 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
130/30 Growth 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
MAINSTAY 130/30 GROWTH FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2015 $ 939
2016 8,200
2017 3,759
- ---------------------------------- -----
Total $12,898
- ---------------------------------- -----
</Table>
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $39,011,797 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
130/30 International Fund through the years indicated. To the extent that these
loss carryforwards are used to offset future capital gains, it is probable that
the capital gains so offset will not be distributed to shareholders. No capital
gain distributions shall be made until any capital loss carryforwards have been
fully utilized or expired.
MAINSTAY 130/30 INTERNATIONAL FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $10,140
2017 28,872
- ---------------------------------- -----
Total $39,012
- ---------------------------------- -----
</Table>
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
-------------------------------------------
TAX BASED TAX BASED
DISTRIBUTIONS DISTRIBUTION
FROM ORDINARY FROM LONG-TERM
INCOME CAPITAL GAINS TOTAL
MainStay 130/30 Core Fund $192,436 $ -- $192,436
- ------------------------------------------------------------------------------------------------
MainStay 130/30 Growth Fund -- -- --
- ------------------------------------------------------------------------------------------------
MainStay 130/30 International Fund -- -- --
- ------------------------------------------------------------------------------------------------
</Table>
76 MainStay 130/30 Funds
NOTE 5--FOREIGN CURRENCY TRANSACTIONS:
MAINSTAY 130/30 INTERNATIONAL FUND
As of April 30, 2010, the Fund held the following foreign currencies:
<Table>
<Caption>
CURRENCY COST VALUE
Australian Dollar AUD 1,980 USD 1,837 USD 1,832
- ---------------------------------------------------------------------------------------------
Euro Currency EUR 41,909 55,507 55,800
- ---------------------------------------------------------------------------------------------
Japanese Yen vs U.S. Dollar JPY 4 --(b) --(b)
- ---------------------------------------------------------------------------------------------
Pound Sterling vs U.S. Dollar GBP 775 1,187 1,186
- ---------------------------------------------------------------------------------------------
Singapore Dollar (a) SGD (74) (54) (54)
- ---------------------------------------------------------------------------------------------
Swiss Franc CHF 2,087 1,927 1,939
- ---------------------------------------------------------------------------------------------
Total USD 60,404 USD60,703
- ---------------------------------------------------------------------------------------------
</Table>
(a) Currency was overdrawn as of April 30, 2010.
(b) Less than one dollar.
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the 130/30
Funds. Custodial fees are charged to the 130/30 Funds based on the market value
of securities in the 130/30 Funds and the number of certain cash transactions
incurred by the 130/30 Funds.
NOTE 7--LINE OF CREDIT:
The 130/30 Funds and certain affiliated funds maintain a line of credit of
$125,000,000 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 line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay 130/30 Funds based upon net assets and
other factors. Interest on any revolving credit loan is charged based upon the
Federal Funds Advances rate or the one month LIBOR rate, whichever is higher.
There were no borrowings made or outstanding with respect to the 130/30 Funds on
the line of credit during the six-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
For the six-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were as follows:
<Table>
<Caption>
MAINSTAY 130/30 MAINSTAY 130/30 MAINSTAY 130/30
CORE FUND GROWTH FUND INTERNATIONAL FUND
--------------------- --------------------- ---------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government Securities $ -- $ -- $ -- $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------
All Others 316,229 216,832 41,521 101,230 117,911 105,945
- ---------------------------------------------------------------------------------------------------------
Total $316,229 $216,832 $41,521 $101,230 $117,911 $105,945
- ---------------------------------------------------------------------------------------------------------
</Table>
mainstayinvestments.com 77
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 9--CAPITAL SHARE TRANSACTIONS:
MAINSTAY 130/30 CORE FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 2,321 $ 16,120
Shares issued to
shareholders in
reinvestment of dividends 10 65
------------------------
Net increase in shares
outstanding before
conversion 2,331 16,185
Shares converted from
Investor Class (See Note
1) (442) (3,035)
------------------------
Net increase 1,889 $ 13,150
========================
Year ended October 31, 2009:
Shares sold 3,607 $ 21,349
Shares redeemed (2,193) (12,164)
------------------------
Net increase 1,414 $ 9,185
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 31,753 $ 231,701
Shares issued to
shareholders in
reinvestment of dividends 30 205
Shares redeemed (5,001) (34,637)
------------------------
Net increase in shares
outstanding before
conversion 26,782 197,269
Shares converted into Class
A (See Note 1) 442 3,035
Shares converted from Class
A (a) (1) (8)
------------------------
Net increase 27,223 $ 200,296
========================
Year ended October 31, 2009:
Shares sold 10,142 $ 54,664
Shares issued to
shareholders in
reinvestment of dividends 19 102
Shares redeemed (53,599) (295,298)
------------------------
Net decrease (43,438) $ (240,532)
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 4,504 $ 31,400
Shares redeemed (4,968) (33,266)
------------------------
Net decrease (464) $ (1,866)
========================
Year ended October 31, 2009:
Shares sold 38,870 $ 216,711
Shares redeemed (18,512) (102,624)
------------------------
Net increase 20,358 $ 114,087
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 13,809,401 $ 95,438,845
Shares issued to
shareholders in
reinvestment of dividends 158,510 1,084,208
Shares redeemed (1,863,359) (13,177,846)
------------------------
Net increase in shares
outstanding before
conversion 12,104,552 83,345,207
Shares converted into Class
I (a) 1 8
------------------------
Net increase 12,104,553 $ 83,345,215
========================
Year ended October 31, 2009:
Shares sold 16,516,049 $ 92,660,860
Shares issued to
shareholders in
reinvestment of dividends 29,161 160,966
Shares redeemed (1,122,504) (6,496,133)
------------------------
Net increase 15,422,706 $ 86,325,693
========================
</Table>
MAINSTAY 130/30 GROWTH FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 3,393 $ 27,068
Shares redeemed (1,700) (13,753)
------------------------
Net increase 1,693 $ 13,315
========================
Year ended October 31, 2009:
Shares sold 6,079 $ 39,531
Shares redeemed (2,429) (15,452)
------------------------
Net increase 3,650 $ 24,079
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 28,244 $ 226,713
Shares redeemed (4,579) (36,005)
------------------------
Net increase in shares
outstanding before
conversion 23,665 190,708
Shares converted from Class A
(a) (1,332) (10,280)
------------------------
Net increase 22,333 $ 180,428
========================
Year ended October 31, 2009:
Shares sold 6,445 $ 39,840
Shares redeemed (19,822) (129,118)
------------------------
Net decrease (13,377) $ (89,278)
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 13,017 $ 103,274
Shares redeemed (3,371) (25,404)
------------------------
Net increase 9,646 $ 77,870
========================
Year ended October 31, 2009:
Shares sold 5,200 $ 35,703
Shares redeemed (6,646) (39,863)
------------------------
Net decrease (1,446) $ (4,160)
========================
</Table>
78 MainStay 130/30 Funds
<Table>
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 152,533 $ 1,195,277
Shares redeemed (6,321,244) (49,806,565)
------------------------
Net decrease in shares
outstanding before
conversion (6,168,711) (48,611,288)
Shares converted into Class I
(a) 1,321 10,280
------------------------
Net decrease (6,167,390) $(48,601,008)
========================
Year ended October 31, 2009:
Shares sold 7,003,223 $ 42,041,863
Shares redeemed (5,119,916) (37,522,988)
------------------------
Net increase 1,883,307 $ 4,518,875
========================
</Table>
MAINSTAY 130/30 INTERNATIONAL FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 6,397 $ 40,660
Shares issued to shareholders
in reinvestment of
dividends 384 2,435
Shares redeemed (831) (5,400)
------------------------
Net increase 5,950 $ 37,695
========================
Year ended October 31, 2009:
Shares sold 5,519 $ 28,831
Shares redeemed (5,255) (28,765)
------------------------
Net increase in shares
outstanding before
conversion 264 66
Shares converted into
Investor Class (See Note 1) 2,829 12,590
Shares converted from
Investor Class (See Note 1) (2,829) (18,361)
------------------------
Net increase (decrease) 264 $ (5,705)
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 4,811 $ 30,913
Shares issued to shareholders
in reinvestment of
dividends 275 1,740
Shares redeemed (5,998) (37,847)
------------------------
Net decrease in shares
outstanding before
conversion (912) (5,194)
Shares converted from Class A
(a) (3,061) (18,452)
------------------------
Net decrease (3,973) $ (23,646)
========================
Year ended October 31, 2009:
Shares sold 4,288 $ 24,925
Shares redeemed (681) (4,423)
------------------------
Net increase in shares
outstanding before
conversion 3,607 20,502
Shares converted into Class A
(See Note 1) 2,825 18,361
Shares converted from Class A
(See Note 1) (2,836) (12,590)
------------------------
Net increase 3,596 $ 26,273
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 4,416 $ 28,126
Shares issued to shareholders
in reinvestment of
dividends 203 1,274
------------------------
Net increase 4,619 $ 29,400
========================
Year ended October 31, 2009:
Shares sold 3,088 $ 16,323
Shares redeemed (503) (2,252)
------------------------
Net increase 2,585 $ 14,071
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 2,885,575 $ 18,154,513
Shares issued to shareholders
in reinvestment of
dividends 434,005 2,760,270
Shares redeemed (1,734,345) (11,044,637)
------------------------
Net increase in shares
outstanding before
conversion 1,585,235 9,870,146
Shares converted into Class I
(a) 3,051 18,452
------------------------
Net increase 1,588,286 $ 9,888,598
========================
Year ended October 31, 2009:
Shares sold 7,455,741 $ 35,669,233
Shares redeemed (4,388,673) (21,788,179)
------------------------
Net increase 3,067,068 $ 13,881,054
========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 10--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value
mainstayinvestments.com 79
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
Measurements". ASU 2010-06 requires reporting entities to make new disclosures
about amount and reasons for significant transfers in and out of Level 1 and
Level 2 fair value measurements and input and valuation techniques used to
measure fair value for both recurring and nonrecurring fair value measurements
that fall in either Level 2 or Level 3, and information on purchased, sales,
issuances, and settlements in the roll forward of activity in Level 3 fair value
measures. The new and revised disclosure requirements are effective for interim
and annual reporting periods beginning after December 15, 2009 except for the
disclosures about purchased, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measures, which are effective for
fiscal years beginning after December 15, 2010. As of April 30, 2010, the Fund
has adopted ASU 2010-06. The adoption of ASU 2010-06 has not impacted the
amounts reported in the financial statements; however, there are additional
disclosures in the Portfolio of Investments.
NOTE 11--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the 130/30
Funds as of and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the 130/30 Funds' management for
possible adjustment and/or disclosure. No subsequent events requiring financial
statement adjustment or disclosure have been identified.
80 MainStay 130/30 Funds
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Funds' securities is available without charge,
upon request, (i) by visiting the Funds' website at mainstayinvestments.com; and
(ii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Company is required to file with the SEC its proxy voting records for each
of its funds for the 12-month period ending June 30 on Form N-PX. The most
recent Form N-PX is available free of charge upon request by calling 800-
MAINSTAY (624-6782); visiting the Funds' website at mainstayinvestments.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 or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 81
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
(C) 2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18306 MS121-10 MS30ALL10-06/10
C2
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY CASH RESERVES FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY CASH RESERVES FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 16
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 22
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 27
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 27
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
CLASS I SHARES(2)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
0.00% 0.05% 2.75% 2.57%
7-DAY CURRENT YIELD: 0.01%
</Table>
(LINE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER AVERAGE LIPPER
MAINSTAY CASH INSTITUTIONAL MONEY MONEY MARKET
RESERVES FUND MARKET FUND FUND
------------- ------------------- --------------
4/30/00 10000 10000 10000
10606 10610 10560
10895 10895 10796
11028 11036 10889
11100 11119 10933
11255 11287 11053
11643 11692 11395
12212 12278 11914
12727 12826 12391
12884 13038 12547
4/30/10 12890 13055 12555
</Table>
SWEEP SHARES(2)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
0.00% 0.02% 2.35% 2.12%
7-DAY CURRENT YIELD: 0.01%
</Table>
(LINE GRAPH)
<Table>
<Caption>
AVERAGE LIPPER AVERAGE LIPPER
MAINSTAY CASH INSTITUTIONAL MONEY MONEY MARKET
RESERVES FUND MARKET FUND FUND
------------- ------------------- --------------
4/30/00 10000 10000 10000
10554 10610 10560
10787 10895 10796
10865 11036 10889
10881 11119 10933
10978 11287 11053
11301 11692 11395
11794 12278 11914
12231 12826 12391
12329 13038 12547
4/30/10 12331 13055 12555
</Table>
1. 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. The graphs assume an initial investment of $10,000. Class
I shares are sold with no initial sales charge or contingent deferred sales
charge ("CDSC"), have no annual 12b-1 fee, and are generally available to
corporate and institutional investors or individual investors with a minimum
initial investment of $5 million. Sweep Shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of 0.25% 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. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements.
2. As of April 30, 2010, MainStay Cash Reserves Fund had an effective 7-day
yield of 0.01% and a 7-day current yield of
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
Lipper institutional money market funds average(3) 0.03% 0.13% 2.93% 2.70%
Lipper money market funds average(4) 0.01 0.06 2.55 2.30
</Table>
0.01% for Class I shares and an effective 7-day yield of 0.01% and a 7-day
current yield of 0.01% for Sweep Shares. These yields reflect certain expense
limitations. Had these expense limitations not been in effect, the effective
7-day yield and the 7-day current yield would have been -0.35% and -0.35% for
Class I shares and -0.85% and -0.85% for Sweep Shares. The current yield
reflects the Fund's earnings better than does the Fund's total return. For
information on current fee waivers and/or expense limitations, please refer
to the notes to the financial statements.
3. The Lipper institutional money market funds average is an equally weighted
performance average adjusted for capital gains distributions and income
dividends of all of the institutional money market funds in the Lipper
Universe. Lipper Inc., a wholly-owned subsidiary of Reuters Group PLC, is an
independent monitor of mutual fund performance. Results do not reflect any
deduction of sales charges, expenses or taxes. Lipper averages are not class
specific. Lipper returns are unaudited.
4. The Lipper money market funds average is an equally weighted performance
average adjusted for capital gains distributions and income dividends of all
of the money market funds in the Lipper Universe. Lipper Inc., a wholly-owned
subsidiary of Reuters Group PLC, is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges. Lipper
averages are not class specific. Lipper returns are unaudited. Results are
based on average total returns of similar funds with all dividend and capital
gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Cash Reserves Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY CASH RESERVES FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
CLASS I SHARES $1,000.00 $1,000.00 $1.19 $1,023.60 $1.20
- -------------------------------------------------------------------------------------------------------
SWEEP SHARES $1,000.00 $1,000.00 $1.19 $1,023.60 $1.20
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.24% for Class I Shares and Sweep Shares) multiplied by the average account
value over the period, divided by 365 and multiplied by 181 (to reflect the
one-half year period). The table above represents the actual expenses
incurred during the one-half year period.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Commercial Paper 47.3
U.S. Government & Federal Agencies 23.0
Repurchase Agreements 13.8
Corporate Bonds 10.6
Asset-Backed Securities 5.0
Other Assets, Less Liabilities 0.3
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
8 MainStay Cash Reserves Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS DAVID E. CLEMENT, CFA, AND THOMAS J.
GIRARD OF NEW YORK LIFE INVESTMENTS,(1) THE FUND'S MANAGER.
HOW DID MAINSTAY CASH RESERVES FUND PERFORM RELATIVE TO ITS PEERS DURING THE SIX
MONTHS ENDED APRIL 30, 2010?
As of April 30, 2010, MainStay Cash Reserves Fund Class I shares and Sweep
Shares each provided a 7-day current yield of 0.01% and a 7-day effective yield
of 0.01%. For the six months ended April 30, 2010, MainStay Cash Reserves Fund
Class I shares and Sweep Shares returned 0.00%. Both share classes
underperformed the 0.03% return of the Lipper(2) institutional money market
funds average for the six months ended April 30, 2010. Class I shares and Sweep
Shares also underperformed the 0.01% return of the Lipper money market funds
average for the six months ended April 30, 2010.
WHAT ECONOMIC AND MARKET FORCES AFFECTED THE FUND DURING THE REPORTING PERIOD?
The Federal Open Market Committee (FOMC) maintained its targeted federal funds
rate in a range from 0% to 0.25% throughout the reporting period. This decision
affected short-term interest rates and resulted in a lower yield in the Fund.
The supply of commercial paper and corporate bonds of industrial issuers
remained sparse. In addition, the anticipation of new Securities and Exchange
Commission (SEC) regulations affected supply/demand characteristics along both
the yield curve and the credit curve,(3) even though these regulations did not
begin to take effect until after the end of the reporting period. In particular,
the yield curve steepened and the credit curve widened. The yield curve
steepened because the new regulations call for higher levels of liquidity,
creating higher demand for securities with shorter maturities. The credit curve
widened because the new regulations also decreased the amount of allowable
investments in second tier commercial paper.
HOW DID YOU MANAGE THE FUND'S DURATION DURING THE REPORTING PERIOD?
The Fund initially had a longer-than-normal duration to take advantage of higher
yields further out the yield curve. Over the course of the reporting period, we
shortened the Fund's duration from 72 days to 55 days. The shorter duration
reflected our expectation that rates would rise later this year. It also
reflected the flatter yield curve we saw for a good portion of the reporting
period. Duration was also shortened to prepare the Fund for new SEC regulations.
In light of these new regulations, effective May 26, 2010, the Fund maintains a
dollar-weighted average maturity of 60 days or less and a dollar-weighted
average life to maturity of 120 days or less. For more information, please refer
to the relevant supplement to the Fund's prospectus dated May 26, 2010.
DURING THE REPORTING PERIOD, WHICH MARKET SEGMENTS WERE POSITIVE CONTRIBUTORS TO
THE FUND'S PERFORMANCE AND WHICH MARKET SEGMENTS DETRACTED?
The major positive contributors to the Fund's performance included Federal
Deposit Insurance Corporation (FDIC) backed paper, Treasury coupons and agency
coupons. The Fund's return was hampered by repurchase agreements and by
commercial paper of industrial issuers. In addition, the Fund's yields were
dampened because of relatively limited exposure to banks and asset-backed
commercial paper.
WHICH POSITIONS WERE STRONG CONTRIBUTORS TO THE FUND'S PERFORMANCE DURING THE
REPORTING PERIOD?
One of the significant investments during the reporting period was a Berkshire
Hathaway floating-rate security (due February 2011), which offered incremental
yield relative to commercial paper investments.
Other significant purchases included investments in a number of asset-backed
securities, which allowed the Fund to pick up yield by extending out an upward
sloping curve and by investing in securities that were less expensive than
commercial paper. A few examples include CNH Equipment Trust and John Deere
Owner Trust paper as well as BMW Vehicle Owner Trust and Mercedes-Benz Auto
Receivables Trust.
Finally, we were able to augment the Fund's yield in the agency sector through
investments in supranationals, such as the International Bank for Reconstruction
and Development (World Bank) and the Inter-American Development Bank.
1. "New York Life Investments" is a service mark used by New York Life
Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. The yield curve is a line that plots the yields of various securities of
similar quality--typically U.S. Treasury issues--across a range of
maturities. The U.S. Treasury yield curve serves as a benchmark for other
debt and is used in economic forecasting. The credit curve reflects credit
spreads (the difference in yield between U.S. Treasurys and credit
securities) across different maturities.
mainstayinvestments.com 9
WERE THERE ANY SIGNIFICANT WEIGHTING CHANGES DURING THE REPORTING PERIOD?
During the reporting period, we increased the Fund's weightings in asset-backed
securities and repurchase agreements. The Fund decreased its weighting in the
commercial paper sector.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Cash Reserves Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS 99.7%+
- -------------------------------------------------------
ASSET-BACKED SECURITIES 5.0%
Ally Auto Receivables Trust
Series 2009-B, Class A1
0.305%, due 11/15/10 (a) $ 1,034,635 $ 1,034,635
Series 2010-1, Class A1
0.323%, due 4/15/11 1,037,239 1,037,239
Bank of America Auto Trust
Series 2010-1A, Class A1
0.262%, due 2/15/11 (a) 2,437,998 2,437,998
Series 2009-3A, Class A1
0.296%, due 11/15/10 (a) 593,216 593,216
BMW Vehicle Owner Trust
Series 2010-A, Class A1
0.279%, due 4/25/11 4,450,000 4,450,000
Carmax Auto Owner Trust
Series 2009-2, Class A1
0.279%, due 11/15/10 503,392 503,392
Chrysler Financial Auto
Securitization Trust
Series 2009-B, Class A1
0.306%, due 12/8/10 (a) 1,364,506 1,364,506
CNH Equipment Trust
Series 2010-A, Class A1
0.354%, due 4/15/11 3,608,272 3,608,272
Series 2009-C, Class A1
0.421%, due 12/3/10 620,904 620,904
Ford Credit Auto Owner Trust
Series 2009-E, Class A1
0.295%, due 12/15/10 (a) 929,148 929,148
Series 2010-A, Class A1
0.384%, due 5/15/11 (a) 4,500,000 4,500,000
Honda Auto Receivables Owner
Trust Series 2010-1, Class
A1
0.269%, due 2/21/11 4,132,029 4,132,029
John Deere Owner Trust
Series 2010-A, Class A1
0.344%, due 5/16/11 4,500,000 4,500,000
Mercedes-Benz Auto
Receivables Trust Series
2010-1, Class A1
0.309%, due 5/15/11 4,100,000 4,100,000
MMAF Equipment Finance LLC
Series 2009-AA, Class A1
0.398%, due 12/15/10 (a) 1,056,237 1,056,237
World Omni Automobile Lease
Securitization Trust
Series 2009-A, Class A1
0.403%, due 11/15/10 683,573 683,573
------------
35,551,149
------------
COMMERCIAL PAPER 47.3%
Abbot Laboratories
0.19%, due 5/11/10 (a)(b) 8,750,000 8,749,538
American Water Capital Corp.
0.31%, due 5/13/10 (a)(b) 2,625,000 2,624,729
Baker Hughes, Inc.
0.19%, due 5/4/10 (a)(b) 9,500,000 9,499,850
Basin Electric Power
Cooperative
0.18%, due 5/3/10 (a)(b) 9,000,000 8,999,910
0.20%, due 5/17/10 (a)(b) 9,750,000 9,749,133
BNP Paribas Finance, Inc.
0.20%, due 5/14/10 (b) 8,750,000 8,749,368
Campbell Soup Co.
0.60%, due 7/30/10 (a)(b) 7,000,000 6,989,500
Canadian Wheat Board
0.17%, due 5/12/10 (b) 9,500,000 9,499,507
Caterpillar Financial
Services Corp.
0.16%, due 5/3/10 (b) 6,400,000 6,399,943
0.18%, due 5/6/10 (b) 9,750,000 9,749,756
Clorox Co. (The)
0.28%, due 5/14/10 (a)(b) 2,900,000 2,899,707
Coca-Cola Co. (The)
0.20%, due 6/9/10 (a)(b) 9,500,000 9,497,942
Diageo Capital PLC
0.30%, due 6/3/10 (a)(b) 2,800,000 2,799,230
Duke Energy Corp.
0.27%, due 5/3/10 (a)(b) 3,000,000 2,999,955
DuPont E.I. De NeMours Co.
0.18%, due 5/7/10 (a)(b) 7,750,000 7,749,767
Emerson Electric Co.
0.18%, due 5/13/10 (a)(b) 7,400,000 7,399,556
General Electric Capital
Corp.
0.18%, due 5/27/10 (b) 8,750,000 8,748,862
H.J. Heinz Financial Co.
0.32%, due 5/28/10 (a)(b) 2,900,000 2,899,304
International Business
Machines Corp.
0.16%, due 5/6/10 (a)(b) 8,750,000 8,749,806
0.17%, due 5/12/10 (a)(b) 6,750,000 6,749,649
John Deere Bank S.A.
0.20%, due 5/5/10 (a)(b) 5,780,000 5,779,872
Johnson & Johnson
0.22%, due 7/26/10 (a)(b) 9,750,000 9,744,876
KfW Group
0.16%, due 5/3/10 (a)(b) 7,750,000 7,749,931
L'Oreal USA, Inc.
0.22%, due 6/18/10 (a)(b) 5,724,000 5,722,321
Merck & Co., Inc.
0.18%, due 5/24/10 (a)(b) 8,750,000 8,748,994
0.23%, due 7/28/10 (a)(b) 5,239,000 5,236,054
</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. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (CONTINUED)
COMMERCIAL PAPER (CONTINUED)
Microsoft Corp.
0.16%, due 5/26/10 (a)(b) $10,000,000 $ 9,998,889
Monsanto Co.
0.18%, due 5/25/10 (a)(b) 5,950,000 5,949,286
National Cooperative
Services Corp.
0.20%, due 5/4/10 (a)(b) 9,000,000 8,999,850
Nestle Capital Corp.
0.20%, due 6/7/10 (a)(b) 7,400,000 7,398,479
Parker-Hannifin Corp.
0.18%, due 5/4/10 (a)(b) 5,250,000 5,249,921
0.18%, due 5/6/10 (a)(b) 9,727,000 9,726,757
0.18%, due 5/18/10 (a)(b) 2,100,000 2,099,821
PepsiCo, Inc.
0.17%, due 5/18/10 (a)(b) 7,600,000 7,599,390
0.18%, due 5/19/10 (a)(b) 10,626,000 10,625,044
Pfizer, Inc.
0.19%, due 6/21/10 (a)(b) 8,750,000 8,747,645
Pitney Bowes, Inc.
0.18%, due 5/27/10 (a)(b) 5,950,000 5,949,226
0.20%, due 5/7/10 (a)(b) 9,500,000 9,499,683
Private Export Funding Corp.
0.20%, due 6/23/10 (a)(b) 8,500,000 8,497,497
Procter & Gamble Co.
0.19%, due 5/21/10 (a)(b) 10,500,000 10,498,892
Siemens Capital Co. LLC
0.19%, due 5/18/10 (a)(b) 8,750,000 8,749,215
Societe Generale North
America, Inc.
0.23%, due 5/7/10 (b) 8,750,000 8,749,665
0.23%, due 5/11/10 (b) 8,750,000 8,749,441
Wal-Mart Stores, Inc.
0.17%, due 5/5/10 (a)(b) 9,310,000 9,309,824
0.18%, due 5/11/10 (a)(b) 7,962,000 7,961,602
------------
338,847,187
------------
CORPORATE BONDS 10.6%
Bank of America Corp.
0.752%, due 12/2/10 (c)(d) 900,000 903,176
Bank of America N.A.
0.287%, due 9/13/10 (c)(d) 1,875,000 1,875,000
0.378%, due 7/29/10 (c)(d) 5,000,000 5,000,000
Berkshire Hathaway, Inc.
0.23%, due 2/10/11 (d) 11,800,000 11,801,003
Citigroup Funding, Inc.
0.438%, due 7/30/10 (c)(d) 5,000,000 5,000,000
Citigroup, Inc.
0.804%, due 12/9/10 (c)(d) 5,000,000 5,019,670
General Electric Capital
Corp.
0.336%, due 3/11/11 (c)(d) 1,250,000 1,250,000
0.345%, due 7/8/10 (c)(d) 5,000,000 5,000,000
0.884%, due 12/9/10 (c)(d) 1,800,000 1,808,147
Inter-American Development
Bank (Discount Note)
0.204%, due 5/13/10 (b) 8,750,000 8,749,417
International Bank for
Reconstruction and
Development (Discount
Notes)
0.214%, due 6/14/10 (b) 3,400,000 3,399,127
0.216%, due 6/1/10 (b) 9,000,000 8,998,373
JPMorgan Chase & Co.
0.752%, due 12/2/10 (c)(d) 5,000,000 5,017,397
KeyCorp
0.907%, due 12/15/10
(c)(d) 5,000,000 5,022,955
Praxair, Inc.
0.342%, due 5/26/10 (d) 5,100,000 5,100,000
SunTrust Bank
0.907%, due 12/16/10
(c)(d) 1,600,000 1,607,661
------------
75,551,926
------------
REPURCHASE AGREEMENTS 13.8%
Bank of America N.A.
0.18%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$24,000,360
(Collateralized by a
United States Treasury
Note with a zero coupon
rate and a maturity date
of 5/15/20, with a
Principal Amount of
$36,785,500 and a Market
Value of $24,480,015) 24,000,000 24,000,000
Deutsche Bank Securities,
Inc.
0.18%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$24,000,360
(Collateralized by United
States Treasury Notes with
a rate of 4.75% and
maturity dates between
3/10/11-8/15/17, with a
Principal Amount of
$23,523,000 and a Market
Value of $24,480,087) 24,000,000 24,000,000
Morgan Stanley Co.
0.18%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$24,000,360
(Collateralized by a
United States Treasury
Note with a rate of 2.50%
and a maturity date of
7/15/16, with a Principal
Amount of $20,548,200 and
a Market Value of
$24,639,988) 24,000,000 24,000,000
</Table>
12 MainStay Cash Reserves Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS (CONTINUED)
REPURCHASE AGREEMENTS (CONTINUED)
SG Americas Securities LLC
0.19%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$26,801,424
(Collateralized by United
States Treasury Notes with
rates between 2.00%-3.125%
and maturity dates between
4/30/17-1/15/26, with a
Principal Amount of
$25,782,900 and a Market
Value of $27,337,031) $26,801,000 $ 26,801,000
------------
98,801,000
------------
U.S. GOVERNMENT & FEDERAL AGENCIES 23.0%
Federal Farm Credit Bank
0.185%, due 7/28/10 (d) 7,000,000 7,000,000
2.75%, due 5/4/10 2,000,000 2,000,329
3.75%, due 12/6/10 2,900,000 2,959,469
5.25%, due 9/13/10 7,000,000 7,119,112
Federal Farm Credit Bank
(Discount Note)
0.40%, due 5/3/10 (b) 6,000,000 5,999,867
Federal Home Loan Bank
0.50%, due 10/29/10 5,000,000 5,000,000
0.55%, due 8/4/10 5,000,000 5,000,563
0.60%, due 6/15/10 5,000,000 5,001,084
0.60%, due 6/25/10 10,000,000 10,001,569
Federal Home Loan Mortgage
Corporation
2.875%, due 6/28/10 3,000,000 3,011,683
Federal National Mortgage
Association
2.875%, due 10/12/10 7,000,000 7,074,850
4.125%, due 5/15/10 10,367,000 10,382,231
Federal National Mortgage
Association (Discount
Note)
0.20%, due 7/12/10 (b) 3,700,000 3,698,520
United States Treasury Bills
0.12%, due 5/6/10 (b) 6,900,000 6,899,885
0.145%, due 5/20/10 (b) 9,000,000 8,999,311
0.156%, due 6/24/10 (b) 8,750,000 8,747,953
0.16%, due 7/1/10 (b) 2,000,000 1,999,458
0.24%, due 7/15/10 (b) 895,000 894,553
0.41%, due 6/10/10 (b) 4,400,000 4,397,996
0.478%, due 7/29/10 (b) 5,000,000 4,994,190
United States Treasury Notes
0.875%, due 1/31/11 12,000,000 12,042,439
0.875%, due 3/31/11 5,500,000 5,522,217
1.50%, due 10/31/10 9,900,000 9,953,371
2.00%, due 9/30/10 18,000,000 18,119,705
2.375%, due 8/31/10 5,100,000 5,134,348
2.875%, due 6/30/10 3,000,000 3,011,099
------------
164,965,802
------------
Total Short-Term Investments
(Amortized Cost
$713,717,064) (e) 99.7% 713,717,064
Other Assets, Less
Liabilities 0.3 2,491,157
----------- ------------
Net Assets 100.0% $716,208,221
=========== ============
</Table>
<Table>
(a) May be sold to institutional investors
only under Rule 144A or securities
offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
(b) Interest rate presented is yield to
maturity.
(c) The debt is guaranteed under the Federal
Deposit Insurance Corporation (FDIC)
Temporary Liquidity Guarantee Program and
is backed by the full faith and credit of
the United States. The expiration date
of the FDIC's guarantee is the earlier of
the maturity date of the debt or June 30,
2012.
(d) Floating rate--Rate shown is the rate in
effect at April 30, 2010.
(e) The cost stated also represents the
aggregate cost for federal income tax
purposes.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Short-Term Investments
Asset-Backed Securities $ -- $ 35,551,149 $ -- $ 35,551,149
Commercial Paper -- 338,847,187 -- 338,847,187
Corporate Bonds -- 75,551,926 -- 75,551,926
Repurchase Agreements -- 98,801,000 -- 98,801,000
U.S. Government & Federal Agencies -- 164,965,802 -- 164,965,802
-------- ------------ -------- ------------
Total Investments in Securities $-- $713,717,064 $-- $713,717,064
======== ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
14 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 the MainStay Cash Reserves
Fund investments by industry.
INDUSTRY DIVERSIFICATION (UNAUDITED)
<Table>
<Caption>
AMORTIZED
COST PERCENT+
Agricultural Operations $ 5,949,286 0.8%
Applications Software 9,998,889 1.4
Automobile ABS Other 20,228,497 2.8
Automobile Sequential 5,537,239 0.8
Beverages--Non-Alcoholic 27,722,376 3.9
Beverages--Wine/Spirits 2,799,230 0.4
Chemicals--Diversified 7,749,767 1.1
Commercial Banks--Central US 1,607,661 0.2
Commercial Banks Non-US 17,499,106 2.5
Computers 15,499,455 2.2
Consumer
Products--Miscellaneous 2,899,707 0.4
Cosmetics and Toiletries 10,498,892 1.5
Diversified Banking
Institutions 10,940,243 1.5
Diversified Financial
Services 8,058,147 1.1
Diversified Manufacturing
Operations 34,574,576 4.8
Electric--Generation 18,749,043 2.6
Electric--Integrated 2,999,955 0.4
Electric
Products--Miscellaneous 7,399,556 1.0
Finance--Consumer Loans 5,779,872 0.8
Finance--Investment
Banker/Broker 13,749,368 1.9
Finance--Other Services 17,497,347 2.4
Finance--Commercial 16,149,699 2.3
Food--Miscellaneous/Diversi-
fied 17,287,283 2.4
Industrial Gases 5,100,000 0.7
Medical--Drugs 31,482,231 4.4
Medical Products 9,744,876 1.4
Office Automation and
Equipment 15,448,909 2.2
Oil--Field Services 9,499,850 1.3
Other ABS 9,785,413 1.4
Reinsurance 11,801,003 1.6
Repurchase Agreement 98,801,000 13.8
Retail--Discount 17,271,426 2.4
Retail--Perfume and Cosmetics 5,722,321 0.8
Sovereignty 9,499,507 1.3
Special Purpose Banks 7,749,931 1.1
Super-Regional Banks--U.S. 11,897,955 1.7
Supranational Bank 21,146,917 3.0
U.S. Government & Federal
Agencies 164,965,802 23.0
Water 2,624,729 0.4
------------ -----
713,717,064 99.7
Other Assets, Less
Liabilities 2,491,157 0.3
------------ -----
Net Assets $716,208,221 100.0%
============ =====
</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. mainstayinvestments.com
15
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(amortized cost $614,916,064) $614,916,064
Repurchase agreements, at value
(identified cost $98,801,000) 98,801,000
Cash 820
Receivables:
Fund shares sold 3,213,591
Interest 548,983
Manager (See Note 3) 112,912
Other assets 70,865
------------
Total assets 717,664,235
------------
LIABILITIES:
Payables:
Fund shares redeemed 980,482
NYLIFE Distributors (See Note 3) 157,607
Shareholder communication 130,428
Transfer agent (See Note 3) 112,850
Professional fees 45,535
Custodian 11,969
Trustees 3,608
Accrued expenses 13,522
Dividend payable 13
------------
Total liabilities 1,456,014
------------
Net assets $716,208,221
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share)
5.35 billion shares authorized $ 716,185
Additional paid-in capital 715,469,358
------------
716,185,543
Accumulated undistributed net
investment income 20,858
Accumulated net realized gain on
investments 1,820
------------
Net assets $716,208,221
============
CLASS I
Net assets applicable to
outstanding shares $338,884,577
============
Shares of beneficial interest
outstanding 338,886,776
============
Net asset value and offering price
per share outstanding $ 1.00
============
SWEEP SHARES
Net assets applicable to
outstanding shares $377,323,644
============
Shares of beneficial interest
outstanding 377,298,008
============
Net asset value and offering price
per share outstanding $ 1.00
============
</Table>
16 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 SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 951,722
-----------
EXPENSES:
Manager (See Note 3) 1,651,930
Distribution--Sweep Shares Class
(See Note 3) 495,982
Service--Sweep Shares Class (See
Note 3) 495,982
Transfer agent--Class I and Sweep
Shares Class (See Note 3) 368,144
Shareholder communication 86,831
Professional fees 75,061
Registration 43,208
Custodian 19,323
Trustees 13,846
Miscellaneous 18,012
-----------
Total expenses before
waiver/reimbursement 3,268,319
Expense waiver/reimbursement from
Manager (See Note 3) (2,354,879)
-----------
Net expenses 913,440
-----------
Net investment income 38,282
-----------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 1,820
-----------
Net increase in net assets resulting
from operations $ 40,102
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 38,282 $ 2,038,543
Net realized gain on
investments 1,820 15,133
----------------------------
Net increase in net assets
resulting from operations 40,102 2,053,676
----------------------------
Dividends to shareholders:
From net investment
income:
Class I (18,216) (1,371,226)
Sweep Shares Class (19,930) (662,845)
----------------------------
Total dividends to
shareholders (38,146) (2,034,071)
----------------------------
Capital share transactions:
Net proceeds from sale of
shares 507,589,520 984,223,558
Net asset value of shares
issued to shareholders in
reinvestment of dividends 38,050 2,028,176
Cost of shares redeemed (578,483,516) (982,684,375)
----------------------------
Increase (decrease) in
net assets derived from
capital share
transactions (70,855,946) 3,567,359
----------------------------
Net increase (decrease)
in net assets (70,853,990) 3,586,964
NET ASSETS:
Beginning of period 787,062,211 783,475,247
----------------------------
End of period $ 716,208,221 $ 787,062,211
============================
Accumulated undistributed
net investment income at
end of period $ 20,858 $ 20,722
============================
</Table>
18 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net investment income 0.00 ++ 0.00 ++ 0.03 0.05 0.04 0.02
Net realized and unrealized gain
(loss) on investments 0.00 ++ 0.00 ++ 0.00 ++ (0.00) ++ -- (0.00)++
-------- -------- -------- -------- -------- --------
Total from investment operations 0.00 ++ 0.00 ++ 0.03 0.05 0.04 0.02
-------- -------- -------- -------- -------- --------
Less dividends:
From net investment income (0.00)++ (0.00)++ (0.03) (0.05) (0.04) (0.02)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total investment return 0.00%+(a) 0.36% 2.66% 4.93% 4.39% 2.42%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.01%++ 0.36% 2.66% 4.82% 4.32% 2.40%
Net expenses 0.24%++ 0.50% 0.50% 0.50% 0.50% 0.50%
Expenses (before waiver) 0.60%++ 0.65% 0.57% 0.57% 0.54% 0.59%
Net assets at end of period (in
000's) $338,885 $382,535 $347,264 $350,717 $253,013 $232,187
</Table>
<Table>
* Unaudited.
++ Annualized.
++ Less than one cent per share.
+ Less than one-tenth percent.
(a) Total return is not annualized.
</Table>
20 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>
SWEEP SHARES
----------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
0.00 ++ 0.00 ++ 0.02 0.04 0.04 0.02
0.00 ++ 0.00 ++ 0.00 ++ (0.00)++ -- (0.00)++
-------- -------- -------- -------- -------- --------
0.00 ++ 0.00 ++ 0.02 0.04 0.04 0.02
-------- -------- -------- -------- -------- --------
(0.00)++ (0.00)++ (0.02) (0.04) (0.04) (0.02)
-------- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
0.00%+(a) 0.15% 2.15% 4.41% 3.88% 1.91%
0.01%++ 0.16% 2.10% 4.32% 3.82% 1.90%
0.24%++ 0.71% 1.00% 1.00% 1.00% 1.00%
1.10%++ 1.15% 1.07% 1.07% 1.04% 1.09%
$377,324 $404,528 $436,211 $373,383 $311,020 $271,039
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Cash Reserves Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Cash Reserves Fund,
a series of Eclipse Funds Inc. (the "Predecessor Fund"). The reorganization of
the Predecessor Fund with and into the Fund, which was not subject to
shareholder approval under applicable law, occurred on February 26, 2010. All
information regarding and references to periods prior to the commencement of
operations of the Fund relate to the Predecessor Fund.
The Fund currently offers two classes of shares. Class I shares commenced
operations on January 2, 1991. The Sweep Shares commenced operations on December
8, 1998. The Fund's No-Load Class shares were redesignated as Class I shares on
January 1, 2004. Class I shares and the Sweep Shares are offered at net asset
value ("NAV") without imposition of a front-end sales charge or a contingent
deferred sales charge. Each class of shares have the same voting (except for
issues that relate solely to one class), dividend, liquidation and other rights
and the same terms and conditions, except that the classes are subject to
different distribution fee rates. The Sweep Shares bear distribution and service
fee payments under a distribution and service plan pursuant to Rule 12b-1 under
the 1940 Act. In addition, the Sweep Shares shareholders bear service fee
payments under a shareholder service plan. Class I shares of the Fund are not
subject to a distribution or service fee.
The Fund's investment objective is to seek a high level of current income while
preserving capital and maintaining liquidity.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) VALUATION OF FUND SHARES. The Fund seeks to maintain a NAV of $1.00 per
share, although there is no assurance that it will be able to do so on a
continuous basis, and it has adopted certain investment, portfolio and dividend
and distribution policies designed to enable it to do as such. An investment in
the Fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(B) SECURITIES VALUATION. Securities are valued at their amortized cost. The
amortized cost method involves valuing a security at its cost on the date of
purchase and thereafter assuming a constant amortization to maturity of the
difference between such cost and the value on maturity date.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets.
22 MainStay Cash Reserves Fund
For the six-month period ended April 30, 2010, there have been no changes to the
fair value methodologies.
(C) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund declares dividends of net
investment income daily and the Fund pays them monthly and declares and pays
distributions of net realized capital gains, at least annually, if any. Unless
the shareholder elects otherwise, all dividends and distributions are reinvested
in the same class of shares of the Fund, at NAV. Dividends and distributions to
shareholders are determined in accordance with federal income tax regulations
and may differ from GAAP.
(E) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Interest income is
accrued daily and discounts and premiums on securities purchased for the Fund
are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(F) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(G) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(H) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager to be creditworthy, pursuant to
guidelines established by the Fund's Board. Repurchase agreements are considered
under the 1940 Act to be collateralized loans by a Fund to the seller secured by
the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(I) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER. New York Life Investment Management LLC ("New York Life
Investments" or "Manager"), a registered investment adviser and an indirect,
wholly-owned
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
subsidiary of New York Life Insurance Company ("New York Life"), serves as the
Fund's Manager, pursuant to a Management Agreement, as amended ("Management
Agreement"). The Manager provides offices, conducts clerical, recordkeeping and
bookkeeping services, and keeps most of the financial and accounting records
required to be maintained by the Fund. Except for the portion of salaries and
expenses that are the responsibility of the Fund, the Manager also pays the
salaries and expenses of all personnel affiliated with the Fund and the
operational expenses of the Fund. The Fund is advised by New York Life
Investments directly, without a subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.45% on assets up to $500 million, 0.40% on assets from $500 million to $1
billion and 0.35% on assets in excess of $1 billion. The effective management
fee rate (exclusive of any applicable waivers/reimbursements) was 0.43% for the
six-month period ended April 30, 2010.
Effective August 1, 2009, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
Fund's management fee or reimburse the expenses of the appropriate class of the
Fund so that total ordinary operating expenses of a class (total ordinary
operating expenses excludes taxes, interest, litigation, extraordinary expenses,
brokerage, and other transaction expenses relating to the purchase or sale of
portfolio investments) do not exceed the following percentages of average daily
net assets: Class I, 0.50%; and Sweep Shares, 1.00%. This agreement expires on
February 28, 2011 and is reviewed annually by the Board in connection with its
review of the Fund's investment advisory agreements. Based on its review, the
Board may agree to maintain, modify or terminate the agreement.
From time to time, the Manager may limit expenses of the Fund to the extent it
deems appropriate to enhance the yield of the Fund, or a particular class of the
Fund, during periods when expenses have a significant impact on the yield of the
Fund, or a particular class of the Fund, as applicable, because of low interest
rates. This expense limitation policy is voluntary and in addition to any
contractual arrangements that may be in place with respect to the Fund described
in the Fund's prospectus. It may be revised or terminated by the Manager at any
time without notice.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $1,651,930 and waived/reimbursed its fees in
the amount of $2,354,879.
State Street Bank and Trust Company ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the Fund pursuant to an agreement with New York Life Investments. These services
include calculating the daily NAVs of the Fund, maintaining the general ledger
and sub-ledger accounts for the calculation of the Fund's respective NAVs, and
assisting New York Life Investments in conducting various aspects of the Fund's
administrative operations. For providing these services to the Fund, State
Street is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. NYLIFE Distributors LLC (the "Distributor")
serves as the Fund's distributor and principal underwriter. The Trust, on behalf
of the Fund, has a Distribution Agreement with the Distributor. The Trust, with
respect to the Sweep Shares of the Fund, has adopted a distribution and service
plan (the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940
Act. The Plan provides that distribution and service fees payable there under
are payable to the Distributor regardless of the amounts actually expended by
the Distributor for distribution of the Fund's Sweep Shares and service
activities. Class I shares of the Fund are not subject to a distribution or
service fee.
Pursuant to the Plan, the Distributor, NYLIFE Securities Inc., an indirect,
wholly-owned subsidiary of New York Life, or any other broker-dealer or other
financial institution, are entitled to receive a monthly distribution fee, which
is an expense of the Plan of the Fund, for distribution or service activities as
designated by the Distributor, at an annual rate of 0.25% of the average daily
net assets of the Fund's Sweep Shares for account sweep and other distribution-
related and shareholder services.
In accordance with a separate Shareholder Service Plan, the Manager has agreed
to provide, through its affiliates or independent third parties, various
shareholder and administrative support services to shareholders of the Sweep
Shares. For its services, the Manager is entitled to a Shareholder Service Fee
accrued daily and paid monthly at an annual rate of 0.25% of the average daily
net assets attributable to the Sweep Shares of the Fund.
(C) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Class I $176,047
- -----------------------------------------------
Sweep Shares 192,097
- -----------------------------------------------
</Table>
24 MainStay Cash Reserves Fund
(D) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(E) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class I $5,419,966 1.6%
- --------------------------------------------------
</Table>
(F) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $19,485.
NOTE 4--FEDERAL INCOME TAX:
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $2,034,071
- ------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
CLASS I (AT $1 PER SHARE) SHARES
Six-month period ended April 30,
2010:
Shares sold 439,058,919
Shares issued to shareholders in
reinvestment of dividends 18,124
Shares redeemed (482,728,105)
------------
Net decrease (43,651,062)
============
Year ended October 31, 2009:
Shares sold 834,415,285
Shares issued to shareholders in
reinvestment of dividends 1,365,331
Shares redeemed (800,519,531)
------------
Net increase 35,261,085
============
<Caption>
SWEEP SHARES CLASS (AT $1 PER
SHARE) SHARES
Six-month period ended April 30,
2010:
Shares sold 68,530,601
Shares issued to shareholders in
reinvestment of dividends 19,926
Shares redeemed (95,755,411)
------------
Net decrease (27,204,884)
============
Year ended October 31, 2009:
Shares sold 149,808,273
Shares issued to shareholders in
reinvestment of dividends 662,845
Shares redeemed (182,164,844)
------------
Net decrease (31,693,726)
============
</Table>
NOTE 7--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 8--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
26 MainStay Cash Reserves Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request (i) by visiting the Fund's website at mainstayinvestments.com; or
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request (i) by calling 800-MAINSTAY (624-6782);
(ii) by visiting the Funds' website at
mainstayinvestments.com; or (iii) on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You can also obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 27
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18327 MS121-10 MSCR10-06/10
B2
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY ASSET ALLOCATION FUNDS
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY ASSET ALLOCATION FUNDS
SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
MAINSTAY CONSERVATIVE ALLOCATION FUND 5
- ---------------------------------------------
MAINSTAY GROWTH ALLOCATION FUND 19
- ---------------------------------------------
MAINSTAY MODERATE ALLOCATION FUND 33
- ---------------------------------------------
MAINSTAY MODERATE GROWTH ALLOCATION FUND 47
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 61
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 74
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 74
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO EACH FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF EACH FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF EACH FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
MAINSTAY CONSERVATIVE ALLOCATION FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 1.78% 16.00% 3.91% 3.65%
Excluding sales charges 7.70 22.75 5.09 4.81
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY CONSERVATIVE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
--------------------- ---------- ------------ ----------------
4/4/05 9450 10000 10000 10000
9356 9846 9879 10114
10157 11364 13187 10186
11155 13096 15800 10935
11425 12483 15519 11686
9771 8075 8883 12134
4/30/10 11994 11212 11941 13141
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 1.72% 15.94% 3.91% 3.65%
Excluding sales charges 7.64 22.69 5.09 4.81
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY CONSERVATIVE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
--------------------- ---------- ------------ ----------------
4/4/05 23625 25000 25000 25000
23389 24616 24697 25285
25392 28411 32967 25464
27889 32740 39499 27338
28563 31209 38797 29215
24438 20188 22206 30336
4/30/10 29984 28030 29853 32853
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 2.34% 16.82% 3.99% 3.87%
Excluding sales charges 7.34 21.82 4.33 4.04
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
S&P BARCLAYS CAPITAL
MAINSTAY CONSERVATIVE 500(R) INDEX MSCI U.S. AGGREGATE
ALLOCATION FUND EAFE(R) INDEX BOND INDEX
--------------------- ------------ ------------- ----------------
4/4/05 10000 10000 10000 10000
9890 9846 9879 10114
10667 11364 13187 10186
11626 13096 15800 10935
11816 12483 15519 11686
10035 8075 8883 12134
4/30/10 12125 11212 11941 13141
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For
THE FOOTNOTE ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 6.34% 20.82% 4.33% 4.04%
Excluding sales charges 7.34 21.82 4.33 4.04
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
S&P BARCLAYS CAPITAL
MAINSTAY CONSERVATIVE 500(R) INDEX MSCI U.S. AGGREGATE
ALLOCATION FUND EAFE(R) INDEX BOND INDEX
--------------------- ------------ ------------- ----------------
4/4/05 10000 10000 10000 10000
9890 9846 9879 10114
10657 11364 13187 10186
11626 13096 15800 10935
11826 12483 15519 11686
10034 8075 8883 12134
4/30/10 12224 11212 11941 13141
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
7.83% 22.97% 5.44% 5.15%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
S&P BARCLAYS CAPITAL
MAINSTAY CONSERVATIVE 500(R) INDEX MSCI U.S. AGGREGATE
ALLOCATION FUND EAFE(R) INDEX BOND INDEX
--------------------- ------------ ------------- ----------------
4/4/05 10000 10000 10000 10000
9900 9846 9879 10114
10800 11364 13187 10186
11910 13096 15800 10935
12231 12483 15519 11686
10492 8075 8883 12134
4/30/10 12902 11212 11941 13141
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
S&P 500(R) Index(3) 15.66% 38.84% 2.63% 2.28%
MSCI EAFE(R) Index(4) 2.48 34.43 3.86 3.56
Barclays Capital U.S. Aggregate Bond Index(5) 2.54 8.30 5.38 5.53
Average Lipper mixed-asset target allocation conservative fund(6) 7.24 22.59 3.65 3.63
</Table>
information on current fee waivers and/or expense limitations, please refer
to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index 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 the Fund's broad-based securities market index
for comparison purposes. An investment cannot be made directly in an index.
4. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--is considered representative of the
international stock market. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly in an index.
5. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the Mortgage-Backed Securities Index and the Asset-
Backed Securities Index. To qualify for inclusion in the Barclays Capital
U.S. 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 $250 million. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly in an index.
6. The average Lipper mixed-asset target allocation conservative fund is
representative of funds that, by portfolio practice, maintain a mix of
between 20%-40% equity securities, with the reminder invested in bonds, cash
and cash equivalents. This benchmark is a product of Lipper Inc. Lipper Inc.
is an independent monitor of fund performance. Results are based on average
total returns of similar funds with all dividend and capital gain
distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Conservative Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY CONSERVATIVE ALLOCATION FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,077.00 $2.57 $1,022.30 $2.51
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,076.40 $2.16 $1,022.70 $2.11
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,073.40 $6.43 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,073.40 $6.43 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,078.30 $0.88 $1,024.00 $0.85
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Investor Class, 0.42% for Class A, 1.25% for Class B and Class C
and 0.17% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
mainstayinvestments.com 7
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Total Return 52.5
Growth of Capital 23
Current Income 18
Capital Appreciation 6.3
Other Assets, Less Liabilities 0.2
</Table>
See Portfolio of Investments on page 11 for specific holdings within these
categories.
8 MainStay Conservative Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY CONSERVATIVE ALLOCATION FUND PERFORM RELATIVE TO ITS PEERS AND
ITS BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Conservative Allocation Fund returned
7.70% for Investor Class shares, 7.64% for Class A shares and 7.34% for Class B
and Class C shares for the six months ended April 30, 2010. Over the same
period, the Fund's Class I shares returned 7.83%. All share classes outperformed
the 7.24% return of the average Lipper(1) mixed-asset target allocation
conservative fund for the six months ended April 30, 2010. All share classes
underperformed the 15.66% return of the S&P 500(R) Index(2) for the same six-
month period. The S&P 500(R) Index is the Fund's broad-based securities-market
index. See pages 5 and 6 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was moderately below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, contributed to the shortfall.
The Fund also had negative beta exposure (or lower volatility than the market as
a whole) in a period when the stock market was rising. In addition, the Fund
suffered from a slight bias toward growth-
oriented stocks in a period when value stocks were in favor. Despite these
shortcomings, the Fund outperformed its average Lipper peer fund.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such
as valuation metrics, earnings data and technical indicators. Finally, we
evaluated the historical success of the portfolio managers responsible for the
Underly-
ing Funds. In general, we sought Underlying Equity Funds that had a track record
of capable portfolio management, that occupied attractively valued market
segments and that invested in companies with fairly priced securities and strong
price and earnings momentum. During the reporting period, these techniques were
generally unsuccessful, as they steered the Fund into Underlying Funds that
collectively underperformed the S&P 500(R) Index after adjusting for Underlying
Fund expenses and strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity mar-
kets turned positive in the spring of 2009, investors aggressively bought the
riskiest and lowest-quality securities in anticipation that these securities
would benefit most from a recovery. This trend persisted throughout the
reporting period, and stocks with negative earnings and cash flows were among
the best performers. This so-called junk rally served as a significant drag on
the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most significant change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced
the Fund's allocations to MainStay Large Cap Growth Fund, MainStay Growth Equity
Fund and MainStay 130/30 Growth Fund and increased the Fund's allocations to
MainStay Epoch U.S. All Cap Fund and, to
a lesser degree, to MainStay 130/30 Core Fund. This shift had a positive impact
on the Fund's perfor-mance, as value-oriented smaller-capitalization stocks
outpaced growth-oriented larger-cap stocks as the
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
mainstayinvestments.com 9
reporting period progressed. We have substantially reduced the Fund's exposure
to growth-oriented stocks over the past two and a half years. At the end of the
current reporting period, the Fund was evenly positioned between growth and
value.
During the reporting period, the Fund initiated new positions in MainStay Epoch
Global Choice Fund
and MainStay Convertible Fund. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's overall responsiveness to movements in the equity
market while incrementally lowering the Fund's average credit quality and
duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
MainStay U.S. Small Cap Fund and MainStay Epoch U.S. All Cap Fund generated the
highest total returns among the Underlying Equity Funds in which the Fund
invested, as these Underlying Funds reached furthest down the capitalization
spectrum. The worst returns came from Underlying Funds that invest abroad,
namely MainStay ICAP International Fund and MainStay 130/30 International Fund.
These Underlying Equity Funds were hampered not only by comparatively weak
overseas returns in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
Among the Underlying Equity Funds in which the Fund invested, MainStay MAP Fund
and MainStay Large Cap Growth Fund were the strongest contributors to the Fund's
absolute performance.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND
DURING THE SIX MONTHS ENDED APRIL 30, 2010?
U.S. Treasury yields were largely unchanged over
the course of the reporting period. Signs of economic strength, improving
corporate profitability and a large supply of new issuance threatened to push
rates higher. These factors, however, were offset by concerns about corporate
and sovereign default risk (holding company Dubai World and Greece were notable
examples) and by questions about the sustainability of the economic recovery.
Lower-quality fixed-income securities generally outperformed higher-quality
fixed-income securities as credit spreads(4) narrowed, driving bond prices
higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished
a bias toward lower-quality instruments. We implemented these strategies
primarily by increasing the Fund's holdings in MainStay Floating Rate Fund,
MainStay High Yield Opportunities Fund and MainStay High Yield Corporate Bond
Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. MainStay Indexed Bond Fund and Main-Stay Intermediate Term
Bond Fund were the worst-performing Underlying Fixed Income Funds, as both
invest in higher-quality debt instruments. Still, both of these Underlying Fixed
Income Funds posted positive results during the reporting period.
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Conservative Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 99.8%+
- -------------------------------------------------------
EQUITY FUNDS 39.4%
MainStay 130/30 Core Fund
Class I 1,667,187 $ 12,103,778
MainStay 130/30 Growth Fund
Class I (a) 114,602 915,673
MainStay 130/30 International
Fund Class I 518,068 3,274,189
MainStay Common Stock Fund
Class I 724,242 7,944,935
MainStay Epoch Global Choice
Fund Class I 68,872 973,158
MainStay Epoch U.S. All Cap
Fund Class I 417,716 9,202,281
MainStay Growth Equity Fund
Class I (b) 49,708 510,000
MainStay ICAP Equity Fund
Class I 203,824 6,978,928
MainStay ICAP International
Fund Class I 120,111 3,293,443
MainStay ICAP Select Equity
Fund Class I 210,985 6,981,495
MainStay International Equity
Fund Class I 227,422 2,790,469
MainStay Large Cap Growth Fund
Class I (a) 1,404,809 9,117,211
MainStay MAP Fund Class I 328,737 9,848,948
MainStay S&P 500 Index Fund
Class I 3,739 102,662
MainStay U.S. Small Cap Fund
Class I (a) 300,155 4,571,365
------------
Total Equity Funds
(Cost $70,150,353) 78,608,535
------------
FIXED INCOME FUNDS 60.4%
MainStay Convertible Fund
Class I 117,622 1,752,572
MainStay Floating Rate Fund
Class I (b) 1,998,043 18,701,684
MainStay High Yield Corporate
Bond Fund Class I 1,248,994 7,219,186
MainStay High Yield
Opportunities Fund Class I
(b) 839,428 9,947,216
MainStay Indexed Bond Fund
Class I (b) 5,093,837 57,916,923
MainStay Intermediate Term
Bond Fund Class I 2,361,375 24,818,056
------------
Total Fixed Income Funds
(Cost $114,424,742) 120,355,637
------------
Total Affiliated Investment
Companies
(Cost $184,575,095) 198,964,172
------------
Total Investments
(Cost $184,575,095) (c) 99.8% 198,964,172
Other Assets, Less Liabilities 0.2 367,094
--------- ------------
Net Assets 100.0% $199,331,266
========= ============
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) The Fund's ownership exceeds 5% of the
outstanding shares of the Underlying
Funds share class (See Note 3).
(c) At April 30, 2010, cost is $192,695,168
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $14,804,706
Gross unrealized depreciation (8,535,702)
-----------
Net unrealized appreciation $ 6,269,004
===========
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $ 78,608,535 $ -- $ -- $ 78,608,535
Fixed Income Funds 120,355,637 -- -- 120,355,637
------------ -------- -------- ------------
Total Investments in Securities $198,964,172 $-- $-- $198,964,172
============ ======== ======== ============
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $184,575,095) $198,964,172
Cash 228,669
Receivables:
Fund shares sold 693,155
Manager (See Note 3) 7,740
Other assets 58,386
------------
Total assets 199,952,122
------------
LIABILITIES:
Payables:
Investment securities purchased 228,669
Fund shares redeemed 219,312
NYLIFE Distributors (See Note 3) 72,869
Transfer agent (See Note 3) 45,018
Shareholder communication 31,213
Professional fees 18,053
Custodian 1,839
Trustees 572
Accrued expenses 3,311
------------
Total liabilities 620,856
------------
Net assets $199,331,266
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 18,954
Additional paid-in capital 201,019,845
------------
201,038,799
Accumulated undistributed net
investment income 272,401
Accumulated net realized loss on
investments (16,369,011)
Net unrealized appreciation on
investments 14,389,077
------------
Net assets $199,331,266
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 30,874,450
============
Shares of beneficial interest
outstanding 2,932,372
============
Net asset value per share
outstanding $ 10.53
Maximum sales charge (5.50% of
offering price) 0.61
------------
Maximum offering price per share
outstanding $ 11.14
============
CLASS A
Net assets applicable to
outstanding shares $108,222,404
============
Shares of beneficial interest
outstanding 10,283,565
============
Net asset value per share
outstanding $ 10.52
Maximum sales charge (5.50% of
offering price) 0.61
------------
Maximum offering price per share
outstanding $ 11.13
============
CLASS B
Net assets applicable to
outstanding shares $ 30,090,243
============
Shares of beneficial interest
outstanding 2,868,899
============
Net asset value and offering price
per share outstanding $ 10.49
============
CLASS C
Net assets applicable to
outstanding shares $ 25,064,947
============
Shares of beneficial interest
outstanding 2,389,655
============
Net asset value and offering price
per share outstanding $ 10.49
============
CLASS I
Net assets applicable to
outstanding shares $ 5,079,222
============
Shares of beneficial interest
outstanding 479,831
============
Net asset value and offering price
per share outstanding $ 10.59
============
</Table>
12 MainStay Conservative Allocation Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 2,736,181
-----------
EXPENSES:
Distribution/Service--Investor
Class (See Note 3) 34,165
Distribution/Service--Class A (See
Note 3) 124,898
Distribution/Service--Class B (See
Note 3) 141,826
Distribution/Service--Class C (See
Note 3) 116,076
Transfer agent (See Note 3) 131,992
Registration 36,632
Shareholder communication 28,494
Professional fees 24,065
Custodian 5,891
Trustees 3,090
Miscellaneous 6,984
-----------
Total expenses before
reimbursement 654,113
Expense reimbursement from Manager
(See Note 3) (48,828)
-----------
Net expenses 605,285
-----------
Net investment income 2,130,896
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on:
Affiliated investment company
transactions 1,539,195
Capital gain distributions from
affiliated investment companies 170,914
-----------
Net realized gain on investments
from affiliated investment
companies 1,710,109
-----------
Net change in unrealized
appreciation on investments 9,506,014
-----------
Net realized and unrealized gain on
investments and investments 11,216,123
-----------
Net increase in net assets resulting
from operations $13,347,019
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 2,130,896 $ 4,200,073
Net realized gain (loss)
on investments from
affiliated investment
company transactions 1,710,109 (16,459,425)
Net change in unrealized
appreciation
(depreciation) on
investments 9,506,014 37,036,092
--------------------------
Net increase in net assets
resulting from operations 13,347,019 24,776,740
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (342,562) (612,952)
Class A (1,297,693) (2,538,185)
Class B (251,076) (547,178)
Class C (208,197) (421,361)
Class I (35,806) (33,989)
--------------------------
(2,135,334) (4,153,665)
--------------------------
From net realized gain on
investments:
Investor Class -- (229,524)
Class A -- (1,061,186)
Class B -- (300,341)
Class C -- (243,454)
Class I -- (14,819)
--------------------------
-- (1,849,324)
--------------------------
Total dividends and
distributions to
shareholders (2,135,334) (6,002,989)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 35,489,990 45,550,701
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 1,949,834 5,476,884
Cost of shares redeemed (19,135,666) (44,781,922)
--------------------------
Increase in net assets
derived from capital
share transactions 18,304,158 6,245,663
--------------------------
Net increase in net
assets 29,515,843 25,019,414
NET ASSETS:
Beginning of period 169,815,423 144,796,009
--------------------------
End of period $199,331,266 $169,815,423
==========================
Accumulated undistributed
net investment income at
end of period $ 272,401 $ 276,963
==========================
</Table>
14 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 9.90 $ 8.76 $ 10.69
------- ------- -------
Net investment income (a) 0.13 0.27 0.19
Net realized and unrealized gain
(loss) on investments 0.63 1.25 (1.91)
------- ------- -------
Total from investment operations 0.76 1.52 (1.72)
------- ------- -------
Less dividends and distributions:
From net investment income (0.13) (0.27) (0.21)
From net realized gain on
investments -- (0.11) --
------- ------- -------
Total dividends and distributions (0.13) (0.38) (0.21)
------- ------- -------
Net asset value at end of period $ 10.53 $ 9.90 $ 8.76
======= ======= =======
Total investment return (d) 7.70%(b) 18.01% (16.36%)(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.53%++ 2.98% 2.72% ++
Net expenses (e) 0.50%++ 0.50% 0.50% ++
Expenses (before reimbursement)
(e) 0.62%++ 0.74% 0.62% ++
Portfolio turnover rate 17% 36% 35%
Net assets at end of period (in
000's) $30,874 $25,216 $17,140
</Table>
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.86 $ 8.73 $ 11.42 $ 10.78 $ 10.18 $10.00
------- ------- ------- ------- ------- ------
Net investment income (a) 0.09 0.20 0.22 0.26 0.22 0.10
Net realized and unrealized gain
(loss) on investments 0.63 1.24 (2.39) 0.73 0.65 0.10 (c)
------- ------- ------- ------- ------- ------
Total from investment operations 0.72 1.44 (2.17) 0.99 0.87 0.20
------- ------- ------- ------- ------- ------
Less dividends and distributions:
From net investment income (0.09) (0.20) (0.39) (0.18) (0.27) (0.02)
From net realized gain on
investments -- (0.11) (0.13) (0.17) (0.00)++ --
------- ------- ------- ------- ------- ------
Total dividends and distributions (0.09) (0.31) (0.52) (0.35) (0.27) (0.02)
------- ------- ------- ------- ------- ------
Net asset value at end of period $ 10.49 $ 9.86 $ 8.73 $ 11.42 $ 10.78 $10.18
======= ======= ======= ======= ======= ======
Total investment return (d) 7.34%(b) 17.09% (19.78%) 9.37% 8.67% 2.02%(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.75%++ 2.25% 2.11% 2.38% 2.07% 1.68%++
Net expenses (e) 1.25%++ 1.25% 1.25% 1.23% 1.28% 1.35%++
Expenses (before reimbursement)
(e) 1.37%++ 1.48% 1.33% 1.23% 1.36% 2.30%++
Portfolio turnover rate 17% 36% 35% 10% 33% 3%
Net assets at end of period (in
000's) $30,090 $27,417 $23,226 $20,919 $13,426 $9,100
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
(c) 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.
(d) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
</Table>
16 MainStay Conservative Allocation Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
---------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.90 $ 8.76 $ 11.47 $ 10.80 $ 10.21 $ 10.00
-------- ------- ------- ------- ------- -------
0.13 0.27 0.30 0.34 0.28 0.14
0.62 1.25 (2.39) 0.73 0.65 0.11 (c)
-------- ------- ------- ------- ------- -------
0.75 1.52 (2.09) 1.07 0.93 0.25
-------- ------- ------- ------- ------- -------
(0.13) (0.27) (0.49) (0.23) (0.34) (0.04)
-- (0.11) (0.13) (0.17) (0.00)++ --
-------- ------- ------- ------- ------- -------
(0.13) (0.38) (0.62) (0.40) (0.34) (0.04)
-------- ------- ------- ------- ------- -------
$ 10.52 $ 9.90 $ 8.76 $ 11.47 $ 10.80 $ 10.21
======== ======= ======= ======= ======= =======
7.64%(b) 18.05% (19.14%) 10.22% 9.36% 2.49%(b)
2.58%++ 3.06% 2.91% 3.12% 2.71% 2.43%++
0.42%++ 0.47% 0.49% 0.48% 0.53% 0.60%++
0.42%++ 0.47% 0.49% 0.48% 0.61% 1.55%++
17% 36% 35% 10% 33% 3%
$108,222 $94,643 $84,434 $80,018 $40,889 $13,350
</Table>
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.86 $ 8.73 $ 11.42 $ 10.78 $10.18 $10.00
------- ------- ------- ------- ------ ------
0.09 0.21 0.22 0.26 0.21 0.10
0.63 1.23 (2.39) 0.73 0.66 0.10 (c)
------- ------- ------- ------- ------ ------
0.72 1.44 (2.17) 0.99 0.87 0.20
------- ------- ------- ------- ------ ------
(0.09) (0.20) (0.39) (0.18) (0.27) (0.02)
-- (0.11) (0.13) (0.17) (0.00)++ --
------- ------- ------- ------- ------ ------
(0.09) (0.31) (0.52) (0.35) (0.27) (0.02)
------- ------- ------- ------- ------ ------
$ 10.49 $ 9.86 $ 8.73 $ 11.42 $10.78 $10.18
======= ======= ======= ======= ====== ======
7.34%(b) 17.09% (19.79%) 9.37% 8.67% 2.02%(b)
1.76%++ 2.29% 2.12% 2.38% 2.02% 1.68%++
1.25%++ 1.25% 1.25% 1.23% 1.28% 1.35%++
1.37%++ 1.48% 1.33% 1.23% 1.36% 2.30%++
17% 36% 35% 10% 33% 3%
$25,065 $21,498 $18,846 $17,628 $8,066 $2,900
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
--------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.95 $ 8.81 $ 11.54 $10.85 $10.21 $10.00
------ ------ ------- ------ ------ ------
Net investment income (a) 0.15 0.30 0.33 0.36 0.33 0.15
Net realized and unrealized gain
(loss) on investments 0.63 1.24 (2.41) 0.75 0.68 0.11 (c)
------ ------ ------- ------ ------ ------
Total from investment operations 0.78 1.54 (2.08) 1.11 1.01 0.26
------ ------ ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.14) (0.29) (0.52) (0.25) (0.37) (0.05)
From net realized gain on
investments -- (0.11) (0.13) (0.17) (0.00)++ --
------ ------ ------- ------ ------ ------
Total dividends and distributions (0.14) (0.40) (0.65) (0.42) (0.37) (0.05)
------ ------ ------- ------ ------ ------
Net asset value at end of period $10.59 $ 9.95 $ 8.81 $11.54 $10.85 $10.21
====== ====== ======= ====== ====== ======
Total investment return (d) 7.83%(b) 18.23% (18.90%) 10.47% 10.13% 2.57%(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.88%++ 3.37% 3.16% 3.30% 3.15% 2.78%++
Net expenses (e) 0.17%++ 0.22% 0.23% 0.25% 0.25% 0.25%++
Expenses (before reimbursement)
(e) 0.17%++ 0.22% 0.28% 0.35% 0.33% 1.20%++
Portfolio turnover rate 17% 36% 35% 10% 33% 3%
Net assets at end of period (in
000's) $5,079 $1,041 $ 1,150 $1,108 $ 607 $ 10
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
(c) 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.
(d) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(e) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
</Table>
18 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(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 6.02% 27.48% 2.17% 1.63%
Excluding sales charges 12.19 34.90 3.33 2.77
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH S&P 500(R) MSCI EAFE(R)
ALLOCATION FUND INDEX INDEX
--------------- ---------- ------------
4/4/05 9450 10000 10000
9214 9846 9879
11081 11364 13187
12646 13096 15800
12469 12483 15519
8046 8075 8883
4/30/10 10854 11212 11941
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 6.04% 27.51% 2.18% 1.64%
Excluding sales charges 12.22 34.93 3.34 2.78
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH S&P 500(R) MSCI EAFE(R)
ALLOCATION FUND INDEX INDEX
--------------- ---------- ------------
4/4/05 23625 25000 25000
23034 24616 24697
27703 28411 32967
31616 32740 39499
31147 31209 38797
20118 20188 22206
4/30/10 27145 28030 29853
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 6.79% 28.79% 2.16% 1.80%
Excluding sales charges 11.79 33.79 2.53 1.98
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH S&P 500(R) MSCI EAFE(R)
ALLOCATION FUND INDEX INDEX
--------------- ---------- ------------
4/4/05 10000 10000 10000
9750 9846 9879
11637 11364 13187
13174 13096 15800
12881 12483 15519
8256 8075 8883
4/30/10 10947 11212 11941
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For information on current fee waivers and/or expense limitations,
please refer to the notes to the financial statements.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 19
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 10.65% 32.74% 2.55% 2.00%
Excluding sales charges 11.65 33.74 2.55 2.00
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH S&P 500(R) MSCI EAFE(R)
ALLOCATION FUND INDEX INDEX
--------------- ---------- ------------
4/4/05 10000 10000 10000
9750 9846 9879
11647 11364 13187
13195 13096 15800
12903 12483 15519
8267 8075 8883
4/30/10 11057 11212 11941
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- --------------------------------------------------------
12.31% 35.13% 3.67% 3.10%
</Table>
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH S&P 500(R) MSCI EAFE(R)
ALLOCATION FUND INDEX INDEX
--------------- ---------- ------------
4/4/05 10000 10000 10000
9750 9846 9879
11809 11364 13187
13516 13096 15800
13345 12483 15519
8639 8075 8883
4/30/10 11674 11212 11941
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
S&P 500(R) Index(3) 15.66% 38.84% 2.63% 2.28%
MSCI EAFE(R) Index(4) 2.48 34.43 3.86 3.56
Average Lipper multi-cap core fund(5) 16.13 39.15 3.32 2.63
</Table>
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index 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 the Fund's broad-based securities market index
for comparison purposes. An investment cannot be made directly in an index.
4. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--is considered representative of the
international stock market. Results assume reinvestment of all income and
capital gains. An investment cannot be made directly in an index.
5. The average Lipper multi-cap core fund is representative of funds that, by
portfolio practice, invest in a variety of market-capitalization ranges
without concentrating 75% of their equity assets in any one market-
capitalization range over an extended period of time. Multi-cap core funds
typically have an average price-to-earnings ratio, price-to-book ratio, and
three-year sales-per-share growth value, compared to the S&P SuperComposite
1500 Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on average total
returns of similar funds with all dividend and capital gain distributions
reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
20 MainStay Growth Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY GROWTH ALLOCATION FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,121.90 $2.63 $1,022.30 $2.51
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,122.20 $2.47 $1,022.50 $2.36
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,117.90 $6.56 $1,018.60 $6.26
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,116.50 $6.56 $1,018.60 $6.26
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,123.10 $1.16 $1,023.70 $1.10
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Investor Class, 0.47% for Class A, 1.25% for Class B and Class C
and 0.22% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
mainstayinvestments.com 21
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Growth of Capital 58.2
Total Return 28.8
Capital Appreciation 13
Other Assets, Less Liabilities (0.0)
</Table>
See Portfolio Investments on page 25 for specific holdings within these
categories.
++ Less than one-tenth of a percent.
22 MainStay Growth Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY GROWTH ALLOCATION FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Growth Allocation Fund returned 12.19% for
Investor Class shares, 12.22% for Class A shares, 11.79% for Class B shares and
11.65% for Class C shares for the six months ended April 30, 2010. Over the same
period, the Fund's Class I shares returned 12.31%. All share classes
underperformed the 16.13% return of the average Lipper(1) multi-cap core fund
for the six months ended April 30, 2010. All share classes also underperformed
the 15.66% return of the S&P 500(R) Index(2) for the same six-month period. The
S&P 500(R) Index is the Fund's broad-based securities-market index. See pages 19
and 20 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in domestic or international stocks at various
capitalization levels. The Fund's primary benchmark, on the other hand, consists
entirely of large-cap U.S. stocks. These asset-class differences accounted for
much of the Fund's underperformance of the S&P 500(R) Index. Even with the
Fund's asset-allocation targets taken into account, however, performance was
substantially below our expectations. Disappointing results from several
Underlying Funds, particularly those that use quantitative stock selection,
detracted from the Fund's performance relative to the S&P 500(R) Index and the
average Lipper peer fund. The Fund also had negative beta exposure (or lower
volatility than the market as a whole) in a period when the stock market was
rising. In addition, the Fund suffered from a slight bias toward growth-oriented
stocks in a period when value stocks were in favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underly-
ing Funds. In general, we sought Underlying Equity Funds that had a track record
of capable portfolio management, that occupied attractively valued market
segments and that invested in companies with fairly priced securities and strong
price and earnings momentum. During the reporting period, these techniques were
generally unsuccessful, as they steered the Fund into investments in Underlying
Funds that collectively underperformed the S&P 500(R) Index after adjusting for
Underlying Fund expenses and strategic allocation policy.
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity mar-
kets turned positive in the spring of 2009, investors aggressively bought the
riskiest and lowest-quality securities in anticipation that these securities
would benefit most from a recovery. This trend persisted throughout the
reporting period, and stocks with negative earnings and cash flows were among
the best performers. This so-called junk rally served as a significant drag on
the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most significant change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced
the Fund's allocations to MainStay Large Cap Growth Fund, MainStay Growth Equity
Fund and MainStay 130/30 Growth Fund and increased the Fund's allocations to
MainStay Epoch U.S. All Cap Fund and, to
a lesser degree, to MainStay 130/30 Core Fund. This shift had a positive impact
on the Fund's performance, as value-oriented smaller-capitalization stocks
outpaced growth-oriented larger-cap stocks as the reporting period progressed.
We have substantially reduced the Fund's exposure to growth-oriented stocks over
the past two and a half years. At the end of the current reporting period, the
Fund was evenly positioned between growth and value.
During the reporting period, the Fund initiated a new position in MainStay Epoch
Global Choice Fund. We chose this Underlying Fund to further diversify the
1. See footnote on page 20 for more information on Lipper Inc.
2. See footnote on page 20 for more information on the S&P 500(R) Index.
mainstayinvestments.com 23
Fund across management strategies and to enhance the Fund's exposure to
desirable cash flow metrics.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
MainStay U.S. Small Cap Fund and MainStay Epoch U.S. All Cap Fund generated the
highest total returns among the Underlying Equity Funds in which the Fund
invested, as these Underlying Funds reached furthest down the capitalization
spectrum. The worst returns came from Underlying Funds that invest abroad,
namely MainStay ICAP International Fund and MainStay 130/30 International Fund.
These Underlying Equity Funds were hampered not only by comparatively weak
overseas returns in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
Among the Underlying Equity Funds in which the Fund invested, MainStay MAP Fund
and MainStay Growth Equity Fund were the strongest contributors to the Fund's
absolute performance.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice 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 forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
24 MainStay Growth Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 100.0%+
- ------------------------------------------------------
EQUITY FUNDS 100.0%
MainStay 130/30 Core Fund
Class I (a) 3,810,156 $ 27,661,734
MainStay 130/30 Growth Fund
Class I (a)(b) 231,720 1,851,446
MainStay 130/30 International
Fund Class I (a) 2,106,544 13,313,357
MainStay Common Stock Fund
Class I (a) 1,899,495 20,837,461
MainStay Epoch Global Choice
Fund Class I (a) 290,270 4,101,510
MainStay Epoch U.S. All Cap
Fund Class I 910,782 20,064,532
MainStay Growth Equity Fund
Class I (a) 169,915 1,743,324
MainStay ICAP Equity Fund
Class I 377,916 12,939,843
MainStay ICAP International
Fund Class I 486,840 13,349,144
MainStay ICAP Select Equity
Fund Class I 391,970 12,970,293
MainStay International Equity
Fund Class I 916,933 11,250,770
MainStay Large Cap Growth
Fund Class I (b) 3,392,903 22,019,941
MainStay MAP Fund Class I 745,329 22,330,044
MainStay S&P 500 Index Fund
Class I 22,400 615,097
MainStay U.S. Small Cap Fund
Class I (a)(b) 1,221,404 18,601,985
------------
Total Equity Funds
(Cost $197,774,774) 203,650,481
------------
Total Investments
(Cost $197,774,774)(c) 100.0% 203,650,481
Other Assets, Less
Liabilities 0.0++ 49,186
--------- ------------
Net Assets 100.0% $203,699,667
========= ============
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
++ Less than one-tenth of a percent.
(a) The Fund's ownership exceeds 5% of the
outstanding shares of the Underlying
Funds share class (See Note 3).
(b) Non-income producing Underlying Fund.
(c) At April 30, 2010, cost is $207,451,244
for federal income tax purposes and net
unrealized depreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 10,087,349
Gross unrealized depreciation (13,888,112)
------------
Net unrealized depreciation $ (3,800,763)
============
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies-Equity
Funds $203,650,481 $ -- $ -- $203,650,481
------------ -------- -------- ------------
Total Investments in Securities $203,650,481 $-- $-- $203,650,481
============ ======== ======== ============
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
25
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $197,774,774) $203,650,481
Receivables:
Fund shares sold 305,760
Investment securities sold 47,747
Manager (See Note 3) 20,893
Other assets 57,126
------------
Total assets 204,082,007
------------
LIABILITIES:
Due to custodian 47,746
Payables:
Fund shares redeemed 103,481
Transfer agent (See Note 3) 93,684
NYLIFE Distributors (See Note 3) 83,359
Shareholder communication 30,739
Professional fees 17,921
Custodian 1,447
Trustees 675
Accrued expenses 3,288
------------
Total liabilities 382,340
------------
Net assets $203,699,667
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 20,454
Additional paid-in capital 233,438,316
------------
233,458,770
Accumulated distributions in excess
of net investment income (106,652)
Accumulated net realized loss on
investments (35,528,158)
Net unrealized appreciation on
investments 5,875,707
------------
Net assets $203,699,667
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 63,725,636
============
Shares of beneficial interest
outstanding 6,368,967
============
Net asset value per share
outstanding $ 10.01
Maximum sales charge (5.50% of
offering price) 0.58
------------
Maximum offering price per share
outstanding $ 10.59
============
CLASS A
Net assets applicable to
outstanding shares $ 72,386,362
============
Shares of beneficial interest
outstanding 7,234,757
============
Net asset value per share
outstanding $ 10.01
Maximum sales charge (5.50% of
offering price) 0.58
------------
Maximum offering price per share
outstanding $ 10.59
============
CLASS B
Net assets applicable to
outstanding shares $ 53,777,420
============
Shares of beneficial interest
outstanding 5,454,345
============
Net asset value and offering price
per share outstanding $ 9.86
============
CLASS C
Net assets applicable to
outstanding shares $ 12,463,881
============
Shares of beneficial interest
outstanding 1,262,445
============
Net asset value and offering price
per share outstanding $ 9.87
============
CLASS I
Net assets applicable to
outstanding shares $ 1,346,368
============
Shares of beneficial interest
outstanding 133,265
============
Net asset value and offering price
per share outstanding $ 10.10
============
</Table>
26 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 OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 1,297,389
-----------
EXPENSES:
Distribution/Service--Investor
Class (See Note 3) 74,467
Distribution/Service--Class A (See
Note 3) 83,877
Distribution/Service--Class B (See
Note 3) 258,767
Distribution/Service--Class C (See
Note 3) 57,750
Transfer agent (See Note 3) 262,622
Registration 36,596
Shareholder communication 28,175
Professional fees 25,307
Custodian 5,233
Trustees 3,333
Miscellaneous 7,134
-----------
Total expenses before
reimbursement 843,261
Expense reimbursement from Manager
(See Note 3) (138,639)
-----------
Net expenses 704,622
-----------
Net investment income 592,767
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investments
from affiliated investment
companies (4,042,972)
Net change in unrealized
depreciation on investments 24,935,141
-----------
Net realized and unrealized gain on
investments and investments 20,892,169
-----------
Net increase in net assets resulting
from operations $21,484,936
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
27
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 592,767 $ 1,755,484
Net realized loss on
investments from
affiliated investment
company transactions (4,042,972) (29,579,724)
Net change in unrealized
depreciation on
investments 24,935,141 49,785,066
--------------------------
Net increase in net assets
resulting from operations 21,484,936 21,960,826
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (316,112) (704,990)
Class A (373,510) (1,021,607)
Class B -- (380,935)
Class C -- (78,878)
Class I (9,797) (16,651)
--------------------------
(699,419) (2,203,061)
--------------------------
From net realized gain on
investments:
Investor Class -- (391,096)
Class A -- (561,229)
Class B -- (420,672)
Class C -- (86,552)
Class I -- (8,108)
--------------------------
-- (1,467,657)
--------------------------
Total dividends and
distributions to
shareholders (699,419) (3,670,718)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 20,598,653 39,274,883
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 669,558 3,524,795
Cost of shares redeemed (16,349,886) (32,171,779)
--------------------------
Increase in net assets
derived from capital
share transactions 4,918,325 10,627,899
--------------------------
Net increase in net
assets 25,703,842 28,918,007
NET ASSETS:
Beginning of period 177,995,825 149,077,818
--------------------------
End of period $203,699,667 $177,995,825
==========================
Accumulated distributions in
excess of net investment
income at end of period $ (106,652) $ --
==========================
</Table>
28 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
29
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
--------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 8.97 $ 8.09 $ 11.68
------- ------- -------
Net investment income (loss) (a) 0.04 0.10 0.01
Net realized and unrealized gain
(loss) on investments 1.05 1.00 (3.60)
------- ------- -------
Total from investment operations 1.09 1.10 (3.59)
------- ------- -------
Less dividends and distributions:
From net investment income (0.05) (0.14) --
From net realized gain on
investments -- (0.08) --
------- ------- -------
Total dividends and distributions (0.05) (0.22) --
------- ------- -------
Net asset value at end of period $ 10.01 $ 8.97 $ 8.09
======= ======= =======
Total investment return (c) 12.19 %(d) 14.13% (30.74%)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.85%++ 1.30% 0.19% ++
Net expenses (e) 0.50%++ 0.50% 0.50% ++
Expenses (before reimbursement)
(e) 0.73%++ 0.88% 0.75% ++
Portfolio turnover rate 29% 42% 37%
Net assets at end of period (in
000's) $63,726 $54,578 $38,881
</Table>
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 8.82 $ 7.94 $ 13.56 $ 11.97 $ 10.47 $10.00
------- ------- ------- ------- ------- ------
Net investment income (loss) (a) 0.01 0.05 (0.03) (0.04) (0.10) (0.08)
Net realized and unrealized gain
(loss) on investments 1.03 0.98 (5.01) 2.07 1.72 0.55 (b)
------- ------- ------- ------- ------- ------
Total from investment operations 1.04 1.03 (5.04) 2.03 1.62 0.47
------- ------- ------- ------- ------- ------
Less dividends and distributions:
From net investment income -- (0.07) (0.24) (0.12) (0.07) --
From net realized gain on
investments -- (0.08) (0.34) (0.32) (0.05) --
------- ------- ------- ------- ------- ------
Total dividends and distributions -- (0.15) (0.58) (0.44) (0.12) --
------- ------- ------- ------- ------- ------
Net asset value at end of period $ 9.86 $ 8.82 $ 7.94 $ 13.56 $ 11.97 $10.47
======= ======= ======= ======= ======= ======
Total investment return (c) 11.79%(d) 13.32% (38.65%) 17.44% 15.59% 4.70% (d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.12%++ 0.65% (0.24%) (0.34%) (0.91%) (1.36%)++
Net expenses (e) 1.25%++ 1.25% 1.25% 1.23% 1.27% 1.37% ++
Expenses (before reimbursement)
(e) 1.48%++ 1.64% 1.44% 1.30% 1.30% 2.59% ++
Portfolio turnover rate 29% 42% 37% 17% 84% 21%
Net assets at end of period (in
000's) $53,777 $49,206 $42,501 $59,902 $27,770 $8,142
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
30 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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, 2009 OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 8.97 $ 8.08 $ 13.78 $ 12.08 $ 10.51 $ 10.00
------- ------- ------- -------- ------- -------
0.04 0.12 0.07 0.05 (0.03) (0.04)
1.05 0.99 (5.11) 2.11 1.74 0.55 (b)
------- ------- ------- -------- ------- -------
1.09 1.11 (5.04) 2.16 1.71 0.51
------- ------- ------- -------- ------- -------
(0.05) (0.14) (0.32) (0.14) (0.09) --
-- (0.08) (0.34) (0.32) (0.05) --
------- ------- ------- -------- ------- -------
(0.05) (0.22) (0.66) (0.46) (0.14) --
------- ------- ------- -------- ------- -------
$ 10.01 $ 8.97 $ 8.08 $ 13.78 $ 12.08 $ 10.51
======= ======= ======= ======== ======= =======
12.22%(d) 14.29% (38.20%) 18.42% 16.49% 5.10%(d)
0.88%++ 1.55% 0.60% 0.41% (0.25%) (0.61%)++
0.47%++ 0.48% 0.49% 0.48% 0.52% 0.62%++
0.47%++ 0.52% 0.57% 0.55% 0.55% 1.84%++
29% 42% 37% 17% 84% 21%
$72,386 $62,210 $58,165 $116,123 $54,499 $10,709
</Table>
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 8.84 $ 7.96 $ 13.58 $ 11.97 $10.46 $10.00
------- ------- ------- ------- ------ ------
0.01 0.05 (0.02) (0.03) (0.11) (0.08)
1.02 0.98 (5.02) 2.08 1.74 0.54 (b)
------- ------- ------- ------- ------ ------
1.03 1.03 (5.04) 2.05 1.63 0.46
------- ------- ------- ------- ------ ------
-- (0.07) (0.24) (0.12) (0.07) --
-- (0.08) (0.34) (0.32) (0.05) --
------- ------- ------- ------- ------ ------
-- (0.15) (0.58) (0.44) (0.12) --
------- ------- ------- ------- ------ ------
$ 9.87 $ 8.84 $ 7.96 $ 13.58 $11.97 $10.46
======= ======= ======= ======= ====== ======
11.65%(d) 13.29% (38.58%) 17.51% 15.79% 4.60% (d)
0.11%++ 0.61% (0.21%) (0.26%) (0.95%) (1.36%)++
1.25%++ 1.25% 1.25% 1.23% 1.27% 1.37% ++
1.48%++ 1.64% 1.44% 1.30% 1.30% 2.59% ++
29% 42% 37% 17% 84% 21%
$12,464 $10,773 $ 8,682 $13,668 $8,640 $ 904
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
31
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
--------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.06 $ 8.17 $ 13.91 $12.17 $10.52 $10.00
------ ------ ------- ------ ------ ------
Net investment income (loss) (a) 0.06 0.12 0.07 0.05 0.01 (0.01)
Net realized and unrealized gain
(loss) on investments 1.05 1.01 (5.12) 2.16 1.79 0.53 (b)
------ ------ ------- ------ ------ ------
Total from investment operations 1.11 1.13 (5.05) 2.21 1.80 0.52
------ ------ ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.07) (0.16) (0.35) (0.15) (0.10) --
From net realized gain on
investments -- (0.08) (0.34) (0.32) (0.05) --
------ ------ ------- ------ ------ ------
Total dividends and distributions (0.07) (0.24) (0.69) (0.47) (0.15) --
------ ------ ------- ------ ------ ------
Net asset value at end of period $10.10 $ 9.06 $ 8.17 $13.91 $12.17 $10.52
====== ====== ======= ====== ====== ======
Total investment return (c) 12.31%(d) 14.40% (38.00%) 18.68% 17.36% 5.20% (d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 1.18%++ 1.50% 0.62% 0.41% 0.06% (0.24%)++
Net expenses (e) 0.22%++ 0.25% 0.25% 0.24% 0.25% 0.25% ++
Expenses (before reimbursement)
(e) 0.22%++ 0.27% 0.28% 0.40% 0.28% 1.47% ++
Portfolio turnover rate 29% 42% 37% 17% 84% 21%
Net assets at end of period (in
000's) $1,346 $1,229 $ 849 $ 107 $ 14 $ 11
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
32 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(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 2.98% 19.49% 3.60% 3.32%
Excluding sales charges 8.97 26.44 4.78 4.48
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY MODERATE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX(R) BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 9450 10000 10000 10000
9346 9846 9879 10114
10492 11364 13187 10186
11737 13096 15800 10935
11916 12483 15519 11686
9335 8075 8883 12134
4/30/10 11803 11212 11941 13141
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 3.12% 19.68% 3.61% 3.33%
Excluding sales charges 9.12 26.65 4.79 4.49
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY MODERATE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 23625 25000 25000 25000
23365 24616 24697 25285
26229 28411 32967 25464
29342 32740 39499 27338
29738 31209 38797 29215
23310 20188 22206 30336
4/30/10 29521 28030 29853 32853
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 3.69% 20.77% 3.63% 3.52%
Excluding sales charges 8.69 25.77 3.97 3.69
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY MODERATE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9890 9846 9879 10114
11012 11364 13187 10186
12228 13096 15800 10935
12296 12483 15519 11686
9556 8075 8883 12134
4/30/10 11918 11212 11941 13141
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 33
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 7.67% 24.60% 3.97% 3.68%
Excluding sales charges 8.67 25.60 3.97 3.68
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY MODERATE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9890 9846 9879 10114
11012 11364 13187 10186
12238 13096 15800 10935
12306 12483 15519 11686
9566 8075 8883 12134
4/30/10 12015 11212 11941 13141
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- --------------------------------------------------------
9.32% 27.09% 5.06% 4.78%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY MODERATE S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9900 9846 9879 10114
11142 11364 13187 10186
12496 13096 15800 10935
12703 12483 15519 11686
9972 8075 8883 12134
4/30/10 12674 11212 11941 13141
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
S&P 500(R) Index(3) 15.66% 38.84% 2.63% 2.28%
MSCI EAFE(R) Index(4) 2.48 34.43 3.86 3.56
Barclays Capital U.S. Aggregate Bond Index(5) 2.54 8.30 5.38 5.53
Average Lipper mixed-asset target allocation moderate fund(6) 9.53 28.19 3.68 3.44
</Table>
information on current fee waivers and/or expense limitations, please refer
to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in fees and expenses. Unadjusted, the
performance shown for the Investor Class shares might have been lower.
3. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index 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 the Fund's broad-based securities market index
for comparison purposes. An investment cannot be made directly in an index.
4. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--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 in an index.
5. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the Mortgage-Backed Securities Index and the Asset-
Backed Securities Index. To qualify for inclusion in the Barclays Capital
U.S. 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 $250 million. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly in an index.
6. The average Lipper mixed-asset target allocation moderate fund is
representative of funds that, by portfolio practice, maintain a mix of
between 40%-60% equity securities, with the remainder invested in bonds,
cash, and cash equivalents. This benchmark is a product of Lipper Inc. Lipper
Inc. is an independent monitor of fund performance. Results are based on
average total returns of similar funds with all dividend and capital gain
distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
34 MainStay Moderate Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY MODERATE ALLOCATION FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,089.70 $2.59 $1,022.30 $2.51
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,091.20 $2.02 $1,022.90 $1.96
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,086.90 $6.47 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,086.70 $6.47 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,093.20 $0.73 $1,024.10 $0.70
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Investor Class, 0.39% for Class A, 1.25% for Class B and Class C
and 0.14% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
mainstayinvestments.com 35
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Total Return 43.5
Growth of Capital 34.8
Current Income 11.9
Capital Appreciation 9.9
Other Assets, Less Liabilities (0.1)
</Table>
See Portfolio of Investments on page 39 for specific holdings within these
categories.
36 MainStay Moderate Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY MODERATE ALLOCATION FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Moderate Allocation Fund returned 8.97%
for Investor Class shares, 9.12% for Class A shares, 8.69% for Class B shares
and 8.67% for Class C shares for the six months ended April 30, 2010. Over the
same period, the Fund's Class I shares returned 9.32%. All share classes
underperformed the 9.53% return of the average Lipper(1) mixed-asset target
allocation moderate fund for the six months ended April 30, 2010. All share
classes also underperformed the 15.66% return of the S&P 500(R) Index(2) for the
same six-month period. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See pages 33 and 34 for Fund returns with sales
charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was moderately below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such
as valuation metrics, earnings data and technical indicators. Finally, we
evaluated the historical success of the portfolio managers responsible for the
Underlying Funds. In general, we sought Underlying Equity Funds that had a track
record of capable portfolio management, that occupied attractively valued market
segments and that invested in companies with fairly priced securities and strong
price and earnings momentum. During the reporting period, these techniques were
generally unsuccessful, as they steered the Fund into Underlying Funds that
collectively underperformed the S&P 500(R) Index after adjusting for Underlying
Fund expenses and strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity mar-
kets turned positive in the spring of 2009, investors aggressively bought the
riskiest and lowest-quality securities in anticipation that these securities
would benefit most from a recovery. This trend persisted throughout the
reporting period, and stocks with negative earnings and cash flows were among
the best performers. This so-called junk rally served as
a significant drag on the Fund's relative performance during the reporting
period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most significant change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This shift had a positive impact on the
Fund's performance, as value-oriented smaller-capitalization stocks
1. See footnote on page 34 for more information on Lipper Inc.
2. See footnote on page 34 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
mainstayinvestments.com 37
outpaced growth-oriented larger-cap stocks as the reporting period progressed.
We have substantially reduced the Fund's exposure to growth-oriented stocks over
the past two and a half years. At the end of the current reporting period, the
Fund was evenly positioned between growth and value.
During the reporting period, the Fund initiated new positions in MainStay Epoch
Global Choice Fund
and MainStay Convertible Fund. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's overall responsiveness to movements in the equity
market while incrementally lowering the Fund's average credit quality and
duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
MainStay U.S. Small Cap Fund and MainStay Epoch U.S. All Cap Fund generated the
highest total returns among the Underlying Equity Funds in which the Fund
invested, as these Underlying Funds reached furthest down the capitalization
spectrum. The worst returns came from Underlying Funds that invest abroad,
namely MainStay ICAP International Fund and MainStay 130/30 International Fund.
These Underlying Equity Funds were hampered not only by comparatively weak
overseas returns in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
Among the Underlying Equity Funds in which the Fund invested, MainStay MAP Fund
and MainStay Growth Equity Fund were the strongest contributors to the Fund's
absolute performance.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND
DURING THE SIX MONTHS ENDED APRIL 30, 2010?
U.S. Treasury yields were largely unchanged over
the course of the reporting period. Signs of economic strength, improving
corporate profitability and a large supply of new issuance threatened to push
rates higher. These factors, however, were offset by concerns about corporate
and sovereign default risk (holding company Dubai World and Greece were notable
examples) and by questions about the sustainability of the economic recovery.
Lower-quality fixed-income securities generally outperformed higher-quality
fixed-income securities as credit spreads(4) narrowed, driving bond prices
higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished
a bias toward lower-quality instruments. We implemented these strategies
primarily by increasing the Fund's holdings in MainStay Floating Rate Fund,
MainStay High Yield Opportunities Fund and MainStay High Yield Corporate Bond
Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. MainStay Indexed Bond Fund and Main-
Stay Intermediate Term Bond Fund were the worst-performing Underlying Fixed
Income Funds, as both invest in higher-quality debt instruments. Still, both of
these Underlying Fixed Income Funds posted positive results during the reporting
period.
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
38 MainStay Moderate Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 100.1%+
- ------------------------------------------------------
EQUITY FUNDS 59.6%
MainStay 130/30 Core Fund
Class I (a) 4,632,146 $ 33,629,382
MainStay 130/30 Growth Fund
Class I (a)(b) 457,663 3,656,725
MainStay 130/30 International
Fund Class I (a) 2,048,460 12,946,265
MainStay Common Stock Fund
Class I (a) 2,043,292 22,414,915
MainStay Epoch Global Choice
Fund Class I (a) 272,786 3,854,462
MainStay Epoch U.S. All Cap
Fund Class I (a) 1,187,242 26,154,951
MainStay Growth Equity Fund
Class I (a) 107,655 1,104,536
MainStay ICAP Equity Fund
Class I 574,591 19,673,982
MainStay ICAP International
Fund Class I 474,951 13,023,152
MainStay ICAP Select Equity
Fund Class I 595,239 19,696,452
MainStay International Equity
Fund Class I 899,269 11,034,028
MainStay Large Cap Growth
Fund Class I (b) 3,930,639 25,509,849
MainStay MAP Fund Class I 1,015,059 30,411,167
MainStay S&P 500 Index Fund
Class I 4,238 116,363
MainStay U.S. Small Cap Fund
Class I (a)(b) 685,646 10,442,396
------------
Total Equity Funds
(Cost $220,738,275) 233,668,625
------------
FIXED INCOME FUNDS 40.5%
MainStay Convertible Fund
Class I 285,638 4,256,004
MainStay Floating Rate Fund
Class I (a) 2,601,303 24,348,197
MainStay High Yield Corporate
Bond Fund Class I 1,630,240 9,422,788
MainStay High Yield
Opportunities Fund Class I
(a) 1,095,656 12,983,529
MainStay Indexed Bond Fund
Class I (a) 6,637,057 75,463,337
MainStay Intermediate Term
Bond Fund Class I (a) 3,076,974 32,338,992
------------
Total Fixed Income Funds
(Cost $151,266,404) 158,812,847
------------
Total Investments
(Cost $372,004,679) (c) 100.1% 392,481,472
Other Assets, Less
Liabilities (0.1) (325,425)
--------- ------------
Net Assets 100.0% $392,156,047
========= ============
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) The Fund's ownership exceeds 5% of the
outstanding shares of the Underlying
Funds share class (See Note 3).
(b) Non-income producing Underlying Fund.
(c) At April 30, 2010, cost is $384,351,610
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 23,510,354
Gross unrealized depreciation (15,380,492)
------------
Net unrealized appreciation $ 8,129,862
============
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $233,668,625 $ -- $ -- $233,668,625
Fixed Income Funds 158,812,847 -- -- 158,812,847
------------ -------- -------- ------------
Total Investments in Securities $392,481,472 $-- $-- $392,481,472
============ ======== ======== ============
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
39
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $372,004,679) $392,481,472
Cash 603,097
Receivables:
Fund shares sold 640,142
Manager (See Note 3) 11,439
Other assets 61,540
------------
Total assets 393,797,690
------------
LIABILITIES:
Payables:
Fund shares redeemed 678,621
Investment securities purchased 603,097
NYLIFE Distributors (See Note 3) 146,663
Transfer agent (See Note 3) 101,816
Shareholder communication 74,349
Professional fees 29,838
Custodian 1,606
Trustees 1,274
Accrued expenses 4,379
------------
Total liabilities 1,641,643
------------
Net assets $392,156,047
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 37,334
Additional paid-in capital 407,461,209
------------
407,498,543
Accumulated undistributed net
investment income 1,189,795
Accumulated net realized loss on
investments (37,009,084)
Net unrealized appreciation on
investments 20,476,793
------------
Net assets $392,156,047
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 74,447,872
============
Shares of beneficial interest
outstanding 7,067,672
============
Net asset value per share
outstanding $ 10.53
Maximum sales charge (5.50% of
offering price) 0.61
------------
Maximum offering price per share
outstanding $ 11.14
============
CLASS A
Net assets applicable to
outstanding shares $197,350,665
============
Shares of beneficial interest
outstanding 18,745,808
============
Net asset value per share
outstanding $ 10.53
Maximum sales charge (5.50% of
offering price) 0.61
------------
Maximum offering price per share
outstanding $ 11.14
============
CLASS B
Net assets applicable to
outstanding shares $ 73,292,789
============
Shares of beneficial interest
outstanding 7,022,380
============
Net asset value and offering price
per share outstanding $ 10.44
============
CLASS C
Net assets applicable to
outstanding shares $ 38,143,212
============
Shares of beneficial interest
outstanding 3,654,313
============
Net asset value and offering price
per share outstanding $ 10.44
============
CLASS I
Net assets applicable to
outstanding shares $ 8,921,509
============
Shares of beneficial interest
outstanding 844,097
============
Net asset value and offering price
per share outstanding $ 10.57
============
</Table>
40 MainStay Moderate Allocation Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 4,476,702
-----------
EXPENSES:
Distribution/Service--Investor
Class (See Note 3) 85,416
Distribution/Service--Class A (See
Note 3) 231,490
Distribution/Service--Class B (See
Note 3) 350,496
Distribution/Service--Class C (See
Note 3) 177,375
Transfer agent (See Note 3) 296,473
Shareholder communication 45,382
Registration 41,676
Professional fees 36,247
Trustees 6,325
Custodian 6,197
Miscellaneous 10,819
-----------
Total expenses before
reimbursement 1,287,896
Expense reimbursement from Manager
(See Note 3) (92,211)
-----------
Net expenses 1,195,685
-----------
Net investment income 3,281,017
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Affiliated investment company
transactions 239,291
Capital gain distributions from
affiliated investment companies 231,454
-----------
Net realized gain on investments
from affiliated investment
companies 470,745
-----------
Net change in unrealized
depreciation on investments 27,614,739
-----------
Net realized and unrealized gain on
investments and investments 28,085,484
-----------
Net increase in net assets resulting
from operations $31,366,501
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
41
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 3,281,017 $ 6,878,826
Net realized gain (loss)
on investments from
affiliated investment
company transactions 470,745 (34,280,675)
Net change in unrealized
depreciation on
investments 27,614,739 75,467,921
--------------------------
Net increase in net assets
resulting from operations 31,366,501 48,066,072
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (1,211,974) (1,390,306)
Class A (3,395,080) (4,314,751)
Class B (828,657) (1,235,625)
Class C (418,401) (596,495)
Class I (93,813) (129,723)
--------------------------
(5,947,925) (7,666,900)
--------------------------
From net realized gain on
investments:
Investor Class -- (586,276)
Class A -- (1,824,129)
Class B -- (729,808)
Class C -- (352,872)
Class I -- (50,077)
--------------------------
-- (3,543,162)
--------------------------
Total dividends and
distributions to
shareholders (5,947,925) (11,210,062)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 52,256,975 76,669,485
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 5,617,922 10,605,468
Cost of shares redeemed (35,947,001) (62,845,725)
--------------------------
Increase in net assets
derived from capital
share transactions 21,927,896 24,429,228
--------------------------
Net increase in net
assets 47,346,472 61,285,238
NET ASSETS:
Beginning of period 344,809,575 283,524,337
--------------------------
End of period $392,156,047 $344,809,575
==========================
Accumulated undistributed
net investment income at
end of period $ 1,189,795 $ 3,856,703
==========================
</Table>
42 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
43
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 9.84 $ 8.77 $ 11.12
------- ------- -------
Net investment income 0.09 0.22 (a) 0.14 (a)
Net realized and unrealized gain
(loss) on investments 0.78 1.22 (2.49)
------- ------- -------
Total from investment operations 0.87 1.44 (2.35)
------- ------- -------
Less dividends and distributions:
From net investment income (0.18) (0.26) --
From net realized gain on
investments -- (0.11) --
------- ------- -------
Total dividends and distributions (0.18) (0.37) --
------- ------- -------
Net asset value at end of period $ 10.53 $ 9.84 $ 8.77
======= ======= =======
Total investment return (c) 8.97%(d) 17.12% (21.13%)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.96%++ 2.48% 1.94% ++
Net expenses (e) 0.50%++ 0.46% 0.45% ++
Expenses (before reimbursement)
(e) 0.61%++ 0.73% 0.61% ++
Portfolio turnover rate 21% 35% 40%
Net assets at end of period (in
000's) $74,448 $63,454 $46,290
</Table>
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.72 $ 8.65 $ 12.23 $ 11.30 $ 10.32 $ 10.00
------- ------- ------- ------- ------- -------
Net investment income 0.06 0.15 (a) 0.15 (a) 0.18 0.13 (a) 0.04 (a)
Net realized and unrealized gain
(loss) on investments 0.78 1.21 (3.27) 1.18 1.02 0.29 (b)
------- ------- ------- ------- ------- -------
Total from investment operations 0.84 1.36 (3.12) 1.36 1.15 0.33
------- ------- ------- ------- ------- -------
Less dividends and distributions:
From net investment income (0.12) (0.18) (0.26) (0.16) (0.17) (0.01)
From net realized gain on
investments -- (0.11) (0.20) (0.27) (0.00)++ --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.12) (0.29) (0.46) (0.43) (0.17) (0.01)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 10.44 $ 9.72 $ 8.65 $ 12.23 $ 11.30 $ 10.32
======= ======= ======= ======= ======= =======
Total investment return (c) 8.69%(d) 16.34% (26.41%) 12.38% 11.31% 3.26%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.20%++ 1.77% 1.38% 1.54% 1.21% 0.67%++
Net expenses (e) 1.25%++ 1.21% 1.22% 1.21% 1.20% 1.30%++
Expenses (before reimbursement)
(e) 1.36%++ 1.49% 1.32% 1.21% 1.20% 1.72%++
Portfolio turnover rate 21% 35% 40% 10% 48% 2%
Net assets at end of period (in
000's) $73,293 $67,726 $58,738 $63,929 $37,649 $19,676
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
44 MainStay Moderate Allocation Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.83 $ 8.76 $ 12.32 $ 11.34 $ 10.35 $ 10.00
-------- -------- -------- -------- -------- -------
0.10 0.22 (a) 0.24 (a) 0.27 0.20 (a) 0.09 (a)
0.79 1.22 (3.29) 1.18 1.04 0.28 (b)
-------- -------- -------- -------- -------- -------
0.89 1.44 (3.05) 1.45 1.24 0.37
-------- -------- -------- -------- -------- -------
(0.19) (0.26) (0.31) (0.20) (0.25) (0.02)
-- (0.11) (0.20) (0.27) (0.00)++ --
-------- -------- -------- -------- -------- -------
(0.19) (0.37) (0.51) (0.47) (0.25) (0.02)
-------- -------- -------- -------- -------- -------
$ 10.53 $ 9.83 $ 8.76 $ 12.32 $ 11.34 $ 10.35
======== ======== ======== ======== ======== =======
9.12%(d) 17.14% (25.78%) 13.18% 12.18% 3.73%(d)
2.06%++ 2.56% 2.17% 2.27% 1.84% 1.42%++
0.39%++ 0.43% 0.46% 0.46% 0.45% 0.55%++
0.39%++ 0.43% 0.46% 0.46% 0.45% 0.97%++
21% 35% 40% 10% 48% 2%
$197,351 $176,139 $146,133 $192,835 $107,586 $24,080
</Table>
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.72 $ 8.66 $ 12.23 $ 11.30 $ 10.32 $10.00
------- ------- ------- ------- ------- ------
0.06 0.15 (a) 0.15 (a) 0.19 0.12 (a) 0.04 (a)
0.78 1.20 (3.26) 1.17 1.03 0.29 (b)
------- ------- ------- ------- ------- ------
0.84 1.35 (3.11) 1.36 1.15 0.33
------- ------- ------- ------- ------- ------
(0.12) (0.18) (0.26) (0.16) (0.17) (0.01)
-- (0.11) (0.20) (0.27) (0.00)++ --
------- ------- ------- ------- ------- ------
(0.12) (0.29) (0.46) (0.43) (0.17) (0.01)
------- ------- ------- ------- ------- ------
$ 10.44 $ 9.72 $ 8.66 $ 12.23 $ 11.30 $10.32
======= ======= ======= ======= ======= ======
8.67%(d) 16.19% (26.33%) 12.37% 11.31% 3.26%(d)
1.22%++ 1.78% 1.39% 1.52% 1.11% 0.67%++
1.25%++ 1.21% 1.22% 1.21% 1.20% 1.30%++
1.36%++ 1.49% 1.32% 1.21% 1.20% 1.72%++
21% 35% 40% 10% 48% 2%
$38,143 $33,043 $27,005 $31,191 $15,192 $2,958
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
45
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
--------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.87 $ 8.80 $ 12.37 $11.36 $10.35 $10.00
------ ------ ------- ------ ------ ------
Net investment income 0.16 0.25 (a) 0.27 (a) 0.29 0.22 (a) 0.10 (a)
Net realized and unrealized gain
(loss) on investments 0.75 1.21 (3.31) 1.20 1.06 0.28 (b)
------ ------ ------- ------ ------ ------
Total from investment operations 0.91 1.46 (3.04) 1.49 1.28 0.38
------ ------ ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.21) (0.28) (0.33) (0.21) (0.27) (0.03)
From net realized gain on
investments -- (0.11) (0.20) (0.27) (0.00)++ --
------ ------ ------- ------ ------ ------
Total dividends and distributions (0.21) (0.39) (0.53) (0.48) (0.27) (0.03)
------ ------ ------- ------ ------ ------
Net asset value at end of period $10.57 $ 9.87 $ 8.80 $12.37 $11.36 $10.35
====== ====== ======= ====== ====== ======
Total investment return (c) 9.32%(d) 17.40% (25.54%) 13.44% 12.63% 3.80%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.23%++ 2.81% 2.52% 2.66% 2.04% 1.72%++
Net expenses (e) 0.14%++ 0.18% 0.19% 0.18% 0.18% 0.25%++
Expenses (before reimbursement)
(e) 0.14%++ 0.18% 0.19% 0.18% 0.18% 0.67%++
Portfolio turnover rate 21% 35% 40% 10% 48% 2%
Net assets at end of period (in
000's) $8,922 $4,447 $ 5,358 $1,446 $ 105 $ 10
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
46 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(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 5.00% 24.93% 3.03% 2.62%
Excluding sales charges 11.11 32.21 4.21 3.77
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MODERATE GROWTH S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
ALLOCATION FUND INDEX INDEX BOND INDEX
--------------- ---------- ------------ ----------------
4/4/05 9450 10000 10000 10000
9280 9846 9879 10114
10822 11364 13187 10186
12227 13096 15800 10935
12154 12483 15519 11686
8625 8075 8883 12134
4/30/10 11403 11212 11941 13141
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 5.04% 25.15% 3.04% 2.63%
Excluding sales charges 11.16 32.43 4.21 3.78
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MODERATE BARCLAYS CAPITAL
GROWTH ALLOCATION S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 23625 25000 25000 25000
23200 24616 24697 25285
27055 28411 32967 25464
30568 32740 39499 27338
30384 31209 38797 29215
21534 20188 22206 30336
4/30/10 28518 28030 29853 32853
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 5.67% 26.19% 3.04% 2.80%
Excluding sales charges 10.67 31.19 3.39 2.97
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MODERATE BARCLAYS CAPITAL
GROWTH ALLOCATION S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9820 9846 9879 10114
11353 11364 13187 10186
12739 13096 15800 10935
12568 12483 15519 11686
8844 8075 8883 12134
4/30/10 11503 11212 11941 13141
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 47
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- -----------------------------------------------------------------
With sales charges 9.66% 30.18% 3.39% 2.97%
Excluding sales charges 10.66 31.18 3.39 2.97
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MODERATE BARCLAYS CAPITAL
GROWTH ALLOCATION S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9820 9846 9879 10114
11353 11364 13187 10186
12739 13096 15800 10935
12568 12483 15519 11686
8845 8075 8883 12134
4/30/10 11603 11212 11941 13141
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (4/4/05)
- --------------------------------------------------------
11.19% 32.58% 4.55% 4.11%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY MODERATE BARCLAYS CAPITAL
GROWTH ALLOCATION S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
FUND INDEX INDEX BOND INDEX
----------------- ---------- ------------ ----------------
4/4/05 10000 10000 10000 10000
9820 9846 9879 10114
11504 11364 13187 10186
13050 13096 15800 10935
13004 12483 15519 11686
9251 8075 8883 12134
4/30/10 12265 11212 11941 13141
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
S&P 500(R) Index(3) 15.66% 38.84% 2.63% 2.28%
MSCI EAFE(R) Index(4) 2.48 34.43 3.86 3.56
Barclays Capital U.S. Aggregate Bond Index(5) 2.54 8.30 5.38 5.53
Average Lipper mixed-asset target allocation growth fund(6) 11.01 31.23 3.50 3.15
</Table>
to corporate and institutional investors or individual 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. For information on current fee waivers and/or expense
limitations, please refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in fees and expenses. Unadjusted, the
performance shown for the Investor Class shares might have been lower.
3. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index 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 the Fund's broad-based securities market index
for comparison purposes. An investment cannot be made directly in an index.
4. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--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 in an index.
5. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the Mortgage-Backed Securities Index and the Asset-
Backed Securities Index. To qualify for inclusion in the Barclays Capital
U.S. 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 $250 million. Results
assume reinvestment of all income and capital gains. An investment cannot be
made directly in an index.
6. The average Lipper mixed-asset target allocation growth fund is
representative of funds that, by portfolio practice, maintain a mix of
between 60%-80% equity securities, with the remainder invested in bonds,
cash, and cash equivalents. This benchmark is a product of Lipper Inc. Lipper
Inc. is an independent monitor of fund performance. Results are based on
average total returns of similar funds with all dividend and capital gain
distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLE AND GRAPH
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
48 MainStay Moderate Growth Allocation Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY MODERATE GROWTH ALLOCATION
FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,111.10 $2.62 $1,022.30 $2.51
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,111.60 $2.15 $1,022.80 $2.06
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,106.70 $6.53 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,106.60 $6.53 $1,018.60 $6.26
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,111.90 $0.84 $1,024.00 $0.80
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.50% for Investor Class, 0.41% for Class A, 1.25% for Class B and Class C
and 0.16% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
mainstayinvestments.com 49
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Growth of Capital 46.3
Total Return 28.6
Capital Appreciation 13
Current Income 12.1
Other Assets,Less Liabilities 0
</Table>
See Portfolio of Investments on page 53 for specific holdings within these
categories.
++ Less than one-tenth of a percent.
50 MainStay Moderate Growth Allocation Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY MODERATE GROWTH ALLOCATION FUND PERFORM RELATIVE TO ITS PEERS
AND ITS BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Moderate Growth Allocation Fund returned
11.11% for Investor Class shares, 11.16% for Class A shares, 10.67% for Class B
shares and 10.66% for Class C shares for the six months ended April 30, 2010.
Over the same period, the Fund's Class I shares returned 11.19%. Investor Class,
Class A and Class I shares outperformed--and Class B and Class C shares
underperformed--the 11.01% return of the average Lipper(1) mixed-asset target
allocation growth fund for the six months ended April 30, 2010. All share
classes underperformed the 15.66% return of the S&P 500(R) Index(2) for the same
six-month period. The S&P 500(R) Index is the Fund's broad-based securities-
market index. See pages 47 and 48 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was moderately below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, contributed to the shortfall. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor. Despite these shortcomings, three of the Fund's share classes managed to
outperform the average Lipper peer fund.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underlying Funds. In general, we sought
Underlying Equity Funds that had a track record of capable portfolio management,
that occupied attractively valued market segments and that invested in companies
with fairly priced securities and strong price and earnings momentum. During the
reporting period, these techniques were generally unsuccessful, as they steered
the Fund into Underlying Funds that collectively underperformed the S&P 500(R)
Index after adjusting for Underlying Fund expenses and strategic allocation
policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most significant change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This
1. See footnote on page 48 for more information on Lipper Inc.
2. See footnote on page 48 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
mainstayinvestments.com 51
shift had a positive impact on the Fund's performance, as value-oriented
smaller-capitalization stocks outpaced growth-oriented larger-cap stocks as the
reporting period progressed. We have substantially reduced the Fund's exposure
to growth-oriented stocks over the past two and a half years. At the end of the
current reporting period, the Fund was evenly positioned between growth and
value.
During the reporting period, the Fund initiated new positions in MainStay Epoch
Global Choice Fund
and MainStay Convertible Fund. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's overall responsiveness to movements in the equity
market while incrementally lowering the Fund's average credit quality and
duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
MainStay U.S. Small Cap Fund and MainStay Epoch U.S. All Cap Fund generated the
highest total returns among the Underlying Equity Funds in which the Fund
invested, as these Underlying Funds reached furthest down the capitalization
spectrum. The worst returns came from Underlying Funds that invest abroad,
namely MainStay ICAP International Fund and MainStay 130/30 International Fund.
These Underlying Equity Funds were hampered not only by comparatively weak
overseas returns in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
Among the Underlying Equity Funds in which the Fund invested, MainStay MAP Fund
and MainStay Growth Equity Fund were the strongest contributors to the Fund's
absolute performance.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND
DURING THE SIX MONTHS ENDED APRIL 30, 2010?
U.S. Treasury yields were largely unchanged over
the course of the reporting period. Signs of economic strength, improving
corporate profitability and a large supply of new issuance threatened to push
rates higher. These factors, however, were offset by concerns about corporate
and sovereign default risk (holding company Dubai World and Greece were notable
examples) and by questions about the sustainability of the economic recovery.
Lower-quality fixed-income securities generally outperformed higher-quality
fixed-income securities as credit spreads(4) narrowed, driving bond prices
higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished
a bias toward lower-quality instruments. We implemented these strategies
primarily by increasing the Fund's holdings in MainStay Floating Rate Fund,
MainStay High Yield Opportunities Fund and MainStay High Yield Corporate Bond
Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. MainStay Indexed Bond Fund and Main-
Stay Intermediate Term Bond Fund were the worst-performing Underlying Fixed
Income Funds, as both invest in higher-quality debt instruments. Still, both of
these Underlying Fixed Income Funds posted positive results during the reporting
period.
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
52 MainStay Moderate Growth Allocation Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 100.0%+
- ------------------------------------------------------
EQUITY FUNDS 79.7%
MainStay 130/30 Core Fund
Class I (a) 5,843,181 $ 42,421,496
MainStay 130/30 Growth Fund
Class I (a)(b) 398,733 3,185,879
MainStay 130/30 International
Fund Class I (a) 3,031,488 19,159,002
MainStay Common Stock Fund
Class I (a) 2,857,653 31,348,453
MainStay Epoch Global Choice
Fund Class I (a) 410,065 5,794,219
MainStay Epoch U.S. All Cap
Fund Class I (a) 1,432,516 31,558,331
MainStay Growth Equity Fund
Class I (a) 239,523 2,457,508
MainStay ICAP Equity Fund
Class I 623,129 21,335,941
MainStay ICAP International
Fund Class I 702,644 19,266,496
MainStay ICAP Select Equity
Fund Class I 645,489 21,359,247
MainStay International Equity
Fund Class I 1,332,385 16,348,369
MainStay Large Cap Growth
Fund Class I (b) 5,196,251 33,723,670
MainStay MAP Fund Class I (a) 1,129,596 33,842,688
MainStay S&P 500 Index Fund
Class I 19,936 547,456
MainStay U.S. Small Cap Fund
Class I (a)(b) 1,826,093 27,811,402
------------
Total Equity Funds
(Cost $306,811,576) 310,160,157
------------
FIXED INCOME FUNDS 20.3%
MainStay Convertible Fund
Class I (a) 742,468 11,062,775
MainStay Floating Rate Fund
Class I (a) 2,619,705 24,520,443
MainStay High Yield Corporate
Bond Fund Class I 1,648,929 9,530,812
MainStay High Yield
Opportunities Fund Class I
(a) 1,113,655 13,196,815
MainStay Indexed Bond Fund
Class I 1,286,758 14,630,436
MainStay Intermediate Term
Bond Fund Class I 596,545 6,269,692
------------
Total Fixed Income Funds
(Cost $74,989,769) 79,210,973
------------
Total Investments
(Cost $381,801,345) (c) 100.0% 389,371,130
Other Assets, Less
Liabilities (0.0)++ (46,270)
--------- ------------
Net Assets 100.0% $389,324,860
========= ============
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
++ Less than one-tenth of a percent.
(a) The Fund's ownership exceeds 5% of the
outstanding shares of the Underlying
Funds share class (See Note 3).
(b) Non-income producing Underlying Fund.
(c) At April 30, 2010, cost is $389,595,264
for federal income tax purposes and net
unrealized depreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 17,074,194
Gross unrealized depreciation (17,298,328)
------------
Net unrealized depreciation $ (224,134)
============
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $310,160,157 $ -- $ -- $310,160,157
Fixed Income Funds 79,210,973 -- -- 79,210,973
------------ -------- -------- ------------
Total Investments in Securities $389,371,130 $-- $-- $389,371,130
============ ======== ======== ============
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
53
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $381,801,345) $389,371,130
Receivables:
Fund shares sold 648,053
Investment securities sold 67,483
Manager (See Note 3) 22,430
Other assets 61,420
------------
Total assets 390,170,516
------------
LIABILITIES:
Due to custodian 67,483
Payables:
Fund shares redeemed 402,557
NYLIFE Distributors (See Note 3) 155,387
Transfer agent (See Note 3) 135,717
Shareholder communication 54,780
Professional fees 22,338
Custodian 1,524
Trustees 1,232
Accrued expenses 4,638
------------
Total liabilities 845,656
------------
Net assets $389,324,860
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 37,906
Additional paid-in capital 425,639,752
------------
425,677,658
Accumulated undistributed net
investment income 320,777
Accumulated net realized loss on
investments (44,243,360)
Net unrealized appreciation on
investments 7,569,785
------------
Net assets $389,324,860
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $103,219,578
============
Shares of beneficial interest
outstanding 10,013,423
============
Net asset value per share
outstanding $ 10.31
Maximum sales charge (5.50% of
offering price) 0.60
------------
Maximum offering price per share
outstanding $ 10.91
============
CLASS A
Net assets applicable to
outstanding shares $163,781,784
============
Shares of beneficial interest
outstanding 15,892,053
============
Net asset value per share
outstanding $ 10.31
Maximum sales charge (5.50% of
offering price) 0.60
------------
Maximum offering price per share
outstanding $ 10.91
============
CLASS B
Net assets applicable to
outstanding shares $ 96,120,548
============
Shares of beneficial interest
outstanding 9,431,350
============
Net asset value and offering price
per share outstanding $ 10.19
============
CLASS C
Net assets applicable to
outstanding shares $ 25,386,830
============
Shares of beneficial interest
outstanding 2,490,845
============
Net asset value and offering price
per share outstanding $ 10.19
============
CLASS I
Net assets applicable to
outstanding shares $ 816,120
============
Shares of beneficial interest
outstanding 78,612
============
Net asset value and offering price
per share outstanding $ 10.38
============
</Table>
54 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 OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 3,701,856
-----------
EXPENSES:
Distribution/Service--Investor
Class (See Note 3) 117,983
Distribution/Service--Class A (See
Note 3) 188,248
Distribution/Service--Class B (See
Note 3) 459,676
Distribution/Service--Class C (See
Note 3) 116,740
Transfer agent (See Note 3) 387,831
Shareholder communication 49,960
Registration 40,464
Professional fees 37,937
Custodian 6,303
Trustees 6,244
Miscellaneous 10,692
-----------
Total expenses before
reimbursement 1,422,078
Expense reimbursement from Manager
(See Note 3) (160,232)
-----------
Net expenses 1,261,846
-----------
Net investment income 2,440,010
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on:
Affiliated investment company
transactions (2,633,282)
Capital gain distributions from
affiliated investment companies 117,972
-----------
Net realized loss on investments
from affiliated investment
companies (2,515,310)
-----------
Net change in unrealized
depreciation on investments 37,241,409
-----------
Net realized and unrealized gain on
investments 34,726,099
-----------
Net increase in net assets resulting
from operations $37,166,109
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
55
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 2,440,010 $ 5,398,434
Net realized loss on
investments from
affiliated investment
company transactions (2,515,310) (39,569,309)
Net change in unrealized
depreciation on
investments 37,241,409 80,825,942
--------------------------
Net increase in net assets
resulting from operations 37,166,109 46,655,067
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (1,203,933) (1,500,796)
Class A (2,008,561) (2,923,712)
Class B (623,138) (1,149,260)
Class C (156,948) (293,037)
Class I (11,153) (13,951)
--------------------------
(4,003,733) (5,880,756)
--------------------------
From net realized gain on
investments:
Investor Class -- (844,025)
Class A -- (1,651,934)
Class B -- (1,019,418)
Class C -- (258,701)
Class I -- (6,933)
--------------------------
-- (3,781,011)
--------------------------
Total dividends and
distributions to
shareholders (4,003,733) (9,661,767)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 44,657,511 61,338,788
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 3,892,702 9,328,362
Cost of shares redeemed (28,986,022) (55,761,867)
--------------------------
Increase in net assets
derived from capital
share transactions 19,564,191 14,905,283
--------------------------
Net increase in net
assets 52,726,567 51,898,583
NET ASSETS:
Beginning of period 336,598,293 284,699,710
--------------------------
End of period $389,324,860 $336,598,293
==========================
Accumulated undistributed
net investment income at
end of period $ 320,777 $ 1,884,500
==========================
</Table>
56 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
57
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
--------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 9.40 $ 8.36 $ 11.37
-------- ------- -------
Net investment income 0.08 (a) 0.17 (a) 0.15 (a)
Net realized and unrealized gain
(loss) on investments 0.96 1.17 (3.16)
-------- ------- -------
Total from investment operations 1.04 1.34 (3.01)
-------- ------- -------
Less dividends and distributions:
From net investment income (0.13) (0.19) --
From net realized gain on
investments -- (0.11) --
-------- ------- -------
Total dividends and distributions (0.13) (0.30) --
-------- ------- -------
Net asset value at end of period $ 10.31 $ 9.40 $ 8.36
======== ======= =======
Total investment return (c) 11.11%(d) 16.87% (26.47%)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.55%++ 2.02% 2.16%++
Net expenses (e) 0.50%++ 0.47% 0.45%++
Expenses (before reimbursement)
(e) 0.65%++ 0.79% 0.67%++
Portfolio turnover rate 29% 36% 40%
Net assets at end of period (in
000's) $103,220 $86,438 $61,901
</Table>
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.27 $ 8.23 $ 12.93 $ 11.60 $ 10.42 $ 10.00
------- ------- ------- ------- ------- -------
Net investment income (loss) 0.04 (a) 0.11 (a) 0.05 (a) 0.12 0.04 (a) (0.01)(a)
Net realized and unrealized gain
(loss) on investments 0.95 1.16 (4.21) 1.57 1.33 0.43 (b)
------- ------- ------- ------- ------- -------
Total from investment operations 0.99 1.27 (4.16) 1.69 1.37 0.42
------- ------- ------- ------- ------- -------
Less dividends and distributions:
From net investment income (0.07) (0.12) (0.28) (0.13) (0.19) --
From net realized gain on
investments -- (0.11) (0.26) (0.23) (0.00)++ --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.07) (0.23) (0.54) (0.36) (0.19) --
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 10.19 $ 9.27 $ 8.23 $ 12.93 $ 11.60 $ 10.42
======= ======= ======= ======= ======= =======
Total investment return (c) 10.67%(d) 16.06% (33.42%) 14.95% 13.28% 4.20%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.80%++ 1.35% 0.48% 0.73% 0.32% (0.27%)++
Net expenses (e) 1.25%++ 1.21% 1.22% 1.21% 1.18% 1.31%++
Expenses (before reimbursement)
(e) 1.40%++ 1.54% 1.37% 1.24% 1.18% 1.80%++
Portfolio turnover rate 29% 36% 40% 13% 61% 2%
Net assets at end of period (in
000's) $96,121 $87,220 $76,188 $93,540 $48,046 $17,453
</Table>
<Table>
* Unaudited
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
58 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.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.40 $ 8.35 $ 13.10 $ 11.68 $ 10.46 $ 10.00
-------- -------- -------- -------- -------- -------
0.08 (a) 0.18 (a) 0.15 (a) 0.20 0.11 (a) 0.03 (a)
0.96 1.17 (4.28) 1.60 1.35 0.43 (b)
-------- -------- -------- -------- -------- -------
1.04 1.35 (4.13) 1.80 1.46 0.46
-------- -------- -------- -------- -------- -------
(0.13) (0.19) (0.36) (0.15) (0.24) --
-- (0.11) (0.26) (0.23) (0.00)++ --
-------- -------- -------- -------- -------- -------
(0.13) (0.30) (0.62) (0.38) (0.24) --
-------- -------- -------- -------- -------- -------
$ 10.31 $ 9.40 $ 8.35 $ 13.10 $ 11.68 $ 10.46
======== ======== ======== ======== ======== =======
11.16%(d) 17.00% (32.92%) 15.83% 14.20% 4.60%(d)
1.64%++ 2.18% 1.30% 1.46% 0.98% 0.48%++
0.41%++ 0.43% 0.46% 0.46% 0.43% 0.56%++
0.41%++ 0.43% 0.49% 0.49% 0.43% 1.05%++
29% 36% 40% 13% 61% 2%
$163,782 $140,284 $127,086 $207,499 $112,099 $22,617
</Table>
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.27 $ 8.23 $ 12.93 $ 11.60 $ 10.42 $10.00
------- ------- ------- ------- ------- ------
0.04 (a) 0.11 (a) 0.06 (a) 0.13 0.03 (a) (0.01)(a)
0.95 1.16 (4.22) 1.56 1.34 0.43 (b)
------- ------- ------- ------- ------- ------
0.99 1.27 (4.16) 1.69 1.37 0.42
------- ------- ------- ------- ------- ------
(0.07) (0.12) (0.28) (0.13) (0.19) --
-- (0.11) (0.26) (0.23) (0.00)++ --
------- ------- ------- ------- ------- ------
(0.07) (0.23) (0.54) (0.36) (0.19) --
------- ------- ------- ------- ------- ------
$ 10.19 $ 9.27 $ 8.23 $ 12.93 $ 11.60 $10.42
======= ======= ======= ======= ======= ======
10.66%(d) 16.07% (33.42%) 14.95% 13.28% 4.20%(d)
0.80%++ 1.39% 0.50% 0.73% 0.25% (0.27%)++
1.25%++ 1.21% 1.22% 1.21% 1.18% 1.31% ++
1.40%++ 1.54% 1.36% 1.24% 1.18% 1.80% ++
29% 36% 40% 13% 61% 2%
$25,387 $21,968 $18,993 $27,284 $15,639 $3,347
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
59
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
--------------------------------------------------------------------------------------
APRIL 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.48 $ 8.42 $ 13.20 $11.74 $10.47 $10.00
------ ------ ------- ------ ------ ------
Net investment income 0.09 (a) 0.19 (a) 0.17 (a) 0.22 0.15 (a) 0.04 (a)
Net realized and unrealized gain
(loss) on investments 0.96 1.20 (4.30) 1.63 1.38 0.43 (b)
------ ------ ------- ------ ------ ------
Total from investment operations 1.05 1.39 (4.13) 1.85 1.53 0.47
------ ------ ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.15) (0.22) (0.39) (0.16) (0.26) --
From net realized gain on
investments -- (0.11) (0.26) (0.23) (0.00)++ --
------ ------ ------- ------ ------ ------
Total dividends and distributions (0.15) (0.33) (0.65) (0.39) (0.26) --
------ ------ ------- ------ ------ ------
Net asset value at end of period $10.38 $ 9.48 $ 8.42 $13.20 $11.74 $10.47
====== ====== ======= ====== ====== ======
Total investment return (c) 11.19%(d) 17.37% (32.72%) 16.17% 14.86% 4.70%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.90%++ 2.30% 1.51% 1.46% 1.36% 0.79%++
Net expenses (e) 0.16%++ 0.19% 0.22% 0.25% 0.17% 0.25%++
Expenses (before
reimbursement)(e) 0.16%++ 0.19% 0.26% 0.31% 0.17% 0.74%++
Portfolio turnover rate 29% 36% 40% 13% 61% 2%
Net assets at end of period (in
000's) $ 816 $ 688 $ 532 $ 681 $ 12 $ 10
</Table>
<Table>
* Unaudited
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(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 and assumes the
reinvestment of dividends and distributions. Class I shares are 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 expense ratios.
</Table>
60 MainStay Moderate Growth Allocation Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
as an open-end management investment company, and is comprised of twenty-nine
funds (collectively referred to as the "Funds" and each individually, referred
to as a "Fund"). These financial statements and notes relate to the MainStay
Conservative Allocation Fund, MainStay Growth Allocation Fund, MainStay Moderate
Allocation Fund and MainStay Moderate Growth Allocation Fund (collectively
referred to as the "Allocation Funds" and each individually referred to as an
"Allocation Fund"). Each is a diversified fund. Each Allocation Fund is the
successor of a series of Eclipse Funds Inc. with the same name (each a
"Predecessor Fund"). The reorganizations of the Predecessor Funds with and into
the respective Allocation Funds, which were not subject to shareholder approval
under applicable law, occurred on February 26, 2010. All information regarding
and references to periods prior to the commencement of operations of each
Allocation Fund relate to the respective Predecessor Fund.
The Allocation Funds each currently offer five classes of shares. Class A
shares, Class B shares, Class C shares and Class I shares commenced operations
on April 4, 2005. Investor Class shares commenced operations on February 28,
2008. Investor Class and Class A shares are offered at net asset value ("NAV")
per share plus an initial sales charge. No sales charge applies on investments
of $1 million or more (and certain other qualified purchases) in Investor Class
and Class A shares, but a contingent deferred sales charge is imposed on certain
redemptions of such shares within one year of the date of purchase. Class B
shares and Class C shares are offered at NAV without an initial sales charge,
although a declining contingent deferred sales charge may be imposed on
redemptions made within six years of purchase of Class B shares and a 1.00%
contingent deferred sales charge may be imposed on redemptions made within one
year of purchase of Class C shares. Class I shares are offered at NAV and are
not subject to a sales charge. Depending upon eligibility, Class B shares
convert to either Investor Class or Class A shares eight years after the date
they were purchased. Additionally, depending upon eligibility, Investor Class
shares may convert to Class A shares and Class A shares may convert to Investor
Class shares. The five classes of shares have the same voting (except for issues
that relate solely to one class), dividend, liquidation and other rights, and
the same terms and conditions, except that Class B and Class C shares are
subject to higher distribution and/or service fee rates than Investor Class and
Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940
Act. Class I shares are not subject to a distribution and/or service fee.
The investment objective for each of the Allocation Funds is as follows:
The 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 Allocation Funds are funds-of-funds and may invest in other Funds of the
Trust as well as funds of the Eclipse Funds and The MainStay Funds, each a
Massachusetts business trust, and Eclipse Funds Inc., a Maryland Corporation,
for which New York Life Investment Management LLC also serves as manager
("Underlying Funds").
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Allocation Funds prepare their financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") and follow the significant accounting policies described below.
(A) SECURITIES VALUATION. Investments in Underlying Funds are valued at their
NAV at the close of business each day. The Allocation Funds' other investments
and securities held by the Underlying Funds are valued as described below.
Debt securities are valued at prices supplied by a pricing agent or broker
selected by the funds' manager in consultation with the funds' subadvisor, if
any, whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the funds' manager in
consultation with the funds' subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Exchange is open
for business ("valuation date").
Equity securities are valued at the latest quoted sales prices as of the close
of regular trading on the Exchange on each valuation date. Securities that are
not traded on the valuation date are valued at the mean of the latest quoted bid
and asked prices. Prices normally are taken from the principal market in which
each security trades.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a
mainstayinvestments.com 61
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
constant amortization to maturity of the difference between the principal amount
due at maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Funds' Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the fund's manager, reflect the security's market value; and (vi)
a security where the trading on that security's principal market is temporarily
closed at a time when, under normal conditions, it would be open. At April 30,
2010, the Allocation Funds did not hold securities that were valued in such a
manner.
"Fair value" is defined as the price that the Allocation Fund would receive upon
selling an investment in an orderly transaction to an independent buyer in the
principal or most advantageous market of the investment. Fair value measurements
are determined within a framework that has established a three-tier hierarchy
which maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Allocation Fund's own
assumptions about the assumptions that market participants would use in
determining the fair value of investments)
The aggregate value by input level, as of April 30, 2010, for each Allocation
Fund's investments is included at the end of each Allocation Fund's Portfolio of
Investments.
The valuation techniques used by the Allocation Funds to measure fair value
during the six-month period ended April 30, 2010 maximized the use of observable
inputs and minimized the use of unobservable inputs. The Underlying Funds may
have utilized some of the following fair value techniques: multi-dimensional
relational pricing models, option adjusted spread pricing and estimating the
price that would have prevailed in a liquid market for an international equity
security given information available at the time of evaluation, when there are
significant events after the close of local foreign markets. For the six-month
period ended April 30, 2010, there have been no changes to the fair value
methodologies.
(B) FEDERAL INCOME TAXES. Each of the Allocation Funds is treated as a separate
entity for federal income tax purposes. The Allocation Funds' policy is to
comply with the requirements of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") applicable to regulated investment companies and
to distribute all of the taxable income to the shareholders of each Allocation
Fund within the allowable time limits. Therefore, no federal income tax
provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Allocation Funds'
tax positions taken on federal income tax returns for all open tax years
(current and prior three tax years), and has concluded that no provision for
federal income tax is required in the Allocation Funds' financial statements.
The Allocation Funds' federal and state income and federal excise tax returns
for tax years for which the applicable statutes of limitations have not expired
are subject to examination by the Internal Revenue Service and state departments
of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Conservative Allocation Fund intends
to declare and pay dividends of net investment income, if any, quarterly and
distributions of net realized capital gains, if any, annually. The other
Allocation Funds intend to declare and pay dividends of net investment income
and
62 Mainstay Allocation Funds
distributions of net realized capital gains, if any, annually. Unless the
shareholder elects otherwise, all dividends and distributions are reinvested in
the same class of shares of the respective Allocation Fund, at NAV. Dividends
and distributions to shareholders are determined in accordance with federal
income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Allocation Funds record
security transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividends and
distributions received by the Allocation Funds from the Underlying Funds are
recorded on the ex-dividend date.
Investment income and realized and unrealized gains and losses on investments of
the Allocation Funds are allocated to separate classes of shares pro rata based
upon their relative net assets on the date the income is earned or realized and
unrealized gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Allocation
Funds in proportion to the net assets of the respective Allocation Funds when
the expenses are incurred, except where direct allocations of expenses can be
made. Expenses (other than transfer agent expenses and fees incurred under the
shareholder services plans and the distribution plans further discussed in Note
3(B)) are allocated to separate classes of shares pro rata based upon their
relative NAV on the date the expenses are incurred. The expenses borne by each
Allocation Fund, including those of related parties to the Allocation Funds, are
shown in the Statement of Operations.
In addition, the Allocation Funds bear a pro rata share of the fees and expenses
of the Underlying Funds in which they invest. Because the Underlying Funds have
varied expense and fee levels and the Allocation Funds may own different
proportions of the Underlying Funds at different times, the amount of fees and
expenses incurred indirectly by the Allocation Funds may vary.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Allocation Funds enter into contracts with third-party service
providers that contain a variety of representations and warranties and which
provide general indemnifications. The Allocation Funds' maximum exposure under
these arrangements is unknown, as this would involve future claims that may be
made against the Allocation Funds that have not yet occurred. Based on
experience, management is of the view that the risk of loss in connection with
these potential indemnification obligations is remote. However, there can be no
assurance that material liabilities related to such obligations will not arise
in the future, which could adversely impact the Allocation Funds.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Allocation Funds' Manager, pursuant to a Management
Agreement, as amended ("Management Agreement"). The Manager provides offices,
conducts clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Allocation
Funds. Except for the portion of salaries and expenses that are the
responsibility of the Allocation Funds, the Manager also pays the salaries and
expenses of all personnel affiliated with the Allocation Funds and the
operational expenses of the Allocation Funds. Madison Square Investors LLC
("Madison Square Investors" or "Subadvisor"), a registered investment adviser
and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor
to the Allocation Funds and is responsible for the day-to-day portfolio
management of the Allocation Funds. Pursuant to the terms of a Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
The Allocation Funds do not pay any fees to the Manager in return for the
services performed. The Allocation Funds do, however, indirectly pay a
proportionate share of the management fees paid to the Manager by the Underlying
Funds in which the Allocation Funds invest.
Effective February 26, 2010, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
Allocation Funds' management fee or reimburse the expenses of the appropriate
class of the Allocation Funds so that the total ordinary operating expenses
(total ordinary operating expenses excludes taxes, interest, litigation,
extraordinary expenses, brokerage and other transaction expenses relating to the
purchase or sale of portfolio investments, and the fees and expenses of the
Underlying Funds in which an Allocation Fund invests) of a class do not exceed
the
mainstayinvestments.com 63
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
following percentages of average daily net assets for each class:
<Table>
<Caption>
INVESTOR
CLASS CLASS A CLASS B CLASS C CLASS I
MainStay
Conservative
Allocation Fund 0.50% 0.50% 1.25% 1.25% 0.25%
- -----------------------------------------------------------------
MainStay Growth
Allocation Fund 0.50 0.50 1.25 1.25 0.25
- -----------------------------------------------------------------
MainStay Moderate
Allocation Fund 0.50 0.50 1.25 1.25 0.25
- -----------------------------------------------------------------
MainStay Moderate
Growth Allocation
Fund 0.50 0.50 1.25 1.25 0.25
- -----------------------------------------------------------------
</Table>
This expense limitation agreement expires on February 28, 2011 and is reviewed
annually by the Board in connection with its review of the Funds' investment
advisory agreements. Based on its review, the Board may agree to maintain,
modify or terminate the agreements.
For the period August 1, 2009 through February 25, 2010, New York Life
Investments had a written expense limitation agreements under which the
management fee was waived and/or the operating expenses of the appropriate class
of the Allocation Funds was reimbursed to the extent necessary to ensure that
the total ordinary operating expenses did not exceed the following percentages
of average daily net assets for Class A (New York Life Investments applied an
equivalent waiver or reimbursement, in an equal number of basis points, to the
other share classes of each Allocation Fund):
<Table>
<Caption>
CLASS A
MainStay Conservative Allocation Fund 0.50%
- ----------------------------------------------
MainStay Growth Allocation Fund 0.50
- ----------------------------------------------
MainStay Moderate Allocation Fund 0.50
- ----------------------------------------------
MainStay Moderate Growth Allocation
Fund 0.50
- ----------------------------------------------
</Table>
Additionally, for the period August 1, 2009, through February 25, 2010, New York
Life Investments had agreed to voluntarily waive or reimburse the expenses of
the appropriate class of the Allocation Funds so that the total ordinary
operating expenses of a class did not exceed the following percentages:
<Table>
<Caption>
INVESTOR
CLASS CLASS B CLASS C
MainStay Conservative
Allocation Fund 0.50% 1.25% 1.25%
- --------------------------------------------------------
MainStay Growth Allocation
Fund 0.50 1.25 1.25
- --------------------------------------------------------
MainStay Moderate Allocation
Fund 0.50 1.25 1.25
- --------------------------------------------------------
MainStay Moderate Growth
Allocation Fund 0.50 1.25 1.25
- --------------------------------------------------------
</Table>
For the six-month period ended April 30, 2010, New York Life Investments
waived/reimbursed expenses of the Allocation Funds as follows:
<Table>
<Caption>
TOTAL
MainStay Conservative Allocation Fund $ 48,828
- -----------------------------------------------
MainStay Growth Allocation Fund 138,639
- -----------------------------------------------
MainStay Moderate Allocation Fund 92,211
- -----------------------------------------------
MainStay Moderate Growth Allocation
Fund 160,232
- -----------------------------------------------
</Table>
State Street Bank and Trust Company ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the Allocation Funds pursuant to an agreement with New York Life Investments.
These services include calculating the daily NAVs of the Allocation Funds,
maintaining the general ledger and sub-ledger accounts for the calculation of
the Allocation Funds' respective NAVs, and assisting New York Life Investments
in conducting various aspects of the Allocation Funds' administrative
operations. For providing these services to the Allocation Funds, State Street
is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Allocation
Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC
(the "Distributor"), an indirect, wholly-owned subsidiary of New York Life. The
Allocation Funds have adopted distribution plans, (the "Plans") in accordance
with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares of each
applicable Allocation Fund at an annual rate of 0.25% of the average daily net
assets of the Investor Class and Class A shares for distribution or service
activities as designated by the Distributor. Pursuant to the Class B and Class C
Plans, Class B and Class C shares of each applicable Allocation Fund pay the
Distributor a monthly distribution fee at an annual rate of 0.75% of the average
daily net assets of the Class B and Class C shares, along with a service fee at
an annual rate of 0.25% of the average daily net assets of the Class B and Class
C shares of the Allocation Funds for a total 12b-1 fee at 1.00%. Class I shares
are not subject to a distribution or service fee.
64 Mainstay Allocation Funds
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Allocation Funds' shares and service activities.
(C) SALES CHARGES. The Allocation Funds were advised by the Distributor that
the amount of sales charges retained on sales of Investor Class and Class A
shares for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY CONSERVATIVE ALLOCATION
FUND
Investor Class $28,470
- ----------------------------------------------
Class A 48,126
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY GROWTH ALLOCATION FUND
Investor Class $49,376
- ----------------------------------------------
Class A 19,302
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE ALLOCATION FUND
Investor Class $59,758
- ----------------------------------------------
Class A 56,162
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE GROWTH ALLOCATION
FUND
Investor Class $85,612
- ----------------------------------------------
Class A 47,357
- ----------------------------------------------
</Table>
The Allocation Funds were also advised that the Distributor retained contingent
deferred sales charges on redemptions of Investor Class, Class A, Class B and
Class C shares, for the six-month period ended April 30, 2010, as follows:
<Table>
<Caption>
MAINSTAY CONSERVATIVE ALLOCATION
FUND
Investor Class $ 20
- ----------------------------------------------
Class A 33
- ----------------------------------------------
Class B 21,864
- ----------------------------------------------
Class C 5,156
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY GROWTH ALLOCATION FUND
Investor Class $ 26
- ----------------------------------------------
Class A 16
- ----------------------------------------------
Class B 51,926
- ----------------------------------------------
Class C 1,010
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE ALLOCATION FUND
Investor Class $ 80
- ----------------------------------------------
Class A 305
- ----------------------------------------------
Class B 61,959
- ----------------------------------------------
Class C 2,465
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE GROWTH ALLOCATION
FUND
Investor Class $ 14
- ----------------------------------------------
Class A 265
- ----------------------------------------------
Class B 91,279
- ----------------------------------------------
Class C 1,548
- ----------------------------------------------
</Table>
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the
Allocation Funds' transfer, dividend disbursing and shareholder servicing agent
pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM
Service Company LLC has entered into an agreement with Boston Financial Data
Services, Inc. ("BFDS") pursuant to which BFDS performs certain transfer agent
services on behalf of NYLIM Service Company LLC. Transfer agent expenses
incurred by the Allocation Funds for the six-month period ended April 30, 2010,
were as follows:
<Table>
<Caption>
MAINSTAY CONSERVATIVE ALLOCATION
FUND TOTAL
Investor Class $35,318
- ----------------------------------------------
Class A 29,107
- ----------------------------------------------
Class B 36,678
- ----------------------------------------------
Class C 30,012
- ----------------------------------------------
Class I 877
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY GROWTH ALLOCATION FUND TOTAL
Investor Class $108,707
- -----------------------------------------------
Class A 37,615
- -----------------------------------------------
Class B 94,512
- -----------------------------------------------
Class C 21,076
- -----------------------------------------------
Class I 712
- -----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE ALLOCATION FUND TOTAL
Investor Class $94,068
- ----------------------------------------------
Class A 54,274
- ----------------------------------------------
Class B 97,097
Class C 49,131
- ----------------------------------------------
Class I 1,903
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE GROWTH ALLOCATION
FUND TOTAL
Investor Class $150,427
- -----------------------------------------------
Class A 53,259
- -----------------------------------------------
Class B 146,660
- -----------------------------------------------
Class C 37,224
- -----------------------------------------------
Class I 261
- -----------------------------------------------
</Table>
mainstayinvestments.com 65
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
(E) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Allocation Funds with the following values and percentages of
net assets as follows:
<Table>
<Caption>
MAINSTAY CONSERVATIVE
ALLOCATION FUND
Class I $12,901 0.3%
- ------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY GROWTH ALLOCATION FUND
Class I 11,672 0.1
- ------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE ALLOCATION
FUND
Class I 12,673 0.1
- ------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE GROWTH
ALLOCATION FUND
Class I 12,264 1.5
- ------------------------------------------------
</Table>
At April 30, 2010, the Allocation Funds held the following percentages of
outstanding shares of affiliated investment companies:
<Table>
<Caption>
MAINSTAY CONSERVATIVE ALLOCATION FUND
MainStay 130/30 Core Fund Class I 4.01%
- ----------------------------------------------
MainStay 130/30 Growth Fund Class I 4.38
- ----------------------------------------------
MainStay 130/30 International Fund
Class I 2.69
- ----------------------------------------------
MainStay Common Stock Fund Class I 3.19
- ----------------------------------------------
MainStay Convertible Fund Class I 0.92
- ----------------------------------------------
MainStay Epoch Global Choice Fund Class
I 1.63
- ----------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 2.23
- ----------------------------------------------
MainStay Floating Rate Fund Class I 6.28
- ----------------------------------------------
MainStay Growth Equity Fund Class I 7.50
- ----------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.46
- ----------------------------------------------
MainStay High Yield Opportunities Fund
Class I 5.04
- ----------------------------------------------
MainStay ICAP Equity Fund Class I 0.84
- ----------------------------------------------
MainStay ICAP International Fund Class
I 0.60
- ----------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.36
- ----------------------------------------------
MainStay Indexed Bond Fund Class I 11.48
- ----------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 4.72
- ----------------------------------------------
MainStay International Equity Fund
Class I 0.69
- ----------------------------------------------
MainStay Large Cap Growth Fund Class I 0.33
- ----------------------------------------------
MainStay MAP Fund Class I 1.51
- ----------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ----------------------------------------------
MainStay U.S. Small Cap Fund Class I 2.57
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY GROWTH ALLOCATION FUND
MainStay 130/30 Core Fund Class I 9.15%
- ----------------------------------------------
MainStay 130/30 Growth Fund Class I 8.86
- ----------------------------------------------
MainStay 130/30 International Fund
Class I 10.95
- ----------------------------------------------
MainStay Common Stock Fund Class I 8.37
- ----------------------------------------------
MainStay Epoch Global Choice Fund Class
I 6.85
- ----------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 4.86
- ----------------------------------------------
MainStay Growth Equity Fund Class I 25.65
- ----------------------------------------------
MainStay ICAP Equity Fund Class I 1.55
- ----------------------------------------------
MainStay ICAP International Fund Class
I 2.43
- ----------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.67
- ----------------------------------------------
MainStay International Equity Fund
Class I 2.78
- ----------------------------------------------
MainStay Large Cap Growth Fund Class I 0.79
- ----------------------------------------------
MainStay MAP Fund Class I 3.43
- ----------------------------------------------
MainStay S&P 500 Index Fund Class I 0.05
- ----------------------------------------------
MainStay U.S. Small Cap Fund Class I 10.47
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY MODERATE ALLOCATION FUND
MainStay 130/30 Core Fund Class I 11.13%
- ----------------------------------------------
MainStay 130/30 Growth Fund Class I 17.51
- ----------------------------------------------
MainStay 130/30 International Fund
Class I 10.65
- ----------------------------------------------
MainStay Common Stock Fund Class I 9.01
- ----------------------------------------------
MainStay Convertible Fund Class I 2.22
- ----------------------------------------------
MainStay Epoch Global Choice Fund Class
I 6.44
- ----------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 6.34
- ----------------------------------------------
MainStay Floating Rate Fund Class I 8.18
- ----------------------------------------------
MainStay Growth Equity Fund Class I 16.25
- ----------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.60
- ----------------------------------------------
MainStay High Yield Opportunities Fund
Class I 6.58
- ----------------------------------------------
MainStay ICAP Equity Fund Class I 2.35
- ----------------------------------------------
MainStay ICAP International Fund Class
I 2.37
- ----------------------------------------------
MainStay ICAP Select Equity Fund Class
I 1.01
- ----------------------------------------------
MainStay Indexed Bond Fund Class I 14.96
- ----------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 6.16
- ----------------------------------------------
MainStay International Equity Fund
Class I 2.73
- ----------------------------------------------
MainStay Large Cap Growth Fund Class I 0.91
- ----------------------------------------------
MainStay MAP Fund Class I 4.67
- ----------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ----------------------------------------------
MainStay U.S. Small Cap Fund Class I 5.88
- ----------------------------------------------
</Table>
66 Mainstay Allocation Funds
<Table>
<Caption>
MAINSTAY MODERATE GROWTH ALLOCATION
FUND
MainStay 130/30 Core Fund Class I 14.04%
- ----------------------------------------------
MainStay 130/30 Growth Fund Class I 15.25
- ----------------------------------------------
MainStay 130/30 International Fund
Class I 15.76
- ----------------------------------------------
MainStay Common Stock Fund Class I 9.68
- ----------------------------------------------
MainStay Convertible Fund Class I 5.78
- ----------------------------------------------
MainStay Epoch Global Choice Fund Class
I 9.68
- ----------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 7.65
- ----------------------------------------------
MainStay Floating Rate Fund Class I 8.23
- ----------------------------------------------
MainStay Growth Equity Fund Class I 36.16
- ----------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.61
- ----------------------------------------------
MainStay High Yield Opportunities Fund
Class I 6.68
- ----------------------------------------------
MainStay ICAP Equity Fund Class I 2.55
- ----------------------------------------------
MainStay ICAP International Fund Class
I 3.51
- ----------------------------------------------
MainStay ICAP Select Equity Fund Class
I 1.10
- ----------------------------------------------
MainStay Indexed Bond Fund Class I 2.90
- ----------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 2.99
- ----------------------------------------------
MainStay International Equity Fund
Class I 4.04
- ----------------------------------------------
MainStay Large Cap Growth Fund Class I 1.21
- ----------------------------------------------
MainStay MAP Fund Class I 5.20
- ----------------------------------------------
MainStay S&P 500 Index Fund Class I 0.05
- ----------------------------------------------
MainStay U.S. Small Cap Fund Class I 15.65
- ----------------------------------------------
</Table>
(F) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Allocation Funds have implemented a small account
fee on certain types of accounts. Certain shareholders with an account balance
of less than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Allocation Funds by the Office of the General Counsel
of New York Life Investments is payable directly by the Allocation Funds. For
the six-month period ended April 30, 2010, these fees, which are included in
professional fees shown on the Statement of Operations, were as follows:
<Table>
MainStay Conservative Allocation Fund $4,453
- -----------------------------------------------
MainStay Growth Allocation Fund 4,781
- -----------------------------------------------
MainStay Moderate Allocation Fund 9,083
- -----------------------------------------------
MainStay Moderate Growth Allocation
Fund 8,999
- -----------------------------------------------
</Table>
NOTE 4--FEDERAL INCOME TAX:
MAINSTAY CONSERVATION ALLOCATION FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $9,959,047 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Conservative
Allocation 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 CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $9,959
- ---------------------------------- -----
</Table>
MAINSTAY GROWTH ALLOCATION FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $21,808,716 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
Growth Allocation Fund through the years indicated. To the extent that these
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 CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $21,809
- ---------------------------------- -----
</Table>
MAINSTAY MODERATE ALLOCATION FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $25,132,898 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
Moderate Allocation Fund through the years indicated. To the extent that these
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 CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $25,133
- ---------------------------------- -----
</Table>
MAINSTAY MODERATE GROWTH ALLOCATION FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $33,934,130 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the MainStay
Moderate Growth Allocation Fund through the years indicated. To the extent that
these 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 CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $33,934
- ---------------------------------- -----
</Table>
mainstayinvestments.com 67
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
-------------------------------------------------------
TAX-BASED
TAX-BASED DISTRIBUTIONS FROM
DISTRIBUTIONS FROM LONG-TERM
ORDINARY INCOME CAPITAL GAINS TOTAL
MainStay Conservative Allocation Fund $4,153,789 $1,849,200 $ 6,002,989
- -------------------------------------------------------------------------------------------------------
MainStay Growth Allocation Fund 2,203,061 1,467,657 3,670,718
- -------------------------------------------------------------------------------------------------------
MainStay Moderate Allocation Fund 7,666,873 3,543,189 11,210,062
- -------------------------------------------------------------------------------------------------------
MainStay Moderate Growth Allocation Fund 5,881,006 3,780,761 9,661,767
- -------------------------------------------------------------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Allocation
Funds. Custodial fees are charged to the Allocation Funds based on the market
value of securities in the Allocation Funds and the number of certain cash
transactions incurred by the Allocation Funds.
NOTE 6--LINE OF CREDIT:
The Allocation Funds and certain affiliated funds maintain a line of credit with
a syndicate of banks in order to secure a source of funds for temporary purposes
to meet unanticipated or excessive shareholder redemption requests. The line of
credit is in the amount of $125,000,000 and the commitment fee rate is an annual
rate of 0.10% of the average commitment amount, plus a 0.04% up-front payment
payable, regardless of usage, to The Bank of New York Mellon, which serves as
agent to the syndicate. The commitment fee and upfront payment are allocated
among certain MainStay Allocation Funds based upon net assets and other factors.
Interest on any revolving credit loan is charged based upon the Federal Funds
Advances rate or the one month LIBOR rate, whichever is higher. There were no
borrowings made or outstanding with respect to the Allocation Funds on the line
of credit during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of
securities were as follows:
<Table>
<Caption>
PURCHASES SALES
MainStay Conservative
Allocation Fund $ 50,572 $ 32,097
- -----------------------------------------------------
MainStay Growth Allocation Fund 60,773 56,394
- -----------------------------------------------------
MainStay Moderate Allocation
Fund 98,613 78,899
- -----------------------------------------------------
MainStay Moderate Growth
Allocation Fund 121,539 103,808
- -----------------------------------------------------
</Table>
NOTE 8--CAPITAL SHARE TRANSACTIONS:
MAINSTAY CONSERVATIVE ALLOCATION FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 616,244 $ 6,348,433
Shares issued to shareholders
in reinvestment of
dividends 33,208 340,791
Shares redeemed (230,988) (2,368,054)
------------------------
Net increase in shares
outstanding before
conversion 418,464 4,321,170
Shares converted into
Investor Class (See Note 1) 104,757 1,083,004
Shares converted from
Investor Class (See Note 1) (137,749) (1,426,469)
------------------------
Net increase 385,472 $ 3,977,705
========================
Year ended October 31, 2009:
Shares sold 1,043,096 $ 9,213,159
Shares issued to shareholders
in reinvestment of
dividends and distributions 95,092 839,296
Shares redeemed (478,534) (4,234,954)
------------------------
Net increase in shares
outstanding before
conversion 659,654 5,817,501
Shares converted into
Investor Class (See Note 1) 224,436 1,973,860
Shares converted from
Investor Class (See Note 1) (293,305) (2,703,150)
------------------------
Net increase 590,785 $ 5,088,211
========================
</Table>
68 Mainstay Allocation Funds
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,515,009 $ 15,581,360
Shares issued to shareholders
in reinvestment of
dividends 112,305 1,151,689
Shares redeemed (1,059,402) (10,872,579)
------------------------
Net increase in shares
outstanding before
conversion 567,912 5,860,470
Shares converted into Class A
(See Note 1) 192,042 1,985,350
Shares converted from Class A
(See Note 1) (40,117) (419,625)
------------------------
Net increase 719,837 $ 7,426,195
========================
Year ended October 31, 2009:
Shares sold 2,465,874 $ 22,198,912
Shares issued to shareholders
in reinvestment of
dividends and distributions 364,461 3,204,176
Shares redeemed (3,246,789) (28,710,259)
------------------------
Net decrease in shares
outstanding before
conversion (416,454) (3,307,171)
Shares converted into Class A
(See Note 1) 420,083 3,837,706
Shares converted from Class A
(See Note 1) (81,510) (728,644)
------------------------
Net decrease (77,881) $ (198,109)
========================
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 448,678 $ 4,593,708
Shares issued to shareholders
in reinvestment of
dividends 23,595 240,850
Shares redeemed (263,595) (2,691,417)
------------------------
Net increase in shares
outstanding before
conversion 208,678 2,143,141
Shares converted from Class B
(See Note 1) (119,465) (1,222,260)
------------------------
Net increase 89,213 $ 920,881
========================
Year ended October 31, 2009:
Shares sold 927,634 $ 8,181,497
Shares issued to shareholders
in reinvestment of
dividends and distributions 93,294 814,672
Shares redeemed (630,587) (5,521,044)
------------------------
Net increase in shares
outstanding before
conversion 390,341 3,475,125
Shares converted from Class B
(See Note 1) (270,734) (2,379,772)
------------------------
Net increase 119,607 $ 1,095,353
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 502,421 $ 5,147,382
Shares issued to shareholders
in reinvestment of
dividends 17,739 181,051
Shares redeemed (309,814) (3,177,163)
------------------------
Net increase 210,346 $ 2,151,270
========================
Year ended October 31, 2009:
Shares sold 652,807 $ 5,923,686
Shares issued to shareholders
in reinvestment of
dividends and distributions 65,419 570,929
Shares redeemed (697,069) (6,006,396)
------------------------
Net increase 21,157 $ 488,219
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 374,347 $ 3,819,107
Shares issued to shareholders
in reinvestment of
dividends 3,409 35,453
Shares redeemed (2,541) (26,453)
------------------------
Net increase 375,215 $ 3,828,107
========================
Year ended October 31, 2009:
Shares sold 3,948 $ 33,447
Shares issued to shareholders
in reinvestment of
dividends and distributions 5,420 47,811
Shares redeemed (35,384) (309,269)
------------------------
Net decrease (26,016) $ (228,011)
========================
</Table>
mainstayinvestments.com 69
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
MAINSTAY GROWTH ALLOCATION FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 818,050 $ 7,919,202
Shares issued to shareholders
in reinvestment of
dividends 32,815 315,339
Shares redeemed (490,750) (4,743,762)
------------------------
Net increase in shares
outstanding before
conversion 360,115 3,490,779
Shares converted into
Investor Class
(See Note 1) 159,475 1,539,412
Shares converted from
Investor Class
(See Note 1) (237,128) (2,334,385)
------------------------
Net increase 282,462 $ 2,695,806
========================
Year ended October 31, 2009:
Shares sold 1,791,737 $ 13,631,315
Shares issued to shareholders
in reinvestment of
dividends and distributions 146,779 1,093,500
Shares redeemed (948,066) (7,232,351)
------------------------
Net increase in shares
outstanding before
conversion 990,450 7,492,464
Shares converted into
Investor Class
(See Note 1) 596,359 4,314,229
Shares converted from
Investor Class
(See Note 1) (307,405) (2,626,232)
------------------------
Net increase 1,279,404 $ 9,180,461
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 631,181 $ 6,106,105
Shares issued to shareholders
in reinvestment of
dividends 35,844 344,422
Shares redeemed (655,392) (6,323,886)
------------------------
Net increase in shares
outstanding before
conversion 11,633 126,641
Shares converted into Class A
(See Note 1) 305,394 2,994,873
Shares converted from Class A
(See Note 1) (16,082) (160,015)
Shares converted from Class A
(a) (727) (6,836)
------------------------
Net increase 300,218 $ 2,954,663
========================
Year ended October 31, 2009:
Shares sold 1,548,088 $ 11,956,167
Shares issued to shareholders
in reinvestment of
dividends and distributions 198,242 1,476,917
Shares redeemed (2,102,290) (16,085,169)
------------------------
Net decrease in shares
outstanding before
conversion (355,960) (2,652,085)
Shares converted into Class A
(See Note 1) 417,548 3,496,827
Shares converted from Class A
(See Note 1) (321,622) (2,254,699)
------------------------
Net decrease (260,034) $ (1,409,957)
========================
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 493,481 $ 4,696,898
Shares redeemed (400,547) (3,791,096)
------------------------
Net increase in shares
outstanding before
conversion 92,934 905,802
Shares converted from Class B
(See Note 1) (214,887) (2,039,885)
------------------------
Net decrease (121,953) $ (1,134,083)
========================
Year ended October 31, 2009:
Shares sold 1,401,884 $ 10,520,578
Shares issued to shareholders
in reinvestment of
dividends and distributions 107,394 792,553
Shares redeemed (892,366) (6,724,241)
------------------------
Net increase in shares
outstanding before
conversion 616,912 4,588,890
Shares converted from Class B
(See Note 1) (390,852) (2,930,125)
------------------------
Net increase 226,060 $ 1,658,765
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 182,970 $ 1,759,007
Shares redeemed (139,701) (1,341,683)
------------------------
Net increase 43,269 $ 417,324
========================
Year ended October 31, 2009:
Shares sold 378,068 $ 2,828,909
Shares issued to shareholders
in reinvestment of
dividends and distributions 18,547 137,066
Shares redeemed (268,756) (1,997,622)
------------------------
Net increase 127,859 $ 968,353
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 11,823 $ 117,441
Shares issued to shareholders
in reinvestment of
dividends 1,011 9,797
Shares redeemed (15,860) (149,459)
------------------------
Net decrease in shares
outstanding before
conversion (3,026) (22,221)
Shares converted into Class I
(a) 720 6,836
------------------------
Net decrease (2,306) $ (15,385)
========================
Year ended October 31, 2009:
Shares sold 43,499 $ 337,914
Shares issued to shareholders
in reinvestment of
dividends and distributions 3,292 24,759
Shares redeemed (15,050) (132,396)
------------------------
Net increase 31,741 $ 230,277
========================
</Table>
70 Mainstay Allocation Funds
MAINSTAY MODERATE ALLOCATION FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,094,400 $ 11,241,532
Shares issued to shareholders
in reinvestment of
dividends 119,532 1,209,632
Shares redeemed (521,676) (5,351,472)
------------------------
Net increase in shares
outstanding before
conversion 692,256 7,099,692
Shares converted into
Investor Class
(See Note 1) 210,326 2,161,553
Shares converted from
Investor Class
(See Note 1) (286,620) (2,965,316)
------------------------
Net increase 615,962 $ 6,295,929
========================
Year ended October 31, 2009:
Shares sold 2,025,142 $ 17,534,335
Shares issued to shareholders
in reinvestment of
dividends and distributions 237,877 1,972,005
Shares redeemed (1,120,094) (9,533,913)
------------------------
Net increase in shares
outstanding before
conversion 1,142,925 9,972,427
Shares converted into
Investor Class
(See Note 1) 519,932 4,419,384
Shares converted from
Investor Class
(See Note 1) (491,213) (4,506,842)
------------------------
Net increase 1,171,644 $ 9,884,969
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 2,137,587 $ 21,982,271
Shares issued to shareholders
in reinvestment of
dividends 310,689 3,141,075
Shares redeemed (2,003,832) (20,553,276)
------------------------
Net increase in shares
outstanding before
conversion 444,444 4,570,070
Shares converted into Class A
(See Note 1) 433,339 4,468,400
Shares converted from Class A
(See Note 1) (40,131) (418,570)
Shares converted from Class A
(a) (14,050) (141,066)
------------------------
Net increase 823,602 $ 8,478,834
========================
Year ended October 31, 2009:
Shares sold 3,785,452 $ 32,954,031
Shares issued to shareholders
in reinvestment of
dividends and distributions 690,613 5,718,278
Shares redeemed (3,833,566) (32,670,474)
------------------------
Net increase in shares
outstanding before
conversion 642,499 6,001,835
Shares converted into Class A
(See Note 1) 767,948 6,892,814
Shares converted from Class A
(See Note 1) (173,414) (1,471,124)
------------------------
Net increase 1,237,033 $ 11,423,525
========================
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 813,283 $ 8,281,290
Shares issued to shareholders
in reinvestment of
dividends 80,747 812,314
Shares redeemed (520,640) (5,277,699)
------------------------
Net increase in shares
outstanding before
conversion 373,390 3,815,905
Shares converted from Class B
(See Note 1) (319,704) (3,246,067)
------------------------
Net increase 53,686 $ 569,838
========================
Year ended October 31, 2009:
Shares sold 1,866,537 $ 16,007,463
Shares issued to shareholders
in reinvestment of
dividends and distributions 233,294 1,922,339
Shares redeemed (1,289,806) (10,835,054)
------------------------
Net increase in shares
outstanding before
conversion 810,025 7,094,748
Shares converted from Class B
(See Note 1) (629,338) (5,334,232)
------------------------
Net increase 180,687 $ 1,760,516
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 640,181 $ 6,549,039
Shares issued to shareholders
in reinvestment of
dividends 36,117 363,340
Shares redeemed (421,086) (4,302,584)
------------------------
Net increase 255,212 $ 2,609,795
========================
Year ended October 31, 2009:
Shares sold 1,142,421 $ 9,962,613
Shares issued to shareholders
in reinvestment of
dividends and distributions 99,620 821,865
Shares redeemed (961,142) (8,119,122)
------------------------
Net increase 280,899 $ 2,665,356
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 415,414 $ 4,202,843
Shares issued to shareholders
in reinvestment of
dividends 9,026 91,561
Shares redeemed (44,870) (461,970)
------------------------
Net increase in shares
outstanding before
conversion 379,570 3,832,434
Shares converted into Class I
(a) 14,009 141,066
------------------------
Net increase 393,579 $ 3,973,500
========================
Year ended October 31, 2009:
Shares sold 24,738 $ 211,043
Shares issued to shareholders
in reinvestment of
dividends and distributions 20,600 170,981
Shares redeemed (203,976) (1,687,162)
------------------------
Net decrease (158,638) $ (1,305,138)
========================
</Table>
mainstayinvestments.com 71
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
MAINSTAY MODERATE GROWTH ALLOCATION FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,457,055 $ 14,561,213
Shares issued to shareholders
in reinvestment of
dividends 121,665 1,202,013
Shares redeemed (728,255) (7,264,155)
------------------------
Net increase in shares
outstanding before
conversion 850,465 8,499,071
Shares converted into
Investor Class
(See Note 1) 266,499 2,670,016
Shares converted from
Investor Class
(See Note 1) (295,789) (2,987,080)
------------------------
Net increase 821,175 $ 8,182,007
========================
Year ended October 31, 2009:
Shares sold 2,657,380 $ 21,329,842
Shares issued to shareholders
in reinvestment of
dividends and distributions 302,888 2,341,328
Shares redeemed (1,407,854) (11,232,360)
------------------------
Net increase in shares
outstanding before
conversion 1,552,414 12,438,810
Shares converted into
Investor Class
(See Note 1) 726,073 5,652,479
Shares converted from
Investor Class
(See Note 1) (494,539) (4,439,730)
------------------------
Net increase 1,783,948 $ 13,651,559
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,684,097 $ 16,977,986
Shares issued to shareholders
in reinvestment of
dividends 195,312 1,927,124
Shares redeemed (1,283,855) (12,837,022)
------------------------
Net increase in shares
outstanding before
conversion 595,554 6,068,088
Shares converted into Class A
(See Note 1) 444,396 4,472,385
Shares converted from Class A
(See Note 1) (70,049) (716,603)
------------------------
Net increase 969,901 $ 9,823,870
========================
Year ended October 31, 2009:
Shares sold 2,089,989 $ 17,107,076
Shares issued to shareholders
in reinvestment of
dividends and distributions 563,061 4,352,901
Shares redeemed (3,450,437) (26,892,287)
------------------------
Net decrease in shares
outstanding before
conversion (797,387) (5,432,310)
Shares converted into Class A
(See Note 1) 817,460 7,079,264
Shares converted from Class A
(See Note 1) (321,889) (2,445,283)
------------------------
Net decrease (301,816) $ (798,329)
========================
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 973,590 $ 9,604,206
Shares issued to shareholders
in reinvestment of
dividends 62,973 616,516
Shares redeemed (662,110) (6,525,120)
------------------------
Net increase in shares
outstanding before
conversion 374,453 3,695,602
Shares converted from Class B
(See Note 1) (349,079) (3,438,718)
------------------------
Net increase 25,374 $ 256,884
========================
Year ended October 31, 2009:
Shares sold 2,201,379 $ 17,472,134
Shares issued to shareholders
in reinvestment of
dividends and distributions 278,703 2,137,709
Shares redeemed (1,597,714) (12,420,435)
------------------------
Net increase in shares
outstanding before
conversion 882,368 7,189,408
Shares converted from Class B
(See Note 1) (735,846) (5,846,730)
------------------------
Net increase 146,522 $ 1,342,678
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 347,675 $ 3,450,000
Shares issued to shareholders
in reinvestment of
dividends 13,881 135,896
Shares redeemed (239,627) (2,344,514)
------------------------
Net increase 121,929 $ 1,241,382
========================
Year ended October 31, 2009:
Shares sold 649,117 $ 5,294,128
Shares issued to shareholders
in reinvestment of
dividends and distributions 62,000 475,541
Shares redeemed (650,189) (5,124,316)
------------------------
Net increase 60,928 $ 645,353
========================
</Table>
72 Mainstay Allocation Funds
<Table>
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 6,431 $ 64,106
Shares issued to shareholders
in reinvestment of
dividends 1,122 11,153
Shares redeemed (1,499) (15,211)
------------------------
Net increase 6,054 $ 60,048
========================
Year ended October 31, 2009:
Shares sold 17,900 $ 135,608
Shares issued to shareholders
in reinvestment of
dividends and distributions 2,684 20,883
Shares redeemed (11,203) (92,469)
------------------------
Net increase 9,381 $ 64,022
========================
(a) In addition to any automatic conversion features
described above in Note 1 with respect to Investor
Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis
into another share class of the same fund for which
you are eligible. However, the following
limitations apply:
</Table>
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Allocation Funds have adopted ASU 2010-06. The adoption of
ASU 2010-06 has not impacted the amounts reported in the Allocation Funds'
financial statements; however, there are additional disclosures in each of the
Allocation Funds' Portfolio of Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Allocation
Funds as of and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Allocation Funds' management
for possible adjustment and/or disclosure. No subsequent events requiring
financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 73
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Funds' securities is available without charge,
upon request, (i) by visiting the Funds' website at mainstayinvestments.com; and
(ii) 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 is available free of charge upon request by calling 800-MAINSTAY (624-
6782); visiting the Funds' website at mainstayinvestments.com; or on the SEC's
website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
Each Allocation Fund is required to file its complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q. The
Funds' Form N-Q is available without charge, on the SEC's website at www.sec.gov
or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can
obtain and review copies of Form N-Q by visiting the SEC's Public Reference Room
in Washington, DC (information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330).
74 Mainstay Allocation Funds
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
(C) 2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18302 MS121-10 MSAA10-06/10
A2
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH GLOBAL CHOICE FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during this period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six months ended April 30, 2010, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the six-month period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
During the period covered by this report, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the period covered by this report. Of course, past performance is
no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH GLOBAL CHOICE FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 14
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 20
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 27
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 27
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (7/25/05)
- --------------------------------------------------------
With sales charges -3.33% 22.13% -1.57%
Excluding sales charges 2.30 29.24 -0.39
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MSCI WORLD RUSSELL 3000(R)
INVESTOR CLASS INDEX INDEX
-------------- ---------- ---------------
07/25/05 9450 10000 10000
04/30/06 9935 11797 10926
04/30/07 11134 13800 12509
04/30/08 11472 13459 11864
04/30/09 7175 8165 7718
04/30/10 9274 11188 10874
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (8/15/06)
- --------------------------------------------------------
With sales charges -3.33% 22.13% -2.48%
Excluding sales charges 2.30 29.23 -0.99
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MSCI WORLD RUSSELL 3000(R)
CLASS A INDEX INDEX
------- ---------- ---------------
08/15/06 23625 25000 25000
04/30/07 27344 29805 29341
04/30/08 28173 29069 27829
04/30/09 17622 17636 18103
04/30/10 22773 24165 25508
</Table>
CLASS C SHARES(2)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (7/25/05)
- --------------------------------------------------------
With sales charges 1.08% 27.39% -0.73%
Excluding sales charges 2.08 28.39 -0.73
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MSCI WORLD RUSSELL 3000(R)
CLASS C INDEX INDEX
------- ---------- ---------------
07/25/05 10000 10000 10000
04/30/06 10453 11797 10926
04/30/07 11641 13800 12509
04/30/08 11895 13459 11864
04/30/09 7523 8165 7718
04/30/10 9659 11188 10874
</Table>
1. Performance tables and graphs do not reflect the deduction of the taxes that
a shareholder would pay on distribution or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge and
are subject to a contingent deferred sales charge ("CDSC") 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 or
individual investors with a minimum initial investment of $5 million.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. The Fund is the successor to the Epoch U.S. All Cap
Equity Fund. Effective January 4, 2010, the Fund changed its fiscal year end
from December 31 to October 31.
2. Performance figures for Investor Class and Class C shares, first offered
November 16, 2009, include the historical performance of Class I shares
through November 15, 2009 adjusted for differences in certain contractual
expenses and fees.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (7/25/05)
- --------------------------------------------------------
2.47% 29.68% 0.27%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MSCI WORLD RUSSELL 3000(R)
CLASS I INDEX INDEX
------- ---------- ---------------
07/25/05 10000 10000 10000
04/30/06 10533 11797 10926
04/30/07 11848 13800 12509
04/30/08 12229 13459 11864
04/30/09 7812 8165 7718
04/30/10 10131 11188 10874
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE FOUR ONE SINCE
MONTHS YEAR INCEPTION
MSCI World Index(4) 3.25% 37.02% 2.38%
Russell 3000(R) Index(5) 8.23 40.90 1.77
Average Lipper global multi-cap core fund(6) 3.72 37.46 1.84
</Table>
3. Performance figures for Class I shares and Class A shares reflect the
historical performance of the Institutional shares and the Class P shares,
respectively, of the Epoch U.S. All Cap Equity Fund (which was subject to a
different fee structure.)
4. The MSCI World Index is a free float-adjusted market capitalization weighted
index that is designed to measure the equity market performance of developed
markets. As of April 30, 2010, the MSCI World Index consisted of the
following 23 developed market country indices: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy,
Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States, Total returns assume
reinvestment of all dividends and capital gains. The Fund has selected the
MSCI World Index in replacement of the Russell 3000(R) Index as its broad-
based securities market Index for comparison purposes because of a change in
investment strategy in connection with the reorganization of the Epoch U.S.
All Cap Equity Fund with and into the Fund. An investment cannot be made
directly in an Index.
5. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Total returns assume
reinvestment of all dividends and capital gains. An investment cannot be made
directly in an index.
6. The average Lipper global multi-cap core fund is representative of funds
that, by portfolio practice, invest in a variety of market capitalization
ranges without concentrating 75% of their equity assets in any one market-
capitalization range over an extended period of time. Global-cap core funds
typically have an average price-to cash flow ratio, price-to-book ratio, and
three-year sales-per-share growth value compared to the S&P/Citigroup BMI
Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on total returns
with all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Epoch Global Choice Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY EPOCH GLOBAL CHOICE FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09(3 ) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES(2) $1,000.00 $1,036.50 $ 7.36 $1,015.80 $ 7.28
- ---------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,092.90 $ 8.04 $1,017.10 $ 7.75
- ---------------------------------------------------------------------------------------------------------
CLASS C SHARES(2) $1,000.00 $1,033.30 $10.95 $1,012.20 $10.84
- ---------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,094.30 $ 6.75 $1,018.30 $ 6.51
- ---------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.57% for Investor Class, 1.55% for Class A, 2.34% for Class C and 1.30% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 days for Class A and Class I (to reflect the one-
half year period) and 168 days for Investor Class and Class C (to reflect the
since-inception period).The table above represents actual expenses incurred
during the one-half year period.
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010, and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $7.85 for Investor Class and $11.68 for Class C and the ending account
value would have been $1,017.00 for Investor Class and $1,013.20 for Class C.
3. Investor Class and Class C shares began investment operations on November 16,
2009.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Software 12.6%
Aerospace & Defense 8.1
Health Care Providers & Services 7.4
Automobiles 6.2
IT Services 5.6
Pharmaceuticals 4.6
Capital Markets 4.5
Wireless Telecommunication Services 3.5
Media 3.3
Internet Software & Services 3.1
Life Sciences Tools & Services 3.1
Electronic Equipment & Instruments 3.0
Machinery 3.0
Road & Rail 2.9
Specialty Retail 2.9
Chemicals 2.8
Insurance 2.8
Beverages 2.7
Diversified Financial Services 2.6
Food Products 2.5
Oil, Gas & Consumable Fuels 2.4
Auto Components 2.3
Electrical Equipment 2.2
Food & Staples Retailing 2.0
Commercial Banks 1.5
Other Assets, Less Liabilities 2.4
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010
<Table>
1. Microsoft Corp.
2. Hyundai Motor Co.
3. Vodafone Group PLC
4. Bombardier, Inc.
5. Comcast Corp. Class A
6. Yahoo!, Inc.
7. Thermo Fisher Scientific, Inc.
8. Danaher Corp.
9. Sybase, Inc.
10. Corning, Inc.
</Table>
8 MainStay Epoch Global Choice Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS(1)
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS WILLIAM PRIEST, CFA, AND MICHAEL
WELHOELTER, CFA, OF EPOCH INVESTMENT PARTNERS, INC. (EPOCH), THE FUND'S
SUBADVISOR.
HOW DID MAINSTAY EPOCH GLOBAL CHOICE FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK FOR THE FOUR MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Epoch Global Choice Fund returned 2.30%
for Investor Class shares, 2.30% for Class A shares and 2.08% for Class C shares
for the four months ended April 30, 2010. Over the same period, the Fund's Class
I shares returned 2.47%. All share classes underperformed the 3.72% return of
the average Lipper(2) global multi-cap core fund, the 8.23% return of the
Russell 3000(R) Index() and the 3.25% return of the MSCI World Index() for the
four months ended April 30, 2010. The MSCI World Index is the Fund's broad-based
securities-market index. See page 5 for Fund returns with sales charges.
WHAT MAJOR FACTORS INFLUENCED THE FUND'S RELATIVE PERFORMANCE DURING THE FOUR-
MONTH REPORTING PERIOD?
The period saw a continuation of the market's focus on lower-quality stocks that
began in March 2009, as short rates collapsed by nearly five percentage points
from midyear 2007, coupled with growing confidence that the worst recession
since World War II was behind us. Companies with less-visible cash flows, high
financial leverage and smaller capitalizations performed well, as did materials
and other cyclical sectors. Our view remained that these factors had run their
course as market drivers. We believed that a more important consideration would
be Europe's ability to solve a financial crisis emanating from the Greek debt
situation and the United States' ability to transition to a sustainable recovery
led by the private sector. Market levels had priced in only positive assumptions
in both cases.
Global equity markets recorded positive returns during the reporting period, and
the Fund rose as well. The main positive factor in the Fund's performance
relative to the MSCI World Index was stock selection in the financials, consumer
discretionary and health care sectors. In addition, the Fund benefited by having
little exposure to underperforming sectors such as utilities. Somewhat
offsetting these positive factors was the underperformance of holdings in
information technology and industrials compared to the average returns of the
respective sectors in the Index. The health care sector lagged the Index return
as the uncertainty surrounding health care reform played out.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH SECTORS MADE THE WEAKEST
CONTRIBUTIONS?
On an absolute basis, the strongest-contributing sectors to the Fund's
performance were consumer discretionary, financials and industrials. On the
whole, the Fund's consumer discretionary holdings performed well as investors
continued to expect improvements in employment and wage growth. Financials
marginally outperformed the MSCI World Index, as concerns mounted over the
potential impact of global regulatory reform in the wake of the Security and
Exchange Commission's case against Goldman Sachs. Financial companies with the
least credit exposure performed best. The Fund's holdings in the industrials
sector also performed well, especially those with exposure to the aerospace
industry.
During the reporting period, the sectors that detracted the most from the Fund's
absolute performance were materials, telecommunication services and information
technology. Materials stocks in general paused after a strong run in 2009, as
investors began to discount the effects of an economic slowdown in China. Metals
stocks were particularly hard hit. Telecommunication services lagged other
sectors as investors found defensive companies less appealing than those with
greater economic sensitivity. Information technology stocks generally performed
well, but our holdings lagged smaller-capitalization information technology
stocks. Companies with more exposure to hardware and companies that manufacture
commodity-type products were the strongest performers.
WHICH INDIVIDUAL STOCKS WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE
PERFORMANCE DURING THE REPORTING PERIOD AND WHICH STOCKS DETRACTED?
On an absolute basis, insurance company Prudential Financial, cable company
Comcast and Korea-based automotive company Hyundai Motor made the strongest
contributions to the Fund's performance. Prudential Financial advanced during
the four months ended April 30, 2010, as investors sought high quality financial
stocks that had previously lagged other more speculative banks. Comcast
benefited from valuation improvements, expected decreases in capital
expenditures and anticipated synergies with NBC Universal. Hyundai Motor saw its
share price rise on increasing
1. Effective January 4, 2010, the Fund's fiscal year-end changed from December
31 to October 31. As a result, the following discussion covers the four-month
reporting period ended April 30, 2010.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Russell 3000(R) Index.
4. See footnote on page 6 for more information on the MSCI World Index.
mainstayinvestments.com 9
sales in China and investors' hopes that the company could capitalize on turmoil
in the U.S. auto market.
Health care and science company Bayer A.G., agricultural products company
Monsanto and diversified health care benefits company Aetna were among the
greatest detractors from the Fund's absolute performance during the four-month
reporting period. Shares of Bayer A.G. declined on disappointing guidance for
the company's health care and crop science units. Monsanto suffered from lower-
than-expected demand from farmers, especially in northern markets. Shares of
Aetna fell because of poor product pricing and investor concerns about health
care reform legislation.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Among the stocks that the Fund purchased during the reporting period were
Internet software & services company Yahoo!, aerospace & defense company
Bombardier and Comcast. We established a Fund position in Yahoo! to take
advantage of the company's partnership with Microsoft. We believed that the
partnership would help Yahoo! reduce expenses, increase market share and
possibly benefit from increased online advertising. Our investment in Bombardier
reflected our view that the transportation segment is a stable and growing
profit and cash-flow contributor that is underappreciated by investors. We
believed that Bombardier's rail segment could benefit from rail stimulus
spending in the United States, and we were attracted by the company's strong
position in emerging markets, including China. We liked Comcast not only for its
leading position within its industry but also because it increased its return of
capital to shareholders through an expanded share buyback. In our view,
Comcast's acquisition of NBC should offer strategic benefits and increase the
shares' valuation.
During the reporting period, we exited the Fund's position in Monsanto as we
became concerned over pricing issues for the company's products. We eliminated
the Fund's holdings in Aetna, believing expectations had not fully discounted
the potential negatives of health care reform legislation. We sold the Fund's
position in computers & peripherals company Apple ahead of the release of the
iPad on the belief that the stock had achieved fair value.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, we increased the Fund's weightings in the
industrials, consumer discretionary and financials sectors. Within industrials,
we added Fund positions in aerospace & defense companies Boeing and Bombardier
and cable manufacturer Prysmian. In consumer discretionary, we added Fund
positions in Comcast, auto manufacturer Daimler Benz and specialty retailer TJX.
In financials, we added Fund positions in capital markets company Ameriprise,
bank holding company CIT Group and brokerage services provider TD Ameritrade.
We reduced the Fund's exposure to the health care, consumer staples and
information technology sectors. In health care, we sold positions in Aetna,
dialysis service provider DaVita and pharmaceutical and diagnostics company
Roche Holding. In consumer staples, we sold positions in international tobacco
company Imperial Tobacco and discount retailing giant Wal-Mart Stores. In
information technology, we sold the Fund's positions in Apple and Taiwan
Semiconductor Manufacturing Company.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010, AND HOW DID THIS
POSITIONING AFFECT THE FUND'S PERFORMANCE?
As of April 30, 2010, the Fund's most substantially overweight sectors relative
to the MSCI World Index were information technology and health care. The
overweight postion in information technology detracted, largely because of the
Fund's sizable position in Microsoft, which underperformed the sector. Because
of effective stock selection, the Fund's overweight position in health care
contributed positively to the Fund's relative performance during the reporting.
On the same date, the Fund's most substantially underweight sectors relative to
the MSCI World Index were financials and energy. Effective stock selection in
both of these sectors helped the Fund's relative 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 forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Epoch Global Choice Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 94.7%+
- ----------------------------------------------------
AEROSPACE & DEFENSE 8.1%
Boeing Co. (The) 19,800 $ 1,434,114
V Bombardier, Inc. 392,500 2,047,893
Rockwell Collins, Inc. 24,200 1,573,000
-----------
5,055,007
-----------
AUTO COMPONENTS 2.3%
Nifco, Inc./Japan 64,800 1,447,518
-----------
AUTOMOBILES 6.2%
Daimler A.G. (a) 32,350 1,669,312
V Hyundai Motor Co. 18,150 2,218,186
-----------
3,887,498
-----------
BEVERAGES 2.7%
InBev N.V. 34,350 1,671,378
-----------
CAPITAL MARKETS 4.5%
Ameriprise Financial, Inc. 26,450 1,226,222
TD Ameritrade Holding Corp.
(a) 79,150 1,584,583
-----------
2,810,805
-----------
CHEMICALS 2.8%
Praxair, Inc. 20,750 1,738,228
-----------
COMMERCIAL BANKS 1.5%
Toronto-Dominion Bank (The) 12,550 932,787
-----------
DIVERSIFIED FINANCIAL SERVICES 2.6%
CIT Group, Inc. (a) 39,550 1,605,730
-----------
ELECTRICAL EQUIPMENT 2.2%
Prysmian S.p.A. 76,000 1,365,415
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS 3.0%
V Corning, Inc. 95,956 1,847,153
-----------
FOOD & STAPLES RETAILING 2.0%
Metro A.G. 20,900 1,255,974
-----------
FOOD PRODUCTS 2.5%
Nestle S.A. Registered 31,700 1,547,102
-----------
HEALTH CARE PROVIDERS & SERVICES 7.4%
Diagnosticos da America S.A. 173,900 1,510,652
Fresenius Medical Care A.G. &
Co. KGaA 28,250 1,531,033
Laboratory Corp. of America
Holdings (a) 20,050 1,575,328
-----------
4,617,013
-----------
INSURANCE 2.8%
Prudential Financial, Inc. 27,050 1,719,298
-----------
INTERNET SOFTWARE & SERVICES 3.1%
V Yahoo!, Inc. (a) 118,750 1,962,938
-----------
IT SERVICES 5.6%
Cielo S.A. 175,000 1,699,410
Visa, Inc. Class A 19,960 1,800,991
-----------
3,500,401
-----------
LIFE SCIENCES TOOLS & SERVICES 3.1%
V Thermo Fisher Scientific,
Inc. (a) 35,200 1,945,856
-----------
MACHINERY 3.0%
V Danaher Corp. 22,200 1,871,016
-----------
MEDIA 3.3%
V Comcast Corp. Class A 108,600 2,047,110
-----------
OIL, GAS & CONSUMABLE FUELS 2.4%
Anadarko Petroleum Corp. 24,350 1,513,596
-----------
PHARMACEUTICALS 4.6%
Bayer A.G. 18,750 1,199,629
Teva Pharmaceutical
Industries, Ltd., Sponsored
ADR (b) 28,800 1,691,424
-----------
2,891,053
-----------
SOFTWARE 12.6%
V Microsoft Corp. 136,100 4,156,494
Oracle Corp. 70,780 1,828,955
V Sybase, Inc. (a) 42,850 1,858,833
-----------
7,844,282
-----------
SPECIALTY RETAIL 2.9%
TJX Cos., Inc. 39,300 1,821,162
-----------
WIRELESS TELECOMMUNICATION SERVICES 3.5%
V Vodafone Group PLC 968,500 2,152,980
-----------
Total Common Stocks
(Cost $55,913,527) 59,051,300
-----------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010. Any of the ten
largest holdings may be a security
traded on more than one exchange. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
PREFERRED STOCK 2.9%
- ----------------------------------------------------
ROAD & RAIL 2.9%
All America Latina Logistica
S.A.
0.07% 198,100 $ 1,802,929
-----------
Total Preferred Stock
(Cost $1,777,620) 1,802,929
-----------
Total Investments
(Cost $57,691,147) (c) 97.6% 60,854,229
Other Assets, Less Liabilities 2.4 1,512,469
------- -----------
Net Assets 100.0% $62,366,698
======= ===========
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) At April 30, 2010, cost is $57,919,418
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $3,898,926
Gross unrealized depreciation (964,115)
----------
Net unrealized appreciation $2,934,811
==========
</Table>
12 MainStay Epoch Global Choice Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks (b) $42,992,773 $16,058,527 $ -- $59,051,300
Preferred Stocks 1,802,929 -- -- 1,802,929
----------- ----------- -------- -----------
Total Investments in Securities $44,795,702 $16,058,527 $-- $60,854,229
----------- ----------- -------- -----------
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 2 assets represent the following international equities: Hyundai Motor
Co., InBev N.V., Nifco, Inc./Japan, Nestle S.A. Registered, Bayer A.G.,
Metro A.G., Fresenius Medical Care A.G. & Co. KGaA, Daimler A.G., Vodafone
Group PLC and Prysmian S.p.A..
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The Fund recognizes transfers between the levels as of the beginning of the
period.
The table below sets forth the diversification of the MainStay Epoch Global
Choice Fund portfolio investments by country.
COUNTRY COMPOSITION
<Table>
<Caption>
VALUE PERCENT+
Belgium $ 1,671,378 2.7%
Brazil 5,012,991 8.0
Canada 2,980,680 4.8
Germany 5,655,948 9.1
Israel 1,691,424 2.7
Italy 1,365,415 2.2
Japan 1,447,518 2.3
South Korea 2,218,186 3.6
Switzerland 1,547,102 2.5
United Kingdom 2,152,980 3.4
United States 35,110,607 56.3
----------- -----
60,854,229 97.6
Other Assets, Less
Liabilities 1,512,469 2.4
----------- -----
Net Assets $62,366,698 100.0%
=========== =====
</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. mainstayinvestments.com
13
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $57,691,147) $ 60,854,229
Cash denominated in foreign
currencies
(identified cost $204,078) 204,134
Receivables:
Investment securities sold 952,889
Fund shares sold 560,607
Dividends and interest 65,382
Other assets 105,034
------------
Total assets 62,742,275
------------
LIABILITIES:
Due to custodian 271,139
Payables:
Manager (See Note 3) 41,883
Shareholder communication 20,635
Custodian 17,725
Professional fees 7,385
Transfer agent (See Note 3) 624
NYLIFE Distributors (See Note 3) 569
Accrued expenses 15,617
------------
Total liabilities 375,577
------------
Net assets $ 62,366,698
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 4,417
Additional paid-in capital 72,860,279
------------
72,864,696
Accumulated net investment income 17,891
Accumulated net realized loss on
investments and foreign currency
transactions (13,678,863)
Net unrealized appreciation on
investments 3,163,082
Net unrealized depreciation on
translation of other assets and
liabilities in foreign currencies (108)
------------
Net assets $ 62,366,698
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 77,806
============
Shares of beneficial interest
outstanding 5,636
============
Net asset value per share
outstanding $ 13.81
Maximum sales charge (5.50% of
offering price) 0.80
------------
Maximum offering price per share
outstanding $ 14.61
============
CLASS A
Net assets applicable to
outstanding shares $ 2,381,636
============
Shares of beneficial interest
outstanding 172,506
============
Net asset value per share
outstanding $ 13.81
Maximum sales charge (5.50% of
offering price) 0.80
------------
Maximum offering price per share
outstanding $ 14.61
============
CLASS C
Net assets applicable to
outstanding shares $ 30,881
============
Shares of beneficial interest
outstanding 2,243
============
Net asset value and offering price
per share outstanding $ 13.77
============
CLASS I
Net assets applicable to
outstanding shares $ 59,876,375
============
Shares of beneficial interest
outstanding 4,236,370
============
Net asset value and offering price
per share outstanding $ 14.13
============
</Table>
14 MainStay Epoch Global Choice Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2010 (A) THROUGH APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (b) $ 322,662
Interest 72
----------
Total income 322,734
----------
EXPENSES:
Manager (See Note 3) 183,215
Registration 41,029
Custodian 22,012
Professional fees 19,953
Shareholder communication 18,563
Transfer agent (See Note 3) 3,154
Distribution/Service--Investor
Class (See Note 3) 34
Distribution/Service--Class A (See
Note 3) 2,214
Distribution/Service--Class C (See
Note 3) 92
Trustees 1,185
Miscellaneous 1,851
----------
Total expenses before waiver 293,302
Expense waiver from Manager (See
Note 3) (54,589)
----------
Net expenses 238,713
----------
Net investment income 84,021
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on:
Security transactions (7,252)
Foreign currency transactions (83,971)
----------
Net realized loss on investments and
foreign currency transactions (91,223)
----------
Net change in unrealized
appreciation on:
Investments 1,653,097
Translation of other assets and
liabilities in foreign
currencies (161)
----------
Net change in unrealized
appreciation on investments and
foreign currency transactions 1,652,936
----------
Net realized and unrealized gain on
investments and foreign currency
transactions 1,561,713
----------
Net increase in net assets resulting
from operations $1,645,734
==========
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Dividends recorded net of foreign withholding taxes in the amount of
$30,591.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 1, 2010 THROUGH APRIL 30, 2010 UNAUDITED, THE YEAR ENDED
DECEMBER 31, 2009 (A) AND THE YEAR ENDED DECEMBER 31, 2008.
<Table>
<Caption>
2010 2009 2008
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment
income $ 84,021 $ 389,464 $ 284,842
Net realized loss on
investments and
foreign currency
transactions (91,223) (7,201,136) (7,027,933)
Net change in
unrealized
appreciation
(depreciation) on
investments and
foreign currency
transactions 1,652,936 22,464,691 (24,585,095)
---------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 1,645,734 15,653,019 (31,328,186)
---------------------------------------
Dividends and
distributions to
shareholders:
From net investment
income:
Investor Class -- (88) --
Class A -- (16,477) (1,048)
Class C -- (71) --
Class I -- (376,919) (273,159)
---------------------------------------
-- (393,555) (274,207)
---------------------------------------
From net realized
gain on
investments:
Class A -- -- (21)
Class I -- -- (3,069)
---------------------------------------
-- -- (3,090)
---------------------------------------
Total dividends and
distributions to
shareholders -- (393,555) (277,297)
---------------------------------------
Capital share
transactions:
Net proceeds from
sale of shares $28,524,135 $ 42,609,969 $ 74,961,349
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions -- 349,914 258,181
Cost of shares
redeemed (b) (9,807,236) (73,269,346) (21,591,079)
---------------------------------------
Increase
(decrease) in net
assets derived
from capital
share
transactions 18,716,899 (30,309,463) 53,628,451
---------------------------------------
Net increase
(decrease) in net
assets 20,362,633 (15,049,999) 22,022,968
NET ASSETS:
Beginning of period 42,004,065 57,054,064 35,031,096
---------------------------------------
End of period $62,366,698 $ 42,004,065 $ 57,054,064
=======================================
Accumulated
undistributed
(distributions in
excess of) net
investment income at
end of period $ 17,891 $ (66,130) $ 11,020
=======================================
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Cost of shares redeemed net of redemption fee of $1,305 for the year ended
December 31, 2008.
16 MainStay Epoch Global Choice 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
------------------------------
JANUARY 1, NOVEMBER 16,
2010*** 2009**
THROUGH THROUGH
APRIL 30, DECEMBER 31,
2010* 2009
Net asset value at beginning of
period $13.49 $13.36
------ ------
Net investment income (loss) 0.01 (a) 0.00 (a)++
Net realized and unrealized gain
(loss) on investments 0.33 0.18
Net realized and unrealized loss on
foreign currency transactions (0.02) (0.00)++
------ ------
Total from investment operations 0.32 0.18
------ ------
Less dividends and distributions:
From net investment income -- (0.05)
From net realized gain on
investments -- --
------ ------
Total dividends and distributions -- (0.05)
------ ------
Redemption fee (e) -- --
------ ------
Net asset value at end of period $13.81 $13.49
====== ======
Total investment return (b) 2.37%(c)(d) 1.33%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.30%++ 0.03%++
Net expenses 1.58%++ 1.53%++
Expenses (before
waiver/recoupment) 1.90%++ 1.72%++
Portfolio turnover rate 55% 74%
Net assets at end of period (in
000's) $ 78 $ 28
</Table>
<Table>
<Caption>
CLASS C
------------------------------
JANUARY 1, NOVEMBER 16,
2010*** 2009**
THROUGH THROUGH
APRIL 30, DECEMBER 31,
2010* 2009
Net asset value at beginning of
period $13.49 $13.36
------ ------
Net investment income (loss) (0.03)(a) (0.01)(a)
Net realized and unrealized gain
(loss) on investments 0.33 0.17
Net realized and unrealized loss on
foreign currency transactions (0.02) (0.00)++
------ ------
Total from investment operations 0.28 0.16
------ ------
Less dividends and distributions:
From net investment income -- (0.03)
From net realized gain on
investments -- --
------ ------
Total dividends and distributions -- (0.03)
------ ------
Redemption fee (e) -- --
------ ------
Net asset value at end of period $13.77 $13.49
====== ======
Total investment return (b) 2.08%(c) 1.23%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.60%)++ (0.78%)++
Net expenses 2.33% ++ 2.28% ++
Expenses (before
waiver/recoupment) 2.64% ++ 2.47% ++
Portfolio turnover rate 55% 74%
Net assets at end of period (in
000's) $ 31 $ 28
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
(e) The redemption fee was discontinued, as of April 1, 2010.
</Table>
18 MainStay Epoch Global Choice Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
CLASS A
---------------------------------------------------------------------------------
JANUARY 1, AUGUST 15,
2010*** 2006**
THROUGH THROUGH
APRIL 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
$13.49 $10.84 $ 17.43 $16.97 $15.31
------ ------ ------- ------ ------
0.01 (a) 0.04 (a) 0.02 (a) 0.01 (0.01)
0.33 2.70 (6.58) 1.45 1.67
(0.02) (0.01) -- -- --
------ ------ ------- ------ ------
0.32 2.73 (6.56) 1.46 1.66
------ ------ ------- ------ ------
-- (0.08) (0.03) (0.01) --
-- -- (0.00)++ (1.05) --
------ ------ ------- ------ ------
-- (0.08) (0.03) (1.06) --
------ ------ ------- ------ ------
-- -- -- 0.06 --
------ ------ ------- ------ ------
$13.81 $13.49 $ 10.84 $17.43 $16.97
====== ====== ======= ====== ======
2.37%(c)(d) 25.17% (37.63%) 8.90% 10.84% (c)
0.18%++ 0.30% 0.21% 0.01% (0.21%)++
1.54%++ 1.55% 1.54% 1.54% 1.54% ++
1.84%++ 1.78% 1.75% 1.95% 1.97% ++
55% 74% 47% 43% 64%
$2,382 $2,973 $ 339 $ 120 $ 142
</Table>
<Table>
<Caption>
CLASS I
----------------------------------------------------------------------------------------------------
JANUARY 1, JULY 25,
2010*** 2005**
THROUGH THROUGH
APRIL 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006 2005
$ 13.79 $ 11.06 $ 17.47 $ 16.99 $ 14.91 $ 15.00
------- ------- ------- ------- ------- -------
0.02 (a) 0.07 (a) 0.05 (a) 0.04 0.01 (0.00)++
0.34 2.76 (6.41) 1.54 2.07 (0.09)
(0.02) (0.01) -- -- -- --
------- ------- ------- ------- ------- -------
0.34 2.82 (6.36) 1.58 2.08 (0.09)
------- ------- ------- ------- ------- -------
-- (0.09) (0.05) (0.05) (0.00)++ --
-- -- (0.00)++ (1.05) -- --
------- ------- ------- ------- ------- -------
-- (0.09) (0.05) (1.10) (0.00)++ --
------- ------- ------- ------- ------- -------
-- -- 0.00 ++ -- -- --
------- ------- ------- ------- ------- -------
$ 14.13 $ 13.79 $ 11.06 $ 17.47 $ 16.99 $ 14.91
======= ======= ======= ======= ======= =======
2.47%(c) 25.53% (36.37%) 9.27% 13.96% 0.60% (c)
0.47%++ 0.62% 0.42% 0.26% 0.05% (0.07%)++
1.29%++ 1.29% 1.29% 1.29% 1.29% 1.29% ++
1.60%++ 1.54% 1.50% 1.70% 1.72% 2.55% ++
55% 74% 47% 43% 64% 17%
$59,876 $38,976 $56,715 $34,911 $27,108 $14,088
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Epoch Global Choice Fund (the "Fund"), a
diversified fund. The Fund is the successor to the Epoch U.S. All Cap Equity
Fund (the "Predecessor Fund"), which was a series of a different registered
investment company for which Epoch Investment Partners, Inc. served as
investment adviser.
The Fund currently offers 4 classes of shares. Investor Class and Class C shares
were seeded as of the close of business on November 13, 2009 and were first
offered and commenced operations on November 16, 2009. Class I shares and Class
A shares commenced operations (under former designations) on July 25, 2005 and
August 15, 2006, respectively. Effective, January 4, 2010, the Fund changed its
fiscal year end and tax year end from December 31 to October 31. Investor Class
and Class A shares are offered at net asset value ("NAV") per share plus an
initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class C shares are
offered at NAV without an initial sales charge, although a 1.00% contingent
deferred sales charge may be imposed on redemptions made within one year of
purchase of Class C shares. Class I shares are offered at NAV and are not
subject to a sales charge. Depending upon eligibility, Investor Class shares may
convert to Class A shares and Class A shares may convert to Investor Class
shares. The four classes of shares have the same voting (except for issues that
relate solely to one class), dividend, liquidation and other rights, and the
same terms and conditions, except that Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek long term capital appreciation.
The financial statements of the Fund reflect the historical results of the
Institutional Class and P shares of the Predecessor Fund prior to its
reorganization. (See Note 10.) Upon the completion of the reorganization, the
Class I and Class A shares of the Fund assumed the performance, financial and
other information of the Institutional Class and Class P shares, respectively.
All information regarding and references to periods prior to the commencement of
operations of the Fund refer to the Predecessor Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Investments in other mutual funds are valued at their NAVs as of the close of
the New York Stock Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector, significant fluctuations in U.S.
or foreign markets, natural disasters, armed conflicts, governmental actions or
other developments not tied directly to the securities markets. Should the
Manager or Subadvisor, as defined in Note 3(A), conclude that such events may
have affected the accuracy of the last price reported on the local foreign
market, the Manager or Subadvisor may, pursuant to procedures adopted by the
Fund's Board, adjust the value of the local price to reflect the impact on the
price of such securities as a result of such events. Additionally, international
equity securities are also fair valued whenever the movement of a particular
index exceeds certain thresholds. In such cases, the securities are fair valued
by applying factors provided by a third party vendor in accordance with the
Fund's policies and procedures. At April 30, 2010, certain foreign equity
securities held by the Fund were fair valued.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is
20 MainStay Epoch Global Choice Fund
not a current market quotation; (iii) a security of an issuer that has entered
into a restructuring; (iv) a security that has been de-listed from a national
exchange; (v) a security the market price of which is not available from an
independent pricing source or, if so provided, does not, in the opinion of the
Fund's Manager or Subadvisor, as defined in Note 3(A), reflect the security's
market value; and (vi) a security where the trading on that security's principal
market is temporarily closed at a time when, under normal conditions, it would
be open. At April 30, 2010, the Fund did not hold securities that were valued in
such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the fair
value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the four-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the four-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Investment income received by the Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are generally withheld at the
source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on securities
purchased, other than short-term investments, for the Fund
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
are accreted and amortized, respectively, on the effective interest rate method
over the life of the respective securities or, in the case of a callable
security, over the period to the first date of call. Discounts and premiums on
short-term investments are accreted and amortized, respectively, on the
straight-line method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund are kept
in U.S. dollars. Prices of securities denominated in foreign currency amounts
are translated into U.S. dollars at the mean between the buying and selling
exchange rates last quoted by any major U.S. bank at the following dates:
(i) market value of investment securities, other assets and liabilities--at the
valuation date, and
(ii) purchases and sales of investment securities, income and expenses--at the
date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are
presented at the exchange rates and market values at the close of the period.
The realized and unrealized changes in net assets arising from fluctuations in
exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the Fund's books, and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing such foreign currency
denominated assets and liabilities, other than investments at valuation date
exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed
22 MainStay Epoch Global Choice Fund
appropriate. The Fund had no portfolio securities on loan as of April 30, 2010.
(J) REDEMPTION FEE. Prior to April 1, 2010, the Fund imposed a 2.00% redemption
fee on redemptions (including exchanges) of Fund shares made within 60 days of
their date of purchase for any class. The redemption fee was designed to offset
brokerage commissions and other costs associated with short-term trading and was
not assessed on shares acquired through the reinvestment of dividends or
distributions paid by the Fund. The redemption fees are included in the
Statement of Changes in Net Assets' shares redeemed amount and retained by the
Fund.
(K) CONCENTRATION OF RISK. The Fund may invest in foreign securities, which
carry certain risks that are in addition to the usual risks inherent in domestic
instruments. These risks include those resulting from currency fluctuations,
future adverse political and economic developments and possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions.
These risks are likely to be greater in emerging markets than in developed
markets.
(L) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Epoch
Investment Partners, Inc. ("Epoch" or "Subadvisor"), a registered investment
adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day
portfolio management of the Fund. Pursuant to the terms of a Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of 1.00% of the Fund's average daily net assets.
Effective after the close of business on November 13, 2009, New York Life
Investments entered into a written expense limitation agreement under which it
has agreed to reimburse expenses of Class A and Class I shares so that the total
ordinary operating expenses (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, brokerage and other transaction
expense relating to the purchase or sale of portfolio investments and the fees
and expenses of any other funds in which the Fund invests) for Class A and Class
I shares do not exceed the following percentages of average daily net assets,
Class A, 1.54% and Class I, 1.29%. These expense limitations were based on the
total annual operating expenses of the predecessor fund (adjusted to reflect any
applicable expense limitation agreement.) New York Life Investments will apply
an equivalent waiver or reimbursement, in an amount equal to the number of basis
points waived for Class A shares, to Investor Class and Class C shares of the
Fund. This agreement will be in effect for a two-year period unless extended by
New York Life Investments and approved by the Fund's Board in connection with
its review of the Fund's investment advisory agreement. Based on its review, the
Board may maintain, modify or terminate the agreement.
Prior to the close of business on November 13, 2009, Epoch had a written expense
limitation agreement under which it had agreed to waive a portion of the
Predecessor Fund's management fee or reimburse the expenses of the appropriate
class of the Predecessor Fund so that the class' total ordinary operating
expenses did not exceed the following percentages of average daily net assets
for each class: Class A, 1.54%; and Class I, 1.29%. The agreement did not apply
to interest, taxes, brokerage commissions, other expenditures capitalized in
accordance with generally accepted accounting principles or other extraordinary
expenses not incurred in the ordinary course of business. The total amount of
reimbursement recoverable by Epoch was the sum of all fees previously waived or
reimbursed by Epoch to the Predecessor Fund during any of the previous three (3)
years, less any reimbursement previously paid by the Predecessor Fund to Epoch
with respect to any waivers, reductions, and payments made.
For the four-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $183,215 and waived its fees in the amount
of $54,589.
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. Effective after the close of business on
November 13, 2009, the Trust, on behalf of the Fund, has entered into a
Distribution Agreement with NYLIFE Distributors LLC (the "Distributor"), an
indirect, wholly-owned subsidiary of New York Life. The Fund has adopted
distribution and service plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Fund at an annual rate of 0.25% of the average
daily net assets of the Fund's Investor Class and Class A shares, which is an
expense of the Investor Class and Class A shares of the Fund for distribution or
service activities as designated by the Distributor. Pursuant to the Class C
Plan, the Fund pays the Distributor a monthly distribution fee, which is an
expense of the Class C shares of the Fund, at an annual rate of 0.75% of the
average daily net assets of the Fund's Class C shares, along with a shareholder
service fee at an annual rate of 0.25% of the average daily net asset value of
the Class C shares of the Fund for a total 12b-1 fee of 1.00%. Class I shares
are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $299
and $654, respectively, for the four-month period ended April 30, 2010 .
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the four-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 8
- ----------------------------------------------
Class A 150
- ----------------------------------------------
Class C 5
- ----------------------------------------------
Class I 2,991
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $ 25,916 33.3%
- -------------------------------------------------
Class C 25,835 83.7
- -------------------------------------------------
Class I 218,814 0.4
- -------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the four-month period
ended April 30, 2010, these fees, which are included in professional fees shown
on the Statement of Operations, were $569.
NOTE 4--FEDERAL INCOME TAX:
At December 31, 2009, for federal income tax purposes, capital loss
carryforwards of $8,339,809 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the Fund
through the years indicated. To the extent that these 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 CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S) DEFERRED (000'S)
2016 $1,567 $ --
2017 6,773 5,020
- --------------------------------------------------- --------
Total $8,340 $5,020
- --------------------------------------------------- --------
</Table>
The tax character of distributions paid during the year ended December 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $393,555
- -----------------------------------------------
</Table>
24 MainStay Epoch Global Choice Fund
NOTE 5--FOREIGN CURRENCY TRANSACTIONS:
As of April 30, 2010, the Fund the following foreign currency:
<Table>
<Caption>
CURRENCY COST VALUE
Brazilian Real BRL 92,323 USD 52,239 USD 53,112
Euro EUR 23,135 31,140 30,803
Pound Sterling GBP 21,112 32,720 32,302
Swiss Franc CHF 84,448 78,615 78,473
South Korean Won KRW 10,466,730 9,364 9,444
- ------------------------------------------------------------------------------------------------
Total USD 204,078 USD 204,134
- ------------------------------------------------------------------------------------------------
</Table>
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 7--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the four-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the four-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $47,077 and $29,447,
respectively.
NOTE 9--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 3,581 $ 48,824
Shares redeemed (7) (101)
------------------------
Net increase 3,574 $ 48,723
========================
Period ended December 31,
2009: (a)
Shares sold 2,056 $ 27,501
Shares issued to shareholders
in reinvestment of
dividends 6 88
------------------------
Net increase 2,062 $ 27,589
========================
<Caption>
CLASS A SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 8,948 $ 122,072
Shares redeemed (56,857) (771,347)
------------------------
Net decrease (47,909) $ (649,275)
========================
Year ended December 31, 2009:
Shares sold 232,099 $ 2,718,761
Shares issued to shareholders
in reinvestment of
dividends 1,055 14,207
Shares redeemed (44,035) (489,842)
------------------------
Net increase 189,119 $ 2,243,126
========================
<Caption>
CLASS C SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 178 $ 2,500
------------------------
Net increase 178 $ 2,500
========================
Period ended December 31,
2009: (a)
Shares sold 2,060 $ 27,500
Shares issued to shareholders
in reinvestment of
dividends 5 71
------------------------
Net increase 2,065 $ 27,571
========================
(a) Investor Class shares and Class C shares were first
offered on November 16, 2009.
</Table>
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS I SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 2,051,656 $ 28,350,739
Shares redeemed (640,732) (9,035,788)
------------------------
Net increase 1,410,924 $ 19,314,951
========================
Year ended December 31, 2009:
Shares sold 3,257,545 $ 39,836,207
Shares issued to shareholders
in reinvestment of
dividends 24,319 335,548
Shares redeemed (5,582,489) (72,779,504)
------------------------
Net decrease (2,300,625) $(32,607,749)
========================
</Table>
NOTE 10--REORGANIZATION:
At a special meeting held on October 30, 2009, the shareholders of the Epoch
U.S. All Cap Equity Fund approved the reorganization of the Epoch U.S. All Cap
Equity Fund with and into MainStay Epoch Global Choice Fund. Effective after the
close of business on November 13, 2009, the Class P shares of Epoch U.S. All Cap
Equity Fund were redesignated as Class A shares of MainStay Epoch Global Choice
Fund and the Institutional Class shares of Epoch U.S. All Cap Equity Fund were
redesignated as Class I shares of MainStay Epoch Global Choice Fund. Investor
Class and Class C shares were seeded as of the close of business on November 13,
2009 and were first offered and commenced operations on November 16, 2009.
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements." ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 12--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal four-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
NOTE 13--DIVIDENDS:
On May 17, 2010, the Fund's management declared dividends and distributions in
the amount of the Fund's remaining undistributed Investment Company Taxable
Income and Net Capital Gain, if any, for the Fund's taxable year ended December
31, 2009, which is in accordance with the provisions of Section 855(a) of the
Internal Revenue Code. The declaration date was May 17, 2010. It is expected
that the ex-dividend, reinvestment, and payable date will be in December 2010.
26 MainStay Epoch Global Choice Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX or
proxy voting record is available free of charge upon request by calling 800-
MAINSTAY (624-6782); visiting the Fund's website at mainstayinvestments.com; or
on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 27
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
(C) 2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18310 MS121-10 MSEGC10-06/10
F2
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH GLOBAL EQUITY YIELD FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during this period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six months ended April 30, 2010, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the six-month period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
During the period covered by this report, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the period covered by this report. Of course, past performance is
no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH GLOBAL EQUITY YIELD FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 16
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 20
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 27
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 27
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF THE FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/27/05)
- ---------------------------------------------------------
With sales charges -4.44% 24.08% 1.61%
Excluding sales charges 1.12 31.30 2.95
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay Epoch
Global Equity MSCI World S&P Developed
Yield Fund Index BMI Index
-------------- ---------- -------------
12/27/05 9450 10000 10000
04/30/06 10325 10931 11027
04/30/07 12655 12787 12917
04/30/08 11947 12471 12588
04/30/09 8165 7566 7683
04/30/10 10720 10367 10794
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE(3)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (8/2/06)
- --------------------------------------------------------
With sales charges -4.45% 24.03% -0.60%
Excluding sales charges 1.11 31.24 0.92
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay Epoch
Global Equity MSCI World S&P Developed
Yield Fund Index BMI Index
-------------- ---------- -------------
08/02/06 23625 25000 25000
04/30/07 28868 30013 30314
04/30/08 27255 29272 29541
04/30/09 18626 17759 18030
4/30/010 24445 24333 25330
</Table>
CLASS C SHARES(2)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/27/05)
- ---------------------------------------------------------
With sales charges -0.11% 29.27% 2.04%
Excluding sales charges 0.89 30.27 2.04
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay Epoch
Global Equity MSCI World S&P Developed
Yield Fund Index BMI Index
-------------- ---------- -------------
12/27/05 10000 10000 10000
04/30/06 10898 10931 11027
04/30/07 13261 12787 12917
04/30/08 12355 12471 12588
04/30/09 8379 7566 7683
04/30/10 10915 10367 10794
</Table>
1. Performance tables and graphs do not reflect the deduction of the taxes that
a shareholder would pay on distribution or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge and
are subject to a contingent deferred sales charge ("CDSC") 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 or
individual investors with a minimum initial investment of $5 million.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. The Fund is the successor to the Epoch Global Equity
Shareholder Yield Fund. Effective January 4, 2010, the Fund changed its
fiscal year end from December 31 to October 31.
2. Performance figures for Investor Class and Class C shares, first offered
November 16, 2009, include the historical performance of Class I shares
through November 13, 2009 adjusted for differences in certain contractual
expenses and fees.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES--NO SALES CHARGE(3)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/27/05)
- ------------------------------------------------
1.18% 31.50% 3.05%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay Epoch
Global Equity MSCI World S&P Developed
Yield Fund Index BMI Index
-------------- ---------- -------------
12/27/05 10000 10000 10000
04/30/06 10935 10931 11027
04/30/07 13440 12787 12917
04/30/08 12648 12471 12588
04/30/09 8664 7566 7683
04/30/10 11393 10367 10794
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE FOUR ONE SINCE
MONTHS YEAR INCEPTION
MSCI World Index(4) 3.25% 37.02% 0.83%
S&P Developed BMI Index(5) 4.53 40.49 1.77
Average Lipper global multi-cap value fund(6) 3.11 38.07 0.91
</Table>
3. Performance figures for Class I shares and Class A shares reflect the
historical performance of the Institutional shares and the Class P shares,
respectively, of the Epoch Global Equity Shareholder Yield Fund (which was
subject to a different fee structure).
4. The MSCI World Index is a free float-adjusted market capitalization weighted
index that is designed to measure the equity market performance of developed
markets. As of April 30, 2010, the MSCI World Index consisted of the
following 23 developed market country indices: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy,
Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States, Total returns assume
reinvestment of all dividends and capital gains. The Fund has selected the
MSCI World Index in replacement of the S&P Developed BMI Index as its broad-
based securities market index for comparison purposes because it believes the
MSCI World Index is more reflective of the Fund's current investment style.
An investment cannot be made directly in an index.
5. The S&P Developed BMI Index is a subset of the S&P Global BMI Index which is
an unmanaged index measuring global stock market performance covering
approximately 11,000 companies in 46 countries. The S&P Developed BMI Index
represents the 25 developed markets within the broader Index. Total returns
assume reinvestment of all dividends and capital gains. An investment cannot
be made directly in an index.
6. The average Lipper global multi-cap value fund is representative of funds
that, by portfolio practice, invest in a variety of market capitalization
ranges without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Global multi-cap value
funds typically have a below-average price-to-cash flow ratio, price-to book
ratio, and three-year sales-per-share growth value compared to the
S&P/Citigroup BMI Index. This benchmark is a product of Lipper Inc. Lipper
Inc. is an independent monitor of fund performance. Results are based on
total returns with all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Epoch Global Equity Yield Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY EPOCH GLOBAL EQUITY YIELD
FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09(3) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES(2) $1,000.00 $1,036.80 $5.30 $1,017.80 $5.25
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,084.80 $6.20 $1,018.80 $6.01
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES(2) $1,000.00 $1,033.60 $8.85 $1,014.30 $8.76
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,085.40 $4.91 $1,020.10 $4.76
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.13% for Investor Class,1.20% for Class A, 1.89% for Class C and 0.95% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 days for Class A and Class I (to reflect the one-
half year period) and 168 days for Investor Class and Class C (to reflect the
since-inception period).The table above represents actual expenses incurred
during the one-half year period.
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010, and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $5.66 for Investor Class and $9.44 for Class C and the ending account
value would have been $1,019.20 for Investor Class and $1,015.40 for Class C.
3. Investor Class and Class C shares began investment operations on November 16,
2009.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
Common Stocks 96.50
Other Assets, Less Liabilities 2.30
Short-Term Investment 0.70
Convertible Preferred Stock 0.50
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Nestle S.A. Registered
2. Altria Group, Inc.
3. BCE, Inc.
4. InBev N.V.
5. CenturyTel, Inc.
6. Arthur J. Gallagher & Co.
7. Imperial Tobacco Group PLC
8. Philip Morris International, Inc.
9. Johnson & Johnson
10. Lorillard, Inc.
</Table>
8 MainStay Epoch Global Equity Yield Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS(1)
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS ERIC SAPPENFIELD, WILLIAM PRIEST, CFA,
AND MICHAEL WELHOELTER, CFA, OF EPOCH INVESTMENT PARTNERS, INC. (EPOCH), THE
FUND'S SUBADVISOR.
HOW DID MAINSTAY EPOCH GLOBAL EQUITY YIELD FUND PERFORM RELATIVE TO ITS PEERS
AND ITS BENCHMARK FOR THE FOUR MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Epoch Global Equity Yield Fund returned
1.12% for Investor Class shares, 1.11% for Class A shares and 0.89% for Class C
shares for the four months ended April 30, 2010. Over the same period, the
Fund's Class I shares returned 1.18%. All share classes underperformed the 3.11%
return of the average Lipper() global multi-cap value fund, the 3.25% return of
the MSCI World Index() and the 4.53% return of the S&P Developed BMI Index() for
the four months ended April 30, 2010. The MSCI World Index is the Fund's broad-
based securities-market index. See page 5 for Fund returns with sales charges.
WHAT MAJOR FACTORS AFFECTED THE FUND'S RELATIVE PERFORMANCE DURING THE FOUR-
MONTH REPORTING PERIOD?
During the four months ended April 30, 2010, market dynamics reflected
significant volatility, although equities finished the reporting period higher
overall. Positive forces included excellent corporate results (buoyed by
productivity gains and cost cutting) and a stronger U.S. dollar, especially
against the Eurozone. Market concerns included government economic intervention
and its impact on funding, the situation in Greece, the possibility of contagion
to other European nations, and China's efforts to contain inflation.
The Fund's exposure to utilities was a positive contributor to performance,
largely because of effective stock selection. Stock selection also added to
returns in the materials sector. The Fund also benefited from having a
significantly underweight position in health care stocks, which lagged the MSCI
World Index primarily because of evolving health care reform in the United
States. More than offsetting these positive factors, however, was the negative
effect of sizable exposure to higher-yielding but lagging sectors, such as
telecommunication services. The Fund's underweight position in industrials and
stock selection in less cyclical portions of the sector also detracted.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH SECTORS MADE THE WEAKEST
CONTRIBUTIONS?
On an absolute basis, the strongest-contributing sectors to the Fund's
performance were industrials, consumer discretionary and financials. Industrial
stocks were generally strong, as investor's remained optimistic about recovering
global activity. The consumer discretionary sector also performed well, as
consumer spending remained strong and the jobs market improved. Financials as a
whole generated strong returns on expectations that interest rates would remain
low and on moderating concerns about loan loss provisions.
During the reporting period, the sectors that detracted the most from the Fund's
absolute performance were telecommunication services, health care and energy.
The defensive nature of these sectors was the primary driver of the
underperformance.
WHICH INDIVIDUAL STOCKS WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE
PERFORMANCE DURING THE REPORTING PERIOD AND WHICH STOCKS DETRACTED?
On an absolute basis, NYSE Euronext, Emerson Electric and Arthur J. Gallagher
made the strongest contributions to the Fund's performance. NYSE Euronext, a
global operator of financial markets and a provider of trading strategies
advanced during the reporting period as volumes in markets picked up. Shares of
Emerson Electric, a United States-based global technology and engineering
services company, rose on the prospect of increased global economic activity.
Arthur J. Gallagher, an insurance brokerage and claims settlement company,
benefited from high-quality earnings and increasing distributions to
shareholders.
Spain-based telecommunications and media company Telefonica, global oil services
company Diamond Offshore Drilling and electricity and gas provider National Grid
were among the largest detractors from the Fund's absolute performance.
Telefonica's stock suffered from the ripple effect of the debt crisis in Greece.
Diamond Offshore Drilling's shares declined on reports that the company had
decided to increase its offshore drilling interests and decrease its dividend
payout. National Grid was hurt by the general decline
1. Effective January 4, 2010, the Fund's fiscal year-end changed from December
31 to October 31. As a result, the following discussion covers the four-month
reporting period ended April 30, 2010.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the MSCI World Index.
4. See footnote on page 6 for more information on the S&P Developed BMI Index.
mainstayinvestments.com 9
in equity prices across Europe and by the foreign exchange translation effects
of a weaker British sterling.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Among the stocks that the Fund purchased during the reporting period were NYSE
Euronext, Taiwan-based information technology company Quanta
Computer and pharmaceutical company Abbott Laboratories. We established a Fund
position in NYSE Euronext to take advantage of increased market volumes and the
company's broad reach as an operator of market exchanges around the globe. At
the time of purchase, Quanta Computer offered a dividend payout in excess of 5%,
which we expected to be sup-ported by an improving global personal computer
cycle. We were attracted to Abbott Laboratories because the globally diversified
health care company is generating substantial free cash flow and focusing on
strengthening its balance sheet while maintaining a high dividend.
During the reporting period, we sold the Fund's positions in Germany-based
electricity and gas suppler RWE, Italy-based electricity operator Enel and
discount retailer Wal-Mart Stores. We sold these positions to reallocate capital
to better investments, such as those noted in the preceding paragraph.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, we increased the Fund's weightings in the
financials, information technology and health care sectors. Within financials,
we added Fund positions in insurance companies Arthur J. Gallagher and Munich Re
and in U.S. bank Hudson Bancorp. In information technology, we established new
Fund positions in Microchip Technology and Quanta Computer and added to existing
positions in Taiwan Semiconductor Manufacturing Company and Redecard. We
increased the Fund's exposure to health care primarily by establishing a
position in Abbott Laboratories.
We reduced the Fund's exposure to the utilities, consumer staples and energy
sectors. In utilities, we sold the Fund's positions in Enel and RWE. In consumer
staples, we sold the Fund's positions in Kraft Foods, Supervalu and Wal-Mart
Stores. We reduced the Fund's allocation to energy primarily by trimming its
position in BP following the initial discovery an oil leak in the Gulf of
Mexico.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010?
As of April 30, 2010, the Fund's most substantially overweight sectors relative
to the MSCI World Index were utilities, telecommunication services and consumer
staples. The Fund's most substantially underweight sectors relative to the MSCI
World Index were financials, information technology and materials. We believe
the Fund is well positioned to achieve its goals of high income with lower
volatility. We believe that the strong balance sheets and growing cash flows
will prove valuable to investors over the long term.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Epoch Global Equity Yield Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 96.5%+
- -------------------------------------------------------
AUSTRALIA 1.6%
BHP Billiton, Ltd., Sponsored
ADR (Metals & Mining) (a) 27,900 $ 2,030,841
Toll Holdings, Ltd. (Air
Freight & Logistics) 216,725 1,416,321
Westpac Banking Corp.
(Commercial Banks) 100,802 2,505,206
------------
5,952,368
------------
BELGIUM 2.3%
Anheuser-Busch InBev N.V.
(Beverages) (b)(c) 228,800 1,526
V InBev N.V. (Beverages) 133,200 6,481,150
Mobistar S.A. (Wireless
Telecommunication Services) 36,600 2,240,270
------------
8,722,946
------------
BRAZIL 0.7%
Redecard S.A. (IT Services) 154,800 2,555,881
------------
CANADA 4.5%
V BCE, Inc. (Diversified
Telecommunication Services) 219,400 6,591,935
Canadian Oil Sands Trust
(Oil, Gas & Consumable
Fuels) 164,100 4,967,587
Rogers Communications, Inc.
Class B (Wireless
Telecommunication Services) 53,250 1,898,191
Shaw Communications, Inc.
(Media) 178,400 3,352,684
------------
16,810,397
------------
FINLAND 0.5%
Fortum Oyj (Electric
Utilities) 72,000 1,865,455
------------
FRANCE 5.8%
Air Liquide S.A. (Chemicals) 39,500 4,570,913
France Telecom S.A.
(Diversified
Telecommunication Services) 199,800 4,379,676
SCOR SE (Insurance) 97,800 2,304,334
Total S.A. (Oil, Gas &
Consumable Fuels) 56,500 3,061,563
Vinci S.A. (Construction &
Engineering) 79,100 4,430,017
Vivendi (Media) 111,500 2,934,638
------------
21,681,141
------------
GERMANY 1.6%
BASF A.G. (Chemicals) 57,700 3,373,744
Muenchener
Rueckversicherungs-
Gesellschaft A.G.
Registered (Insurance) 17,570 2,483,054
------------
5,856,798
------------
ITALY 0.8%
Terna S.p.A. (Electric
Utilities) 735,300 2,981,432
------------
NORWAY 1.0%
Orkla ASA (Industrial
Conglomerates) 215,700 1,818,191
StatoilHydro ASA, Sponsored
ADR (Oil, Gas & Consumable
Fuels) (a) 75,200 1,817,584
------------
3,635,775
------------
PHILIPPINES 0.5%
Philippine Long Distance
Telephone Co., Sponsored
ADR (Wireless
Telecommunication Services)
(a) 34,831 1,958,895
------------
SPAIN 1.8%
Banco Santander S.A.
(Commercial Banks) 170,400 2,140,822
Telefonica S.A. (Diversified
Telecommunication Services) 197,100 4,426,236
------------
6,567,058
------------
SWEDEN 1.0%
Assa Abloy AB (Building
Products) 154,000 3,581,842
------------
SWITZERLAND 4.1%
V Nestle S.A. Registered
(Food Products) 138,800 6,774,063
Roche Holding A.G.,
Genusscheine
(Pharmaceuticals) 21,100 3,332,388
Swisscom A.G. (Diversified
Telecommunication Services) 14,600 4,949,351
------------
15,055,802
------------
TAIWAN 1.8%
Chunghwa Telecom Co., Ltd.,
ADR (Diversified
Telecommunication Services)
(a) 1 20
Quanta Computer, Inc.
(Computers & Peripherals) 1,486,000 2,784,479
Taiwan Semiconductor
Manufacturing Co., Ltd.,
Sponsored ADR
(Semiconductors &
Semiconductor Equipment)
(a) 351,200 3,719,208
------------
6,503,707
------------
UNITED KINGDOM 17.1%
AstraZeneca PLC, Sponsored
ADR (Pharmaceuticals) (a) 111,800 4,944,914
BAE Systems PLC (Aerospace &
Defense) 614,000 3,227,443
British American Tobacco PLC
(Tobacco) 112,400 3,530,268
Compass Group PLC (Hotels,
Restaurants & Leisure) 405,300 3,308,201
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. Any of the ten largest holdings may be a security
traded on more than one exchange. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
Diageo PLC, Sponsored ADR
(Beverages) (a) 78,800 $ 5,369,432
Firstgroup PLC (Road & Rail) 416,000 2,427,015
V Imperial Tobacco Group PLC
(Tobacco) 216,700 6,185,645
Meggitt PLC (Aerospace &
Defense) 889,600 4,233,277
National Grid PLC (Multi-
Utilities) 444,150 4,288,649
Next PLC (Multiline Retail) 110,300 3,869,534
Pearson PLC (Media) 302,400 4,854,607
Royal Dutch Shell PLC Class
A, ADR (Oil, Gas &
Consumable Fuels) (a) 75,800 4,756,450
Scottish & Southern Energy
PLC (Electric Utilities) 189,700 3,129,512
United Utilities Group PLC
(Multi-Utilities) 482,259 3,956,535
Vodafone Group PLC (Wireless
Telecommunication Services) 2,344,400 5,211,613
------------
63,293,095
------------
UNITED STATES 51.4%
Abbott Laboratories
(Pharmaceuticals) 49,700 2,542,652
V Altria Group, Inc.
(Tobacco) 318,100 6,740,539
V Arthur J. Gallagher & Co.
(Insurance) 235,800 6,194,466
AT&T, Inc. (Diversified
Telecommunication Services) 196,555 5,122,223
Automatic Data Processing,
Inc. (IT Services) 43,100 1,868,816
Bemis Co., Inc. (Containers &
Packaging) 65,700 1,997,937
Bristol-Myers Squibb Co.
(Pharmaceuticals) 183,200 4,633,128
V CenturyTel, Inc.
(Diversified
Telecommunication Services) 188,800 6,439,968
Chevron Corp. (Oil, Gas &
Consumable Fuels) 33,600 2,736,384
Coca-Cola Co. (The)
(Beverages) 33,600 1,795,920
Coca-Cola Enterprises, Inc.
(Beverages) 90,700 2,515,111
Diamond Offshore Drilling,
Inc. (Energy Equipment &
Services) 45,800 3,622,780
Duke Energy Corp. (Electric
Utilities) 235,750 3,955,885
E.I. du Pont de Nemours & Co.
(Chemicals) 110,300 4,394,352
Emerson Electric Co.
(Electrical Equipment) 74,900 3,912,027
ExxonMobil Corp. (Oil, Gas &
Consumable Fuels) 23,800 1,614,830
Federated Investors, Inc.
Class B (Capital Markets) 61,800 1,490,616
First Niagara Financial
Group, Inc. (Thrifts &
Mortgage Finance) 130,200 1,809,780
Genuine Parts Co.
(Distributors) 90,400 3,869,120
H.J. Heinz Co. (Food
Products) 62,400 2,924,688
Honeywell International, Inc.
(Aerospace & Defense) 72,000 3,417,840
Hudson City Bancorp, Inc.
(Thrifts & Mortgage
Finance) 131,400 1,747,620
V Johnson & Johnson
(Pharmaceuticals) 93,700 6,024,910
Kellogg Co. (Food Products) 51,700 2,840,398
Kimberly-Clark Corp.
(Household Products) 74,900 4,588,374
Kinder Morgan Energy
Partners, L.P. (Oil, Gas &
Consumable Fuels) 63,300 4,272,117
V Lorillard, Inc. (Tobacco) 76,700 6,010,979
McDonald's Corp. (Hotels,
Restaurants & Leisure) 30,300 2,138,877
Merck & Co., Inc.
(Pharmaceuticals) 118,000 4,134,720
MetLife, Inc. (Insurance) 47,300 2,155,934
Microchip Technology, Inc.
(Semiconductors &
Semiconductor Equipment) 167,100 4,880,991
Microsoft Corp. (Software) 101,700 3,105,918
Nicor, Inc. (Gas Utilities) 64,500 2,806,395
NiSource, Inc. (Multi-
Utilities) 198,000 3,227,400
NSTAR (Multi-Utilities) 54,700 2,002,020
NYSE Euronext (Diversified
Financial Services) 114,200 3,726,346
OGE Energy Corp. (Multi-
Utilities) 109,400 4,526,972
ONEOK, Inc. (Gas Utilities) 78,800 3,872,232
Oracle Corp. (Software) 108,500 2,803,640
V Philip Morris
International, Inc.
(Tobacco) 125,200 6,144,816
Pitney Bowes, Inc.
(Commercial Services &
Supplies) 191,200 4,856,480
Progress Energy, Inc.
(Electric Utilities) 45,200 1,804,384
Reynolds American, Inc.
(Tobacco) 39,500 2,110,090
SCANA Corp. (Multi-Utilities) 45,200 1,784,044
Southern Co. (The) (Electric
Utilities) 107,000 3,697,920
Spectra Energy Corp. (Oil,
Gas & Consumable Fuels) 178,400 4,163,856
TECO Energy, Inc. (Multi-
Utilities) 226,900 3,841,417
Travelers Cos., Inc. (The)
(Insurance) 35,400 1,796,196
Tupperware Brands Corp.
(Household Durables) 38,900 1,986,623
Vectren Corp. (Multi-
Utilities) 68,100 1,703,181
Verizon Communications, Inc.
(Diversified
Telecommunication Services) 176,900 5,110,641
VF Corp. (Textiles, Apparel &
Luxury Goods) 34,500 2,981,490
Waste Management, Inc.
(Commercial Services &
Supplies) 80,900 2,805,612
Westar Energy, Inc. (Electric
Utilities) 120,750 2,860,568
WGL Holdings, Inc. (Gas
Utilities) 69,600 2,487,504
Windstream Corp. (Diversified
Telecommunication Services) 173,300 1,914,965
------------
190,514,692
------------
Total Common Stocks
(Cost $327,417,727) 357,537,284
------------
</Table>
12 MainStay Epoch Global Equity Yield 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
CONVERTIBLE PREFERRED STOCK 0.5%
- -------------------------------------------------------
UNITED STATES 0.5%
MetLife, Inc. (Insurance)
6.50% 77,000 $ 1,865,710
------------
Total Convertible Preferred
Stock
(Cost $1,778,815) 1,865,710
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 0.7%
- -------------------------------------------------------
REPURCHASE AGREEMENT 0.7%
UNITED STATES 0.7%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$2,570,009
(Collateralized by a United
States Treasury Bill with a
rate of 0.135%
and a maturity date of
5/27/10,
with a Principal Amount of
$2,625,000 and a Market
Value of $2,624,738)
(Capital Markets) $2,570,007 2,570,007
------------
Total Short-Term Investment
(Cost $2,570,007) 2,570,007
------------
Total Investments
(Cost $331,766,549) (d) 97.7% 361,973,001
Other Assets, Less
Liabilities 2.3 8,521,055
---------- ------------
Net Assets 100.0% $370,494,056
========== ============
</Table>
<Table>
(a) ADR--American Depositary Receipt
(b) Non-income producing security
(c) Illiquid security--The total market value
of this security at April 30, 2010 is
$1,526, which represents less than one-
tenth of a percent of the Fund's net
assets
(d) At April 30, 2010, cost is $332,255,408
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 42,287,407
Gross unrealized depreciation (12,569,814)
------------
Net unrealized appreciation $ 29,717,593
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks (b) $234,478,314 $123,058,970 $ -- $357,537,284
Convertible Preferred Stock 1,865,710 -- -- 1,865,710
Short-Term Investment
Repurchase Agreement -- 2,570,007 -- 2,570,007
------------ ------------ ------------- ------------
Total Investments in Securities $236,344,024 $125,628,977 $ -- $361,973,001
============ ============ ============= ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 1 assets represent ADRs, securities listed under Canada and United
States.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The Fund recognizes transfers between the levels as of the beginning of the
period.
14 MainStay Epoch Global Equity Yield 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 the MainStay Epoch Global
Equity Yield Fund investments by industry.
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT +
Aerospace & Defense $ 10,878,560 2.9%
Air Freight & Logistics 1,416,321 0.4
Beverages 16,163,139 4.3
Building Products 3,581,842 1.0
Capital Markets 4,060,623 1.1
Chemicals 12,339,009 3.3
Commercial Banks 4,646,028 1.3
Commercial Services &
Supplies 7,662,092 2.1
Computers & Peripherals 2,784,479 0.8
Construction & Engineering 4,430,017 1.2
Containers & Packaging 1,997,937 0.5
Distributors 3,869,120 1.0
Diversified Financial
Services 3,726,346 1.0
Diversified Telecommunication
Services 38,935,015 10.6
Electric Utilities 20,295,156 5.5
Electrical Equipment 3,912,027 1.1
Energy Equipment & Services 3,622,780 1.0
Food Products 12,539,149 3.4
Gas Utilities 9,166,131 2.5
Hotels, Restaurants & Leisure 5,447,078 1.5
Household Durables 1,986,623 0.5
Household Products 4,588,374 1.2
IT Services 4,424,697 1.2
Industrial Conglomerates 1,818,191 0.5
Insurance 16,799,694 4.6
Media 11,141,929 3.0
Metals & Mining 2,030,841 0.5
Multi-Utilities 25,330,218 6.9
Multiline Retail 3,869,534 1.0
Oil, Gas & Consumable Fuels 27,390,371 7.2
Pharmaceuticals 25,612,712 6.8
Road & Rail 2,427,015 0.7
Semiconductors &
Semiconductor Equipment 8,600,199 2.3
Software 5,909,558 1.6
Textiles, Apparel & Luxury
Goods 2,981,490 0.8
Thrifts & Mortgage Finance 3,557,400 1.0
Tobacco 30,722,337 8.4
Wireless Telecommunication
Services 11,308,969 3.0
------------ -----
361,973,001 97.7
Other Assets, Less
Liabilities 8,521,055 2.3
------------ -----
Net Assets $370,494,056 100.0%
============ =====
</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. mainstayinvestments.com
15
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $331,766,549) $ 361,973,001
Cash denominated in foreign
currencies (identified cost
$2,883,043) 2,890,342
Receivables:
Investment securities sold 6,348,152
Dividends and interest 1,881,564
Fund shares sold 427,059
Other assets 306,170
-------------
Total assets 373,826,288
-------------
LIABILITIES:
Payables:
Investment securities purchased 2,064,902
Fund shares redeemed 874,878
Manager (See Note 3) 218,613
Shareholder communication 71,322
Custodian 27,467
NYLIFE Distributors (See Note 3) 75,050
-------------
Total liabilities 3,332,232
-------------
Net assets $ 370,494,056
=============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 26,980
Additional paid-in capital 488,965,918
-------------
488,992,898
Accumulated undistributed net
investment income 2,351,547
Accumulated net realized loss on
investments and foreign currency
transactions (151,061,650)
Net unrealized appreciation on
investments 30,206,452
Net unrealized appreciation on
translation of other assets and
liabilities in foreign currencies 4,809
-------------
Net assets $ 370,494,056
=============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 92,781
=============
Shares of beneficial interest
outstanding 6,746
=============
Net asset value per share
outstanding $ 13.75
Maximum sales charge (5.50% of
offering price) 0.80
-------------
Maximum offering price per share
outstanding $ 14.55
=============
CLASS A
Net assets applicable to
outstanding shares $ 20,179,525
=============
Shares of beneficial interest
outstanding 1,467,265
=============
Net asset value per share
outstanding $ 13.75
Maximum sales charge (5.50% of
offering price) 0.80
-------------
Maximum offering price per share
outstanding $ 14.55
=============
CLASS C
Net assets applicable to
outstanding shares $ 2,089,145
=============
Shares of beneficial interest
outstanding 152,104
=============
Net asset value and offering price
per share outstanding $ 13.73
=============
CLASS I
Net assets applicable to
outstanding shares $ 348,132,605
=============
Shares of beneficial interest
outstanding 25,353,447
=============
Net asset value and offering price
per share outstanding $ 13.73
=============
</Table>
16 MainStay Epoch Global Equity Yield Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2010 (A) THROUGH APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (b) $5,962,987
Interest 568
----------
Total income 5,963,555
----------
EXPENSES:
Manager (See Note 3) 908,499
Transfer agent (See Note 3) 147,400
Shareholder communication 76,013
Custodian 63,715
Professional fees 44,839
Registration 42,167
Distribution/Service--Investor
Class (See Note 3) 42
Distribution/Service--Class A (See
Note 3) 17,058
Distribution/Service--Class C (See
Note 3) 3,032
Trustees 6,129
Miscellaneous 27,289
----------
Total expenses before waiver 1,336,183
Expense waiver from Manager (See
Note 3) (31,442)
----------
Net expenses 1,304,741
----------
Net investment income 4,658,814
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on:
Security transactions (23,941)
Foreign currency transactions (110,316)
----------
Net realized loss on investments and
foreign currency transactions (134,257)
----------
Net change in unrealized
appreciation on:
Investments 334,886
Translation of other assets and
liabilities in foreign
currencies (20,287)
----------
Net change in unrealized
appreciation on investments and
foreign currency transactions 314,599
----------
Net realized and unrealized gain on
investments and foreign currency
transactions 180,342
----------
Net increase in net assets resulting
from operations $4,839,156
==========
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Dividends recorded net of foreign withholding taxes in the amount of
$301,096.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 1, 2010 THROUGH APRIL 30, 2010 UNAUDITED, THE YEAR ENDED
DECEMBER 31, 2009 (A) AND THE YEAR ENDED DECEMBER 31, 2008.
<Table>
<Caption>
2010 2009 2008
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment
income $ 4,658,814 $ 13,501,084 $ 22,203,158
Net realized loss
on investments
and foreign
currency
transactions (134,257) (55,755,456) (100,701,531)
Net change in
unrealized
appreciation
(depreciation) on
investments and
foreign currency
transactions 314,599 122,178,121 (109,475,635)
------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 4,839,156 79,923,749 (187,974,008)
------------------------------------------
Dividends and
distributions to
shareholders:
From net
investment
income:
Investor Class (667) (151) --
Class A (180,581) (665,965) (541,418)
Class C (11,546) (181) --
Class I (3,507,191) (10,698,508) (17,605,363)
------------------------------------------
(3,699,985) (11,364,805) (18,146,781)
------------------------------------------
From net realized
gain on
investments:
Class A -- -- (115,391)
Class I -- -- (2,080,618)
------------------------------------------
-- -- (2,196,009)
------------------------------------------
Return of capital:
Class A -- -- (51,670)
Class I -- -- (1,641,966)
------------------------------------------
-- -- (1,693,636)
------------------------------------------
Total dividends and
distributions to
shareholders (3,699,985) (11,364,805) (22,036,426)
------------------------------------------
Capital share
transactions:
Net proceeds from
sale of shares $ 41,424,296 $ 184,852,742 $ 374,462,803
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions 3,187,896 10,140,348 20,979,165
Cost of shares
redeemed (b) (81,883,266) (170,919,032) (426,057,455)
------------------------------------------
Increase
(decrease) in
net assets
derived from
capital share
transactions (37,271,074) 24,074,058 (30,615,487)
------------------------------------------
Net increase
(decrease) in
net assets (36,131,903) 92,633,002 (240,625,921)
NET ASSETS:
Beginning of period 406,625,959 313,992,957 554,618,878
------------------------------------------
End of period $370,494,056 $ 406,625,959 $ 313,992,957
==========================================
Accumulated
undistributed net
investment income
at end of period $ 2,351,547 $ 1,392,718 $ 736,842
==========================================
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Cost of shares redeemed net of redemption fees of $11,486, $136 and $8,520
for the period January 1, 2010 through April 30, 2010, the years ended
December 31, 2009 and 2008. (See Note 2 (J)).
18 MainStay Epoch Global Equity Yield 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>
INVESTOR CLASS CLASS A
------------------------------ ----------------------------------------
JANUARY 1, NOVEMBER JANUARY 1,
2010*** 16, 2009** 2010***
THROUGH THROUGH THROUGH YEAR ENDED DECEMBER
APRIL 30, DECEMBER 31, APRIL 30, 31,
2010* 2009 2010* 2009 2008
Net asset value at beginning of
period $13.72 $13.46 $ 13.72 $ 11.52 $ 17.72
------ ------ ------- ------- -------
Net investment income 0.18 (a) 0.05 0.15 (a) 0.44 0.59 (a)
Net realized and unrealized gain
(loss) on investments (0.05) 0.29 (0.00)++ 2.14 (6.18)
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.02 -- -- (0.03) --
------ ------ ------- ------- -------
Total from investment operations 0.15 0.34 0.15 2.55 (5.59)
------ ------ ------- ------- -------
Less dividends and distributions:
From net investment income (0.12) (0.08) (0.12) (0.35) (0.48)
From net realized gain on
investments -- -- -- -- (0.08)
Return of capital -- -- -- -- (0.05)
------ ------ ------- ------- -------
Total dividends and distributions (0.12) (0.08) (0.12) (0.35) (0.61)
------ ------ ------- ------- -------
Redemption fee (d) 0.00 ++ -- 0.00 ++ 0.00 ++ 0.00 ++
------ ------ ------- ------- -------
Net asset value at end of period $13.75 $13.72 $ 13.75 $ 13.72 $ 11.52
====== ====== ======= ======= =======
Total investment return (b) 1.12%(c) 2.54%(c) 1.11%(c) 22.47% (32.19%)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.99%++ 2.67%++ 3.31%++ 3.66% 4.01%
Net expenses 1.14%++ 1.09%++ 1.24%++ 1.21% 1.18%
Expenses (before
recoupment/waiver/reimburse-
ment) 1.17%++ 1.09%++ 1.27%++ 1.21% 1.18%
Portfolio turnover rate 13% 59% 13% 59% 72%
Net assets at end of period (in
000's) $ 93 $ 26 $20,180 $23,336 $16,480
<Caption>
CLASS A
---------------------------
YEAR AUGUST 2,
ENDED 2006**
DECEM- THROUGH
BER 31, DECEMBER 31,
2007 2006
Net asset value at beginning of
period $ 17.94 $16.00
------- ------
Net investment income 0.69 0.19
Net realized and unrealized gain
(loss) on investments 0.79 1.99
Net realized and unrealized gain
(loss) on foreign currency
transactions -- --
------- ------
Total from investment operations 1.48 2.18
------- ------
Less dividends and distributions:
From net investment income (0.72) (0.21)
From net realized gain on
investments (0.99) (0.03)
Return of capital -- --
------- ------
Total dividends and distributions (1.71) (0.24)
------- ------
Redemption fee (d) 0.01 --
------- ------
Net asset value at end of period $ 17.72 $17.94
======= ======
Total investment return (b) 8.34% 13.73%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.97% 2.74%++
Net expenses 1.16% 1.30%++
Expenses (before
recoupment/waiver/reimburse-
ment) 1.16% 1.30%++
Portfolio turnover rate 47% 32%
Net assets at end of period (in
000's) $19,390 $1,593
</Table>
<Table>
<Caption>
CLASS C CLASS I
------------------------------ ------------------------------------------
JANUARY 1, NOVEMBER 16, JANUARY 1,
2010*** 2009** 2010***
THROUGH THROUGH THROUGH
APRIL 30, DECEMBER 31, APRIL 30, YEAR ENDED DECEMBER 31,
2010* 2009 2010* 2009 2008
Net asset value at beginning of
period $13.72 $13.46 $ 13.70 $ 11.53 $ 17.75
------ ------ -------- -------- --------
Net investment income (loss) 0.16 (a) 0.03 0.16 (a) 0.44 0.66 (a)
Net realized and unrealized gain
(loss) on investments (0.07) 0.30 (0.00)++ 2.13 (6.24)
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.03 -- -- (0.03) --
------ ------ -------- -------- --------
Total from investment operations 0.12 0.33 0.16 2.54 (5.58)
------ ------ -------- -------- --------
Less dividends and distributions:
From net investment income (0.11) (0.07) (0.13) (0.37) (0.51)
From net realized gain on
investments -- -- -- -- (0.08)
Return of capital -- -- -- -- (0.05)
------ ------ -------- -------- --------
Total dividends and distributions (0.11) (0.07) (0.13) (0.37) (0.64)
------ ------ -------- -------- --------
Redemption fee (d) 0.00 ++ -- 0.00 ++ 0.00 ++ 0.00 ++
------ ------ -------- -------- --------
Net asset value at end of period $13.73 $13.72 $ 13.73 $ 13.70 $ 11.53
====== ====== ======== ======== ========
Total investment return (b) 0.89%(c) 2.45%(c) 1.18%(c) 22.49% (32.10%)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 3.50%++ 1.80%++ 3.61%++ 3.85% 4.40%
Net expenses 1.89%++ 1.84%++ 0.99%++ 0.96% 0.93%
Expenses (before
recoupment/waiver/reimburse-
ment) 1.92%++ 1.84%++ 1.01%++ 0.96% 0.93%
Portfolio turnover rate 13% 59% 13% 59% 72%
Net assets at end of period (in
000's) $2,089 $ 36 $348,133 $383,228 $297,513
<Caption>
CLASS I
--------------------------------------------
DECEMBER 27,
2005**
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
2007 2006 2005
Net asset value at beginning of
period $ 18.02 $ 14.92 $ 15.00
-------- -------- -------
Net investment income (loss) 0.77 0.63 (0.00)++
Net realized and unrealized gain
(loss) on investments 0.72 3.13 (0.08)
Net realized and unrealized gain
(loss) on foreign currency
transactions -- -- --
-------- -------- -------
Total from investment operations 1.49 3.76 (0.08)
-------- -------- -------
Less dividends and distributions:
From net investment income (0.77) (0.63) --
From net realized gain on
investments (0.99) (0.03) --
Return of capital -- -- --
-------- -------- -------
Total dividends and distributions (1.76) (0.66) --
-------- -------- -------
Redemption fee (d) 0.00 ++ -- --
-------- -------- -------
Net asset value at end of period $ 17.75 $ 18.02 $ 14.92
======== ======== =======
Total investment return (b) 8.28% 25.71% (0.53%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 4.21% 3.88% (1.10%)++
Net expenses 0.91% 1.05% 1.10%++
Expenses (before
recoupment/waiver/reimburse-
ment) 0.91% 1.05% 3.59%++
Portfolio turnover rate 47% 32% 0%
Net assets at end of period (in
000's) $535,229 $272,016 $71,432
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) The redemption fee was discontinued as of April 1, 2010.
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Epoch Global Equity Yield Fund (the
"Fund"), a diversified fund. The Fund is the successor to the Epoch Global
Equity Shareholder Yield Fund (the "Predecessor Fund"), which was a series of a
different registered investment company for which Epoch Investment Partners,
Inc. served as investment adviser.
The Fund currently offers 4 classes of shares. Investor Class and Class C shares
were seeded as of the close of business on November 13, 2009 and were first
offered and commenced operations on November 16, 2009. Class I shares and Class
A shares commenced operations (under former designations) on December 27, 2005
and August 2, 2006, respectively. Effective, January 4, 2010, the Fund changed
its fiscal year end and tax year end from December 31 to October 31. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class C shares are
offered at NAV without an initial sales charge, although a 1.00% contingent
deferred sales charge may be imposed on redemptions made within one year of
purchase of Class C shares. Class I shares are offered at NAV and are not
subject to a sales charge. Depending upon eligibility, Investor Class shares may
convert to Class A shares and Class A shares may convert to Investor Class
shares. The four classes of shares have the same voting (except for issues that
relate solely to one class), dividend, liquidation and other rights, and the
same terms and conditions, except that Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek to provide a high level of income.
Capital appreciation is a secondary investment objective.
The financial statements of the Fund reflect the historical results of the
Institutional Class and P shares of the Predecessor Fund prior to its
reorganization. (See Note 10.) Upon the completion of the reorganization, the
Class I and Class A shares of the Fund assumed the performance, financial and
other information of the Institutional Class and Class P shares, respectively.
All information regarding and references to periods prior to the commencement of
operations of the Fund refer to the Predecessor Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Investments in other mutual funds are valued at their NAVs as of the close of
the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund the Fund did
not hold securities that were valued in such a manner.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector, significant fluctuations in U.S.
or foreign markets, natural disasters, armed conflicts, governmental actions or
other
20 MainStay Epoch Global Equity Yield Fund
developments not tied directly to the securities markets. Should the Manager or
Subadvisor, as defined in Note 3(A), conclude that such events may have affected
the accuracy of the last price reported on the local foreign market, the Manager
or Subadvisor may, pursuant to procedures adopted by the Fund's Board, adjust
the value of the local price to reflect the impact on the price of such
securities as a result of such events. Additionally, international equity
securities are also fair valued whenever the movement of a particular index
exceeds certain thresholds. In such cases, the securities are fair valued by
applying factors provided by a third party vendor in accordance with the Fund's
policies and procedures. At April 30, 2010, certain foreign equity securities
held by the Fund were fair valued.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the four-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the four-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Investment income received by the Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are generally withheld at the
source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income, if any, quarterly and distributions of net
realized capital and currency gains, if any, annually. Unless the shareholder
elects otherwise, all dividends and distributions are reinvested in the same
class of shares of the Fund, at NAV. Dividends and distributions to shareholders
are determined in accordance with federal income tax regulations and may differ
from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
and interest income is accrued as earned using the effective interest rate
method. Discounts and premiums on short-term investments are accreted and
amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund are kept
in U.S. dollars. Prices of securities denominated in foreign currency amounts
are translated into U.S. dollars at the mean between the buying and selling
exchange rates last quoted by any major U.S. bank at the following dates:
(i) market value of investment securities, other assets and liabilities--at the
valuation date, and
(ii) purchases and sales of investment securities, income and expenses--at the
date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are
presented at the exchange rates and market values at the close of the period.
The realized and unrealized changes in net assets arising from fluctuations in
exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the Fund's books, and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing such foreign currency
denominated assets and liabilities, other than investments at valuation date
exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed
22 MainStay Epoch Global Equity Yield Fund
appropriate. The Fund had no portfolio securities on loan as of April 30, 2010.
(J) REDEMPTION FEE. Prior to April 1, 2010, the Fund imposed a 2.00% redemption
fee on redemptions (including exchanges) of Fund shares made within 60 days of
their date of purchase for any class. The redemption fee was designed to offset
brokerage commissions and other costs associated with short-term trading and was
not assessed on shares acquired through the reinvestment of dividends or
distributions paid by the Fund. The redemption fees are included in the
Statement of Changes in Net Assets' shares redeemed amount and retained by the
Fund.
(L) CONCENTRATION OF RISK. The Fund invests in foreign securities, which carry
certain risks that are in addition to the usual risks inherent in domestic
instruments. These risks include those resulting from currency fluctuations,
future adverse political and economic developments and possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions.
These risks are likely to be greater in emerging markets than in developed
markets. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic or political developments in a
specific country, industry or region.
(K) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
(L) LARGE TRANSACTION RISKS. From time to time, the Fund may receive large
purchase or redemption orders from affiliated or unaffiliated mutual funds or
other investors. Such large transactions could have adverse effects on a Fund's
performance if the Fund were required to sell securities or invest cash at times
when it otherwise would not do so. This activity could also accelerate the
realization of capital gains and increase the Fund's transaction costs. The Fund
has adopted procedures designed to mitigate the negative impacts of such large
transactions, but there can be no assurance that these procedures will be
effective.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Epoch
Investment Partners, Inc. ("Epoch" or "Subadvisor"), a registered investment
adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day
portfolio management of the Fund. Pursuant to the terms of a Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of 0.70% of the Fund's average daily net assets.
Effective after the close of business on November 13, 2009, New York Life
Investments entered into a written expense limitation agreement under which it
has agreed to reimburse expenses of Class A and Class I Shares of the Fund so
that the total ordinary operating expenses (total ordinary operating expenses
excludes taxes, interest, litigation, extraordinary expenses, brokerage and
other transaction expense relating to the purchase or sale of portfolio
investments and the fees and expenses of any other funds in which the Fund
invests) for Class A and Class I do not exceed the following percentages of
average daily net assets, Class A, 1.24% and Class I, 0.99%. These expense
limitations were based on the total annual operating expenses of the predecessor
fund (adjusted to reflect any applicable expense limitation agreement.) New York
Life Investments will apply an equivalent waiver or reimbursement, in an amount
equal to the number of basis points waived for Class A shares, to Investor Class
and Class C shares of the Fund. This agreement will be in effect for a two-year
period unless extended by New York Life Investments and approved by the Fund's
Board in connection with its review of the Fund's investment advisory agreement.
Based on its review, the Board may maintain, modify or terminate the agreement.
For the four-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $908,499 and waived its fees in the amount
of $31,442.
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. Effective after the close of business on
November 13, 2009, the Trust, on behalf of the Fund, has entered into a
Distribution Agreement with NYLIFE Distributors LLC (the "Distributor"), an
indirect, wholly-owned subsidiary of New York Life. The Fund has adopted
distribution and service plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from each Fund at an annual rate of 0.25% of the
average daily net assets of the Fund's Investor Class and Class A shares, which
is an expense of the Investor Class and Class A shares of the respective Funds
for distribution or service activities as designated by the Distributor.
Pursuant to the Class C Plan, each Fund pays the Distributor a monthly
distribution fee, which is an expense of the Class C shares of the Fund, at an
annual rate of 0.75% of the average daily net assets of the respective Fund's
Class C shares, along with a shareholder service fee at an annual rate of 0.25%
of the average daily net assets of the Class C shares of the Fund for a total
12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service
fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $251
and $3,234, respectively, for the four-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the four-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 3
- -----------------------------------------------
Class A 7,918
- -----------------------------------------------
Class C 55
- -----------------------------------------------
Class I 139,424
- -----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $ 25,926 27.9%
- -------------------------------------------------
Class C 25,845 1.2
- -------------------------------------------------
Class I 222,084 0.1
- -------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the four-month period
ended April 30, 2010, these fees, which are included in professional fees shown
on the Statement of Operations, were $5,517.
NOTE 4--FEDERAL INCOME TAX:
At December 31, 2009, for federal income tax purposes, capital loss
carryforwards of $146,135,436 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the Fund
through the years indicated. To the extent that these loss carryforwards are
used to offset future capital gains, it is probable that the capital gains so
offset will not be distributed to shareholders. No capital gain distributions
shall be made until any capital loss carryforwards have been fully utilized or
expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S) DEFERRED (000'S)
2016 $ 71,904 $ --
2017 74,231 3,179
- ---------------------------------------------------------- ---------
Total $146,135 $3,179
- ---------------------------------------------------------- ---------
</Table>
24 MainStay Epoch Global Equity Yield Fund
The tax character of distributions paid during the year ended December 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $11,364,805
- ------------------------------------------------
</Table>
NOTE 5--FOREIGN CURRENCY TRANSACTIONS:
As of April 30, 2010, the Fund held the following foreign currencies:
<Table>
<Caption>
CURRENCY COST VALUE
Brazilian Real BRL 162,934 USD 93,734 USD 93,734
- ---------------------------------------------------------------
Canadian Dollar CAD 11,700 11,626 11,518
- ---------------------------------------------------------------
Euro Currency EUR 146,600 193,841 195,191
- ---------------------------------------------------------------
New Taiwan Dollar TWD 79,123,409 2,518,838 2,524,839
- ---------------------------------------------------------------
Swedish Krona SEK 471,240 65,004 65,060
- ---------------------------------------------------------------
Total USD 2,883,043 USD 2,890,342
- ---------------------------------------------------------------
</Table>
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 7--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the four-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the four-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $49,292 and $92,171,
respectively.
NOTE 9--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Four-month period April 30,
2010:
Shares sold 4,829 $ 66,188
Shares issued to
shareholders in
reinvestment of dividends 48 667
--------------------------
Net increase 4,877 $ 66,855
==========================
Period ended December 31,
2009 (a):
Shares sold 1,858 $ 25,000
Shares issued to
shareholders in
reinvestment of dividends 11 151
--------------------------
Net increase 1,869 $ 25,151
==========================
<Caption>
CLASS A SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 256,290 $ 3,490,644
Shares issued to
shareholders in
reinvestment of dividends 11,855 163,248
Shares redeemed (501,597) (6,636,580)
--------------------------
Net decrease (233,452) $ (2,982,688)
==========================
Year ended December 31,
2009:
Shares sold 873,503 $ 9,944,403
Shares issued to
shareholders in
reinvestment of dividends 50,639 619,790
Shares redeemed (653,938) (8,219,128)
--------------------------
Net increase 270,204 $ 2,345,065
==========================
<Caption>
CLASS C SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 148,793 $ 2,035,730
Shares issued to
shareholders in
reinvestment of dividends 840 11,546
Shares redeemed (138) (1,889)
--------------------------
Net increase 149,495 $ 2,045,387
==========================
Period ended December 31,
2009 (a):
Shares sold 2,596 $ 35,007
Shares issued to
shareholders in
reinvestment of dividends 13 182
--------------------------
Net increase 2,609 $ 35,189
==========================
<Caption>
CLASS I SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 2,618,779 $ 35,831,734
Shares issued to
shareholders in
reinvestment of dividends 219,245 3,012,435
Shares redeemed (5,464,808) (75,244,797)
--------------------------
Net decrease (2,626,784) $ (36,400,628)
==========================
Year ended December 31,
2009:
Shares sold 15,386,586 $ 174,848,332
Shares issued to
shareholders in
reinvestment of dividends 777,370 9,520,225
Shares redeemed (13,991,520) (162,699,904)
--------------------------
Net increase 2,172,436 $ 21,668,653
==========================
(a) Investor Class shares and Class C shares were first
offered on November 16, 2009.
</Table>
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 10--REORGANIZATION:
At a special meeting held on October 30, 2009, the shareholders of the Epoch
Global Equity Shareholder Yield Fund, approved the reorganization of the Epoch
Global Equity Shareholder Yield Fund with and into MainStay Epoch Global Equity
Yield Fund. Effective after the close of business on November 13, 2009, the
Class P shares of Epoch Global Equity Shareholder Yield Fund were redesignated
as Class A shares of MainStay Epoch Global Equity Yield Fund. Effective after
the close of business on November 13, 2009, the Institutional Class shares of
Epoch Global Equity Shareholder Yield Fund were redesignated as Class I shares
of MainStay Epoch Global Equity Yield Fund. Investor Class and Class C shares
were seeded as of the close of business on November 13, 2009 and were first
offered and commenced operations on November 16, 2009.
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 12--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal four-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
26 MainStay Epoch Global Equity Yield Fund
PROXY VOTING POLICIES AND
PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX or
proxy voting record is available free of charge upon request by calling 800-
MAINSTAY (624-6782); visiting the Fund's website at mainstayinvestments.com; or
on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 27
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18309 MS121-10 MSEGE10-06/10
F3
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH INTERNATIONAL SMALL CAP FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during this period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six months ended April 30, 2010, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the six-month period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
During the period covered by this report, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the period covered by this report. Of course, past performance is
no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH INTERNATIONAL SMALL CAP FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 17
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 22
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 29
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 29
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF THE FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (1/25/05)
- -----------------------------------------------------------------
With sales charges -1.67% 40.30% 6.78% 6.23%
Excluding sales charges 4.05 48.47 7.99 7.37
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MSCI WORLD
MAINSTAY EPOCH EX. U.S. S&P EPAC
INTERNATIONAL SMALL SMALL CAP SMALL CAP
CAP FUND INDEX INDEX
------------------- ---------- ---------
01/25/05 9450 10000 10000
9356 10140 10079
14463 14522 14374
17578 16674 17734
16858 14813 16132
9256 8445 9278
4/30/10 13741 13025 13407
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (8/2/06)
- --------------------------------------------------------
With sales charges -1.67% 40.21% -0.88%
Excluding sales charges 4.05 48.38 0.63
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MSCI WORLD
MAINSTAY EPOCH EX. U.S. S&P EPAC
INTERNATIONAL SMALL SMALL CAP SMALL CAP
CAP FUND INDEX INDEX
------------------- ---------- ---------
08/02/06 23625 25000 25000
30962 31630 32991
29695 28099 30011
16303 16021 17261
4/30/10 24190 24707 24942
</Table>
CLASS C SHARES(2)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (1/25/05)
- -----------------------------------------------------------------
With sales charges 2.86% 46.77% 7.43% 6.80%
Excluding sales charges 3.86 47.77 7.43 6.80
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MSCI WORLD
MAINSTAY EPOCH EX. U.S. S&P EPAC
INTERNATIONAL SMALL SMALL CAP SMALL CAP
CAP FUND INDEX INDEX
------------------- ---------- ---------
01/25/05 10000 10000 10000
9881 10140 10079
15161 14522 14374
18366 16674 17734
17466 14813 16132
9568 8445 9278
4/30/10 14138 13025 13407
</Table>
1. Performance tables and graphs do not reflect the deduction of the taxes that
a shareholder would pay on distribution or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge and
are subject to a contingent deferred sales charge ("CDSC") 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 or
individual investors with a minimum initial investment of $5 million.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. The Fund is the successor to the Epoch International
Small Cap Fund. Effective January 4, 2010, the Fund changed its fiscal year
end from December 31 to October 31.
2. Performance figures for Investor Class and Class C shares, first offered
November 16, 2009, include the historical performance of Class I shares
through November 13, 2009 adjusted for differences in certain contractual
expenses and fees.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (1/25/05)
- --------------------------------------------------------
4.13% 49.12% 8.49% 7.86%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MSCI WORLD
MAINSTAY EPOCH EX. U.S. S&P EPAC
INTERNATIONAL SMALL SMALL CAP SMALL CAP
CAP FUND INDEX INDEX
------------------- ---------- ---------
01/25/05 10000 10000 10000
9907 10140 10079
15353 14522 14374
18785 16674 17734
18045 14813 16132
9984 8445 9278
4/30/10 14888 13025 13407
</Table>
<Table>
MainStay Epoch International Small Cap Fund - - MSCI World Ex. U.S. Small Cap Index - S&P EPAC Small Cap Index
- -
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE FOUR ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
MSCI World Ex. U.S. Small Cap Index(4) 7.49% 54.22% 5.14% 5.15%
S&P EPAC Small Cap Index(5) 5.10 44.50 5.87 5.73
Average Lipper international multi-cap core fund(6) 0.37 37.12 5.02 4.69
</Table>
3. Performance figures for Class I shares and Class A shares reflect the
historical performance of the Institutional shares and the Class P shares,
respectively, of the Epoch International Small Cap Fund, which was subject to
a different fee structure.
4. The Morgan Stanley Capital International ("MSCI") World Ex. U.S. Small Cap
Index is composed of small capitalization stocks designed to measure equity
performance in 22 global developed markets, excluding the U.S. Total returns
assume reinvestment of all dividends and capital gains. The Fund has selected
the MSCI World Ex. U.S. Small Cap Index as its primary benchmark index in
replacement of the S&P EPAC Small Cap Index as its broad-based securities
market index for comparison purposes because it believes the MSCI World Ex.
U.S. Small Cap Index is more reflective of the Fund's current investment
style. An investment cannot be made directly in an index.
5. The S&P Europe, Pacific and Asia Composite ("EPAC") Small Cap Index measures
the performance of the smallest companies from the European and Pacific
countries represented in the S&P Broad Market Index. The S&P EPAC Small Cap
Index represents the bottom 15% of the total market capitalization of each
country. Total returns assume reinvestment of all dividends and capital
gains. An investment cannot be made directly in an index.
6. The average Lipper international multi-cap core fund is representative of
funds that, by portfolio practice, invest in a variety of market
capitalization ranges without concentrating 75% of their equity assets in any
one market-capitalization range over an extended period of time.
International multi-cap core funds typically have an average price-to-cash
flow ratio, price-to book ratio, and three-year sales-per-share growth value
compared to the S&P/Citigroup World ex-U.S. BMI. This benchmark is a product
of Lipper Inc. Lipper Inc. is an independent monitor of fund performance.
Results are based on average total returns of similar funds with all dividend
and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Epoch International Small Cap Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY EPOCH INTERNATIONAL SMALL CAP
FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09(3) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES(2) $1,000.00 $1,021.10 $ 7.63 $1,015.50 $ 7.61
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,073.10 $ 8.74 $1,016.40 $ 8.50
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES(2) $1,000.00 $1,018.00 $11.15 $1,012.00 $11.11
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,076.40 $ 7.47 $1,017.60 $ 7.25
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.64% for Investor Class, 1.70% for Class A, 2.40% for Class C and 1.45% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 days for Class A and Class I (to reflect the one-
half year period) and 168 days for Investor Class and Class C (to reflect the
since-inception period).The table above represents actual expenses incurred
during the one-half year period.
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010, and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $8.20 for Investor Class and $11.98 for Class C and the ending account
value would have been $1,016.70 for Investor Class and $1,012.90 for Class C.
3. Investor Class and Class C shares began investment operations on November 16,
2009.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
Common Stocks 97.5
Preferred Stock 1.0
Other Assets, Less Liabilities 0.9
Short-Term Investment 0.3
Unaffiliated Investment Company 0.3
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Rhodia S.A.
2. Technip S.A.
3. Intermediate Capital Group PLC
4. Temenos Group A.G. Registered
5. Localiza Rent a Car S.A.
6. EFG International A.G
7. Sysmex Corp.
8. Cookson Group PLC
9. Nifco, Inc. /Japan
10. Diagnosticos da America S.A.
</Table>
8 MainStay Epoch International Small Cap Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS(1)
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS EMILY BAKER, WILLIAM PRIEST, CFA, AND
MICHAEL WELHOELTER, CFA, OF EPOCH INVESTMENT PARTNERS, INC. (EPOCH), THE FUND'S
SUBADVISOR.
HOW DID MAINSTAY EPOCH INTERNATIONAL SMALL CAP FUND PERFORM RELATIVE TO ITS
PEERS AND ITS BENCHMARK FOR THE FOUR MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Epoch International Small Cap Fund
returned 4.05% for Investor Class shares, 4.05% for Class A shares and 3.86% for
Class C shares for the four months ended April 30, 2010. Over the same period,
the Fund's Class I shares returned 4.13%. All share classes outperformed the
0.37% return of the average Lipper(2) international multi-cap core fund for the
same period. All share classes underperformed the 7.49% return of the MSCI World
Ex U.S. Small Cap Index(3) and the 5.10% return of the S&P EPAC Small Cap
Index(4) during the four months ended April 30, 2010. The MSCI World Ex U.S.
Small Cap Index is the Fund's broad-based securities-market index. See page 5
for Fund returns with sales charges.
WHAT MAJOR FACTORS INFLUENCED THE FUND'S RELATIVE PERFORMANCE DURING THE FOUR-
MONTH REPORTING PERIOD?
The first few months of 2010 proved to be highly volatile, as markets initially
turned negative on concerns over Chinese monetary tightening and European debt
concerns (particularly in Portugal, Ireland, Italy, Greece and Spain).
Gradually, a combination of improved macroeconomic data and evidence that
European troubles could be resolved and that China had made a strong policy move
resulted in a sharp market rally. Sentiment shifted again as news about the
Greek debt situation became less positive and doubts emerged about the
effectiveness of and timetable for related reforms. Despite this volatility,
international small caps performed well during the reporting period.
In addition, we saw encouraging signs of movement into a recovery in which
income and employment may start to grow more decisively. Corporate announcements
across the globe continued the trend of upside surprises. The strong momentum of
key leading indicators suggested that continued strong reporting may lie ahead.
These factors, along with attractive equity valuations, provided fundamental
positive underlying support for the market. Realizing that challenges may still
lie ahead, we have positioned the Fund with a focus on strong businesses that
generate a high level of reliable cash flow and that are run by management teams
with strong records of allocating capital to enhance shareholder value.
During the four months ended April 30, 2010, stock selection in the energy
sector contributed positively to the Fund's results relative to the MSCI World
Ex U.S. Small Cap Index. More specifically, the Fund's exposure to oil services
firms contributed meaningfully. For example, positions in Acergy, Technip and
Subsea outperformed the benchmark index, given their active exposure to the most
prolific, higher-growth offshore development regions. The Fund also benefited
from having an underweight position in financials.
More than offsetting these positive factors, however, were the detracting
effects of an overweight position in Europe, exposure to Brazilian stocks, and
weaker stock selection in the industrials sector. The Fund's overweight position
in Europe was adversely affected by debt concerns in several peripheral European
countries, which affected the entire region and drove the euro down against the
U.S. dollar. Brazilian stocks detracted from the Fund's performance relative to
the benchmark. Despite good fundamentals, the market suffered from variations in
Chinese commodity demand. Many of the Fund's Brazilian consumer discretionary
stocks, including home builders, autos and malls, paused during the reporting
period following significant gains in the fourth quarter of 2009. In the
industrials sector, the Fund's holdings in Italy and Spain particularly
struggled along with the broader equity markets in these countries.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH SECTORS MADE THE WEAKEST
CONTRIBUTIONS?
On an absolute basis, the strongest-contributing sectors to the Fund's
performance were energy, industrials and materials. In energy, Fund holdings in
oil services stocks particularly boosted Fund performance. In industrials, the
Fund saw strong results from companies with leading positions in their fields,
providers of productivity-improving services and companies involved in global
trade. In materials, stocks with exposure to precious metals, nonindustrial
metals and industrial gases helped the Fund's absolute performance.
1. Effective January 4, 2010, the Fund's fiscal year-end changed from December
31 to October 31. As a result, the following discussion covers the four-month
reporting period ended April 30, 2010.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the MSCI World Ex U.S. Small
Cap Index.
4. See footnote on page 6 for more information on the S&P EPAC (Europe Pacific
Asia Composite) Small Cap Index.
mainstayinvestments.com 9
During the reporting period, the sectors that detracted most from the Fund's
absolute performance were financials, utilities and information technology. The
Fund had exposure to financial companies with businesses in southern Europe.
These companies suffered from contagion concerns stemming from the debt crisis
in Greece. Although the Fund had only limited exposure to utilities, Red
Electrica of Spain was one holding that felt the effects of Greek-contagion
concerns. We sold the Fund's position in Red Electrica during the reporting
period. In information technology, the Fund's position in Germany-based
electronic payment and risk management company Wirecard A.G. suffered when
negative rumors involving senior management circulated, causing extreme stock
price weakness.
WHICH INDIVIDUAL STOCKS WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE
PERFORMANCE DURING THE REPORTING PERIOD AND WHICH STOCKS DETRACTED?
On an absolute basis, France-based specialty chemicals company Rhodia, U.K.-
based materials science company Cookson Group and Canada-based diversified
natural resource company Sherritt International made the strongest contributions
to the Fund's performance.
During the four-month reporting period, Wirecard A.G., Italy-based asset-
management company Azimut Holding and Greece-based financial services group EFG
Eurobank Ergasias were among the greatest detractors from the Fund's absolute
performance.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Among the stocks that the Fund purchased during the reporting period was
ProSiebenSat. 1 Media, a German broadcasting company. We bought the stock for
the Fund because of the company's free cash flow growth potential, since
advertising revenues are expected to pick up as the economy recovers. We also
established a Fund position in Canadian methanol company Methanex. We liked this
company's prospects for strong free cash flow growth as global activity
recovers.
In addition to the Fund's sales of Wirecard A.G. and Azimut Holding, we sold the
Fund's position in Unipol Gruppo Finanziario, an Italian holding company in the
financial sector. We sold the Fund's position on heightened concerns about the
extent of the Greek crisis. We also eliminated the Fund's holding in Cap Gemini,
a French consulting, outsourcing, technology and professional services company.
We sold the position when price appreciation took the stock out of the small-cap
universe.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the four months ended April 30, 2010, we increased the Fund's weightings
in the industrials, energy and materials sectors. We raised the Fund's weighting
in industrials to gain more Fund exposure to global economic growth. The
increased weighting in energy was driven primarily by the attractive valuations
of oil services companies. The Fund's exposure to materials rose through
investments in nonindustrial metals stocks that had lagged and offered an
attractive way to add more cyclicality to the Fund.
We reduced the Fund's exposure to the financials and information technology
sectors. Exposure to financials was lowered primarily by selling out of stocks
in the southern peripheral markets of Europe, which we felt would be adversely
affected by the troubles in Greece. We sold information technology stocks for
company-specific reasons and to raise capital to reinvest elsewhere.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010?
As of April 30, 2010, the Fund's most substantially overweight sectors relative
to the MSCI World Ex U.S. Small Cap Index were industrials, energy and health
care. As of the same date, the Fund's most substantially underweight sectors
relative to the MSCI World Ex U.S. Small Cap Index were financials, consumer
discretionary and materials.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Epoch International Small Cap Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 97.5%+
- -------------------------------------------------------
AUSTRALIA 2.0%
Centamin Egypt, Ltd. (Metals
& Mining) (a) 927,400 $ 1,953,767
SAI Global, Ltd.
(Professional Services) 260,817 1,034,158
Transpacific Industries
Group, Ltd. (Commercial
Services & Supplies)(a) 507,000 588,722
------------
3,576,647
------------
AUSTRIA 1.3%
Andritz A.G. (Machinery) 20,600 1,271,671
Vienna Insurance Group
(Insurance) 21,850 1,071,376
------------
2,343,047
------------
BELGIUM 1.2%
Telenet Group Holding N.V.
(Diversified
Telecommunication Services)
(a) 71,602 2,159,107
------------
BERMUDA 1.5%
Frontline Ltd. (Oil, Gas &
Consumable Fuels) 37,650 1,370,056
Golden Ocean Group, Ltd.
(Marine) (a) 247,900 493,865
Lancashire Holdings, Ltd.
(Insurance) 116,800 826,511
Peace Mark Holdings, Ltd.
(Textiles, Apparel & Luxury
Goods) (a)(b)(c) 1,118,750 1,441
------------
2,691,873
------------
BRAZIL 9.6%
All America Latina Logistica
S.A. (Road & Rail) (a) 268,650 2,445,013
Banco ABC Brasil S.A.
(Diversified Financial
Services) 343,400 2,459,560
BR Malls Participacoes S.A.
(Real Estate Management &
Development) (a) 111,500 1,420,170
V Diagnosticos da America
S.A. (Health Care Providers
& Services) 340,200 2,955,283
V Localiza Rent a Car S.A.
(Road & Rail) 290,400 3,257,759
Marfrig Alimentos S.A. (Food
Products) 73,200 768,110
MRV Engenharia e
Participacoes S.A.
(Household Durables) 226,000 1,599,195
PDG Realty S.A.
Empreendimentos e
Participacoes (Household
Durables) 57,700 529,781
Rossi Residencial S.A.
(Household Durables) 120,650 891,904
Santos Brasil Participacoes
S.A. (Transportation
Infrastructure) 19,800 190,795
Tegma Gestao Logistica S.A.
(Road & Rail) 78,150 681,129
------------
17,198,699
------------
CANADA 5.0%
Crew Energy, Inc. (Oil, Gas &
Consumable Fuels) (a) 34,100 612,645
Eldorado Gold Corp. (Metals &
Mining) (a) 98,807 1,517,414
Methanex Corp. (Chemicals) 66,000 1,535,322
Migao Corp. (Chemicals) (a) 59,700 405,523
Paramount Resources, Ltd.
(Oil, Gas & Consumable
Fuels) (a) 36,050 622,837
Sherritt International Corp.
(Metals & Mining) 231,500 1,800,404
Sino-Forest Corp. (Paper &
Forest Products) (a) 116,450 2,070,375
Westport Innovations, Inc.
(Auto Components) (a) 23,027 439,775
------------
9,004,295
------------
CAYMAN ISLANDS 1.6%
Subsea 7, Inc. (Energy
Equipment & Services) (a) 145,900 2,834,748
------------
CHINA 2.4%
Dalian Port PDA Co., Ltd.
(Transportation
Infrastructure) 2,992,426 1,381,265
Shandong Weigao Group Medical
Polymer Co., Ltd. (Health
Care Equipment & Supplies) 269,000 1,267,840
Zhuzhou CSR Times Electric
Co., Ltd. (Electrical
Equipment) 816,000 1,717,688
------------
4,366,793
------------
CYPRUS 0.4%
Bank of Cyprus Public Co.,
Ltd. (Commercial Banks) 125,200 724,150
------------
FRANCE 9.1%
Alten, Ltd. (IT Services) (a) 100,850 2,938,486
Carbone Lorraine S.A.
(Electrical Equipment) 48,700 1,779,322
EDF Energies Nouvelles S.A.
(Independent Power
Producers & Energy Traders) 11,075 499,717
IPSOS (Media) 61,200 2,348,705
V Rhodia S.A. (Chemicals)
(a) 191,150 4,481,512
Saft Groupe S.A. (Electrical
Equipment) (a) 11,150 405,273
V Technip S.A. (Energy
Equipment & Services) 49,150 3,927,774
------------
16,380,789
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. Any of the ten largest holdings may be a security
traded on more than one exchange. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
GERMANY 3.3%
Asian Bamboo A.G. (Food
Products) (a) 11,900 $ 557,612
Axel Springer A.G. (Media) 9,658 1,101,795
GFK SE (Media) 10,100 381,265
Hamburger Hafen und Logistik
A.G. (Transportation
Infrastructure) 13,905 507,727
Morphosys A.G. (Life Sciences
Tools & Services) (a) 53,450 1,090,255
Puma A.G. Rudolf Dassler
Sport (Textiles, Apparel &
Luxury Goods) 3,850 1,288,955
Software A.G. (Software) 9,450 1,086,080
------------
6,013,689
------------
GREECE 0.3%
Intralot S.A. Integrated
Lottery Systems & Services
(Hotels, Restaurants &
Leisure) 134,168 576,466
------------
HONG KONG 2.1%
Asia Cement China Holdings
Corp. (Construction
Materials) 1,010,000 489,513
Industrial and Commercial
Bank of China Asia, Ltd.
(Commercial Banks) 554,664 1,388,971
Sinotrans Shipping, Ltd.
(Marine) 670,500 302,769
Television Broadcasts, Ltd.
(Media) 76,000 371,194
Vitasoy International
Holdings, Ltd. (Food
Products) 1,620,000 1,233,805
------------
3,786,252
------------
IRELAND 0.4%
Irish Life & Permanent Group
Holdings PLC (Insurance)
(a) 159,250 645,301
------------
ITALY 7.7%
Amplifon S.p.A (Health Care
Providers & Services) (a) 239,300 1,253,018
Ansaldo STS S.p.A
(Transportation
Infrastructure) 100,850 1,853,923
Astaldi S.p.A (Construction &
Engineering) 321,048 2,411,735
Danieli & Co. S.p.A.
(Machinery) 189,050 2,499,752
Exor S.p.A (Diversified
Financial Services) 80,314 1,469,375
Maire Tecnimont S.p.A
(Construction &
Engineering) 713,000 2,951,707
Prysmian S.p.A (Electrical
Equipment) 26,600 477,895
Tod's S.p.A. (Textiles,
Apparel & Luxury Goods) 12,469 917,477
------------
13,834,882
------------
JAPAN 12.5%
Air Water, Inc. (Chemicals) 189,160 2,083,116
Daibiru Corp. (Real Estate
Management & Development) 51,000 488,560
Daiseki Co., Ltd. (Commercial
Services & Supplies) 22,495 493,998
Disco Corp. (Semiconductors &
Semiconductor Equipment) 7,900 553,330
House Foods Corp. (Food
Products) 61,200 881,906
Japan Retail Fund Investment
Corp. (Real Estate
Investment Trusts) 202 271,595
JGC Corp. (Construction &
Engineering) 118,750 2,034,655
Kansai Paint Co., Ltd.
(Chemicals) 133,440 1,013,050
McDonald's Holdings Co.
Japan, Ltd. (Hotels,
Restaurants & Leisure) 46,000 977,634
Nabtesco Corp. (Machinery) 177,000 2,208,524
NET One Systems Co., Ltd. (IT
Services) 500 722,128
V Nifco, Inc. /Japan (Auto
Components) 134,850 3,012,311
Oracle Corp. Japan (Software) 19,600 971,194
ORIX Corp. (Consumer Finance)
(a) 8,500 778,480
Pigeon Corp. (Household
Products) 11,600 435,010
Sawai Pharmaceutical Co.,
Ltd. (Pharmaceuticals) 12,100 920,813
So-net Entertainment Corp.
(Internet Software &
Services) 210 548,744
V Sysmex Corp. (Health Care
Equipment & Supplies) 52,753 3,172,526
Unicharm Petcare Corp. (Food
Products) 27,200 906,306
------------
22,473,880
------------
LUXEMBOURG 1.6%
Acergy S.A. (Energy Equipment
& Services) 142,400 2,680,340
L'Occitane International S.A.
(Household Products) (a) 53,950 105,842
------------
2,786,182
------------
NETHERLANDS 3.5%
Core Laboratories N.V.
(Energy Equipment &
Services) 12,850 1,926,087
Imtech N.V. (Construction &
Engineering) 19,500 613,731
SBM Offshore N.V. (Energy
Equipment & Services) 118,871 2,355,694
Ten Cate N.V. (Textiles,
Apparel & Luxury Goods) 19,215 524,016
USG People N.V. (Professional
Services) (a) 53,900 948,660
------------
6,368,188
------------
PORTUGAL 0.3%
Jeronimo Martins SGPS S.A.
(Food & Staples Retailing)
(a) 52,660 544,105
------------
REPUBLIC OF KOREA 0.3%
Glovis Co., Ltd. (Air Freight
& Logistics) 4,676 513,390
------------
</Table>
12 MainStay Epoch International Small Cap 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)
SPAIN 5.0%
Construcciones y Auxiliar de
Ferrocarriles S.A.
(Machinery) 3,900 $ 2,135,607
Ebro Puleva S.A. (Food
Products) 134,041 2,496,415
Obrascon Huarte Lain S.A.
(Construction &
Engineering) 54,940 1,571,867
Prosegur Cia de Seguridad
S.A. (Commercial Services &
Supplies) 12,110 562,481
Viscofan S.A. (Food Products) 80,750 2,196,951
------------
8,963,321
------------
SWITZERLAND 6.4%
Bank Sarasin & Cie A.G.
(Capital Markets) 8,550 333,504
Clariant A.G. (Chemicals) (a) 160,850 2,220,111
V EFG International A.G.
(Capital Markets) 190,950 3,211,696
Helvetia Holding A.G.
(Insurance) 2,650 805,340
Petroplus Holdings A.G. (Oil,
Gas & Consumable Fuels) (a) 41,587 737,540
Straumann Holding A.G.
(Health Care Equipment &
Supplies) 3,800 941,856
V Temenos Group A.G.
Registered (Software) (a) 123,074 3,333,096
------------
11,583,143
------------
TAIWAN 1.3%
Clevo Co. (Computers &
Peripherals) (a) 545,000 1,185,824
Far EasTone
Telecommunications Co.,
Ltd. (Wireless
Telecommunication Services) 517,000 628,722
First Steamship Co., Ltd.
(Marine) 318,000 548,968
------------
2,363,514
------------
UNITED KINGDOM 18.7%
Afren PLC (Oil, Gas &
Consumable Fuels) (a) 2,012,150 2,814,506
Aggreko PLC (Commercial
Services & Supplies) 80,950 1,514,177
Ashtead Group PLC (Trading
Companies & Distributors) 984,900 1,786,626
Bovis Homes Group PLC
(Household Durables) (a) 77,500 500,081
Cairn Energy PLC (Oil, Gas &
Consumable Fuels) (a) 230,150 1,405,096
Charter International PLC
(Machinery) 99,800 1,230,202
V Cookson Group PLC
(Industrial Conglomerates)
(a) 366,650 3,168,679
Domino's Pizza UK & IRL PLC
(Hotels, Restaurants &
Leisure) 236,500 1,257,996
Homeserve PLC (Commercial
Services & Supplies) 60,903 1,865,599
V Intermediate Capital Group
PLC (Capital Markets) 776,000 3,344,779
Intertek Group PLC
(Professional Services) 80,900 1,841,855
Invensys PLC (Machinery) 122,700 632,967
Kingfisher PLC (Specialty
Retail) 318,650 1,217,572
London Stock Exchange Group
PLC (Diversified Financial
Services) 24,550 255,977
Meggitt PLC (Aerospace &
Defense) 368,550 1,753,793
Millennium & Copthorne Hotels
PLC (Hotels, Restaurants &
Leisure) 272,400 1,970,975
Misys PLC (Software) (a) 276,200 988,148
Next PLC (Multiline Retail) 70,200 2,462,750
Promethean World PLC
(Diversified Consumer
Services) (a) 357,913 1,169,180
SSL International PLC (Health
Care Equipment & Supplies) 196,280 2,576,165
------------
33,757,123
------------
Total Common Stocks
(Cost $142,191,702) 175,489,584
------------
PREFERRED STOCK 1.0%
- -------------------------------------------------------
GERMANY 1.0%
ProSiebenSat.1 Media A.G.
0.15% (Media) 99,150 1,870,878
------------
Total Preferred Stock
(Cost $1,358,822) 1,870,878
------------
UNAFFILIATED INVESTMENT COMPANY 0.3%
- -------------------------------------------------------
AUSTRALIA 0.3%
Australian Infrastructure
Fund (Transportation
Infrastructure) 320,650 580,408
------------
Total Unaffiliated Investment
Company
(Cost $577,858) 580,408
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 0.3%
- -------------------------------------------------------
REPURCHASE AGREEMENT 0.3%
UNITED STATES 0.3%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$602,895 (Collateralized by
a United States Treasury
Bill with a rate of 0.135%
and a maturity date of
5/27/10, with a Principal
Amount of $620,000 and a
Market Value of $619,938)
(Capital Markets) $ 602,894 $ 602,894
------------
Total Short-Term Investment
(Cost $602,894) 602,894
------------
Total Investments
(Cost $144,731,276) (d) 99.1% 178,543,764
Other Assets, Less
Liabilities 0.9 1,550,186
---------- ------------
Net Assets 100.0% $180,093,950
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) Fair valued security--The total market
value of this security at April 30, 2010
is $1,441, which represents less than
one-tenth of a percent of the Fund's net
assets.
(c) Illiquid security--The total market value
of this security at April 30, 2010 is
$1,441, which represents less than one-
tenth of a percent of the Fund's net
assets.
(d) At April 30, 2010, cost is $149,015,009
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $38,789,310
Gross unrealized depreciation (9,260,555)
-----------
Net unrealized appreciation $29,528,755
===========
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities(a)
Common Stocks (b)(c) $30,082,848 $145,405,295 $1,441 $175,489,584
Preferred Stock -- 1,870,878 -- 1,870,878
Unaffiliated Investment Company -- 580,408 -- 580,408
Short-Term Investment
Repurchase Agreement -- 602,894 -- 602,894
----------- ------------ ------ ------------
Total Investments in Securities $30,082,848 $148,459,475 $1,441 $178,543,764
=========== ============ ====== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 1 assets represent securities listed under Brazil, Canada and the
following common stock whose primary exchange is the New York Stock
Exchange: Centamin Egypt, Ltd., under Australia and Core Laboratories N.V.
under Netherlands.
(c) The level 3 security valued at $1,441 is a security listed under Bermuda
within the Textiles, Apparel & Luxury Goods industry within the Common
Stocks section of the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2.
The Fund recognizes transfers between the levels as of the beginning of the
period
14 MainStay Epoch International Small Cap Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
The following is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining value:
ASSET VALUATION INPUTS
<Table>
<Caption>
BALANCE
AS OF ACCRUED REALIZED
INVESTMENTS IN DECEMBER 31, DISCOUNTS GAIN
SECURITIES 2009 (PREMIUMS) (LOSS)
Common Stock
Bermuda $1,443 $ -- $ --
------ ----- -----
Total $1,443 $-- $--
====== ===== =====
<Caption>
CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
CHANGE IN NET NET BALANCE INVESTMENTS
UNREALIZED TRANSFERS TRANSFERS AS OF STILL HELD AT
INVESTMENTS IN APPRECIATION NET NET IN TO OUT OF APRIL 30, APRIL 30,
SECURITIES (DEPRECIATION) PURCHASES SALES LEVEL 3 LEVEL 3 2010 2010 (A)
Common Stock
Bermuda $ (2) $ -- $ -- $ -- $ -- $1,441 $ (2)
----- ----- ----- ----- ----- ------ -----
Total $(2) $-- $-- $-- $-- $1,441 $(2)
===== ===== ===== ===== ===== ====== =====
</Table>
(a) Included in "Net change in unrealized appreciation (depreciation) on
investments" in the Statement of Operations.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
INDUSTRY DIVERSIFICATION
<Table>
<Caption>
VALUE PERCENT+
Aerospace & Defense $ 1,753,793 1.0%
Air Freight & Logistics 513,390 0.3
Auto Components 3,452,086 1.9
Capital Markets 7,492,873 4.2
Chemicals 11,738,634 6.6
Commercial Banks 2,113,121 1.2
Commercial Services &
Supplies 5,024,977 2.7
Computers & Peripherals 1,185,824 0.7
Construction & Engineering 9,583,695 5.3
Construction Materials 489,513 0.3
Consumer Finance 778,480 0.4
Diversified Consumer Services 1,169,180 0.6
Diversified Financial
Services 4,184,912 2.3
Diversified Telecommunication
Services 2,159,107 1.2
Electrical Equipment 4,380,178 2.4
Energy Equipment & Services 13,724,643 7.7
Food & Staples Retailing 544,105 0.3
Food Products 9,041,105 5.0
Health Care Equipment &
Supplies 7,958,387 4.4
Health Care Providers &
Services 4,208,301 2.3
Hotels, Restaurants & Leisure 4,783,071 2.6
Household Durables 3,520,961 2.2
Household Products 540,852 0.3
Independent Power Producers &
Energy Traders 499,717 0.3
Industrial Conglomerates 3,168,679 1.8
Insurance 3,348,528 1.8
Internet Software & Services 548,744 0.3
IT Services 3,660,614 2.0
Life Sciences Tools &
Services 1,090,255 0.6
Machinery 9,978,723 5.5
Marine 1,345,602 0.7
Media 6,073,837 3.3
Metals & Mining 5,271,585 2.9
Multiline Retail 2,462,750 1.4
Oil, Gas & Consumable Fuels 7,562,680 4.2
Paper & Forest Products 2,070,375 1.2
Pharmaceuticals 920,813 0.5
Professional Services 3,824,673 2.1
Real Estate Investment Trusts 271,595 0.2
Real Estate Management &
Development 1,908,730 1.1
Road & Rail 6,383,901 3.5
Semiconductors &
Semiconductor Equipment 553,330 0.3
Software 6,378,518 3.5
Specialty Retail 1,217,572 0.7
Textiles, Apparel & Luxury
Goods 2,731,889 1.5
Trading Companies &
Distributors 1,786,626 1.0
Transportation Infrastructure 4,514,118 2.5
Wireless Telecommunication
Services 628,722 0.3
------------ -----
178,543,764 99.1
Other Assets, Less
Liabilities 1,550,186 0.9
------------ -----
Net Assets $180,093,950 100.0%
============ =====
</Table>
+ Percentages indicated are based on Fund net assets
16 MainStay Epoch International Small Cap Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $144,731,276) $ 178,543,764
Cash denominated in foreign
currencies (identified cost
$522,045) 522,538
Receivables:
Investment securities sold 1,385,082
Dividends and interest 523,307
Fund shares sold 315,444
Other assets 214,629
-------------
Total assets 181,504,764
-------------
LIABILITIES:
Payables:
Investment securities purchased 1,012,336
Manager (See Note 3) 183,686
Fund shares redeemed 108,799
Shareholder communication 42,642
NYLIFE Distributors (See Note 3) 1,443
Accrued expenses 61,908
-------------
Total liabilities 1,410,814
-------------
Net assets $ 180,093,950
=============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 10,659
Additional paid-in capital 259,208,819
-------------
259,219,478
Accumulated net investment income 874,233
Accumulated net realized loss on
investments and foreign currency
transactions (113,809,661)
Net unrealized appreciation on
investments 33,812,488
Net unrealized depreciation on
translation of other assets and
liabilities in foreign currencies (2,588)
-------------
Net assets $ 180,093,950
=============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 167,818
=============
Shares of beneficial interest
outstanding 10,200
=============
Net asset value per share
outstanding $ 16.45
Maximum sales charge (5.50% of
offering price) 0.96
-------------
Maximum offering price per share
outstanding $ 17.41
=============
CLASS A
Net assets applicable to
outstanding shares $ 3,952,112
=============
Shares of beneficial interest
outstanding 240,346
=============
Net asset value per share
outstanding $ 16.44
Maximum sales charge (5.50% of
offering price) 0.96
-------------
Maximum offering price per share
outstanding $ 17.40
=============
CLASS C
Net assets applicable to
outstanding shares $ 931,630
=============
Shares of beneficial interest
outstanding 56,813
=============
Net asset value and offering price
per share outstanding $ 16.40
=============
CLASS I
Net assets applicable to
outstanding shares $ 175,042,390
=============
Shares of beneficial interest
outstanding 10,351,730
=============
Net asset value and offering price
per share outstanding $ 16.91
=============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2010 (A) THROUGH APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (b) $ 730,085
Interest 79
----------
Total income 730,164
----------
EXPENSES:
Manager (See Note 3) 649,111
Custodian 53,329
Transfer agent (See Note 3) 51,702
Shareholder communication 37,086
Registration 34,430
Professional fees 30,392
Distribution/Service--Investor
Class (See Note 3) 84
Distribution/Service--Class A (See
Note 3) 2,920
Distribution/Service--Class C (See
Note 3) 893
Trustees 2,749
Miscellaneous 11,808
----------
Total expenses 874,504
----------
Net investment loss (144,340)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions 3,067,642
Foreign currency transactions (122,388)
----------
Net realized gain on investments and
foreign currency transactions 2,945,254
----------
Net change in unrealized
appreciation on:
Investments 4,316,685
Translation of other assets and
liabilities in foreign
currencies (6,108)
----------
Net change in unrealized
appreciation on investments and
foreign currency transactions 4,310,577
----------
Net realized and unrealized gain on
investments and foreign currency
transactions 7,255,831
----------
Net increase in net assets resulting
from operations $7,111,491
==========
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Dividends recorded net of foreign withholding taxes in the amount of
$72,761.
18 MainStay Epoch International Small Cap Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 1, 2010 THROUGH APRIL 30, 2010 UNAUDITED, THE YEAR ENDED
DECEMBER 31, 2009 (A) AND THE YEAR ENDED DECEMBER 31, 2008.
<Table>
<Caption>
2010 2009 2008
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment
income (loss) $ (144,340) $ 1,009,249 $ 900,065
Net realized gain
(loss) on
investments and
foreign currency
transactions 2,945,254 (57,165,310) (60,451,165)
Net change in
unrealized
appreciation
(depreciation) on
investments and
foreign currency
transactions 4,310,577 111,359,387 (123,467,983)
------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 7,111,491 55,203,326 (183,019,083)
------------------------------------------
Dividends and
distributions to
shareholders:
From net investment
income:
Class I -- -- (514,082)
------------------------------------------
-- -- (514,082)
------------------------------------------
From net realized
gain on
investments:
Class A -- -- (87,227)
Class I -- -- (11,611,848)
------------------------------------------
-- -- (11,699,075)
------------------------------------------
Total dividends and
distributions to
shareholders -- -- (12,213,157)
------------------------------------------
Capital share
transactions:
Net proceeds from
sale of shares 31,260,567 79,648,838 147,589,968
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions -- -- 12,183,832
Cost of shares
redeemed (b) (28,652,004) (115,080,875) (268,039,007)
------------------------------------------
Increase
(decrease) in
net assets
derived from
capital share
transactions 2,608,563 (35,432,037) (108,265,207)
------------------------------------------
Net increase
(decrease) in
net assets 9,720,054 19,771,289 (303,497,447)
NET ASSETS:
Beginning of period 170,373,896 150,602,607 454,100,054
------------------------------------------
End of period $180,093,950 $ 170,373,896 $ 150,602,607
==========================================
Accumulated
undistributed
(distributions in
excess of) net
investment income
at end of period $ 874,233 $ 1,018,573 $ (371,161)
==========================================
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Cost of shares redeemed net of redemption fees of $78, $1 and $791 for the
four-month period ended April 30, 2010, the year ended December 31, 2009 and
the year ended December 31, 2008, respectively (See Note 2(J)).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS CLASS A
-------------------------- ---------------------------------------------------------
JANUARY 1, NOVEMBER 16, JANUARY 1, AUGUST 2,
2010*** 2009** 2010*** 2006**
THROUGH THROUGH THROUGH YEAR ENDED THROUGH
APRIL 30, DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------------------------------
2010* 2009 2010* 2009 2008 2007 2006
Net asset value at
beginning of period $15.81 $16.11 $15.80 $10.98 $ 23.39 $23.49 $21.20
------ ------ ------ ------ ------- ------ ------
Net investment income
(loss) (0.00) ++(a) 0.00 ++(a) (0.02)(a) 0.06(a) 0.03 (a) (0.04) (0.02)
Net realized and
unrealized gain
(loss) on investments 0.65 (0.30) 0.67 4.76 (11.51) 3.39 3.63
Net realized and
unrealized loss on
foreign currency
transactions (0.01) -- (0.01) -- -- -- --
------ ------ ------ ------ ------- ------ ------
Total from investment
operations 0.64 (0.30) 0.64 4.82 (11.48) 3.35 3.61
------ ------ ------ ------ ------- ------ ------
Less dividends and
distributions:
From net investment
income -- -- -- -- -- (0.01) (0.00)++
From net realized
gain on
investments -- -- -- -- (0.94) (3.48) (1.32)
------ ------ ------ ------ ------- ------ ------
Total dividends and
distributions -- -- -- -- (0.94) (3.49) (1.32)
------ ------ ------ ------ ------- ------ ------
Redemption fee (d) 0.00 ++ -- 0.00 ++ 0.00++ 0.01 0.04 --
------ ------ ------ ------ ------- ------ ------
Net asset value at end
of period $16.45 $15.81 $16.44 $15.80 $ 10.98 $23.39 $23.49
====== ====== ====== ====== ======= ====== ======
Total investment return
(b) 4.05% (c) (1.86%)(c) 4.05% (c) 43.90% (49.01%) 14.54% 17.10% (c)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income
(loss) (0.09%)++ 0.15% ++ (0.39%)++ 0.42% 0.17% (0.10%) (0.41%)++
Net expenses 1.65% ++ 1.59% ++ 1.73% ++ 1.83% 1.74% 1.70% 1.80% ++
Portfolio turnover rate 22% 105% 22% 105% 107% 140% 75%
Net assets at end of
period (in 000's) $ 168 $ 31 $3,952 $2,749 $ 1,098 $2,858 $ 268
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) The redemption fee was discontinued, as of April 1, 2010.
</Table>
20 MainStay Epoch International Small Cap Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS C CLASS I
-------------------------------- ----------------------------------------------------------------------------------
JANUARY 1, NOVEMBER 16, JANUARY 1,
2010*** 2009** 2010***
THROUGH THROUGH THROUGH
APRIL 30, DECEMBER 31, APRIL 30, YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------------------------
2010* 2009 2010* 2009 2008 2007 2006
$15.79 $16.11 $ 16.24 $ 11.16 $ 23.77 $ 23.91 $ 18.26
------ ------ -------- -------- -------- -------- --------
(0.01)(a) (0.01)(a) (0.01)(a) 0.09 (a) 0.06 (a) 0.04 (0.01)
0.63 (0.31) 0.69 4.99 (11.69) 3.31 7.00
(0.01) -- (0.01) -- -- -- --
------ ------ -------- -------- -------- -------- --------
0.61 (0.32) 0.67 5.08 (11.63) 3.35 6.99
------ ------ -------- -------- -------- -------- --------
-- -- -- -- (0.04) (0.01) (0.02)
-- -- -- -- (0.94) (3.48) (1.32)
------ ------ -------- -------- -------- -------- --------
-- -- -- -- (0.98) (3.49) (1.34)
------ ------ -------- -------- -------- -------- --------
-- 0.00 -- -- 0.00 ++ -- --
------ ------ -------- -------- -------- -------- --------
$16.40 $15.79 $ 16.91 $ 16.24 $ 11.16 $ 23.77 $ 23.91
====== ====== ======== ======== ======== ======== ========
3.86% (c) (1.99%)(c) 4.13% (c) 45.52% (48.89%) 14.12% 38.40%
(0.16%)++ (0.65%)++ (0.24%)++ 0.67% 0.30% 0.15% 0.11%
2.40% ++ 2.34% ++ 1.48% ++ 1.60% 1.49% 1.45% 1.55%
22% 105% 22% 105% 107% 140% 75%
$ 932 $ 25 $175,042 $167,568 $149,505 $451,242 $286,841
<Caption>
CLASS C CLASS I
---------- ------------
JANUARY 1, JANUARY 25,
2010*** 2005**
THROUGH THROUGH
APRIL 30, DECEMBER 31,
--------------------------------
2010* 2005
$15.79 $ 15.00
------ --------
(0.01)(a) 0.02
0.63 3.24
(0.01) --
------ --------
0.61 3.26
------ --------
-- --
-- --
------ --------
-- --
------ --------
-- --
------ --------
$16.40 $ 18.26
====== ========
3.86% (c) 21.73%(c)
(0.16%)++ 0.13%++
2.40% ++ 1.73%++
22% 49%
$ 932 $115,681
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Epoch International Small Cap Fund (the
"Fund"), a diversified fund. The Fund is the successor to the Epoch
International Small Cap Fund (the "Predecessor Fund"), which was a series of a
different registered investment company for which Epoch Investment Partners,
Inc. served as investment adviser.
The Fund currently offers 4 classes of shares. Investor Class and Class C shares
were seeded as of the close of business on November 13, 2009 and were first
offered and commenced operations on November 16, 2009. Class I shares and Class
A shares commenced operations (under former designations) on January 25, 2005
and August 2, 2006, respectively. Effective, January 4, 2010, the Fund changed
its fiscal year end and tax year end from December 31 to October 31. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class C shares are
offered at NAV without an initial sales charge, although a 1.00% contingent
deferred sales charge may be imposed on redemptions made within one year of
purchase of Class C shares. Class I shares are offered at NAV and are not
subject to a sales charge. Depending upon eligibility, Investor Class shares may
convert to Class A shares and Class A shares may convert to Investor Class
shares. The four classes of shares have the same voting (except for issues that
relate solely to one class), dividend, liquidation and other rights, and the
same terms and conditions, except that Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek long-term capital appreciation.
The financial statements of the Fund reflect the historical results of the
Institutional Class and P shares of the Predecessor Fund prior to its
reorganization. (See Note 10.) Upon the completion of the reorganization, the
Class I and Class A shares of the Fund assumed the performance, financial and
other information of the Institutional Class and Class P shares, respectively of
the Predecessor Fund. All information regarding and references to periods prior
to the commencement of operations of the Fund refer to the Predecessor Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Investments in other mutual funds are valued at their NAVs as of the close of
the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund held a security
with a value of $1,441, that was valued in such a manner.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector, significant fluctuations in U.S.
or foreign markets, natural disasters, armed conflicts, governmental actions or
other
22 MainStay Epoch International Small Cap Fund
developments not tied directly to the securities markets. Should the Manager or
Subadvisor, as defined in Note 3(A),
conclude that such events may have affected the accuracy of the last price
reported on the local foreign market, the Manager or Subadvisor may, pursuant to
procedures adopted by the Fund's Board, adjust the value of the local price to
reflect the impact on the price of such securities as a result of such events.
Additionally, international equity securities are also fair valued whenever the
movement of a particular index exceeds certain thresholds. In such cases, the
securities are fair valued by applying factors provided by a third party vendor
in accordance with the Fund's policies and procedures. At April 30, 2010,
certain foreign equity securities held by the Fund were fair valued.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the four-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the four-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
Generally, a security is considered illiquid if it cannot be sold or disposed of
in the ordinary course of business at approximately the price at which it is
valued. Its illiquidity might prevent the sale of such security at a time when
the Manager or Subadvisor, if any, as defined in Note 3(A) might wish to sell,
and these securities could have the effect of decreasing the overall level of a
Fund's liquidity. Further, the lack of an established secondary market may make
it more difficult to value illiquid securities, requiring the Fund to rely on
judgments that may be somewhat subjective in determining value, which could vary
from the amount that the Fund could realize upon disposition. Difficulty in
selling illiquid securities may result in a loss or may be costly to the Fund.
Under the supervision of the Board, the Manager or Subadvisor, if any,
determines the liquidity of a Fund's investments; in doing so, the Manager or
Subadvisor, if any, may consider various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective purchasers, (3)
the dealer undertakings to make a market, and (4) the nature of the security and
the market in which it trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). Illiquid
securities generally will be valued in such manner, as the Board in good faith
deems appropriate to reflect their fair market value.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Investment income received by the Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are generally withheld at the
source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
"more likely than not" to be sustained assuming examination by taxing
authorities. Management has analyzed the Fund's tax positions taken on federal
income tax returns for all open tax years (current and prior three tax years),
and has concluded that no provision for federal income tax is required in the
Fund's financial statements. The Fund's federal and state income and federal
excise tax returns for tax years for which the applicable statutes of
limitations have not expired are subject to examination by the Internal Revenue
Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund are kept
in U.S. dollars. Prices of securities denominated in foreign currency amounts
are translated into U.S. dollars at the mean between the buying and selling
exchange rates last quoted by any major U.S. bank at the following dates:
(i) market value of investment securities, other assets and liabilities--at the
valuation date, and
(ii) purchases and sales of investment securities, income and expenses--at the
date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are
presented at the exchange rates and market values at the close of the period.
The realized and unrealized changes in net assets arising from fluctuations in
exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the Fund's books, and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing such foreign currency
denominated assets and liabilities, other than investments at valuation date
exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
24 MainStay Epoch International Small Cap Fund
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(J) REDEMPTION FEE. Prior to April 1, 2010, the Fund imposed a 2.00% redemption
fee on redemptions (including exchanges) of Fund shares made within 60 days of
their date of purchase for any class. The redemption fee was designed to offset
brokerage commissions and other costs associated with short-term trading and was
not assessed on shares acquired through the reinvestment of dividends or
distributions paid by the Fund. The redemption fees are included in the
Statement of Changes in Net Assets' shares redeemed amount and retained by the
Fund.
(K) CONCENTRATION OF RISK The Fund invests in foreign securities, which carry
certain risks that are in addition to the usual risks inherent in domestic
instruments. These risks include those resulting from currency fluctuations,
future adverse political and economic developments and possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions.
These risks are likely to be greater in emerging markets than in developed
markets. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic or political developments in a
specific country, industry or region.
(L) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
(M) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the Fund's derivative and hedging activities,
including how such activities are accounted for and their effect on the Fund's
financial positions, performance and cash flows. These derivatives are not
accounted for as hedging instruments.
Fair value of Derivatives as of April 30, 2010:
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights (2) 20,450 20,450
=================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
(N) LARGE TRANSACTION RISKS. From time to time, the Fund may receive large
purchase or redemption orders from affiliated or unaffiliated mutual funds or
other investors. Such large transactions could have adverse effects on a Fund's
performance if the Fund were required to sell securities or invest cash at times
when it otherwise would not do so. This activity could also accelerate the
realization of capital gains and increase the Fund's transaction costs. The Fund
has adopted procedures designed to mitigate the negative impacts of such large
transactions, but there can be no assurance that these procedures will be
effective.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Epoch
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
Investment Partners, LLC ("Epoch" or "Subadvisor"), a registered investment
adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day
portfolio management of the Fund. Pursuant to the terms of a Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of 1.10% of the Fund's average daily net assets.
Effective after the close of business on November 13, 2009, New York Life
Investments entered into a written expense limitation agreement under which it
has agreed to reimburse expenses Class A and Class I shares of the Fund so that
the total ordinary operating expenses (total ordinary operating expenses
excludes taxes, interest, litigation, extraordinary expenses, brokerage and
other transaction expense relating to the purchase or sale of portfolio
investments and the fees and expenses of any other funds in which the Fund
invests) for Class A and Class I shares do not exceed the following percentages
of average daily net assets, Class A, 1.89% and Class I, 1.65%. These expense
limitations were based on the total annual operating expenses of the Predecessor
Fund (adjusted to reflect any applicable expense limitation agreement). New York
Life Investments will apply an equivalent waiver or reimbursement, in an amount
equal to the number of basis points waived for Class A shares, to Investor Class
and Class C shares of the Fund. This agreement will be in effect for a two-year
period unless extended by New York Life Investments and approved by the Fund's
Board in connection with its review of the Fund's Investment advisory agreement.
Based on its review the Board may maintain, modify or terminate the agreement.
For the four-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $649,111.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. Effective after the close of business on
November 13, 2009, the Trust, on behalf of the Fund, entered into a Distribution
Agreement with NYLIFE Distributors LLC (the "Distributor"), an indirect, wholly-
owned subsidiary of New York Life. The Fund has adopted distribution and service
plans, (the "Plans") in accordance with the provisions of Rule 12b-1 under the
1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from each Fund at an annual rate of 0.25% of the
average daily net assets of the Fund's Investor Class and Class A shares, which
is an expense of the Investor Class and Class A shares of the respective Funds
for distribution or service activities as designated by the Distributor.
Pursuant to the Class C Plan, each Fund pays the Distributor a monthly
distribution fee, which is an expense of the Class C shares of the Fund, at an
annual rate of 0.75% of the average daily net assets of the respective Fund's
Class C shares, along with a shareholder service fee at an annual rate of 0.25%
of the average daily net assets of the Class C shares of the Fund for a total
12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service
fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $482
and $1,465, respectively, for the four-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the four-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 2
- ----------------------------------------------
Class A 1,032
- ----------------------------------------------
Class C 11
- ----------------------------------------------
Class I 50,657
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
26 MainStay Epoch International Small Cap Fund
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $ 25,522 15.2%
- -------------------------------------------------
Class C 25,444 2.7
- -------------------------------------------------
Class I 209,038 0.1
- -------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the four-month period
ended April 30, 2010, these fees, which are included in professional fees shown
on the Statement of Operations, were $2,312.
NOTE 4--FEDERAL INCOME TAX:
At December 31, 2009, for federal income tax purposes, capital loss
carryforwards of $114,066,578 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the Fund
through the years indicated. To the extent that these loss carryforwards are
used to offset future capital gains, it is probable that the capital gains so
offset will not be distributed to shareholders. No capital gain distributions
shall be made until any capital loss carryforwards have been fully utilized or
expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S) DEFERRED (000'S)
2016 $ 47,303 $--
2017 66,764 39
- ---------------------------------------------------------
Total $114,067 $39
- ---------------------------------------------------------
</Table>
NOTE 5--FOREIGN CURRENCY TRANSACTIONS:
As of April 30, 2010, the Fund held the following foreign currencies:
<Table>
<Caption>
CURRENCY COST VALUE
Australian Dollar AUD 18 USD 16 USD 17
Brazilian Real BRL 233,533 132,539 134,350
Canadian Dollar CAD 28,799 28,870 28,351
Danish Krone DKK 5,305 1,068 949
Euro EUR 83,454 110,965 111,115
Hong Kong Dollar HKD 1,105,515 142,450 142,388
Japanese Yen JPY 333,312 3,543 3,548
Norwegian Krone
(a) NOK (42,774) (7,158) (7,251)
Pound Sterling GBP 22,393 34,265 34,262
Swedish Krona SEK 48 7 7
Swiss Franc CHF 80,499 75,480 74,802
- ------------------------------------------------------------
Total USD 522,045 USD 522,538
- ------------------------------------------------------------
</Table>
(a) Currency was overdrawn as of April 30, 2010.
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 7--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the four-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the four-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $41,031 and $38,278,
respectively.
NOTE 9--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 7,301 $ 118,135
Shares redeemed (210) (3,274)
-------------------------
Net increase in shares
outstanding before
conversion 7,091 114,861
Shares converted into
Investor Class (See Note
1) 1,117 18,192
-------------------------
Net increase 8,208 $ 133,053
=========================
Period ended December 31,
2009: (a)
Shares sold 2,315 $ 36,932
Shares redeemed (323) (5,029)
-------------------------
Net increase 1,992 $ 31,903
=========================
</Table>
mainstayinvestments.com 27
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS A SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 86,040 $ 1,376,848
Shares redeemed (18,543) (308,879)
-------------------------
Net increase in shares
outstanding before
conversion 67,497 1,067,969
Shares converted from Class
A (See Note 1) (1,117) (18,192)
-------------------------
Net increase 66,380 $ 1,049,777
=========================
Year ended December 31,
2009:
Shares sold 96,215 $ 1,346,882
Shares redeemed (22,168) (300,828)
-------------------------
Net increase 74,047 $ 1,046,054
=========================
<Caption>
CLASS C SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 55,260 $ 899,278
-------------------------
Net increase 55,260 $ 899,278
=========================
Period ended December 31,
2009: (a)
Shares sold 1,553 $ 25,019
-------------------------
Net increase 1,553 $ 25,019
=========================
<Caption>
CLASS I SHARES AMOUNT
Four-month period ended
April 30, 2010:
Shares sold 1,756,941 $ 28,866,306
Shares redeemed (1,723,580) (28,339,851)
-------------------------
Net increase 33,361 $ 526,455
=========================
Year ended December 31,
2009:
Shares sold 6,676,243 $ 78,240,005
Shares redeemed (9,749,184) (114,775,018)
-------------------------
Net decrease (3,072,941) $ (36,535,013)
=========================
</Table>
(a) Investor Class shares and Class C shares were first offered on November 16,
2009.
NOTE 10--REORGANIZATION:
At a special meeting held on October 30, 2009, the shareholders of the Epoch
International Small Cap Fund approved the reorganization of the Epoch
International Small Cap Fund with and into MainStay Epoch International Small
Cap Fund. Effective after the close of business on November 13, 2009, the Class
P shares of Epoch International Small Cap Fund were redesignated as Class A
shares of MainStay Epoch International Small Cap Fund. Effective after the close
of business on November 13, 2009, the Institutional Class shares of Epoch
International Small Cap Fund were redesignated as Class I shares of MainStay
Epoch International Small Cap Fund. Investor Class and Class C shares were
seeded as of the close of business on November 13, 2009 and were first offered
and commenced operations on November 16, 2009.
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 12--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal four-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
NOTE 13--DIVIDENDS:
On May 17, 2010, the Fund's management declared dividends and distributions in
the amount of the Fund's remaining undistributed Investment Company Taxable
Income and Net Capital Gain, if any, for the Fund's taxable year ended December
31, 2009, which is in accordance with the provisions of Section 855(a) of the
Internal Revenue Code. The declaration date was May 17, 2010; it is expected
that ex-dividend, reinvestment, and payable date, will be in December 2010.
28 MainStay Epoch International Small Cap Fund
PROXY VOTING POLICIES AND
PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX or
proxy voting record is available free of charge upon request by calling 800-
MAINSTAY (624-6782); visiting the Fund's website at mainstayinvestments.com; or
on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 29
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18313 MS121-10 MSEISC10-06/10
F4
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH U.S. ALL CAP FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH U.S. ALL CAP FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 14
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 21
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 27
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 27
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF THE FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 10.50% 28.55% 2.28% -4.12%
Excluding sales charges 16.93 36.04 3.44 -3.57
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. ALL RUSSELL 3000(R) RUSSELL 3000(R)
CAP FUND GROWTH INDEX INDEX
-------------- --------------- ---------------
4/30/00 9450.00 10000.00 10000.00
7157.00 6825.00 8704.00
5755.00 5508.00 7770.00
4587.00 4682.00 6683.00
5459.00 5755.00 8362.00
5547.00 5773.00 8945.00
7189.00 6748.00 10562.00
7569.00 7527.00 12092.00
7564.00 7468.00 11468.00
4829.00 5118.00 7460.00
4/30/10 6569.00 7098.00 10512.00
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 10.75% 29.06% 2.44% -4.04%
Excluding sales charges 17.19 36.57 3.60 -3.50
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. ALL RUSSELL 3000(R) RUSSELL 3000(R)
CAP FUND GROWTH INDEX INDEX
-------------- --------------- ---------------
4/30/00 23625.00 25000.00 25000.00
17892.00 17062.00 21761.00
14387.00 13771.00 19426.00
11467.00 11705.00 16708.00
13648.00 14389.00 20904.00
13867.00 14432.00 22362.00
17972.00 16871.00 26405.00
18924.00 18817.00 30229.00
18903.00 18669.00 28671.00
12120.00 12795.00 18651.00
4/30/10 16552.00 17746.00 26279.00
</Table>
CLASS B SHARES(3)--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 11.51% 29.94% 2.28% -4.33%
Excluding sales charges 16.51 34.94 2.65 -4.33
</Table>
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. ALL RUSSELL 3000(R) RUSSELL 3000(R)
CAP FUND GROWTH INDEX INDEX
-------------- --------------- ---------------
4/30/00 10000.00 10000.00 10000.00
7491.00 6825.00 8704.00
5977.00 5508.00 7770.00
4731.00 4682.00 6683.00
5593.00 5755.00 8362.00
5635.00 5773.00 8945.00
7251.00 6748.00 10562.00
7578.00 7527.00 12092.00
7511.00 7468.00 11468.00
4759.00 5118.00 7460.00
4/30/10 6421.00 7098.00 10512.00
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For information on current fee waivers and/or expense limitations,
please refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS C SHARES(3)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 15.49% 33.98% 2.67% -4.32%
Excluding sales charges 16.49 34.98 2.67 -4.32
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. ALL RUSSELL 3000(R) RUSSELL 3000(R)
CAP FUND GROWTH INDEX INDEX
-------------- --------------- ---------------
4/30/00 10000.00 10000.00 10000.00
7491.00 6825.00 8704.00
5977.00 5508.00 7770.00
4731.00 4682.00 6683.00
5596.00 5755.00 8362.00
5635.00 5773.00 8945.00
7257.00 6748.00 10562.00
7584.00 7527.00 12092.00
7517.00 7468.00 11468.00
4762.00 5118.00 7460.00
4/30/10 6427.00 7098.00 10512.00
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE
ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------
17.30% 36.88% 4.11% -3.15%
</Table>
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. ALL RUSSELL 3000(R) RUSSELL 3000(R)
CAP FUND GROWTH INDEX INDEX
-------------- --------------- ---------------
4/30/00 10000.00 10000.00 10000.00
7569.00 6825.00 8704.00
6101.00 5508.00 7770.00
4876.00 4682.00 6683.00
5819.00 5755.00 8362.00
5940.00 5773.00 8945.00
7745.00 6748.00 10562.00
8208.00 7527.00 12092.00
8250.00 7468.00 11468.00
5307.00 5118.00 7460.00
4/30/10 7264.00 7098.00 10512.00
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
Russell 3000(R) Index(4) 17.64% 40.90% 3.28% 0.50%
Russell 3000(R) Growth Index(5) 16.50 38.69 4.22 -3.37
Average Lipper multi-cap core fund(6) 16.13 39.15 3.32 2.13
</Table>
certain contractual expenses and fees. Unadjusted, the performance shown for
Investor Class shares might have been lower.
3. Performance figures for Class A, B and C shares, first offered on January 2,
2004, include the historical performance of Class I shares through January 1,
2004, adjusted for differences in certain contractual expenses and fees.
Unadjusted, the performance shown for Class A, B and C shares might have been
lower.
4. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Total returns assume
reinvestment of all dividends and capital gains. The Russell 3000(R) Index is
the Fund's broad-based securities market index for comparison purposes.
Effective June 29, 2009, the Fund selected the Russell 3000(R) Index as its
primary benchmark in replacement of the Russell 3000(R) Growth Index because
it believes that this index is more reflective of the Fund's investment
style. An investment cannot be made directly in an index.
5. The Russell 3000(R) Growth Index 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,
which represents approximately 98% of the investable U.S. equity market.
Total returns assume reinvestment of all dividends and capital gains. An
investment cannot be made directly in an index.
6. The average Lipper multi-cap core fund is representative of funds that, by
portfolio practice, invest in a variety of market-capitalization ranges
without concentrating 75% of their equity assets in any one market-
capitalization range over an extended period of time. Multi-cap core funds
typically have an above-average price-to-earnings ratio, price-to-book ratio,
and three-year sales-per-share growth value, compared to the S&P
SuperComposite 1500 Index. This benchmark is a product of Lipper Inc. Lipper
Inc. is an independent monitor of fund performance. Results are based on
average total returns of similar funds with all dividend and capital gain
distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Epoch U.S. All Cap Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY EPOCH U.S. ALL CAP FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,169.30 $ 9.14 $1,016.40 $ 8.50
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,171.90 $ 6.52 $1,018.80 $ 6.06
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,165.10 $13.15 $1,012.60 $12.23
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,164.90 $13.15 $1,012.60 $12.23
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,173.00 $ 5.12 $1,020.10 $ 4.76
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.70% for Investor Class, 1.21% for Class A, 2.45% for Class B and Class C
and 0.95% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Software 9.2%
Capital Markets 8.1
Oil, Gas & Consumable Fuels 7.5
Health Care Providers & Services 6.0
Chemicals 5.9
Insurance 4.8
Specialty Retail 4.0
Aerospace & Defense 3.9
Energy Equipment & Services 3.7
Pharmaceuticals 3.7
Machinery 3.5
IT Services 3.4
Semiconductors & Semiconductor
Equipment 3.4
Household Durables 2.6
Diversified Financial Services 2.4
Media 2.2
Life Sciences Tools & Services 2.1
Building Products 2.0
Commercial Services & Supplies 2.0
Computers & Peripherals 2.0
Electronic Equipment & Instruments 2.0
Gas Utilities 2.0
Distributors 1.9
Internet Software & Services 1.9
Hotels, Restaurants & Leisure 1.8
Textiles, Apparel & Luxury Goods 1.7
Multi-Utilities 1.6
Food Products 1.1
Real Estate Investment Trusts 1.0
Thrifts & Mortgage Finance 0.8
Diversified Consumer Services 0.7
Containers & Packaging 0.6
Short-Term Investment 1.0
Other Assets, Less Liabilities -0.5
-----
100.0%
=====
</Table>
See Portfolio of Investment beginning on page 11 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Microsoft Corp.
2. Visa, Inc. Class A
3. MetLife, Inc.
4. Praxair, Inc.
5. ExxonMobil Corp.
6. Franklin Resources, Inc.
7. Ameriprise Financial, Inc.
8. NYSE Euronext
9. GameStop Corp. Class A
10. Comcast Corp. Class A
</Table>
8 MainStay Epoch U.S. All Cap Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS DAVID PEARL, WILLIAM PRIEST, CFA, AND
MICHAEL WELHOELTER, CFA, OF EPOCH INVESTMENT PARTNERS, INC. (EPOCH), THE FUND'S
SUBADVISOR.
HOW DID MAINSTAY EPOCH U.S. ALL CAP FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Epoch U.S. All Cap Fund returned 16.93%
for Investor Class shares, 17.19% for Class A shares, 16.51% for Class B shares
and 16.49% for Class C shares for the six months ended April 30, 2010. Over the
same period, the Fund's Class I shares returned 17.30%. All share classes
outperformed the 16.13% return of the average Lipper(1) multi-cap core fund for
the same period. All share classes underperformed the 17.64% return of the
Russell 3000(R) Index(2) for the six months ended April 30, 2010. Investor
Class, Class A, Class B and Class I shares outperformed--and Class C shares
underperformed--the 16.50% return of the Russell 3000(R) Growth Index(3) for the
same period. The Russell 3000(R) Index is the Fund's broad-based securities-
market index. See pages 5 and 6 for Fund returns with sales charges.
WHAT MAJOR FACTORS INFLUENCED THE FUND'S RELATIVE PERFORMANCE DURING THE
REPORTING PERIOD?
Throughout the reporting period, we stayed true to our philosophy and process.
The Fund focused on quality companies that were producing free cash flow and
were run by strong management teams who allocated that cash flow to increase
shareholder returns. While the Fund generated robust absolute gains,
conservative stock selection (or, in other words, not buying highly leveraged,
highly cyclical or commodity-oriented companies) detracted from performance
relative to the Russell 3000(R) Index. These effects were partially offset by
effective sector allocation, which contributed positively to the Fund's relative
results.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS MADE THE WEAKEST
CONTRIBUTIONS?
Relative to the Russell 3000(R) Index, the strongest-contributing sectors to the
Fund's performance were consumer staples, utilities and financials. Strong stock
selection across all three sectors helped relative performance, as did the
Fund's significant underweight position in consumer staples and modestly
overweight position in financials. While an underweight position in utilities
detracted somewhat from the Fund's returns, we shifted to a neutral weighting
relative to the benchmark by the end of the reporting period.
During the reporting period, the sectors that detracted the most from the Fund's
performance relative to the Russell 3000(R) Index were consumer discretionary
and materials. While the Fund benefited from overweight positions in both
sectors, the Fund's conservative stock selections detracted. The Fund's small
cash position also detracted, since the Fund was not fully invested in equities
during the significant market rally.
WHICH INDIVIDUAL STOCKS WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE
PERFORMANCE DURING THE REPORTING PERIOD AND WHICH STOCKS DETRACTED?
On an absolute basis, insurance company MetLife, aerospace & defense company
Boeing and electronic payments company Visa made the strongest contributions to
the Fund's results. MetLife advanced as market forces boosted the company's
variable annuity, 401(k) and asset management operations. Boeing benefited from
prospects of a large replacement cycle in the commercial aerospace industry and
positive reactions to the company's new aircraft. Visa produces an immense
amount of free cash flow and has benefited from the continued move from cash to
credit and debit cards. Visa has also seen its stock price rise with the
economic rebound.
Global reinsurance company Everest Re Group, wire-transfer provider Western
Union and oil, gas & consumable fuels company ExxonMobil were among the greatest
detractors from the Fund's absolute performance. Everest Re suffered losses as a
result of the earthquake in Chile. We exited the Fund's position in Western
Union when the company failed to execute on the business plan the way we thought
they should. ExxonMobil underperformed with the rest of the energy sector, but
we maintained the Fund's position in the stock.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Among the stocks that the Fund purchased during the reporting period were
semiconductor manufacturer Texas Instruments, brokerage services provider TD
Ameritrade, Internet software & services company Yahoo! and pharmaceuticals
company Abbott Laboratories.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 3000(R) Index.
3. See footnote on page 6 for more information on the Russell 3000(R) Growth
Index.
mainstayinvestments.com 9
We believed that Texas Instruments would continue to grow market share in the
analog market because of solid innovation and a scale advantage in sales
productivity. The company had also been gaining in its share of distributors. We
expected TD Ameritrade to benefit from increased activity in the capital markets
and from increased savings rates by consumers, particularly if the company
continued to gain market share from other discount brokers. We found the search-
advertising partnership between Yahoo! and Microsoft appealing, and we felt that
Yahoo! could benefit from a rebound in display advertising and from the movement
toward online advertising. Abbott Laboratories had experienced strong revenue
growth across its many business divisions, and we believe its management has a
track record of being a good allocator of capital.
In addition to the sale of Western Union, we sold the Fund's positions in
medical device maker Boston Scientific and weapon and space systems company
Alliant Techsystems during the reporting period. Although Boston Scientific's
acquisition of Guidant initially showed promise, the two stent makers took
longer than anticipated to provide synergies. We exited the Fund's position in
Boston Scientific to redeploy the assets in more promising opportunities,
specifically Abbott Laboratories, which in addition to providing the Fund
exposure to the stent business, provided a better product portfolio. Alliant
Techsystems suffered when the U.S. administration took aim at a number of NASA's
programs, leaving Alliant Techsystems' future somewhat uncertain. We sold the
Fund's position in the stock.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, the Fund's weightings in the consumer discretionary
and energy sectors modestly increased in absolute terms and relative to the
Russell 3000(R) Index. In the consumer discretionary sector, we increased the
Fund's position in GameStop, which we felt would benefit from the beginning
stages of a new gaming cycle. We also added Tupperware Brands to the Fund. In
energy, we added several new companies, with a focus on oil services. We
modestly reduced the Fund's exposure to utilities, primarily through the sale of
Indiana-based energy holding company Vectren.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010?
As of April 30, 2010, the Fund's most substantially overweight sectors relative
to the Russell 3000(R) Index were consumer discretionary, information technology
and materials. As of the same date, the Fund's most substantially underweight
sector relative to the Russell 3000(R) Index was consumer staples. The Fund had
no direct exposure to the telecommunications services sector as of April 30,
2010.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Epoch U.S. All Cap Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 99.5%+
- -----------------------------------------------------
AEROSPACE & DEFENSE 3.9%
Boeing Co. (The) 136,000 $ 9,850,480
Rockwell Collins, Inc. 120,750 7,848,750
------------
17,699,230
------------
BUILDING PRODUCTS 2.0%
Masco Corp. 558,100 9,057,963
------------
CAPITAL MARKETS 8.1%
V Ameriprise Financial, Inc. 243,050 11,267,798
Bank of New York Mellon Corp.
(The) 296,300 9,223,819
V Franklin Resources, Inc. 97,800 11,309,592
TD Ameritrade Holding
Corp. (a) 231,850 4,641,637
------------
36,442,846
------------
CHEMICALS 5.9%
E.I. du Pont de Nemours & Co. 217,950 8,683,128
International Flavors &
Fragrances, Inc. 113,800 5,700,242
V Praxair, Inc. 141,600 11,861,832
------------
26,245,202
------------
COMMERCIAL SERVICES & SUPPLIES 2.0%
Waste Management, Inc. 252,500 8,756,700
------------
COMPUTERS & PERIPHERALS 2.0%
Apple, Inc. (a) 33,950 8,865,024
------------
CONTAINERS & PACKAGING 0.6%
Silgan Holdings, Inc. 43,200 2,606,256
------------
DISTRIBUTORS 1.9%
Genuine Parts Co. 196,550 8,412,340
------------
DIVERSIFIED CONSUMER SERVICES 0.7%
Service Corp. International 340,850 3,060,833
------------
DIVERSIFIED FINANCIAL SERVICES 2.4%
V NYSE Euronext 324,450 10,586,804
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 2.0%
Corning, Inc. 459,860 8,852,305
------------
ENERGY EQUIPMENT & SERVICES 3.7%
Cameron International
Corp. (a) 90,933 3,588,216
Dresser-Rand Group, Inc. (a) 72,347 2,552,402
National-Oilwell Varco, Inc. 132,900 5,851,587
Weatherford International,
Ltd. (a) 242,250 4,387,148
------------
16,379,353
------------
FOOD PRODUCTS 1.1%
Corn Products International,
Inc. 142,750 5,139,000
------------
GAS UTILITIES 2.0%
ONEOK, Inc. 182,850 8,985,249
------------
HEALTH CARE PROVIDERS & SERVICES 6.0%
Aetna, Inc. 228,200 6,743,310
DaVita, Inc. (a) 125,341 7,825,039
Laboratory Corp. of America
Holdings (a) 113,250 8,898,052
UnitedHealth Group, Inc. 117,300 3,555,363
------------
27,021,764
------------
HOTELS, RESTAURANTS & LEISURE 1.8%
International Game Technology 379,200 7,993,536
------------
HOUSEHOLD DURABLES 2.6%
KB Home 444,200 8,231,026
Tupperware Brands Corp. 63,450 3,240,391
------------
11,471,417
------------
INSURANCE 4.8%
Everest Re Group, Ltd. 94,900 7,274,085
V MetLife, Inc. 310,366 14,146,482
------------
21,420,567
------------
INTERNET SOFTWARE & SERVICES 1.9%
eBay, Inc. (a) 173,000 4,119,130
Yahoo!, Inc. (a) 267,150 4,415,990
------------
8,535,120
------------
IT SERVICES 3.4%
V Visa, Inc. Class A 169,050 15,253,381
------------
LIFE SCIENCES TOOLS & SERVICES 2.1%
Thermo Fisher Scientific,
Inc. (a) 169,350 9,361,668
------------
MACHINERY 3.5%
AGCO Corp. (a) 84,100 2,945,182
Deere & Co. 95,300 5,700,846
Wabtec Corp. 148,900 7,084,662
------------
15,730,690
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
MEDIA 2.2%
V Comcast Corp. Class A 532,100 $ 10,030,085
------------
MULTI-UTILITIES 1.6%
Wisconsin Energy Corp. 133,700 7,020,587
------------
OIL, GAS & CONSUMABLE FUELS 7.5%
Anadarko Petroleum Corp. 128,650 7,996,884
ConocoPhillips 76,400 4,522,116
V ExxonMobil Corp. 171,650 11,646,452
Occidental Petroleum Corp. 106,557 9,447,344
------------
33,612,796
------------
PHARMACEUTICALS 3.7%
Abbott Laboratories 158,700 8,119,092
Endo Pharmaceuticals Holdings,
Inc. (a) 381,350 8,351,565
------------
16,470,657
------------
REAL ESTATE INVESTMENT TRUSTS 1.0%
Ventas, Inc. 91,250 4,309,738
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 3.4%
MEMC Electronic Materials,
Inc. (a) 504,000 6,536,880
Texas Instruments, Inc. 341,798 8,890,166
------------
15,427,046
------------
SOFTWARE 9.2%
Electronic Arts, Inc. (a) 224,500 4,348,565
V Microsoft Corp. 630,350 19,250,889
Oracle Corp. 333,700 8,622,808
Sybase, Inc. (a) 209,300 9,079,434
------------
41,301,696
------------
SPECIALTY RETAIL 4.0%
V GameStop Corp. Class A (a) 419,930 10,208,498
TJX Cos., Inc. 163,550 7,578,907
------------
17,787,405
------------
TEXTILES, APPAREL & LUXURY GOODS 1.7%
Warnaco Group, Inc. (The) (a) 157,600 7,539,584
------------
THRIFTS & MORTGAGE FINANCE 0.8%
Hudson City Bancorp, Inc. 259,450 3,450,685
------------
Total Common Stocks
(Cost $383,283,559) 444,827,527
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 1.0%
- -------------------------------------------------------
REPURCHASE AGREEMENT 1.0%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$4,638,173
(Collateralized by a United
States Treasury Bill with a
rate of 0.144%
and a maturity date of
7/15/10
with a Principal Amount of
$4,735,000 and a Market
Value of $4,733,580) $4,638,170 $ 4,638,170
------------
Total Short-Term Investment
(Cost $4,638,170) 4,638,170
------------
Total Investments
(Cost $387,921,729) (b) 100.5% 449,465,697
Other Assets, Less
Liabilities (0.5) (2,111,386)
---------- ------------
Net Assets 100.0% $447,354,311
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) At April 30, 2010, cost is $387,922,063
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $64,072,704
Gross unrealized depreciation (2,529,070)
-----------
Net unrealized appreciation $61,543,634
===========
</Table>
12 MainStay Epoch U.S. All Cap Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $444,827,527 $ -- $ -- $444,827,527
Short-Term Investment
Repurchase Agreement -- 4,638,170 -- 4,638,170
------------ ---------- -------- ------------
Total Investments in Securities $444,827,527 $4,638,170 $-- $449,465,697
============ ========== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $387,921,729) $449,465,697
Receivables:
Investment securities sold 7,279,224
Dividends and interest 253,348
Fund shares sold 83,969
Other assets 55,994
------------
Total assets 457,138,232
------------
LIABILITIES:
Payables:
Investment securities purchased 9,045,899
Manager (See Note 3) 316,050
Fund shares redeemed 264,630
Shareholder communication 74,214
Transfer agent (See Note 3) 32,890
Professional fees 30,913
NYLIFE Distributors (See Note 3) 14,024
Custodian 775
Accrued expenses 4,526
------------
Total liabilities 9,783,921
------------
Net assets $447,354,311
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 20,439
Additional paid-in capital 399,910,986
------------
399,931,425
Accumulated undistributed net
investment income 442,783
Accumulated net realized loss on
investments (14,563,865)
Net unrealized appreciation on
investments 61,543,968
------------
Net assets $447,354,311
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 7,398,022
============
Shares of beneficial interest
outstanding 358,766
============
Net asset value per share
outstanding $ 20.62
Maximum sales charge (5.50% of
offering price) 1.20
------------
Maximum offering price per share
outstanding $ 21.82
============
CLASS A
Net assets applicable to
outstanding shares $ 16,456,525
============
Shares of beneficial interest
outstanding 792,881
============
Net asset value per share
outstanding $ 20.76
Maximum sales charge (5.50% of
offering price) 1.21
------------
Maximum offering price per share
outstanding $ 21.97
============
CLASS B
Net assets applicable to
outstanding shares $ 6,955,054
============
Shares of beneficial interest
outstanding 354,921
============
Net asset value and offering price
per share outstanding $ 19.60
============
CLASS C
Net assets applicable to
outstanding shares $ 4,055,829
============
Shares of beneficial interest
outstanding 206,793
============
Net asset value and offering price
per share outstanding $ 19.61
============
CLASS I
Net assets applicable to
outstanding shares $412,488,881
============
Shares of beneficial interest
outstanding 18,725,563
============
Net asset value and offering price
per share outstanding $ 22.03
============
</Table>
14 MainStay Epoch U.S. All Cap Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 2,897,513
Interest 594
-----------
Total income 2,898,107
-----------
EXPENSES:
Manager (See Note 3) 1,449,849
Transfer agent (See Note 3) 92,610
Distribution/Service--Investor
Class (See Note 3) 8,537
Distribution/Service--Class A (See
Note 3) 19,139
Distribution/Service--Class B (See
Note 3) 33,389
Distribution/Service--Class C (See
Note 3) 18,753
Shareholder communication 37,870
Registration 35,367
Professional fees 34,912
Custodian 6,687
Trustees 4,728
Miscellaneous 9,046
-----------
Total expenses 1,750,887
-----------
Net investment income 1,147,220
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 9,080,200
Net change in unrealized
appreciation on investments 43,548,018
-----------
Net realized and unrealized gain on
investments 52,628,218
-----------
Net increase in net assets resulting
from operations $53,775,438
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 1,147,220 $ 578,010
Net realized gain (loss)
on investments 9,080,200 (18,006,679)
Net change in unrealized
appreciation
(depreciation) on
investments 43,548,018 45,128,203
--------------------------
Net increase in net assets
resulting from operations 53,775,438 27,699,534
--------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (6,765) --
Class A (39,351) --
Class B (7,024) --
Class C (3,879) --
Class I (1,225,428) --
--------------------------
Total dividends to
shareholders (1,282,447) --
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 199,599,141 47,937,660
Net asset value of shares
issued to shareholders in
reinvestment of dividends 1,247,383 --
Cost of shares redeemed (31,576,104) (35,694,263)
--------------------------
Increase in net assets
derived from capital
share transactions 169,270,420 12,243,397
--------------------------
Net increase in net
assets 221,763,411 39,942,931
NET ASSETS:
Beginning of period 225,590,900 185,647,969
--------------------------
End of period $447,354,311 $225,590,900
==========================
Accumulated undistributed
net investment income at
end of period $ 442,783 $ 578,010
==========================
</Table>
16 MainStay Epoch U.S. All Cap 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
--------------------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31 OCTOBER 31,
2010* 2009 2008
Net asset value at
beginning of period $17.66 $15.40 $ 23.34
------ ------ -------
Net investment income
(loss) (a) 0.01 (0.05) (0.13)
Net realized and
unrealized gain (loss)
on investments 2.97 2.31 (7.81)
------ ------ -------
Total from investment
operations 2.98 2.26 (7.94)
------ ------ -------
Less dividends and
distributions:
From net investment
income (0.02) -- --
From net realized gain
on investments -- -- --
------ ------ -------
Total dividends and
distributions (0.02) -- --
------ ------ -------
Net asset value at end of
period $20.62 $17.66 $ 15.40
====== ====== =======
Total investment return
(c) 16.93%(d) 14.68%(f) (34.02%)(d)
Ratios (to average net
assets)/ Supplemental
Data:
Net investment income
(loss) 0.11%++ (0.29%) (0.88%)++
Net expenses 1.70%++ 1.67% 1.64%++
Expenses (before
waiver/recoupment) 1.70%++ 1.96% 1.66%++
Portfolio turnover rate 23% 135% 56%
Net assets at end of
period (in 000's) $7,398 $6,384 $ 5,460
</Table>
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $16.84 $14.80 $ 28.03 $ 23.36 $ 21.54 $18.21
------ ------ ------- ------- ------- ------
Net investment loss (a) (0.06) (0.15) (0.34) (0.39) (0.37) (0.36)(b)
Net realized and unrealized gain
(loss) on investments 2.84 2.19 (10.65) 5.06 2.19 3.69
------ ------ ------- ------- ------- ------
Total from investment operations 2.78 2.04 (10.99) 4.67 1.82 3.33
------ ------ ------- ------- ------- ------
Less dividends and distributions:
From net investment income (0.02) -- -- -- -- --
From net realized gain on
investments -- -- (2.24) -- -- --
------ ------ ------- ------- ------- ------
Total dividends and distributions (0.02) -- (2.24) -- -- --
------ ------ ------- ------- ------- ------
Net asset value at end of period $19.60 $16.84 $ 14.80 $ 28.03 $ 23.36 $21.54
====== ====== ======= ======= ======= ======
Total investment return (c) 16.51%(d) 13.78%(f) (42.43%) 19.99% 8.45% 18.29%
Ratios (to average net assets)/
Supplemental Data:
Net investment loss (0.63%)++ (1.04%) (1.55%) (1.54%) (1.63%) (1.70%)(b)
Net expenses 2.45%++ 2.42% 2.34% 2.30% 2.25% 2.30%
Expenses (before
waiver/recoupment) 2.45%++ 2.71% 2.35% 2.28%(e) 2.29% 2.34%
Portfolio turnover rate 23% 135% 56% 37% 46% 31%
Net assets at end of period (in
000's) $6,955 $6,383 $ 6,191 $11,925 $10,770 $9,499
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) 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.
(c) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(d) Total return is not annualized.
(e) Due to expense cap structure change, Class A, B and C were able to recoup
expenses during year ended October 31, 2007.
(f) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
18 MainStay Epoch U.S. All Cap 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
- ---------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 17.76 $ 15.42 $ 28.85 $ 23.86 $ 21.84 $ 18.32
------- ------- ------- ------- ------- -------
0.06 0.02 (0.14) (0.21) (0.21) (0.19) (b)
2.99 2.32 (11.05) 5.20 2.23 3.71
------- ------- ------- ------- ------- -------
3.05 2.34 (11.19) 4.99 2.02 3.52
------- ------- ------- ------- ------- -------
(0.05) -- -- -- -- --
-- -- (2.24) -- -- --
------- ------- ------- ------- ------- -------
(0.05) -- (2.24) -- -- --
------- ------- ------- ------- ------- -------
$ 20.76 $ 17.76 $ 15.42 $ 28.85 $ 23.86 $ 21.84
======= ======= ======= ======= ======= =======
17.19%(d) 15.18%(f) (41.88%) 20.91% 9.25% 19.21%
0.61%++ 0.13% (0.59%) (0.79%) (0.89%) (0.95%)(b)
1.21%++ 1.26% 1.39% 1.55% 1.50% 1.55%
1.21%++ 1.34% 1.40% 1.53%(e) 1.54% 1.59%
23% 135% 56% 37% 46% 31%
$16,457 $14,006 $12,771 $32,894 $28,170 $14,333
</Table>
<Table>
<Caption>
CLASS C
- -----------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$16.86 $14.82 $ 28.06 $23.38 $21.56 $18.22
------ ------ ------- ------ ------ ------
(0.06) (0.15) (0.34) (0.39) (0.37) (0.36) (b)
2.83 2.19 (10.66) 5.07 2.19 3.70
------ ------ ------- ------ ------ ------
2.77 2.04 (11.00) 4.68 1.82 3.34
------ ------ ------- ------ ------ ------
(0.02) -- -- -- -- --
-- -- (2.24) -- -- --
------ ------ ------- ------ ------ ------
(0.02) -- (2.24) -- -- --
------ ------ ------- ------ ------ ------
$19.61 $16.86 $ 14.82 $28.06 $23.38 $21.56
====== ====== ======= ====== ====== ======
16.49%(d) 13.77%(f) (42.42%) 20.02% 8.44% 18.33%
(0.64%)++ (1.03%) (1.55%) (1.55%) (1.64%) (1.70%)(b)
2.45%++ 2.42% 2.34% 2.30% 2.25% 2.30%
2.45%++ 2.71% 2.35% 2.28%(e) 2.29% 2.34%
23% 135% 56% 37% 46% 31%
$4,056 $3,514 $ 4,004 $7,396 $4,820 $2,292
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 18.87 $ 16.33 $ 30.28 $ 24.90 $ 22.66 $ 18.90
-------- -------- -------- -------- -------- --------
Net investment income (loss) (a) 0.08 0.07 (0.03) (0.05) (0.08) (0.07) (b)
Net realized and unrealized gain
(loss) on investments 3.18 2.47 (11.68) 5.43 2.32 3.83
-------- -------- -------- -------- -------- --------
Total from investment operations 3.26 2.54 (11.71) 5.38 2.24 3.76
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income (0.10) -- -- -- -- --
From net realized gain on
investments -- -- (2.24) -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.10) -- (2.24) -- -- --
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 22.03 $ 18.87 $ 16.33 $ 30.28 $ 24.90 $ 22.66
======== ======== ======== ======== ======== ========
Total investment return (c) 17.30%(d) 15.55%(f) (41.60%) 21.61% 9.89% 19.89%
Ratios (to average net assets)/
Supplemental Data:
Net investment income (loss) 0.73%++ 0.42% (0.14%) (0.18%) (0.31%) (0.33%)(b)
Net expenses 0.95%++ 0.95% 0.93% 0.93% 0.93% 0.93%
Expenses (before
waiver/recoupment) 0.95%++ 1.09% 0.97% 0.95% 0.97% 0.97%
Portfolio turnover rate 23% 135% 56% 37% 46% 31%
Net assets at end of period (in
000's) $412,489 $195,303 $157,222 $297,744 $263,102 $289,058
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) 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.
(c) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(d) Total return is not annualized.
(e) Due to expense cap structure change, Class A, B and C were able to recoup
expenses during year ended October 31, 2007.
(f) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
20 MainStay Epoch U.S. All Cap Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Epoch U.S. All Cap Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Epoch U.S. All Cap
Fund, a series of Eclipse Funds Inc. (the "Predecessor Fund"). The
reorganization of the Predecessor Fund with and into the Fund, which was not
subject to shareholder approval under applicable law, occurred on February 26,
2010. All information regarding and references to periods prior to the
commencement of operations of the Fund relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class I shares commenced
operations on January 2, 1991. Class A shares, Class B shares and Class C shares
commenced operations on January 2, 2004. Investor Class shares commenced
operations on February 28, 2008. Investor Class and Class A shares are offered
at net asset value ("NAV") per share plus an initial sales charge. No sales
charge applies on investments of $1 million or more (and certain other qualified
purchases) in Investor Class and Class A shares, but a contingent deferred sales
charge is imposed on certain redemptions of such shares within one year of the
date of purchase. Class B shares and Class C shares are offered at NAV without
an initial sales charge, although a declining contingent deferred sales charge
may be imposed on redemptions made within six years of purchase of Class B
shares and a 1.00% contingent deferred sales charge may be imposed on
redemptions made within one year of purchase of Class C shares. Class I shares
are offered at NAV and are not subject to a sales charge. Depending upon
eligibility, Class B shares convert to either Investor Class or Class A shares
eight years after the date they were purchased. Additionally, depending upon
eligibility, Investor Class shares may convert to Class A shares and Class A
shares may convert to Investor Class shares. The five classes of shares have the
same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions, except that
Class B and Class C shares are subject to higher distribution and/or service fee
rates than Investor Class and Class A shares under a distribution plan pursuant
to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a
distribution and/or service fee.
The Fund's investment objective is to seek long-term capital appreciation.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Options contracts are valued at the last posted settlement price on the market
where such options are principally traded. Investments in other mutual funds are
valued at their NAVs as of the close of the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
risk inherent in a particular valuation technique used to measure fair value
using a pricing model and/or the risk inherent in the inputs for the valuation
technique. Inputs may be observable or unobservable. Observable inputs are
inputs that reflect the assumptions market participants would use in pricing the
asset or liability based on market data obtained from sources independent of the
reporting entity. Unobservable inputs are inputs that reflect the reporting
entity's own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the information available in
the circumstances. The inputs or methodology used for valuing securities may not
be an indication of the risks associated with investing in those securities. The
three-tier hierarchy of inputs is summarized in the three broad Levels listed
below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on securities
purchased, other than short-term investments, for the Fund are accreted and
amortized, respectively, on the effective interest rate method over the life of
the respective securities or, in the case of a callable security, over the
period to the first date of call. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
22 MainStay Epoch U.S. All Cap Fund
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(I) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Epoch
Investment Partners, Inc. (the "Subadvisor"), a registered investment adviser,
is responsible for the day-to-day portfolio management of the Fund. Pursuant to
the terms of a Subadvisory Agreement between New York Life Investments and the
Subadvisor, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.85% on assets up to $500 million, 0.825% on assets from $500 million to $1
billion and 0.80% on assets in excess of $1 billion. The effective management
fee rate was 0.85% for the six-month period ended April 30, 2010.
Effective February 26, 2010, New York Life Investments has entered into a
written expense limitation agreement, under which it agreed to waive a portion
of the management fee or reimburse expenses of the appropriate class of the Fund
to the extent necessary to ensure that the total ordinary
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
operating expenses (total ordinary operating expenses excludes taxes, interest,
litigation, extraordinary expenses, brokerage, other transaction expenses
relating to the purchase or sale of portfolio investments, and the fees and
expenses of any other funds in which the Fund invests) of a class do not exceed
the following percentages of average daily net assets: Investor Class, 1.85%;
Class B, 2.60%; Class C, 2.60% and Class I, 1.00%. This expense limitation
agreement expires February 28, 2011 and is reviewed annually by the Board in
connection with its review of the Fund's investment advisory agreements. Based
on its review, the Board may agree to maintain, modify or terminate the
agreement.
For the period August 1, 2009 to February 25, 2010, New York Life Investments
had agreed to voluntarily waive or reimburse the expenses of the appropriate
class of the Fund so that the total ordinary operating expenses of a class did
not exceed the following percentages of average daily net assets: Investor
Class, 1.85%; Class B, 2.60%; Class C, 2.60% and Class I, 1.00%.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $1,449,849.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Pursuant to the Class B and Class C Plans, Class B and Class C shares of the
Fund pay the Distributor a monthly distribution fee at an annual rate of 0.75%
of the average daily net assets of the Fund's Class B and Class C shares, along
with a service fee at an annual rate of 0.25% of the average daily net assets of
the Class B and Class C shares of the Fund for a total 12b-1 fee of 1.00%. Class
I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $2,888
and $1,497, respectively, for the six-month period ended April 30, 2010. The
Fund was also advised that the Distributor retained contingent deferred sales
charges on redemptions of Class B and Class C shares of $7,264 and $13,
respectively, for the six-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $18,022
- ----------------------------------------------
Class A 2,293
- ----------------------------------------------
Class B 17,637
- ----------------------------------------------
Class C 9,893
- ----------------------------------------------
Class I 44,765
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class A $ 1,191 0.0%++
- ---------------------------------------------------
Class B 1,126 0.0++
- ---------------------------------------------------
Class C 1,127 0.0++
- ---------------------------------------------------
Class I 147,111,680 35.7
- ---------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-
24 MainStay Epoch U.S. All Cap Fund
month period ended April 30, 2010, these fees, which are included in
professional fees shown on the Statement of Operations, were $7,070.
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $23,643,731 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the Fund through
the years indicated. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to shareholders. No capital gain distributions shall be
made until any capital loss carryforwards have been fully utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 3,732
2017 19,912
- ---------------------------------- -----
Total $23,644
- ---------------------------------- -----
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $195,820 and $76,530,
respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 32,413 $ 640,059
Shares issued to
shareholders in
reinvestment of dividends 351 6,740
Shares redeemed (26,829) (515,888)
------------------------
Net increase in shares
outstanding before
conversion 5,935 130,911
Shares converted into
Investor Class
(See Note 1) 5,156 98,814
Shares converted from
Investor Class
(See Note 1) (13,851) (271,765)
------------------------
Net decrease (2,760) $ (42,040)
========================
Year ended October 31, 2009:
Shares sold 54,690 $ 825,493
Shares redeemed (73,321) (1,091,582)
------------------------
Net decrease in shares
outstanding before
conversion (18,631) (266,089)
Shares converted into
Investor Class
(See Note 1) 39,675 564,385
Shares converted from
Investor Class
(See Note 1) (14,148) (230,821)
------------------------
Net increase 6,896 $ 67,475
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 82,782 $ 1,642,079
Shares issued to
shareholders in
reinvestment of dividends 1,939 37,075
Shares redeemed (97,969) (1,946,414)
------------------------
Net decrease in shares
outstanding before
conversion (13,248) (267,260)
Shares converted into
Class A (See Note 1) 21,852 428,268
Shares converted from
Class A (a) (4,282) (81,534)
------------------------
Net increase 4,322 $ 79,474
========================
Year ended October 31, 2009:
Shares sold 194,342 $ 3,010,083
Shares redeemed (226,670) (3,377,893)
------------------------
Net decrease in shares
outstanding before
conversion (32,328) (367,810)
Shares converted into
Class A (See Note 1) 19,260 314,200
Shares converted from
Class A (See Note 1) (26,535) (376,642)
------------------------
Net decrease (39,603) $ (430,252)
========================
</Table>
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 22,462 $ 421,055
Shares issued to
shareholders in
reinvestment of dividends 369 6,742
Shares redeemed (32,933) (608,418)
------------------------
Net decrease in shares
outstanding before
conversion (10,102) (180,621)
Shares converted from
Class B (See Note 1) (13,949) (255,317)
------------------------
Net decrease (24,051) $ (435,938)
========================
Year ended October 31, 2009:
Shares sold 71,726 $ 1,050,330
Shares redeemed (92,098) (1,301,825)
------------------------
Net decrease in shares
outstanding before
conversion (20,372) (251,495)
Shares converted from
Class B (See Note 1) (19,089) (271,122)
------------------------
Net decrease (39,461) $ (522,617)
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 9,928 $ 185,541
Shares issued to
shareholders in
reinvestment of dividends 189 3,463
Shares redeemed (11,726) (213,743)
------------------------
Net decrease (1,609) $ (24,739)
========================
Year ended October 31, 2009:
Shares sold 24,106 $ 344,509
Shares redeemed (85,967) (1,184,927)
------------------------
Net decrease (61,861) $ (840,418)
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 9,673,395 $196,710,407
Shares issued to
shareholders in
reinvestment of dividends 59,023 1,193,363
Shares redeemed (1,361,750) (28,291,641)
------------------------
Net increase in shares
outstanding before
conversion 8,370,668 169,612,129
Shares converted into
Class I (a) 4,038 81,534
------------------------
Net increase 8,374,706 $169,693,663
========================
Year ended October 31, 2009:
Shares sold 2,426,594 $ 42,707,245
Shares redeemed (1,702,538) (28,738,036)
------------------------
Net increase 724,056 $ 13,969,209
========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
26 MainStay Epoch U.S. All Cap Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request by calling 800-MAINSTAY (624-6782);
visiting the Fund's website at mainstayinvestments.com; or on the SEC's website
at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 27
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18311 MS121-10 MSEUAC10-06/10
A1
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH U.S. EQUITY FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during this period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six months ended April 30, 2010, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the six-month period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
During the period covered by this report, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the period covered by this report. Of course, past performance is
no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY EPOCH U.S. EQUITY FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 17
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 23
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 23
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/3/08)
- --------------------------------------------------------
With sales charges 0.69% 26.50% 25.63%
Excluding sales charges 6.55 33.86 30.79
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. EQUITY RUSSELL 1000(R) RUSSELL 3000(R)
FUND INDEX INDEX
-------------- --------------- ---------------
12/03/08 9450.00 10000.00 10000.00
10295.00 10319.00 10357.00
04/30/10 13781.00 14468.00 14594.00
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (2/3/09)
- --------------------------------------------------------
With sales charges 0.62% 26.39% 26.97%
Excluding sales charges 6.47 33.74 32.91
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. EQUITY RUSSELL 1000(R) RUSSELL 3000(R)
FUND INDEX INDEX
-------------- --------------- ---------------
2/3/09 23625.00 25000.00 25000.00
25125.00 26843.00 26903.00
04/30/10 33603.00 37638.00 37907.00
</Table>
CLASS C SHARES(2)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/3/08)
- --------------------------------------------------------
With sales charges 5.24% 31.95% 29.91%
Excluding sales charges 6.24 32.95 29.91
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. EQUITY RUSSELL 1000(R) RUSSELL 3000(R)
FUND INDEX INDEX
-------------- --------------- ---------------
12/03/08 10000.00 10000.00 10000.00
10864.00 10319.00 10357.00
04/30/10 14445.00 14468.00 14594.00
</Table>
1. Performance tables and graphs do not reflect the deduction of the taxes that
a shareholder would pay on distribution or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.5% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge and
are subject to a contingent deferred sales charge ("CDSC") 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 or
individual investors with a minimum initial investment of $5 million.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. The Fund is the successor to the Epoch U.S. Large Cap
Equity Fund. Effective January 4, 2010 the Fund changed its fiscal year end
from December 31 to October 31.
2. Performance figures for Investor Class and Class C shares, first offered
November 16, 2009, include the historical performance of Class I shares
through November 13, 2009 adjusted for differences in certain contractual
expenses and fees.
3. Performance figures for Class I shares and Class A shares reflect the
historical performance of the Institutional shares and the Class P shares,
respectively, of the Epoch U.S. Large
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL FOUR ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (12/3/08)
- --------------------------------------------------------
6.54% 34.19% 31.14%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY EPOCH
U.S. EQUITY RUSSELL 1000(R) RUSSELL 3000(R)
FUND INDEX INDEX
-------------- --------------- ---------------
12/03/08 10000.00 10000.00 10000.00
10909.00 10319.00 10357.00
04/30/10 14638.00 14468.00 14594.00
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE FOUR ONE SINCE
MONTHS YEAR INCEPTION
- ----------------------------------------------------------------------
Russell 1000(R) Index(4) 7.65% 40.21% 30.06%
Russell 3000(R) Index(5) 8.23 40.90 30.86
Average Lipper large-cap core fund(6) 6.18 36.84 30.82
</Table>
Cap Equity Fund (which was subject to a different fee structure.)
4. The Russell 1000(R) Index measures the performance of the 1,000 largest
companies in the Russell 3000(R) Index, which represents approximately 92% of
the total market capitalization of the Russell 3000(R) Index. The Fund has
selected the Russell 1000(R) Index as its broad-based securities market index
for comparison purposes. Total returns assume reinvestment of all dividends
and capital gains. An investment cannot be made directly in an index.
5. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Total returns assume
reinvestment of all dividends and capital gains. An investment cannot be made
directly in an index.
6. The average Lipper large-cap core fund is representative of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies
with market capitalization (on a three-year weighted basis) above Lipper's
U.S. Diversified Equity large-cap floor. Large-cap core funds have more
latitude in the companies in which they invest. These funds typically have an
average price-to-earning ratio, price-to-book ratio, and three-year sales-
per-share growth value, compared to the S&P 500(R) Index. This benchmark is a
product of Lipper Inc. Lipper Inc. is an independent monitor of fund
performance. Results are based on average total returns of similar funds with
all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Epoch U.S. Equity Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY EPOCH U.S. EQUITY FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09(3) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES(2) $1,000.00 $1,093.30 $5.88 $1,017.40 $5.66
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,154.10 $7.16 $1,018.10 $6.71
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES(2) $1,000.00 $1,089.00 $9.47 $1,013.90 $9.13
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,155.30 $5.82 $1,019.40 $5.46
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.22% for Investor Class, 1.34% for Class A, 1.97% for Class C and 1.09% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 days for Class A and Class I (to reflect the one-
half year period) and 168 days for Investor Class and Class C (to reflect the
since-inception period). The table above represents actual expenses incurred
during the one-half year period.
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010, and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $6.11 for Investor Class and $9.84 for Class C and the ending account
value would have been $1,018.70 for Investor Class and $1,015.00 for Class C.
3. Investor Class and Class C shares began investment operations on November 16,
2009.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Capital Markets 10.5%
Oil, Gas & Consumable Fuels 10.0
Software 9.9
Insurance 8.9
Health Care Providers & Services 8.4
IT Services 7.8
Aerospace & Defense 6.5
Chemicals 5.4
Machinery 5.0
Computers & Peripherals 4.2
Energy Equipment & Services 3.9
Multi-Utilities 3.9
Semiconductors & Semiconductor
Equipment 3.4
Life Sciences Tools & Services 3.2
Commercial Services & Supplies 2.8
Media 2.8
Real Estate Investment Trusts 2.7
Specialty Retail 2.7
Electronic Equipment & Instruments 2.5
Diversified Financial Services 2.4
Internet Software & Services 2.2
Pharmaceuticals 2.2
Hotels, Restaurants & Leisure 2.1
Household Products 1.5
Distributors 1.3
Diversified Telecommunication
Services 1.1
Electric Utilities 1.1
Thrifts & Mortgage Finance 0.5
Short-Term Investment 1.5
Other Assets, Less Liabilities -20.4
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Microsoft Corp.
2. Visa, Inc. Class A
3. ExxonMobil Corp.
4. Boeing Co. (The)
5. Franklin Resources, Inc.
6. Oracle Corp.
7. Praxair, Inc.
8. Thermo Fisher Scientific, Inc.
9. Ameriprise Financial, Inc.
10. Prudential Financial, Inc.
</Table>
8 MainStay Epoch U.S. Equity Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS(1)
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS DAVID PEARL, WILLIAM PRIEST, CFA, AND
MICHAEL WELHOELTER, CFA, OF EPOCH INVESTMENT PARTNERS, INC. (EPOCH), THE FUND'S
SUBADVISOR.
HOW DID MAINSTAY EPOCH U.S. EQUITY FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK FOR THE FOUR MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Epoch U.S. Equity Fund returned 6.55% for
Investor Class shares, 6.47% for Class A shares and 6.24% for Class C shares for
the four months ended April 30, 2010. Over the same period, the Fund's Class I
shares returned 6.54%. All share classes outperformed the 6.18% return of the
average Lipper(2) large-cap core fund. All share classes underperformed the
7.65% return of the Russell 1000(R) Index(3) and the 8.23% return of the Russell
3000(R) Index(4) for the same period. The Russell 1000(R) Index is the Fund's
broad-based securities-market index. See page 5 for Fund returns with sales
charges.
WHAT MAJOR FACTORS INFLUENCED THE FUND'S RELATIVE PERFORMANCE DURING THE
REPORTING PERIOD?
Throughout the reporting period, we stayed true to our philosophy and process.
The Fund focused on quality companies that produced free cash flow and that were
run by strong management teams who allocated that cash flow to increase
shareholder returns. While the Fund generated absolute gains, its conservative
stock selection detracted from performance relative to the Russell 1000(R) Index
in a market led by momentum stocks and stocks with higher volatility than the
market as a whole.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS MADE THE WEAKEST
CONTRIBUTIONS?
Relative to the Russell 1000(R) Index, the strongest-contributing sectors to the
Fund's performance were telecommunication services, consumer staples and health
care. Strong stock selection across all three sectors helped relative
performance, as did the Fund's significantly underweight position in consumer
staples and more modestly underweight positions in telecommunication services
and health care.
During the reporting period, the sectors that detracted the most from the Fund's
performance relative to the Russell 1000(R) Index were energy and industrials.
Stock selection in each sector was weak and was only partially offset by sector
positioning. The Fund's position in cash also detracted, as the Fund was not
100% invested in equities during the significant market rally.
WHICH INDIVIDUAL STOCKS WERE THE STRONGEST CONTRIBUTORS TO THE FUND'S ABSOLUTE
PERFORMANCE DURING THE REPORTING PERIOD AND WHICH STOCKS DETRACTED?
On an absolute basis, aerospace & defense company Boeing and insurance companies
Prudential Financial and MetLife made the strongest contributions to the Fund's
performance. Boeing benefited from prospects of a large replacement cycle in the
commercial aerospace industry and from positive reactions to the company's new
aircraft. Prudential Financial gained market share and benefited from structural
improvements in fixed-income markets and a rebound in the equity markets, which
in turn benefited the company's variable annuity, 401(k) and asset management
operations. MetLife advanced for similar reasons.
Wire transfer service provider Western Union, weapon and space systems company
Alliant Techsystems and global reinsurance company Everest Re Group were among
the most significant detractors from the Fund's absolute performance. We exited
the Fund's position in Western Union when the stock disappointed. We also sold
Alliant Techsystems when the U.S. administration took aim at a number of NASA's
programs, leaving the future of Alliant Techsystems uncertain. Although Everest
Re Group suffered losses because of the Chilean earthquake, we continued to hold
the Fund's position in the company.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Among the stocks that the Fund purchased during the reporting period were
semiconductor manufacturer Texas Instruments, brokerage service provider TD
Ameritrade, Internet software & services company Yahoo! and pharmaceuticals
company Abbott Laboratories.
We believed that Texas Instruments would continue to gain market share in the
analog market because of solid innovation and a scale advantage in sales
productivity. The company had also been gaining in its share of distributors. We
expected TD Ameritrade to benefit from increased activity in the capital markets
and increased savings rates by consumers, particularly if the company continued
to gain market share from other discount brokers. We found the search-
advertising partnership between Yahoo! and Microsoft appealing, and we felt that
Yahoo! could benefit from a
1. Effective January 4, 2010, the Fund's fiscal year-end changed from December
31 to October 31. As a result the following discussion covers the four-month
reporting period ended April 30, 2010.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Russell 1000(R) Index.
4. See footnote on page 6 for more information on the Russell 3000(R) Index.
mainstayinvestments.com 9
rebound in display advertising and from the movement toward online advertising.
Abbott Laboratories had experienced strong revenue growth across its many
business divisions, and we believe its management has a track record of being a
good allocator of capital.
In addition to the sales of Western Union and Alliant Techsystems, we sold the
Fund's positions in medical device manufacturer Boston Scientific, natural gas
distributor ONEOK and retail food-and-drug chain Safeway during the reporting
period. Although Boston Scientifics' acquisition of Guidant at first showed
promise, the two stent makers took longer than anticipated to provide synergies,
so we sold the stock and redeployed the proceeds in health care companies such
as Abbott Laboratories that had better risk/reward characteristics. In light of
the supply/demand balance for natural gas and other opportunities available, we
decided to exit the Fund's position in ONEOK. The Fund's position in Safeway was
based on the premise that the company would perform well in a weak domestic
economy experiencing notable food inflation. When food inflation and the
potential to pass through increased costs slowed in the recent downturn, we sold
the position.
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, there were no significant changes in sector
weightings. We modestly reduced the Fund's exposure to utilities, primarily
through the sale of ONEOK. We modestly increased the Fund's allocation to
telecommunication services, primarily through a new position in Qwest
Communications International, which provides data, Internet, video and voice
services in the U.S. and internationally.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010?
As of April 30, 2010, the Fund's most substantially overweight sectors relative
to the Russell 1000(R) Index were information technology and financials. On the
same date, the Fund's most substantially underweight sectors relative to the
Russell 1000(R) Index were consumer discretionary and consumer staples.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Epoch U.S. Equity Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 118.9%+
- -------------------------------------------------------
AEROSPACE & DEFENSE 6.5%
Alliant Techsystems, Inc. (a) 21,250 $ 1,719,337
V Boeing Co. (The) 87,100 6,308,653
Rockwell Collins, Inc. 56,950 3,701,750
------------
11,729,740
------------
CAPITAL MARKETS 10.5%
V Ameriprise Financial, Inc. 124,250 5,760,230
Bank of New York Mellon Corp.
(The) 148,600 4,625,918
V Franklin Resources, Inc. 54,550 6,308,162
TD Ameritrade Holding Corp.
(a) 115,500 2,312,310
------------
19,006,620
------------
CHEMICALS 5.4%
E.I. du Pont de Nemours & Co. 98,900 3,940,176
V Praxair, Inc. 69,900 5,855,523
------------
9,795,699
------------
COMMERCIAL SERVICES & SUPPLIES 2.8%
Waste Management, Inc. 146,000 5,063,280
------------
COMPUTERS & PERIPHERALS 4.2%
Apple, Inc. (a) 16,880 4,407,706
Dell, Inc. (a) 202,250 3,272,405
------------
7,680,111
------------
DISTRIBUTORS 1.3%
Genuine Parts Co. 54,550 2,334,740
------------
DIVERSIFIED FINANCIAL SERVICES 2.4%
NYSE Euronext 130,400 4,254,952
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 1.1%
Qwest Communications
International, Inc. 386,498 2,021,385
------------
ELECTRIC UTILITIES 1.1%
Entergy Corp. 23,450 1,906,251
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 2.5%
Corning, Inc. 231,452 4,455,451
------------
ENERGY EQUIPMENT & SERVICES 3.9%
Cameron International Corp.
(a) 45,270 1,786,354
National Oilwell Varco, Inc. 68,300 3,007,249
Weatherford International,
Ltd. (a) 121,370 2,198,011
------------
6,991,614
------------
HEALTH CARE PROVIDERS & SERVICES 8.4%
Aetna, Inc. 122,990 3,634,355
DaVita, Inc. (a) 84,000 5,244,120
Laboratory Corp. of America
Holdings(a) 56,950 4,474,561
UnitedHealth Group, Inc. 58,900 1,785,259
------------
15,138,295
------------
HOTELS, RESTAURANTS & LEISURE 2.1%
International Game Technology 183,800 3,874,504
------------
HOUSEHOLD PRODUCTS 1.5%
Colgate-Palmolive Co. 31,600 2,657,560
------------
INSURANCE 8.9%
Everest Re Group, Ltd. 47,750 3,660,037
MetLife, Inc. 107,292 4,890,369
V Prudential Financial, Inc. 86,653 5,507,665
Travelers Cos., Inc. (The) 40,775 2,068,924
------------
16,126,995
------------
INTERNET SOFTWARE & SERVICES 2.2%
eBay, Inc. (a) 81,850 1,948,849
Yahoo!, Inc. (a) 127,900 2,114,187
------------
4,063,036
------------
IT SERVICES 7.8%
Automatic Data Processing,
Inc. 72,300 3,134,928
Fiserv, Inc. (a) 67,550 3,451,129
V Visa, Inc. Class A 83,900 7,570,297
------------
14,156,354
------------
LIFE SCIENCES TOOLS & SERVICES 3.2%
V Thermo Fisher Scientific,
Inc. (a) 105,500 5,832,040
------------
MACHINERY 5.0%
Danaher Corp. 55,450 4,673,326
Deere & Co. 71,650 4,286,103
------------
8,959,429
------------
MEDIA 2.8%
Comcast Corp. Class A 269,395 5,078,096
------------
MULTI-UTILITIES 3.9%
NSTAR 73,800 2,701,080
Wisconsin Energy Corp. 82,450 4,329,449
------------
7,030,529
------------
OIL, GAS & CONSUMABLE FUELS 10.0%
Anadarko Petroleum Corp. 67,050 4,167,828
ConocoPhillips 38,300 2,266,977
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
V ExxonMobil Corp. 101,950 $ 6,917,307
Occidental Petroleum Corp. 52,915 4,691,444
------------
18,043,556
------------
PHARMACEUTICALS 2.2%
Abbott Laboratories 78,700 4,026,292
------------
REAL ESTATE INVESTMENT TRUSTS 2.7%
Ventas, Inc. 103,700 4,897,751
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 3.4%
MEMC Electronic Materials,
Inc. (a) 129,150 1,675,075
Texas Instruments, Inc. 169,400 4,406,094
------------
6,081,169
------------
SOFTWARE 9.9%
Electronic Arts, Inc. (a) 112,300 2,175,251
V Microsoft Corp. 316,850 9,676,599
V Oracle Corp. 230,550 5,957,412
------------
17,809,262
------------
SPECIALTY RETAIL 2.7%
TJX Cos., Inc. 103,464 4,794,522
------------
THRIFTS & MORTGAGE FINANCE 0.5%
Hudson City Bancorp, Inc. 72,650 966,245
------------
Total Common Stocks
(Cost $177,055,287) 214,775,478
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 1.5%
- -------------------------------------------------------
REPURCHASE AGREEMENT 1.5%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$2,773,207
(Collateralized by a United
States Treasury Bill with a
rate of 0.107%
and a maturity date of
6/3/10,
with a Principal Amount of
$2,830,000
and a Market Value of
$2,829,717) $2,773,204 $ 2,773,204
------------
Total Short-Term Investment
(Cost $2,773,204) 2,773,204
------------
Total Investments
(Cost $179,828,491) (b) 120.4% 217,548,682
Other Assets, Less
Liabilities (20.4) (36,885,398)
---------- ------------
Net Assets 100.0% $180,663,284
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) At April 30, 2010, cost is $179,960,034
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $39,090,940
Gross unrealized depreciation (1,502,292)
-----------
Net unrealized appreciation $37,588,648
===========
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $214,775,478 $ -- $ -- $214,775,478
Short-Term Investment
Repurchase Agreement -- 2,773,204 -- 2,773,204
------------ ---------- -------- ------------
Total Investments in Securities $214,775,478 $2,773,204 $-- $217,548,682
============ ========== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
12 MainStay Epoch U.S. Equity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $179,828,491) $217,548,682
Receivables:
Investment securities sold 5,387,988
Fund shares sold 672,600
Dividends and interest 140,888
Other assets 100,942
------------
Total assets 223,851,100
------------
LIABILITIES:
Payables:
Fund shares redeemed 42,961,852
Manager (See Note 3) 150,395
Shareholder communication 29,057
Transfer agent (See Note 3) 22,088
Professional fees 7,108
Custodian 2,950
NYLIFE Distributors (See Note 3) 152
Accrued expenses 14,214
------------
Total liabilities 43,187,816
------------
Net assets $180,663,284
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 13,347
Additional paid-in capital 132,708,738
------------
132,722,085
Accumulated net investment income 163,841
Accumulated net realized gain on
investments 10,057,167
Net unrealized appreciation on
investments 37,720,191
------------
Net assets $180,663,284
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 164,490
============
Shares of beneficial interest
outstanding 12,186
============
Net asset value per share
outstanding $ 13.50
Maximum sales charge (5.50% of
offering price) 0.79
------------
Maximum offering price per share
outstanding $ 14.29
============
CLASS A
Net assets applicable to
outstanding shares $ 624,472
============
Shares of beneficial interest
outstanding 46,270
============
Net asset value per share
outstanding $ 13.50
Maximum sales charge (5.50% of
offering price) 0.79
------------
Maximum offering price per share
outstanding $ 14.29
============
CLASS C
Net assets applicable to
outstanding shares $ 27,238
============
Shares of beneficial interest
outstanding 2,023
============
Net asset value and offering price
per share outstanding $ 13.46
============
CLASS I
Net assets applicable to
outstanding shares $179,847,084
============
Shares of beneficial interest
outstanding 13,286,194
============
Net asset value and offering price
per share outstanding $ 13.54
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2010 (A) THROUGH APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 816,751
Interest 345
-----------
Total income 817,096
-----------
EXPENSES:
Manager (See Note 3) 479,134
Registration 69,846
Transfer agent (See Note 3) 69,503
Shareholder communication 38,757
Professional fees 25,060
Custodian 4,074
Trustees 2,173
Distribution/Service--Investor
Class (See Note 3) 43
Distribution/Service--Class A (See
Note 3) 295
Distribution/Service--Class C (See
Note 3) 86
Miscellaneous 8,819
-----------
Total expenses before waiver 697,790
Expense waiver from Manager (See
Note 3) (44,535)
-----------
Net expenses 653,255
-----------
Net investment income 163,841
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 6,856,075
Net change in unrealized
appreciation on investments 5,024,357
-----------
Net realized and unrealized gain on
investments 11,880,432
-----------
Net increase in net assets resulting
from operations $12,044,273
===========
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
14 MainStay Epoch U.S. Equity Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 1, 2010 THROUGH APRIL 30, 2010 UNAUDITED, THE YEAR ENDED
DECEMBER 31, 2009 (A) AND THE YEAR ENDED DECEMBER 31, 2008.
<Table>
<Caption>
2010 2009 2008 (B)
INCREASE IN NET ASSETS:
Operations:
Net investment
income $ 163,841 $ 1,437,455 $ 90,864
Net realized gain
on investments 6,856,075 13,607,151 105,996
Net change in
unrealized
appreciation on
investments 5,024,357 25,404,187 7,291,647
---------------------------------------
Net increase in net
assets resulting
from operations 12,044,273 40,448,793 7,488,507
---------------------------------------
Dividends and
distributions to
shareholders:
From net investment
income:
Investor Class -- (66) --
Class A -- (310) --
Class C -- (42) --
Class I -- (1,464,922) (74,040)
---------------------------------------
-- (1,465,340) (74,040)
---------------------------------------
From net realized
gain on
investments:
Class A -- (2,232) --
Class I -- (10,499,362) --
---------------------------------------
-- (10,501,594) --
---------------------------------------
Total dividends and
distributions to
shareholders -- (11,966,934) (74,040)
---------------------------------------
Capital share
transactions:
Net proceeds from
sale of shares 76,799,800 91,138,718 91,722,291
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions -- 374,971 1,071
Cost of shares
redeemed (63,592,472) (63,361,768) (359,926)
---------------------------------------
Increase in net
assets derived
from capital
share
transactions 13,207,328 28,151,921 91,363,436
---------------------------------------
Net increase in
net assets 25,251,601 56,633,780 98,777,903
NET ASSETS:
Beginning of period 155,411,683 98,777,903 --
---------------------------------------
End of period $180,663,284 $155,411,683 $98,777,903
=======================================
Accumulated
undistributed net
investment income
at end of period $ 163,841 $ -- $ 16,824
=======================================
</Table>
(a) The Fund changed its fiscal year end from December 31 to October 31.
(b) Commencement of operations was December 3, 2008.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS CLASS A
------------------------------ ------------------------------
JANUARY 1, NOVEMBER 16, JANUARY 1, FEBRUARY 3,
2010*** 2009** 2010*** 2009**
THROUGH THROUGH THROUGH THROUGH
APRIL 30, DECEMBER 31, APRIL 30, DECEMBER 31,
2010* 2009 2010* 2009
Net asset value at beginning of
period $12.67 $12.38 $12.67 $10.24
------ ------ ------ ------
Net investment income 0.01(a) 0.02 (a) 0.00++(a) 0.08 (a)
Net realized and unrealized gain on
investments 0.82 0.30 0.83 3.33
------ ------ ------ ------
Total from investment operations 0.83 0.32 0.83 3.41
------ ------ ------ ------
Less dividends and distributions:
From net investment income -- (0.03) -- (0.10)
From net realized gain on
investments -- -- -- (0.88)
------ ------ ------ ------
Total dividends and distributions -- (0.03) -- (0.98)
------ ------ ------ ------
Net asset value at end of period $13.50 $12.67 $13.50 $12.67
====== ====== ====== ======
Total investment return (b) 6.55%(c) 2.60%(c) 6.55%(c)(d) 33.59%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.21%++ 1.11%++ 0.05%++ 0.76%++
Net expenses 1.23%++ 1.19%++ 1.34%++ 1.35%++
Expenses (before
waiver/reimbursement) 1.30%++ 1.19%++ 1.41%++ 1.44%++
Portfolio turnover rate 16% 54% 16% 54%
Net assets at end of period (in
000's) $ 164 $ 28 $ 624 $ 127
</Table>
<Table>
<Caption>
CLASS C CLASS I
----------------------------- ----------------------------------------------
JANUARY 1, NOVEMBER 16, JANUARY 1, DECEMBER 3,
2010*** 2009** 2010*** 2008**
THROUGH THROUGH THROUGH YEAR ENDED THROUGH
APRIL 30, DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31,
2010* 2009 2010* 2009 2008
Net asset value at beginning of
period $12.67 $12.38 $ 12.70 $ 10.85 $ 10.00
------ ------ -------- -------- -------
Net investment income (loss) (0.02)(a) 0.01 (a) 0.01 (a) 0.11 (a) 0.01
Net realized and unrealized gain on
investments 0.81 0.30 0.83 2.74 0.85
------ ------ -------- -------- -------
Total from investment operations 0.79 0.31 0.84 2.85 0.86
------ ------ -------- -------- -------
Less dividends and distributions:
From net investment income -- (0.02) -- (0.12) (0.01)
From net realized gain on
investments -- -- -- (0.88) --
------ ------ -------- -------- -------
Total dividends and distributions -- (0.02) -- (10.00) (0.01)
------ ------ -------- -------- -------
Net asset value at end of period $13.46 $12.67 $ 13.54 $ 12.70 $ 10.85
====== ====== ======== ======== =======
Total investment return (b) 6.24%(c) 2.51%(c) 6.61%(c)(d) 26.53% 8.59%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.54%)++ 0.37%++ 0.27%++ 0.98% 1.28%++
Net expenses 1.98%++ 1.94%++ 1.09%++ 1.09% 1.09%++
Expenses (before
waiver/reimbursement) 2.05%++ 1.94%++ 1.16%++ 1.19% 1.16%++
Portfolio turnover rate 16% 54% 16% 54% 1%
Net assets at end of period (in
000's) $ 27 $ 26 $179,847 $155,231 $98,778
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
16 MainStay Epoch U.S. Equity Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Epoch U.S. Equity Fund (the "Fund"), a
diversified Fund. The Fund is the successor to the Epoch U.S. Large Cap Equity
Fund (the "Predecessor Fund"), which was a series of a different registered
investment company for which Epoch Investment Partners, Inc. served as
investment adviser.
The Fund currently offers four classes of shares: Investor Class, Class A, Class
C and Class I shares. Investor Class and Class C shares were seeded as of the
close of business on November 13, 2009 and were first offered and commenced
operations on November 16, 2009. Class I and Class A shares commenced operations
(under former designations), on December 3, 2008 and February 3, 2009,
respectively. Effective January 4, 2010, the Fund changed its fiscal year end
and tax year end from December 31 to October 31. Investor Class and Class A
shares are offered at net asset value ("NAV") per share plus an initial sales
charge. No sales charge applies on investments of $1 million or more (and
certain other qualified purchases) in Investor Class and Class A shares, but a
contingent deferred sales charge is imposed on certain redemptions of such
shares within one year of the date of purchase. Class C shares are offered at
NAV without an initial sales charge, although a 1.00% contingent deferred sales
charge may be imposed on redemptions made within one year of purchase of Class C
shares. Class I shares are offered at NAV and are not subject to a sales charge.
Depending upon eligibility, Investor Class shares may convert to Class A shares
and Class A shares may convert to Investor Class shares. The four classes of
shares have the same voting (except for issues that relate solely to one class),
dividend, liquidation and other rights, and the same terms and conditions,
except that Class C shares are subject to higher distribution and/or service fee
rates than Investor Class and Class A shares under a distribution plan pursuant
to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a
distribution and/or service fee.
The Fund's investment objective is to seek long-term capital appreciation.
The financial statements of the Fund reflect the historical results of the
Institutional Class and P shares of the Predecessor Fund prior to its
reorganization. (See Note 9.) Upon the completion of the reorganization, the
Class I and Class A shares of the Fund assumed the performance, financial and
other information of the Institutional Class and Class P shares, respectively.
All information regarding and references to periods prior to the commencement of
operations of the Fund refer to the Predecessor Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Investments in other mutual funds are valued at their NAVs as of the close of
the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector, significant fluctuations in U.S.
or foreign markets, natural disasters, armed conflicts, governmental actions or
other developments not tied directly to the securities markets. Should the
Manager or Subadvisor, as defined in Note 3(A), conclude that such events may
have affected the accuracy of the last price reported on the local foreign
market, the Manager or Subadvisor may, pursuant to procedures adopted by the
Fund's Board, adjust the value of the local price to reflect the impact on the
price of such securities as a result of such events. Additionally, international
equity securities are also fair valued whenever the movement of a particular
index exceeds certain thresholds. In such cases, the securities are fair valued
by applying factors provided by a third party vendor in accordance with the
Fund's policies and procedures. At April 30, 2010, certain foreign equity
securities held by the Fund were fair valued.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for
mainstayinvestments.com 17
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
which has been halted or suspended; (ii) a debt security that has recently gone
into default and for which there is not a current market quotation; (iii) a
security of an issuer that has entered into a restructuring; (iv) a security
that has been de-listed from a national exchange; (v) a security the market
price of which is not available from an independent pricing source or, if so
provided, does not, in the opinion of the Fund's Manager or Subadvisor, as
defined in Note 3(A), reflect the security's market value; and (vi) a security
where the trading on that security's principal market is temporarily closed at a
time when, under normal conditions, it would be open. At April 30, 2010, the
Fund did not hold securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the four-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the four-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Investment income received by the Fund from foreign sources may be subject to
foreign income taxes. These foreign income taxes are generally withheld at the
source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date
18 MainStay Epoch U.S. Equity Fund
and interest income is accrued as earned using the effective interest rate
method. Discounts and premiums on short-term investments are accreted and
amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(I) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the
mainstayinvestments.com 19
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
responsibility of the Fund, the Manager also pays the salaries and expenses of
all personnel affiliated with the Fund and the operational expenses of the Fund.
Epoch Investment Partners, Inc. ("Epoch" or "Subadvisor"), a registered
investment adviser, serves as Subadvisor to the Fund and is responsible for the
day-to-day portfolio management of the Fund. Pursuant to the terms of an
Subadvisory Agreement between New York Life Investments and the Subadvisor, New
York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of 0.80% of the Fund's average daily net assets.
Effective after the close of business on November 13, 2009, New York Life
Investments entered into a written expense limitation agreement under which it
has agreed to reimburse expenses of Class A and Class I shares of the Fund so
that the total ordinary operating expenses (total ordinary operating expenses
excludes taxes, interest, litigation, extraordinary expenses, brokerage and
other transaction expense relating to the purchase or sale of portfolio
investments and the fees and expenses of any other funds in which the Fund
invests) for Class A and Class I shares do not exceed the following percentages
of average daily net assets, Class A, 1.34% and Class I, 1.09%. These expense
limitations were based on the total annual operating expenses of the Predecessor
Fund (adjusted to reflect any applicable expense limitation agreement.) New York
Life Investments will apply an equivalent waiver or reimbursement, in an amount
equal to the number of basis points waived for Class A shares, to Investor Class
and Class C shares of the Fund. This agreement will be in effect for a two-year
period unless extended by New York Life Investments and approved by the Fund's
Board in connection with its review of the Fund's investment advisory agreement.
Based on its review, the Board may maintain, modify or terminate the agreement.
Prior to the close of business on November 13, 2009, Epoch had a written expense
limitation agreement under which it had agreed to waive a portion of the
Predecessor Fund's management fee or reimburse the expenses of the appropriate
class of the Predecessor Fund so that the class' total ordinary operating
expenses did not exceed the following percentages of average daily net assets
for each class: Class A, 1.34%; and Class I, 1.09%. The agreement did not apply
to interest, taxes, brokerage commissions, other expenditures capitalized in
accordance with generally accepted accounting principles or other extraordinary
expenses not incurred in the ordinary course of business. The total amount of
reimbursement recoverable by Epoch was the sum of all fees previously waived or
reimbursed by Epoch to the Predecessor Fund during any of the previous three (3)
years, less any reimbursement previously paid by the Predecessor Fund to Epoch
with respect to any waivers, reductions, and payments made.
For the four-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $479,134 and waived its fees in the amount
of $44,535.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. Effective after the close of business on
November 13, 2009, the Trust, on behalf of the Fund, has entered into a
Distribution Agreement with NYLIFE Distributors LLC (the "Distributor"), an
indirect, wholly-owned subsidiary of New York Life. The Fund has adopted
distribution and service plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from each Fund at an annual rate of 0.25% of the
average daily net assets of the Fund's Investor Class and Class A shares, which
is an expense of the Investor Class and Class A shares of the respective Funds
for distribution or service activities as designated by the Distributor.
Pursuant to the Class C Plan, each Fund pays the Distributor a monthly
distribution fee, which is an expense of the Class C shares of the Fund, at an
annual rate of 0.75% of the average daily net assets of the respective Fund's
Class C shares, along with a shareholder service fee at an annual rate of 0.25%
of the average daily net assets of the Class C shares of the Fund for a total
12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service
fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $181
and $94, respectively, for the four-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service
Company LLC has entered into an agreement with Boston Financial Data Services,
Inc. ("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of
20 MainStay Epoch U.S. Equity Fund
NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the
four-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ --
- ----------------------------------------------
Class A 135
- ----------------------------------------------
Class C --
- ----------------------------------------------
Class I 69,368
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $ 27,326 16.6%
- --------------------------------------------------
Class A 3,557 0.6
- --------------------------------------------------
Class C 27,238 100.0
- --------------------------------------------------
Class I 353,603 0.2
- --------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the four-month period
ended April 30, 2010, these fees, which are included in professional fees shown
on the Statement of Operations, were $2,105.
NOTE 4--FEDERAL INCOME TAX:
The tax character of distributions paid during the year ended December 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $11,966,934
- ------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the four-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES IN (000'S):
During the four-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $83,758 and $27,843,
respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 11,569 $ 155,886
Shares redeemed (381) (5,183)
------------------------
Net increase in shares
outstanding before
conversion 11,188 150,703
Shares converted from
Investor Class (See Note 1) (1,225) (16,177)
------------------------
Net increase 9,963 $ 134,526
========================
Period ended December 31,
2009: (a)
Shares sold 2,218 $ 27,541
Shares issued to shareholders
in reinvestment of
dividends 5 66
------------------------
Net increase 2,223 $ 27,607
========================
<Caption>
CLASS A SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 36,722 $ 482,643
Shares redeemed (1,676) (22,687)
------------------------
Net increase in shares
outstanding before
conversion 35,046 459,956
Shares converted into Class A
(See Note 1) 1,225 16,177
------------------------
Net increase 36,271 $ 476,133
========================
Period ended December 31,
2009: (b)
Shares sold 9,794 $ 122,216
Shares issued to shareholders
in reinvestment of
dividends and distributions 205 127
------------------------
Net increase 9,999 $ 122,343
========================
</Table>
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS C (C) SHARES AMOUNT
Period ended December 31,
2009: (a)
Shares sold 2,020 $ 25,000
Shares issued to shareholders
in reinvestment of
dividends 3 42
------------------------
Net increase 2,023 $ 25,042
========================
<Caption>
CLASS I SHARES AMOUNT
Four-month period ended April
30, 2010:
Shares sold 5,799,454 $ 76,161,271
Shares redeemed (4,737,905) (63,564,602)
------------------------
Net increase 1,061,549 $ 12,596,669
========================
Year ended December 31, 2009:
Shares sold 8,316,820 $ 90,963,961
Shares issued to shareholders
in reinvestment of
dividends and distributions 30,085 374,736
Shares redeemed (5,228,135) (63,361,768)
------------------------
Net increase 3,118,770 $ 27,976,929
========================
</Table>
(a) Investor Class shares and Class C shares were first offered on November 16,
2009.
(b) Class A shares were first offered on February 3, 2009.
(c) Class C had no share activity for the four-month period ended April 30,
2010.
NOTE 9--REORGANIZATION:
At a special meeting held on October 30, 2009, the shareholders of the Epoch
U.S. Large Cap Equity Fund approved the reorganization of the Epoch U.S. Large
Cap Equity Fund with and into MainStay Epoch U.S. Equity Fund. Effective after
the close of business on November 13, 2009, the Class P shares of Epoch U.S.
Large Cap Equity Fund were redesignated as Class A shares of MainStay Epoch U.S.
Equity Fund. Investor Class and Class C shares were seeded as of the close of
business on November 13, 2009 and were first offered and commenced operations on
November 16, 2009.
NOTE 10--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 11--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal four-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
NOTE 12--DIVIDENDS:
On May 17, 2010, the Fund's management declared dividends and distributions in
the amount of the Fund's remaining undistributed Investment Company Taxable
Income and Net Capital Gain, if any, for the Fund's taxable year ended December
31, 2009, which is in accordance with the provisions of Section 855(a) of the
Internal Revenue Code. The declaration date was May 17, 2010; it is expected
that ex-dividend, reinvestment, and payable date will be in December 2010.
22 MainStay Epoch U.S. Equity Fund
PROXY VOTING POLICIES AND
PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX or
proxy voting record is available free of charge upon request by calling 800-
MAINSTAY (624-6782); visiting the Fund's website at mainstayinvestments.com; or
on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 23
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-A018314 MS121-10 MSEUE10-06/10
F1
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY FLOATING RATE FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY FLOATING RATE FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------
FINANCIAL STATEMENTS 22
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 29
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 36
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 36
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (5/3/04)
- -----------------------------------------------------------------
With sales charges 2.83% 17.30% 3.07% 3.14%
Excluding sales charges 6.01 20.93 3.70 3.67
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
CREDIT SUISSE
MAINSTAY FLOATING LEVERAGED LOAN
RATE FUND INDEX
----------------- --------------
5/3/04 9700 10000
10042 10505
10525 11200
11158 12026
10948 11624
9958 9845
4/30/10 12041 13021
</Table>
CLASS A SHARES--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (5/3/04)
- -----------------------------------------------------------------
With sales charges 2.88% 17.45% 3.12% 3.19%
Excluding sales charges 6.06 21.08 3.75 3.71
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
CREDIT SUISSE
MAINSTAY FLOATING LEVERAGED LOAN
RATE FUND INDEX
----------------- --------------
5/3/04 24250 25000
25105 26262
26313 28000
27896 30065
27372 29061
24929 24612
4/30/10 30184 32553
</Table>
CLASS B SHARES--MAXIMUM 3% CDSC IF REDEEMED WITHIN THE FIRST FOUR YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (5/3/04)
- -----------------------------------------------------------------
With sales charges 2.73% 17.16% 2.95% 2.91%
Excluding sales charges 5.73 20.16 2.95 2.91
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
CREDIT SUISSE
MAINSTAY FLOATING LEVERAGED LOAN
RATE FUND INDEX
----------------- --------------
5/3/04 10000 10000
10276 10505
10701 11200
11261 12026
10966 11624
9888 9845
4/30/10 11881 13021
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 3.00% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For information on current fee waivers and/or expense limitations,
please refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in certain contractual fees and expenses.
Unadjusted, the
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (5/3/04)
- -----------------------------------------------------------------
With sales charges 4.61% 19.02% 2.92% 2.89%
Excluding sales charges 5.61 20.02 2.92 2.89
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
CREDIT SUISSE
MAINSTAY FLOATING LEVERAGED LOAN
RATE FUND INDEX
----------------- --------------
5/3/04 10000 10000
10275 10505
10700 11200
11248 12026
10965 11624
9887 9845
4/30/10 11867 13021
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE FIVE INCEPTION
TOTAL RETURNS MONTHS YEAR YEARS (5/3/04)
- -----------------------------------------------------------------
6.20% 21.38% 4.04% 3.99%
</Table>
(LINE GRAPH)
<Table>
<Caption>
CREDIT SUISSE
MAINSTAY FLOATING LEVERAGED LOAN
RATE FUND INDEX
----------------- --------------
5/3/04 10000 10000
10379 10505
10916 11200
11594 12026
11415 11624
10422 9845
4/30/10 12650 13021
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE SINCE
MONTHS YEAR YEARS INCEPTION
Credit Suisse Leveraged Loan Index(3) 8.83% 32.26% 4.39% 4.50%
Average Lipper loan participation fund(4) 7.88 27.02 3.37 3.54
</Table>
performance shown for Investor Class shares might have been lower.
3. The Credit Suisse Leveraged Loan Index represents tradable, senior-secured,
U.S. dollar denominated non-investment-grade loans. Results assume
reinvestment of all income and capital gains. The Credit Suisse Leveraged
Loan Index is the Fund's broad-based securities market index for comparison
purposes. An investment cannot be made directly in an index.
4. The average Lipper loan participation fund is representative of funds that
invest primarily in participation interests in collateralized senior
corporate loans that have floating or variable rates. This benchmark is a
product of Lipper Inc. Lipper Inc. is an independent monitor of fund
performance. Results are based on average total returns of similar funds with
all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Floating Rate Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY FLOATING RATE FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,060.10 $5.62 $1,019.30 $5.51
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,060.60 $5.06 $1,019.90 $4.96
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,057.30 $9.44 $1,015.60 $9.25
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,056.10 $9.43 $1,015.60 $9.25
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,062.00 $3.78 $1,021.10 $3.71
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.10% for Investor Class, 0.99% for Class A, 1.85% for Class B and Class C
and 0.74% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Floating Rate Loans 76.4
Short-Term Investments 16.3
Corporate Bonds 7.3
Foreign Floating Rate Loans 3.4
Yankee Bond 0.5
Common Stocks 0.2
Other Assets, Less Liabilities (4.1)
</Table>
See Portfolio of Investments beginning on page 10 for specific holdings within
these categories.
TOP TEN ISSUERS HELD AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. CF Industries, Inc., 5.75%, due 4/5/15
2. Bucyrus International, Inc., 4.50%, due 2/19/16
3. Charter Communications Operating LLC, 2.30%-7.25%, due
3/6/14-9/6/16
4. UPC Financing Partnership, 2.18%-3.93%, due
12/31/14-12/30/16
5. Georgia-Pacific Corp., 2.267%-3.526%, due 12/20/12-12/23/14
6. Community Health Systems, Inc., 2.502%, due 7/25/14
7. Intelsat Corp., 2.792%, due 1/3/14
8. Ford Motor Co., 3.284%, due 12/16/13
9. Wm. Wrigley Jr. Co., 3.063-3.313, due 12/17/12-10/6/14
10. Flextronics International, Ltd., 2.541%-2.553%, due
10/1/12-10/1/14
</Table>
8 MainStay Floating Rate Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGER ROBERT H. DIAL OF NEW YORK LIFE
INVESTMENTS,(1) THE FUND'S MANAGER.
HOW DID MAINSTAY FLOATING RATE FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Floating Rate Fund returned 6.01% for
Investor Class shares, 6.06% for Class A shares, 5.73% for Class B shares and
5.61% for Class C shares during the six months ended April 30, 2010. Over the
same period, Class I shares returned 6.20%. All share classes underperformed the
7.88% return of the average Lipper(2) loan participation fund and the 8.83%
return of the Credit Suisse Leveraged Loan Index(3) for the six months ended
April 30, 2010. The Credit Suisse Leveraged Loan Index is the Fund's broad-based
securities-market index. See pages 5 and 6 for Fund returns with sales charges.
WHAT FACTORS ACCOUNTED FOR THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The leveraged loan market followed its historic return in 2009 with a strong
beginning to 2010. The trend from the second half of 2009 continued, with the
advance led primarily by lower-rated, distressed and defaulted securities.
The reporting period was marked by a number of favorable developments, including
a shrinking default rate, repayment and extension activity and significant
growth in the new-issue market. On the default front, the trailing 12-month rate
fell to 5.8% in the first quarter of 2010, compared 9.6% at the end of 2009.
This is well below the all-time high of 10.8% in November 2009 and the lowest
default rate in the last year and a half.
Despite the increase in primary activity, new issue volume was overwhelmed by
repayments. As a result, the institutional loan market contracted 3% during the
first quarter of 2010. Because of the shrinking secondary market, as well as
strong demand from collateral-
ized loan obligations (CLOs) and relative value accounts, the market has become
increasingly issuer friendly.
The Fund's underweight position in riskier credits (unrated credits and those
rated CCC(4) and lower) detracted from relative performance as these loans
outperformed their higher-rated counterparts. In addition, a significant cash
position was a drag on the Fund's relative performance in light of the low
yields available from short-term money market instruments.
WHAT WERE SOME OF THE CHARACTERISTICS OF THE LOANS IN THE FUND DURING THE
REPORTING PERIOD?
The Fund invested in floating rate loans that had a weighted average effective
duration(5) of less than three months. The floating-rate loans may have final
maturities of seven to nine years, but underlying interest rate contracts
typically pegged to LIBOR(6) that reset every 30, 60, 90 or 180 days. The
weighted average reset figure for the Fund at the end of the six-month period
was 45 days. This means that, barring any defaults, if short-term interest rates
were to increase, we would expect the Fund to "catch up" within 45 days and
increase the yield it would pay to investors. If interest rates were to decline,
a decrease in yields would be anticipated.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was significantly underweight relative to the
Credit Suisse Leveraged Loan Index in loans that were either unrated or rated
CCC or lower. As of April 30, 2010, the Fund held 9.29% of its assets in loans
that were either unrated or rated CCC or lower, while 28.43% of the Credit
Suisse Leveraged Loan Index consisted of those riskier assets.
1. "New York Life Investments" is a service mark used by New York Life
Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Credit Suisse Leveraged
Loan Index.
4. 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.
5. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity-gauge than average maturity.
6. London interbank offered rates (LIBOR) are interest rates that are widely
used as reference rates in bank, corporate and government lending agreements.
The opinions expressed are those of the portfolio manager as of the date of this
report and are subject to change. There is no guarantee that any forecast made
will come to pass. This material does not constitute investment advice and is
not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS 87.6%+
CORPORATE BONDS 7.3%
- -------------------------------------------------------
AEROSPACE & DEFENSE 0.5%
Oshkosh Corp.
8.25%, due 3/1/17 (a) $ 3,400,000 $ 3,578,500
Spirit Aerosystems, Inc.
7.50%, due 10/1/17 (a) 865,000 884,463
------------
4,462,963
------------
BEVERAGE, FOOD & TOBACCO 0.6%
Del Monte Corp.
7.50%, due 10/15/19 (a) 3,000,000 3,168,750
Dole Food Co., Inc.
8.00%, due 10/1/16 (a) 2,500,000 2,587,500
------------
5,756,250
------------
BROADCASTING & ENTERTAINMENT 0.2%
CSC Holdings, Inc.
8.625%, due 2/15/19 (a) 1,300,000 1,420,250
------------
CHEMICALS, PLASTICS & RUBBER 1.4%
Ashland, Inc.
9.125%, due 6/1/17 (a) 1,000,000 1,140,000
Hexion Finance Escrow
LLC/Hexion Escrow Corp.
8.875%, due 2/1/18 (a) 4,500,000 4,426,875
Lyondell Chemical Co.
11.00%, due 5/1/18 4,989,878 5,314,195
Nalco Co.
8.25%, due 5/15/17 (a) 1,800,000 1,930,500
------------
12,811,570
------------
CONTAINERS, PACKAGING & GLASS 1.6%
Ball Corp.
7.125%, due 9/1/16 4,000,000 4,250,000
Crown Americas LLC/Crown
Americas Capital Corp. II
7.625%, due 5/15/17 (a) 1,800,000 1,874,250
Greif, Inc.
7.75%, due 8/1/19 1,350,000 1,420,875
Silgan Holdings, Inc.
7.25%, due 8/15/16 3,000,000 3,127,500
Solo Cup Co.
10.50%, due 11/1/13 3,750,000 3,993,750
------------
14,666,375
------------
DIVERSIFIED NATURAL RESOURCES, PRECIOUS METALS &
MINERALS 0.1%
Boise Paper Holdings
LLC/Boise Co-Issuer Co.
8.00%, due 4/1/20 (a) 1,300,000 1,339,000
------------
DIVERSIFIED/CONGLOMERATE SERVICE 0.3%
Corrections Corp. of America
7.75%, due 6/1/17 3,000,000 3,180,000
------------
ECOLOGICAL 0.3%
Clean Harbors, Inc.
7.625%, due 8/15/16 2,300,000 2,394,875
------------
ELECTRONICS 0.2%
Freescale Semiconductor,
Inc.
9.25%, due 4/15/18 (a) 1,875,000 1,950,000
------------
HEALTHCARE, EDUCATION & CHILDCARE 0.1%
HCA, Inc.
8.50%, due 4/15/19 (a) 1,200,000 1,318,500
------------
HOTELS, MOTELS, INNS & GAMING 0.4%
Ameristar Casinos, Inc.
9.25%, due 6/1/14 2,385,000 2,504,250
MGM Mirage, Inc.
10.375%, due 5/15/14 (a) 300,000 328,500
11.125%, due 11/15/17 (a) 850,000 965,813
------------
3,798,563
------------
LEISURE, AMUSEMENT, MOTION PICTURES & ENTERTAINMENT
0.1%
Cinemark USA, Inc.
8.625%, due 6/15/19 600,000 636,000
------------
MACHINERY (NON-AGRICULTURE, NON-CONSTRUCT & NON-
ELECTRONIC) 0.2%
CPM Holdings, Inc.
10.625%, due 9/1/14 (a) 1,475,000 1,578,250
------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.5%
Consol Energy, Inc.
8.00%, due 4/1/17 (a) 4,500,000 4,753,125
------------
PRINTING & PUBLISHING 0.2%
Nielsen Finance LLC
11.625%, due 2/1/14 1,300,000 1,475,500
------------
TELECOMMUNICATIONS 0.6%
GCI, Inc.
7.25%, due 2/15/14 1,595,000 1,598,987
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest issuers held, as of April 30, 2010, excluding
short-term investments. May be subject to change daily.
10 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
Sprint Capital Corp.
8.375%, due 3/15/12 $ 3,500,000 $ 3,692,500
------------
5,291,487
------------
Total Corporate Bonds
(Cost $62,827,802) 66,832,708
------------
FLOATING RATE LOANS 76.4% (B)
- -------------------------------------------------------
AEROSPACE & DEFENSE 2.4%
BE Aerospace, Inc.
Term Loan B
5.75%, due 7/28/14 (c) 3,000,000 3,016,251
Hexcel Corp.
1st Lien Term Loan
6.50%, due 5/21/14 2,966,833 2,974,251
Oshkosh Truck Corp.
Term Loan B
6.259%, due 12/6/13 4,788,091 4,802,555
Spirit Aerosystems, Inc.
Term Loan B
2.05%, due 9/30/13 3,490,945 3,441,489
Transdigm, Inc.
Term Loan
2.278%, due 6/23/13 5,765,454 5,666,161
Vought Aircraft Industries,
Inc.
Conversion Term Loan
7.50%, due 12/22/10 373,333 373,800
Term Loan
7.50%, due 12/22/11 1,931,988 1,933,800
------------
22,208,307
------------
AUTOMOBILE 5.8%
Allison Transmission, Inc.
Term Loan B
3.014%, due 8/7/14 6,984,730 6,668,475
Dana Corp.
Term Loan B
4.53%, due 1/30/15 6,605,795 6,539,737
Dayco Products LLC
Term Loan B2
10.50%, due 5/13/14 593,316 590,350
Term Loan B4
12.50%, due 11/13/14 87,796 79,895
Federal-Mogul Corp.
Term Loan B
2.189%, due 12/29/14 2,240,709 2,047,914
Term Loan C
2.196%, due 12/28/15 4,249,086 3,883,486
V Ford Motor Co.
Term Loan
3.284%, due 12/16/13 9,859,921 9,505,585
Goodyear Tire & Rubber Co.
(The)
2nd Lien Term Loan
2.24%, due 4/30/14 5,250,000 5,003,250
KAR Holdings, Inc.
Term Loan B
3.03%, due 10/18/13 (c) 5,000,000 4,890,145
Key Safety Systems, Inc.
1st Lien Term Loan
2.513%, due 3/8/14 3,632,094 3,247,699
Sensata Technologies Finance
Co. LLC
Term Loan
2.078%, due 4/26/13 6,296,754 6,061,935
Tenneco, Inc.
Tranche B1 Credit Linked
Deposit
5.249%, due 3/17/14 2,361,559 2,367,463
Tower Automotive Corp.
Term Loan
4.563%, due 7/31/13 (c) 1,683,220 1,009,932
United Components, Inc.
Term Loan D
2.25%, due 6/29/12 (c) 547,748 531,316
------------
52,427,182
------------
BEVERAGE, FOOD & TOBACCO 4.1%
American Seafoods Group LLC
Term Loan A
4.023%, due 9/30/11 (c) 2,047,200 1,852,716
Tranche B1 Term Loan
4.023%, due 9/28/12 (c) 295,402 292,909
Tranche B2 Term Loan
4.023%, due 9/28/12 (c) 1,078,398 1,074,354
Constellation Brands, Inc.
Extended Term Loan B
3.00%, due 6/5/15 4,000,000 4,022,500
Dean Foods Co.
Tranche B Term Loan
1.675%, due 4/2/14 5,607,742 5,478,736
Dole Food Co., Inc.
Credit Link Deposit
0.163%, due 4/12/13 602,154 607,573
Term Loan C
5.005%, due 3/2/17 3,155,824 3,184,226
Term Loan B
5.042%, due 3/2/17 1,270,588 1,282,024
Michael Foods, Inc.
Term Loan B
6.50%, due 5/1/14 3,329,600 3,345,415
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
BEVERAGE, FOOD & TOBACCO (CONTINUED)
Wm. Bolthouse Farms, Inc.
New 1st Lien Term Loan
5.50%, due 2/11/16 $ 4,325,000 $ 4,343,922
New 2nd Lien Term Loan
9.50%, due 8/11/16 2,000,000 2,012,500
V Wm. Wrigley Jr. Co.
Term Loan B1
3.063%, due 12/17/12 2,729,375 2,743,385
Term Loan B2
3.313%, due 10/6/14 6,693,419 6,729,985
------------
36,970,245
------------
BROADCASTING & ENTERTAINMENT 5.8%
Atlantic Broadband Finance
LLC
Term Loan B-2-A
2.55%, due 9/1/11 138,182 136,109
Term Loan B-2-B
6.75%, due 5/31/13 3,715,791 3,708,824
V Charter Communications
Operating LLC
Replacement Term Loan
2.30%, due 3/6/14 1,984,772 1,880,847
Extended Term Loan
3.55%, due 9/6/16 3,000,000 2,866,875
New Term Loan
7.25%, due 3/6/14 5,914,609 5,998,046
CSC Holdings, Inc.
Incremental B2 Term Loan
2.004%, due 3/29/16 5,281,108 5,275,827
Extended Term Loan B3
2.087%, due 3/29/16 1,000,000 994,643
Discovery Communications
Holdings LLC
Term Loan B
2.29%, due 5/14/14 4,376,651 4,367,079
Term Loan C
5.25%, due 5/14/14 4,131,106 4,160,151
Emmis Operating Co.
Term Loan B
4.288%, due 11/1/13 269,364 246,019
Gray Television, Inc.
Term Loan B
3.801%, due 12/31/14 2,541,606 2,489,867
Insight Midwest Holdings LLC
Initial Term Loan
2.27%, due 4/7/14 3,905,631 3,803,718
LodgeNet Entertainment Corp.
Term Loan
2.30%, due 4/4/14 713,729 681,611
Mediacom Broadband Group
(FKA MCC Iowa)
Tranche D1 Term Loan
2.01%, due 1/31/15 1,866,842 1,790,769
Univision Communications,
Inc.
Initial Term Loan
2.54%, due 9/29/14 7,000,000 6,370,441
Weather Channel
Replacement Term Loan
5.00%, due 9/14/15 8,022,020 8,086,196
------------
52,857,022
------------
BUILDINGS & REAL ESTATE 2.2%
Armstrong World Industries,
Inc.
Term Loan
2.063%, due 10/2/13 1,910,554 1,888,583
Building Materials Corp. of
America
1st Lien Term Loan
3.063%, due 2/24/14 8,815,438 8,672,187
CB Richard Ellis Services,
Inc.
Tranche B
6.00%, due 12/20/13 3,862,321 3,858,702
Tranche B1
6.50%, due 12/21/15 998,189 998,189
Central Parking Corp.
Letter Of Credit Term Loan
2.563%, due 5/22/14 568,966 479,827
Term Loan
2.563%, due 5/22/14 1,566,735 1,321,279
Realogy Corp.
Term Loan
TBA, due 10/10/13 (c) 3,500,000 3,162,639
------------
20,381,406
------------
CHEMICALS, PLASTICS & RUBBER 6.6%
Celanese U.S. Holdings LLC
Synthetic Letter of Credit
1.999%, due 4/2/14 1,745,931 1,707,739
Dollar Term Loan
2.042%, due 4/2/14 4,458,046 4,360,780
V CF Industries, Inc.
New Term Loan B
5.75%, due 4/5/15 11,000,000 11,066,000
Gentek, Inc.
Term Loan
7.00%, due 10/29/14 1,654,501 1,661,223
Huntsman International LLC
New Term Loan
2.056%, due 4/21/14 1,326,369 1,275,801
</Table>
12 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
CHEMICALS, PLASTICS & RUBBER (CONTINUED)
INEOS U.S. Finance LLC
Tranche A4 Term Loan
7.001%, due 12/14/12 $ 1,690,211 $ 1,702,888
Tranche B2 Term Loan
7.501%, due 12/16/13 1,791,149 1,787,232
Tranche C2 Term Loan
8.001%, due 12/16/14 1,790,657 1,786,741
ISP Chemco, Inc.
Term Loan
2.063%, due 6/4/14 4,813,875 4,674,432
Kraton Polymers LLC
Term Loan
2.313%, due 5/13/13 627,061 601,665
Lyondell Chemical Co.
DIP Term Loan Roll Up
TBA, due 6/3/10 2,500,000 2,733,333
Nalco Co.
Term Loan
6.50%, due 5/13/16 4,520,862 4,553,829
Polymer Group, Inc.
Tranche 2 Extending
7.00%, due 11/24/14 4,204,239 4,214,749
Rockwood Specialties Group,
Inc.
Tranche H
6.00%, due 5/15/14 6,051,979 6,084,762
Solutia, Inc.
Term Loan B
4.75%, due 3/17/17 6,790,000 6,829,606
TPC Group LLC
Incremental Term Loan B
2.813%, due 6/27/13 852,612 797,192
Term Loan B
2.813%, due 6/27/13 2,526,022 2,361,831
Univar, Inc.
Opco Term Loan
3.273%, due 10/10/14 2,226,181 2,183,327
------------
60,383,130
------------
CONTAINERS, PACKAGING & GLASS 3.5%
Berry Plastics Corp.
Term Loan C
2.257%, due 4/3/15 3,000,000 2,795,832
Crown Americas LLC
Term B Dollar Loan
2.004%, due 11/15/12 2,862,041 2,823,881
Graham Packaging Co., L.P.
New Term Loan B
2.504%, due 10/7/11 320,611 318,087
Term Loan C
6.75%, due 4/5/14 7,374,839 7,422,082
Graphic Packaging
International, Inc.
Term Loan B
2.30%, due 5/16/14 3,376,989 3,318,736
Term Loan C
3.043%, due 5/16/14 4,857,673 4,827,312
Reynolds Group Holdings,
Inc.
Dollar Term Loan
6.25%, due 11/5/15 5,962,500 5,981,878
Smurfit-Stone Container
Enterprises, Inc.
Tranche B Term Loan
2.50%, due 11/1/11 (d) 3,154,698 3,123,151
Tranche C Term Loan
2.50%, due 11/1/11 (d) 291,580 289,576
Tranche C1 Term Loan
2.50%, due 11/1/11 (d) 88,157 87,551
Revolver
2.894%, due 11/2/09 (d) 675,626 675,626
Canadian Revolver
3.118%, due 11/1/09 (d) 224,623 224,623
Offering Credit Link
Deposit
4.50%, due 11/1/10 (d) 135,935 134,576
------------
32,022,911
------------
DIVERSIFIED NATURAL RESOURCES, PRECIOUS METALS &
MINERALS 1.1%
V Georgia-Pacific Corp.
New Term Loan B
2.267%, due 12/21/12 4,997,748 4,962,139
Term Loan B1
2.332%, due 12/20/12 2,039,226 2,024,697
New Term Loan C
3.526%, due 12/23/14 2,853,362 2,856,484
------------
9,843,320
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING 2.3%
V Bucyrus International,
Inc.
Term Loan
4.50%, due 2/19/16 11,000,000 11,052,954
Electrical Components
International Holdings
1st Lien Term Loan
9.25%, due 5/1/13 (d) 2,467,070 1,874,973
Mueller Water Products, Inc.
Term Loan B
5.328%, due 5/23/14 1,730,954 1,731,387
Terex Corp.
Term Loan
4.04%, due 7/12/13 5,969,925 5,875,403
------------
20,534,717
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
DIVERSIFIED/CONGLOMERATE SERVICE 3.8%
Dealer Computer Services,
Inc.
Term Loan B
5.25%, due 4/21/17 $ 7,300,000 $ 7,288,597
First Data Corp.
Term Loan B1
3.014%, due 9/24/14 3,855,457 3,466,684
Term Loan B2
3.032%, due 9/24/14 975,000 875,280
Term Loan B3
3.032%, due 9/24/14 992,366 891,393
Language Line LLC
Term Loan B
5.50%, due 11/4/15 3,917,500 3,928,927
ServiceMaster Co.
Delayed Draw Term Loan
2.75%, due 7/24/14 405,120 391,053
Term Loan
2.764%, due 7/24/14 4,068,075 3,926,823
SunGard Data Systems, Inc.
Tranche A
2.001%, due 2/28/14 4,780,106 4,614,299
Tranche B
3.875%, due 2/26/16 3,884,467 3,858,802
VeriFone, Inc.
Term Loan B
3.03%, due 10/31/13 1,342,500 1,315,650
Verint Systems, Inc.
Term Loan B
3.54%, due 5/25/14 (c) 3,860,643 3,704,608
------------
34,262,116
------------
ECOLOGICAL 1.2%
Big Dumpster Merger Sub,
Inc.
Delayed Draw Term Loan B
2.53%, due 2/5/13 (c) 331,011 261,499
Term Loan B
2.53%, due 2/5/13 (c) 786,152 621,060
Duratek, Inc.
Term Loan B
4.03%, due 6/7/13 1,558,739 1,534,059
EnergySolutions LLC
Synthetic Letter of Credit
0.27%, due 6/7/13 231,532 227,866
Term Loan
4.03%, due 6/7/13 3,248,894 3,197,454
IESI Corp.
Term Loan
2.016%, due 1/20/12 4,000,000 3,980,000
Synagro Technologies, Inc.
Term Loan B
2.26%, due 4/2/14 972,500 878,897
2nd Lien Term Loan
5.01%, due 10/2/14 750,000 604,375
------------
11,305,210
------------
ELECTRONICS 1.0%
V Flextronics
International, Ltd.
Term Loan B
2.541%, due 10/1/12 4,463,149 4,364,590
Term Loan A
2.542%, due 10/1/14 3,883,929 3,739,252
Delayed Draw A1A Term Loan
2.553%, due 10/1/14 1,116,071 1,074,498
------------
9,178,340
------------
FINANCE 0.7%
Brand Energy &
Infrastructure Services,
Inc.
New Term Loan
2.563%, due 2/7/14 2,292,601 2,212,360
Hertz Corp., (The)
Synthetic Letter of Credit
0.271%, due 12/21/12 153,131 151,004
Tranche B Term Loan
2.012%, due 12/21/12 3,103,301 3,060,200
MSCI, Inc.
Term Loan B
2.752%, due 11/20/14 387,079 385,627
Rental Services Corp.
2nd Lien Term Loan
3.80%, due 12/2/13 716,267 694,779
------------
6,503,970
------------
GROCERY 0.8%
Roundy's Supermarkets, Inc.
Extended Term Loan
5.221%, due 11/3/13 3,477,284 3,495,713
SUPERVALU, Inc.
Term Loan A
1.165%, due 6/2/11 3,611,111 3,564,781
Term Loan B1
1.523%, due 6/1/12 600,000 590,209
------------
7,650,703
------------
HEALTHCARE, EDUCATION & CHILDCARE 10.7%
AGA Medical Corp.
Tranche B Term Loan
2.282%, due 4/26/13 (c) 4,580,523 4,198,814
</Table>
14 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
HEALTHCARE, EDUCATION & CHILDCARE (CONTINUED)
Alliance Healthcare
Services, Inc.
Term Loan B
5.50%, due 6/1/16 $ 7,231,875 $ 7,215,300
AMR HoldCo., Inc.
New Term Loan
3.251%, due 4/8/15 4,250,000 4,263,281
Bausch and Lomb, Inc.
Delayed Draw Term Loan
3.54%, due 4/24/15 1,137,298 1,112,220
Term Loan
3.54%, due 4/24/15 4,689,474 4,586,071
Biomet, Inc.
Term Loan B
3.283%, due 3/25/15 6,859,733 6,753,023
V Community Health Systems,
Inc.
Delayed Draw Term Loan
2.502%, due 7/25/14 488,934 475,058
Term Loan
2.502%, due 7/25/14 9,547,864 9,276,896
DaVita, Inc.
Tranche B-1 Term Loan
1.774%, due 10/5/12 3,230,815 3,187,738
Gentiva Health Services,
Inc.
Term Loan B
2.023%, due 3/31/13 (c) 1,881,081 1,826,216
HCA, Inc.
Term Loan B
2.54%, due 11/18/13 7,566,658 7,360,466
Health Management
Associates, Inc.
Term Loan B
2.04%, due 2/28/14 5,805,124 5,612,103
HealthSouth Corp.
Term Loan B
2.51%, due 3/11/13 2,380,391 2,333,278
Extended Term Loan B
4.01%, due 9/10/15 1,959,164 1,954,266
Mylan Laboratories, Inc.
Term Loan B
3.563%, due 10/2/14 7,889,072 7,871,543
Quintiles Transnational
Corp.
Term Loan B
2.30%, due 3/31/13 2,433,771 2,386,110
2nd Lien Term Loan C
4.30%, due 3/31/14 500,000 492,500
Royalty Pharma Finance Trust
Term Loan B
2.54%, due 4/16/13 5,794,878 5,754,256
Rural/Metro Operating Co.
LLC
Term Loan
7.00%, due 12/9/14 2,314,200 2,325,771
Select Medical Corp.
Extended Term Loan B
4.001%, due 8/22/14 2,485,578 2,435,867
Sun Healthcare Group, Inc.
Synthetic Letter of Credit
2.29%, due 4/21/14 413,793 397,034
Term Loan B
2.349%, due 4/21/14 1,847,328 1,772,511
Sunrise Medical Holdings,
Inc.
Term Loan B1
6.25%, due 5/13/14 (c) 1,573,209 1,455,219
Vanguard Health Holding Co.
LLC
Term Loan B
5.00%, due 1/29/16 6,500,000 6,512,187
Warner Chilcott Co. LLC
Tranche B2
5.75%, due 4/30/15 1,834,964 1,836,485
Warner Chilcott PLC
Tranche A
5.50%, due 10/30/14 1,784,746 1,785,483
Incremental Term Loan
5.75%, due 4/30/15 997,500 998,119
Tranche B1
5.75%, due 4/30/15 1,101,797 1,102,711
------------
97,280,526
------------
HOME AND OFFICE FURNISHINGS, HOUSEWARES & DURABLE
CONSUMER PRODUCTS 0.7%
Jarden Corp.
Term Loan B1
2.04%, due 1/24/12 391,036 388,243
Term Loan B2
2.04%, due 1/24/12 680,330 675,227
Term Loan B4
3.54%, due 1/26/15 2,669,567 2,675,269
National Bedding Co. LLC
1st Lien Term Loan
2.313%, due 2/28/13 2,858,962 2,778,554
------------
6,517,293
------------
HOTELS, MOTELS, INNS & GAMING 1.3%
Las Vegas Sands LLC
Delayed Draw Term Loan
2.05%, due 5/23/14 1,078,695 1,018,692
Term Loan B
2.05%, due 5/23/14 3,782,577 3,572,172
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
HOTELS, MOTELS, INNS & GAMING (CONTINUED)
Penn National Gaming, Inc.
Term Loan B
2.023%, due 10/3/12 $ 7,313,931 $ 7,228,570
------------
11,819,434
------------
INSURANCE 0.6%
Hub International Holdings,
Inc.
Delayed Draw Term Loan
2.79%, due 6/13/14 176,124 166,261
Initial Term Loan
2.79%, due 6/13/14 783,547 739,668
Multiplan Merger Corp.
Incremental Term Loan
6.00%, due 4/12/13 4,250,000 4,250,000
------------
5,155,929
------------
LEISURE, AMUSEMENT, MOTION PICTURES & ENTERTAINMENT
2.6%
AMC Entertainment, Inc.
Term Loan
2.013%, due 1/28/13 3,344,332 3,260,202
Bombardier Recreational
Products, Inc.
Term Loan
3.254%, due 6/28/13 (c) 1,298,693 1,146,096
Cedar Fair, L.P.
U.S. Term Loan
2.273%, due 8/30/12 328,646 325,360
U.S. Term B Extended
4.273%, due 8/30/14 2,428,964 2,421,374
Cinemark USA, Inc.
Extended Term Loan
3.536%, due 4/29/16 4,872,095 4,867,174
Metro-Goldwyn-Mayer Studios,
Inc.
Tranche B Term Loan
20.50%, due 4/9/12 2,940,709 1,351,809
Regal Cinemas Corp.
Term Loan
3.79%, due 10/28/13 7,747,604 7,737,463
Town Sports International,
Inc.
Term Loan
2.063%, due 2/27/14 1,455,000 1,353,150
Universal City Development
Partners, Ltd.
Term Loan B
5.50%, due 11/6/14 1,496,250 1,501,536
------------
23,964,164
------------
MACHINERY (NON-AGRICULTURE, NON-CONSTRUCT & NON-
ELECTRONIC) 1.7%
Baldor Electric Co.
Term Loan B
5.25%, due 1/31/14 6,175,083 6,191,447
Gleason Corp.
New U.S. Term Loan
2.02%, due 6/30/13 (c) 1,414,578 1,386,287
Manitowoc Co., Inc. (The)
Term Loan B
7.50%, due 11/6/14 3,126,132 3,128,924
Rexnord Corp.
Term Loan B
2.813%, due 7/19/13 4,672,131 4,535,859
------------
15,242,517
------------
MINING, STEEL, IRON & NON-PRECIOUS METALS 0.8%
Novelis, Inc.
New Canadian Term Loan
2.28%, due 7/6/14 1,367,578 1,321,636
New U.S. Term Loan
2.289%, due 7/6/14 3,008,819 2,907,740
Walter Industries, Inc.
Term Loan
2.508%, due 10/3/12 3,084,290 3,057,302
------------
7,286,678
------------
OIL & GAS 1.3%
Dresser, Inc.
Term Loan
2.50%, due 5/4/14 4,811,158 4,678,822
2nd Lien Term Loan
6.00%, due 5/4/15 1,200,000 1,161,000
Energy Transfer Equity, L.P.
Term Loan B
2.006%, due 11/1/12 6,000,000 5,943,216
------------
11,783,038
------------
PERSONAL & NONDURABLE CONSUMER PRODUCTS (MANUFACTURING
ONLY) 1.1%
Hillman Group, Inc.
Term Loan B1
3.01%, due 3/31/11 732,509 727,015
JohnsonDiversey, Inc.
Term Loan B
5.50%, due 11/24/15 6,448,838 6,489,143
Visant Corp.
Term Loan C
2.251%, due 10/4/11 2,836,724 2,810,130
------------
10,026,288
------------
PERSONAL TRANSPORTATION 0.3%
United Airlines, Inc.
Term Loan B
2.357%, due 2/3/14 2,748,122 2,522,776
------------
</Table>
16 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
PERSONAL, FOOD & MISCELLANEOUS SERVICES 0.8%
Aramark Corp.
Term Loan
2.165%, due 1/27/14 $ 7,286,363 $ 7,148,694
Synthetic Letter of Credit
2.167%, due 1/27/14 484,137 474,990
------------
7,623,684
------------
PRINTING & PUBLISHING 3.0%
Affiliated Media, Inc.
New Term Loan
8.50%, due 3/19/14 463,698 435,876
Cenveo Corp.
Delayed Draw Term Loan
4.771%, due 6/21/13 56,479 56,531
Term Loan C
4.771%, due 6/21/13 1,549,337 1,550,770
Dex Media East LLC
New Term Loan
2.80%, due 10/24/14 1,736,908 1,542,126
F&W Publications, Inc. (aka
New Publishing
Acquisition, Inc.)
Tranche B Term Loan
6.50%, due 8/5/12 (d) 4,031,684 2,015,842
Hanley Wood LLC
New Term Loan B
2.531%, due 3/8/14 1,612,417 826,364
Lamar Media Corp.
Term Loan B
4.25%, due 12/30/16 3,500,000 3,505,835
Merrill Communications LLC
Term Loan
8.50%, due 12/24/12 5,129,990 4,764,479
Nielsen Finance LLC
Class A Term Loan
2.251%, due 8/9/13 3,715,550 3,617,437
Class B Term Loan
2.297%, due 5/2/16 1,000,000 987,344
Penton Media, Inc.
New Term Loan B
5.00%, due 8/1/14 (c) 5,340,569 3,992,075
R.H. Donnelley, Inc.
New Term Loan
9.25%, due 10/24/14 2,867,173 2,785,458
SuperMedia, Inc.
Exit Term loan
11.00%, due 12/31/15 1,121,758 1,048,716
------------
27,128,853
------------
RETAIL STORE 3.0%
Michaels Stores, Inc.
Term Loan B1
2.538%, due 10/31/13 3,773,712 3,613,854
Term Loan B2
4.788%, due 7/31/16 2,533,613 2,493,835
Neiman Marcus Group, Inc.
(The)
Term Loan B
2.252%, due 4/5/13 6,138,260 5,869,711
Pantry, Inc. (The)
Delayed Draw Term Loan B
2.03%, due 5/15/14 619,800 593,458
Term Loan B
2.03%, due 5/15/14 2,152,697 2,061,207
Petco Animal Supplies, Inc.
Term Loan B
2.534%, due 10/25/13 4,855,009 4,767,769
Pilot Travel Centers LLC
Term Loan B
TBA, due 11/24/15 (c) 1,500,000 1,509,107
QVC, Inc.
Tranche 2-J
3.761%, due 3/3/11 2,026,217 2,023,582
Tranche 3-J
4.261%, due 6/30/11 454,568 453,053
Yankee Candle Co., Inc.
(The)
Term Loan B
2.28%, due 2/6/14 4,396,192 4,303,274
------------
27,688,850
------------
TELECOMMUNICATIONS 2.0%
V Intelsat Corp.
Term Loan B2-A
2.792%, due 1/3/14 4,598,790 4,506,097
Term Loan B2-B
2.792%, due 1/3/14 2,597,992 2,545,627
Term Loan B2-C
2.792%, due 1/3/14 2,597,992 2,545,628
MetroPCS Wireless, Inc.
Term Loan B
2.522%, due 11/4/13 3,953,912 3,859,247
Windstream Corp.
Tranche B2
3.06%, due 12/17/15 4,987,469 4,976,247
------------
18,432,846
------------
TEXTILES & LEATHER 0.2%
Spring Windows Fashions LLC
Term Loan B
3.063%, due 12/31/12 (c) 2,415,100 2,300,383
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FLOATING RATE LOANS (CONTINUED)
UTILITIES 5.0%
AES Corp.
Term Loan
3.29%, due 8/10/11 $ 2,000,000 $ 1,988,126
BRSP LLC
Term Loan B
7.50%, due 6/4/14 1,465,139 1,465,139
Calpine Corp.
1st Priority Term Loan
3.165%, due 3/29/14 7,771,527 7,481,027
Coleto Creek Power, L.P.
Term Loan
3.036%, due 6/28/13 1,111,097 1,043,042
Synthetic Letter of Credit
3.14%, due 6/28/13 107,499 100,915
Covanta Energy Corp.
Synthetic Letter of Credit
0.192%, due 2/10/14 1,480,657 1,454,005
Term Loan B
1.809%, due 2/10/14 2,917,357 2,864,845
Dynegy Holdings, Inc.
Synthetic Letter of Credit
4.03%, due 4/2/13 249,344 244,474
InfrastruX Group, Inc.
Delayed Draw Term Loan
8.00%, due 11/5/12 2,895,174 2,880,698
KGen LLC
Synthetic Letter of Credit
0.313%, due 2/8/14 1,687,500 1,590,469
1st Lien Term Loan
2.063%, due 2/10/14 2,721,094 2,564,631
Mirant North America LLC
Term Loan
2.023%, due 1/3/13 3,193,627 3,140,019
NRG Energy, Inc.
Term Loan
2.003%, due 12/9/13 2,041,742 1,998,588
Synthetic Letter of Credit
2.04%, due 12/9/13 4,073,778 3,987,675
Texas Competitive Electric
Holdings Co. LLC
Term Loan B2
3.752%, due 10/10/14 1,925,316 1,576,593
Term Loan B3
3.752%, due 10/10/14 3,914,848 3,184,075
TPF Generation Holdings LLC
Synthetic Revolver
0.19%, due 12/15/11 95,091 91,984
Synthetic Letter of Credit
2.29%, due 12/13/13 303,342 293,429
Term Loan B
2.29%, due 12/15/13 766,092 741,057
2nd Lien Term Loan C
4.54%, due 12/15/14 1,600,000 1,475,200
TPF II LC LLC
Term Loan B
3.04%, due 10/15/14 (c) 1,491,190 1,453,911
USPF Holdings LLC
Term Loan
2.013%, due 4/11/14 (c) 2,259,405 2,233,987
Synthetic Letter of Credit
2.04%, due 4/11/14 (c) 1,300,000 1,285,375
------------
45,139,264
------------
Total Floating Rate Loans
(Cost $708,230,889) 696,441,102
------------
FOREIGN FLOATING RATE LOANS 3.4% (B)
- -------------------------------------------------------
BROADCASTING & ENTERTAINMENT 1.1%
V UPC Financing Partnership
Term Loan N
2.18%, due 12/31/14 3,241,439 3,148,248
Term Loan T
3.93%, due 12/30/16 7,258,561 7,155,126
------------
10,303,374
------------
CHEMICALS, PLASTICS & RUBBER 0.3%
Brenntag Holding GmbH & Co.
Term Loan B2
4.029%, due 1/20/14 1,797,596 1,793,102
Acquisition Term Loan
4.07%, due 1/20/14 892,043 889,813
------------
2,682,915
------------
FINANCE 0.5%
Ashtead Group PLC
Term Loan
2.063%, due 8/31/11 4,059,000 4,018,410
------------
PRINTING & PUBLISHING 0.3%
Yell Group PLC
New Term Loan B1
4.023%, due 7/31/14 2,958,015 2,429,269
------------
RETAIL STORE 0.4%
Dollarama Group, L.P.
Replacement Term Loan B
2.023%, due 11/18/11 3,782,272 3,758,633
------------
</Table>
18 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
FOREIGN FLOATING RATE LOANS (CONTINUED)
TELECOMMUNICATIONS 0.8%
Intelsat Subsidiary Holding
Co.
Tranche B Term Loan
2.792%, due 7/3/13 $ 1,806,614 $ 1,768,223
Telesat Canada
U.S. Term I Loan
3.28%, due 10/31/14 5,409,544 5,317,133
U.S. Term II Loan
3.28%, due 10/31/14 464,645 456,707
------------
7,542,063
------------
Total Foreign Floating Rate
Loans
(Cost $31,406,499) 30,734,664
------------
YANKEE BOND 0.5% (E)
- -------------------------------------------------------
AEROSPACE & DEFENSE 0.5%
Bombardier, Inc.
7.50%, due 3/15/18 (a) 4,200,000 4,452,000
------------
Total Yankee Bond
(Cost $4,200,000) 4,452,000
------------
Total Long-Term Bonds
(Cost $806,665,190) 798,460,474
------------
<Caption>
SHARES
COMMON STOCKS 0.2%
- -------------------------------------------------------
AUTOMOBILE 0.1%
Mark IV LLC (f) 26,783 803,490
------------
BEVERAGE, FOOD & TOBACCO 0.0%++
Nellson Nutraceutical, Inc.
(c)(f) 379 265,300
------------
PERSONAL & NONDURABLE CONSUMER PRODUCTS
(MANUFACTURING ONLY) 0.0%++
MEGA Brands, Inc. (g) 639,425 333,624
------------
PRINTING & PUBLISHING 0.1%
Affiliated Media, Inc. (f) 27,482 401,512
SuperMedia, Inc. (g) 5,307 238,284
------------
639,796
------------
Total Common Stocks
(Cost $3,988,741) 2,042,210
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS 16.3%
- -------------------------------------------------------
COMMERCIAL PAPER 10.4%
Brown-Forman Corp.
0.23%, due 5/19/10 (a)(h) $ 2,000,000 $ 1,999,770
DuPont E.I. De NeMours Co.
0.18%, due 5/6/10 (a)(h) 5,175,000 5,174,871
0.18%, due 5/10/10 (a)(h) 2,000,000 1,999,910
Electricite de France S.A.
0.20%, due 5/19/10 (a)(h) 9,000,000 8,999,100
General Electric Capital
Corp.
0.18%, due 5/27/10 (h) 10,000,000 9,998,700
KfW International Finance,
Inc.
0.16%, due 5/3/10 (a)(h) 8,135,000 8,134,928
0.17%, due 5/3/10 (a)(h) 2,930,000 2,929,972
National Rural Utility
Cooperative Finance Corp.
0.20%, due 5/12/10 (h) 9,000,000 8,999,450
Nestle Capital Corp.
0.17%, due 5/20/10 (a)(h) 13,000,000 12,998,834
NSTAR Electric Co.
0.20%, due 5/7/10 (h) 8,000,000 7,999,733
Pitney Bowes, Inc.
0.18%, due 5/6/10 (a)(h) 7,000,000 6,999,825
Procter & Gamble
International Funding
0.19%, due 5/10/10 (a)(h) 10,000,000 9,999,525
Royal Bank of Canada
0.17%, due 5/24/10 (h) 8,000,000 7,999,131
------------
Total Commercial Paper
(Cost $94,233,749) 94,233,749
------------
REPURCHASE AGREEMENTS 3.6%
BNP Paribas
0.18%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$30,968,465
(Collateralized by U.S.
Government Agency
Obligations with zero
coupon rates and maturity
dates of 4/15/30, with a
Principal Amount of
$87,428,000 and a Market
Value of $31,587,625) 30,968,000 30,968,000
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONTINUED)
REPURCHASE AGREEMENTS (CONTINUED)
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$2,020,869 (Collateralized
by a United States
Treasury Bill with a zero
coupon rate and a maturity
date of
5/6/10, with a Principal
Amount of $2,065,000 and a
Market Value of
$2,065,000) $ 2,020,867 $ 2,020,867
------------
Total Repurchase Agreements
(Cost $32,988,867) 32,988,867
------------
U.S. GOVERNMENT & FEDERAL AGENCIES 2.3%
International Bank for
Reconstruction &
Development (Discount
Note)
0.10%, due 5/17/10 (h) 13,700,000 13,699,411
United States Treasury Bill
0.142%, due 6/3/10 (h) 7,000,000 6,999,089
------------
Total U.S. Government &
Federal Agencies
(Cost $20,696,729) 20,698,500
------------
Total Short-Term Investments
(Cost $147,919,345) 147,921,116
------------
Total Investments
(Cost $958,573,276) (i) 104.1% 948,423,800
Other Assets, Less
Liabilities (4.1) (37,417,074)
----------- ------------
Net Assets 100.0% $911,006,726
=========== ============
</Table>
<Table>
++ Less than one-tenth of a percent.
(a) May be sold to institutional investors
only under Rule 144A or securities
offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
(b) Floating Rate Loan--generally pays
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 April 30,
2010. 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.
(c) Illiquid security. The total market
value of these securities at April 30,
2010 is $43,470,199, which represents
4.8% of the Fund's net assets.
(d) Issue in default.
(e) Yankee Bond--dollar-denominated bond
issued in the United States by a foreign
bank or corporation.
(f) Fair valued security. The total market
value of these securities at April 30,
2010 is $1,470,302, which represents 0.2%
of the Fund's net assets.
(g) Non-income producing security.
(h) Interest rate presented is yield to
maturity.
(i) At April 30, 2010, cost is $958,563,161
for federal income tax purposes and net
unrealized depreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 10,846,882
Gross unrealized depreciation (20,986,243)
------------
Net unrealized depreciation $(10,139,361)
============
</Table>
20 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.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Long-Term Bonds
Corporate Bonds $ -- $ 66,832,708 $ -- $ 66,832,708
Floating Rate Loans -- 696,441,102 -- 696,441,102
Foreign Floating Rate Loans -- 30,734,664 -- 30,734,664
Yankee Bonds -- 4,452,000 -- 4,452,000
-------- ------------ ---------- ------------
Total Long-Term Bonds -- 798,460,474 -- 798,460,474
-------- ------------ ---------- ------------
Common Stocks (b) 571,908 -- 1,470,302 2,042,210
-------- ------------ ---------- ------------
Short-Term Investments
Commercial Paper -- 94,233,749 -- 94,233,749
Repurchase Agreements -- 32,988,867 -- 32,988,867
U.S. Government & Federal Agencies -- 20,698,500 -- 20,698,500
-------- ------------ ---------- ------------
Total Short-Term Investments -- 147,921,116 -- 147,921,116
-------- ------------ ---------- ------------
Total Investments in Securities $571,908 $946,381,590 $1,470,302 $948,423,800
======== ============ ========== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) The level 3 securities valued at $803,490, $401,512 and $265,300 are held in
Automobiles, Media and Specialty Retail within the Common Stock section of
the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2.
The following is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining value:
ASSET VALUATION INPUTS
<Table>
<Caption>
BALANCE CHANGE IN NET NET BALANCE
AS OF ACCRUED REALIZED UNREALIZED TRANSFERS TRANSFERS AS OF
INVESTMENTS IN OCTOBER 31, DISCOUNTS GAIN APPRECIATION NET NET IN TO OUT OF APRIL 30,
SECURITIES 2009 (PREMIUMS) (LOSS) (DEPRECIATION) PURCHASES SALES LEVEL 3 LEVEL 3 2010
Long-Term Investments
Common Stocks
Automobiles $ -- $ -- $ -- $(199,494) $1,002,984 $ -- $ -- $ -- $ 803,490
Media -- -- -- (434,991) 836,503 -- -- -- 401,512
Special Retail 265,300 -- -- -- -- -- -- -- 265,300
-------- -------- -------- --------- ---------- -------- -------- -------- ----------
Total $265,300 $-- $-- $(634,485) $1,839,487 $-- $-- $-- $1,470,302
======== ======== ======== ========= ========== ======== ======== ======== ==========
<Caption>
CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
INVESTMENTS
STILL HELD AT
INVESTMENTS IN APRIL 30,
SECURITIES 2010 (A)
Long-Term Investments
Common Stocks
Automobiles $(199,494)
Media (434,991)
Special Retail --
---------
Total $(634,485)
=========
</Table>
(a) Included in "Net change in unrealized appreciation (depreciation) on
investments" in the Statement of Operations.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $958,573,276) $948,423,800
Cash 9,308,000
Unrealized appreciation on unfunded
commitments 22,458
Receivables:
Investment securities sold 19,912,719
Fund shares sold 13,413,138
Dividends and interest 3,969,157
Other assets 89,659
------------
Total assets 995,138,931
------------
LIABILITIES:
Payables:
Investment securities purchased 80,746,213
Fund shares redeemed 1,842,759
Manager (See Note 3) 428,951
NYLIFE Distributors (See Note 3) 231,395
Shareholder communication 119,748
Transfer agent (See Note 3) 109,708
Professional fees 50,571
Custodian 5,412
Trustees 2,374
Accrued expenses 2,426
Dividend payable 592,648
------------
Total liabilities 84,132,205
------------
Net assets $911,006,726
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 97,389
Additional paid-in capital 978,802,169
------------
978,899,558
Accumulated distributions in excess
of net investment income (118,535)
Accumulated net realized loss on
investments (57,647,279)
Net unrealized depreciation on
investments (10,149,476)
Net unrealized appreciation on
unfunded commitments 22,458
------------
Net assets $911,006,726
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 22,345,439
============
Shares of beneficial interest
outstanding 2,389,172
============
Net asset value per share
outstanding $ 9.35
Maximum sales charge (3.00% of
offering price) 0.29
------------
Maximum offering price per share
outstanding $ 9.64
============
CLASS A
Net assets applicable to
outstanding shares $408,685,446
============
Shares of beneficial interest
outstanding 43,696,185
============
Net asset value per share
outstanding $ 9.35
Maximum sales charge (3.00% of
offering price) 0.29
------------
Maximum offering price per share
outstanding $ 9.64
============
CLASS B
Net assets applicable to
outstanding shares $ 19,052,138
============
Shares of beneficial interest
outstanding 2,035,663
============
Net asset value and offering price
per share outstanding $ 9.36
============
CLASS C
Net assets applicable to
outstanding shares $163,251,832
============
Shares of beneficial interest
outstanding 17,449,222
============
Net asset value and offering price
per share outstanding $ 9.36
============
CLASS I
Net assets applicable to
outstanding shares $297,671,871
============
Shares of beneficial interest
outstanding 31,818,487
============
Net asset value and offering price
per share outstanding $ 9.36
============
</Table>
22 MainStay Floating Rate Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $17,597,981
Dividends 28,984
-----------
Total income 17,626,965
-----------
EXPENSES:
Manager (See Note 3) 2,329,071
Distribution/Service--Investor
Class (See Note 3) 25,793
Distribution/Service--Class A (See
Note 3) 445,673
Distribution/Service--Class B (See
Note 3) 95,767
Distribution/Service--Class C (See
Note 3) 709,444
Transfer agent (See Note 3) 371,509
Professional fees 88,699
Registration 54,973
Shareholder communication 53,834
Custodian 16,887
Trustees 13,040
Miscellaneous 29,236
-----------
Total expenses 4,233,926
-----------
Net investment income 13,393,039
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investments (447,638)
Net change in unrealized
appreciation/(depreciation) on
investments and unfunded
commitments 33,106,005
-----------
Net realized and unrealized gain on
investments and unfunded
commitments 32,658,367
-----------
Net increase in net assets resulting
from operations $46,051,406
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
23
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 13,393,039 $ 20,541,412
Net realized loss on
investments (447,638) (7,443,031)
Net change in unrealized
depreciation on
investments and unfunded
commitments 33,106,005 106,153,544
----------------------------
Net increase in net assets
resulting from operations 46,051,406 119,251,925
----------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (351,658) (602,935)
Class A (6,250,100) (10,469,233)
Class B (254,743) (565,130)
Class C (1,871,041) (3,229,882)
Class I (4,447,551) (5,649,888)
----------------------------
Total dividends to
shareholders (13,175,093) (20,517,068)
----------------------------
Capital share transactions:
Net proceeds from sale of
shares 247,528,177 314,852,950
Net asset value of shares
issued to shareholders in
reinvestment of dividends 9,835,031 14,948,031
Cost of shares redeemed
(a) (102,425,138) (193,803,240)
----------------------------
Increase in net assets
derived from capital
share transactions 154,938,070 135,997,741
----------------------------
Net increase in net
assets 187,814,383 234,732,598
NET ASSETS:
Beginning of period 723,192,343 488,459,745
----------------------------
End of period $ 911,006,726 $ 723,192,343
============================
Accumulated distributions in
excess of net investment
income at end of period $ (118,535) $ (336,481)
============================
</Table>
(a) Cost of shares redeemed net of redemption fees of $18,776 and $73,001 for
the six-month period ended April 30, 2010 and the year ended October 31,
2009. (See Note 2(I)).
24 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
25
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY
SIX MONTHS 28, 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 8.97 $ 7.61 $ 8.94
------- ------- -------
Net investment income 0.15 0.29 0.28
Net realized and unrealized gain
(loss) on investments 0.38 1.36 (1.33)
------- ------- -------
Total from investment operations 0.53 1.65 (1.05)
------- ------- -------
Less dividends:
From net investment income (0.15) (0.29) (0.28)
------- ------- -------
Redemption fee (d) 0.00 ++ 0.00 ++ 0.00 ++
------- ------- -------
Net asset value at end of period $ 9.35 $ 8.97 $ 7.61
======= ======= =======
Total investment return (b) 6.01%(c) 22.32% (12.19%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.46%++ 3.63% 4.43% ++
Net expenses 1.10%++ 1.19% 1.05% ++
Portfolio turnover rate 7% 17% 10%
Net assets at end of period (in
000's) $22,345 $20,191 $14,586
</Table>
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99 $ 10.03
------- ------- ------- ------- ------- -------
Net investment income 0.12 0.23 0.39 0.55 0.51 0.33 (a)
Net realized and unrealized gain
(loss) on investments 0.39 1.36 (2.03) (0.28) (0.06) (0.04)
------- ------- ------- ------- ------- -------
Total from investment operations 0.51 1.59 (1.64) 0.27 0.45 0.29
------- ------- ------- ------- ------- -------
Less dividends:
From net investment income (0.12) (0.23) (0.40) (0.55) (0.51) (0.33)
------- ------- ------- ------- ------- -------
Redemption fee (d) 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 9.36 $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99
======= ======= ======= ======= ======= =======
Total investment return (b) 5.73%(c) 21.41% (17.66%) 2.88% 4.66% 2.95%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.70%++ 2.95% 4.51% 5.59% 5.20% 3.36%
Net expenses 1.85%++ 1.94% 1.79% 1.76% 1.75% 1.79%
Portfolio turnover rate 7% 17% 10% 29% 8% 13%
Net assets at end of period (in
000's) $19,052 $20,289 $20,703 $47,141 $53,466 $62,196
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) The redemption fee was discontinued, as of April 1, 2010.
</Table>
26 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
----------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99 $ 10.03
-------- -------- -------- -------- -------- --------
0.17 0.31 0.46 0.62 0.59 0.40 (a)
0.37 1.36 (2.03) (0.28) (0.06) (0.03)
-------- -------- -------- -------- -------- --------
0.54 1.67 (1.57) 0.34 0.53 0.37
-------- -------- -------- -------- -------- --------
(0.16) (0.31) (0.47) (0.62) (0.59) (0.41)
-------- -------- -------- -------- -------- --------
0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++
-------- -------- -------- -------- -------- --------
$ 9.35 $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99
======== ======== ======== ======== ======== ========
6.06%(c) 22.53% (16.91%) 3.65% 5.34% 3.72%
3.56%++ 3.80% 5.36% 6.34% 5.95% 4.11%
0.99%++ 1.01% 1.00% 1.01% 1.00% 1.04%
7% 17% 10% 29% 8% 13%
$408,685 $338,350 $245,193 $631,749 $692,411 $505,726
</Table>
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99 $ 10.03
-------- -------- -------- -------- -------- --------
0.12 0.24 0.39 0.55 0.51 0.33 (a)
0.39 1.35 (2.03) (0.28) (0.06) (0.04)
-------- -------- -------- -------- -------- --------
0.51 1.59 (1.64) 0.27 0.45 0.29
-------- -------- -------- -------- -------- --------
(0.12) (0.23) (0.40) (0.55) (0.51) (0.33)
-------- -------- -------- -------- -------- --------
0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++
-------- -------- -------- -------- -------- --------
$ 9.36 $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99
======== ======== ======== ======== ======== ========
5.61%(c) 21.41% (17.66%) 2.88% 4.66% 2.94%
2.69%++ 2.89% 4.52% 5.59% 5.20% 3.36%
1.85%++ 1.94% 1.79% 1.76% 1.75% 1.79%
7% 17% 10% 29% 8% 13%
$163,252 $132,105 $104,048 $232,130 $242,469 $168,021
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
27
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
-------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99 $10.03
-------- -------- -------- ------- ------- ------
Net investment income 0.17 0.33 0.50 0.66 0.61 0.43 (a)
Net realized and unrealized gain
(loss) on investments 0.39 1.36 (2.04) (0.28) (0.06) (0.04)
-------- -------- -------- ------- ------- ------
Total from investment operations 0.56 1.69 (1.54) 0.38 0.55 0.39
-------- -------- -------- ------- ------- ------
Less dividends:
From net investment income (0.17) (0.33) (0.50) (0.66) (0.61) (0.43)
-------- -------- -------- ------- ------- ------
Redemption fee (d) 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++ 0.00 ++
-------- -------- -------- ------- ------- ------
Net asset value at end of period $ 9.36 $ 8.97 $ 7.61 $ 9.65 $ 9.93 $ 9.99
======== ======== ======== ======= ======= ======
Total investment return (b) 6.20%(c) 22.84% (16.67%) 3.89% 5.71% 3.98%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.82%++ 3.97% 5.33% 6.68% 6.20% 4.36%
Net expenses 0.74%++ 0.77% 0.71% 0.67% 0.75% 0.79%
Portfolio turnover rate 7% 17% 10% 29% 8% 13%
Net assets at end of period (in
000's) $297,672 $212,257 $103,930 $61,992 $47,743 $9,284
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) The redemption fee was discontinued, as of April 1, 2010.
</Table>
28 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.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Floating Rate Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Floating Rate Fund,
a series of Eclipse Funds Inc. (the "Predecessor Fund"). The reorganization of
the Predecessor Fund with and into the Fund, which was not subject to
shareholder approval under applicable law, occurred on February 26, 2010. All
information regarding and references to periods prior to the commencement of
operations of the Fund relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class A shares, Class B
shares, Class C shares and Class I shares commenced operations on May 3, 2004.
Investor Class shares commenced operations on February 28, 2008. Investor Class
and Class A shares are offered at net asset value ("NAV") per share plus an
initial sales charge. No sales charge applies on investments of $500,000 or more
(and certain other qualified purchases) in Investor Class and Class A shares,
but a contingent deferred sales charge is imposed on certain redemptions of such
shares within one year of the date of purchase. Class B shares and Class C
shares are offered at NAV without an initial sales charge, although a declining
contingent deferred sales charge may be imposed on redemptions made within four
years of purchase of Class B shares and a 1.00% contingent deferred sales charge
may be imposed on redemptions made within one year of purchase of Class C
shares. Class I shares are offered at NAV and are not subject to a sales charge.
Depending upon eligibility, Class B shares convert to Investor Class or Class A
shares four years after the date they were purchased. Additionally, depending
upon eligibility, Investor Class shares may convert to Class A shares and Class
A shares may convert to Investor Class shares. The five classes of shares have
the same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions, except that
Class B and Class C shares are subject to higher distribution and/or service fee
rates than Investor Class and Class A shares under a distribution plan pursuant
to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a
distribution and/or service fee.
The Fund's investment objective is to seek to provide high current income.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the Fund's Manager (as defined in Note 3(A))
in consultation with the Fund's Subadvisor, if any (as defined in Note 3(A)),
whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the Fund's Manager, in
consultation with the Fund's Subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date").
Loan assignments, participations and commitments are valued at the average of
bid quotations obtained from a pricing service. The Trust has engaged an
independent pricing service to provide market value quotations from dealers in
loans.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund held securities
with a value of $1,470,302 that were valued in such a manner.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector,
mainstayinvestments.com 29
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
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, as defined in Note 3(A), conclude that
such events may have affected the accuracy of the last price reported on the
local foreign market, the Manager may, pursuant to procedures adopted by the
Fund's Board, adjust the value of the local price to reflect the impact on the
price of such securities as a result of such events. At April 30, 2010, certain
foreign equity securities held by the Fund were fair valued.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
Generally, a security is considered illiquid if it cannot be sold or disposed of
in the ordinary course of business at approximately the price at which it is
valued. Its illiquidity might prevent the sale of such security at a time when
the Manager or Subadvisor, if any, as defined in Note 3(A) might wish to sell,
and these securities could have the effect of decreasing the overall level of a
Fund's liquidity. Further, the lack of an established secondary market may make
it more difficult to value illiquid securities, requiring the Fund to rely on
judgments that may be somewhat subjective in determining value, which could vary
from the amount that the Fund could realize upon disposition. Difficulty in
selling illiquid securities may result in a loss or may be costly to the Fund.
Under the supervision of the Board, the Manager or Subadvisor, if any,
determines the liquidity of a Fund's investments; in doing so, the Manager or
Subadvisor, if any, may consider various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective purchasers, (3)
the dealer undertakings to make a market, and (4) the nature of the security and
the market in which it trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). Illiquid
securities generally will be valued in such manner, as the Board in good faith
deems appropriate to reflect their fair market value.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's
30 MainStay Floating Rate Fund
federal and state income and federal excise tax returns for tax years for which
the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund declares dividends of net
investment income daily and the Fund pays them monthly and declares and pays
distribution of net realized capital gains, if any, annually. Unless the
shareholder elects otherwise, all dividends and distributions are reinvested in
the same class of shares of the Fund, at NAV. Dividends and distributions to
shareholders are determined in accordance with federal income tax regulations
and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) LOAN ASSIGNMENTS, PARTICIPATIONS AND COMMITMENTS. The Fund invests in loan
assignments and loan participations. Loan assignments and participations
("loans") are agreements to make money available (a "commitment") to a borrower
in a specified amount, at a specified rate and within a specified time. Such
loans are typically senior, secured and collateralized in nature. The Fund
records an investment when the borrower withdraws money and records interest as
earned. These loans pay interest at rates that are periodically reset by
reference to a base lending rate plus a spread. These base lending rates are
generally the prime rate offered by a designated U.S. bank or the London
InterBank Offered Rate ("LIBOR").
The loans in which the Fund invests are generally readily marketable, but may be
subject to some restrictions on resale. For example, the Fund may be
contractually obligated to receive approval from the agent bank and/or borrower
prior to the sale of these investments.
The Fund assumes the credit risk of the borrower, the selling participant and
any other persons interpositioned between the Fund and the borrower
("intermediate participants"). In the event that the borrower, selling
participant or intermediate participants become insolvent or enters into
bankruptcy, the Fund may incur certain costs and delays in realizing payment, or
may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the
borrower. At any point in time, up to the maturity date of the issue, the
borrower may demand the unfunded portion. These unfunded amounts are marked to
market and recorded in the Statement of Assets and Liabilities. (See Note 5.)
(I) REDEMPTION FEE. Prior to April 1, 2010, the Fund imposed a 2.00% redemption
fee on redemptions (including exchanges) of Fund shares made within 60 days of
their date of purchase for any class. The redemption fee was designed to offset
brokerage commissions and other costs associated with short-term trading and was
not assessed on shares acquired through the reinvestment of dividends or
distributions paid by the Fund. The redemption fees are
mainstayinvestments.com 31
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
included in the Statement of Changes in Net Assets' shares redeemed amount and
retained by the Fund.
(J) CONCENTRATION OF RISK. The ability of issuers of debt securities held by
the Fund to meet their obligations may be affected by economic or political
developments in a specific country, industry or region.
The Fund invests in floating rate loans. The floating rate loans in which the
Fund principally invests are usually rated less than investment grade and are
generally considered speculative because they present a greater risk of loss,
including default, than higher quality debt securities. These securities pay
investors a higher interest rate because of the increased risk of loss. Although
certain floating rate loans are collateralized, there is no guarantee that the
value of the collateral will be sufficient to repay the loan. In a recession or
serious credit event, the Fund's net asset value could go down and you could
lose money.
(K) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
(L) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the Fund's derivative and hedging activities,
including how such activities are accounted for and their effect on the Fund's
financial positions, performance and cash flows. These derivatives are not
accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the six
months ended April 30, 2010.
REALIZED GAIN (LOSS)
<Table>
<Caption>
STATEMENT OF EQUITY
OPERATIONS CONTRACTS
LOCATION RISK TOTAL
Rights Net realized loss on investments $19 $19
----------------
Total Realized
Gain $19 $19
================
</Table>
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights (2) 0 - 83,766 0 - 83,766
======================
</Table>
(1) Amount disclosed represents the minimum and maximum held during the six-
month period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER. New York Life Investment Management LLC ("New York Life
Investments" or "Manager"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's Manager, pursuant to a Management Agreement, as amended
("Management Agreement"). The Manager provides offices, conducts clerical,
recordkeeping and bookkeeping services, and keeps most of the financial and
accounting records required to be maintained by the Fund. Except for the portion
of salaries and expenses that are the responsibility of the Fund, the Manager
also pays the salaries and expenses of all personnel affiliated with the Fund
and the operational expenses of the Fund. The Fund is advised by New York Life
Investments directly, without a subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.60% on assets up to $1 billion and 0.575% on assets in excess of $1 billion.
The effective management fee rate (exclusive of any applicable
waivers/reimbursements) was 0.60% for the six-month period ended April 30, 2010.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $2,329,071.
State Street Bank and Trust Company ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the Fund pursuant to an agreement with New York Life Investments. These services
include calculating the daily NAVs of the Fund, maintaining the general ledger
and sub-ledger accounts for the calculation of the Fund's respective NAVs, and
assisting New York Life Investments in conducting various aspects of the Fund's
administrative operations. For providing these services to the Fund, State
Street is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an
32 MainStay Floating Rate Fund
indirect, wholly-owned subsidiary of New York Life. The Fund has adopted
distribution plans, (the "Plans") in accordance with the provisions of Rule 12b-
1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Pursuant to the Class B and Class C Plans, Class B and Class C shares of the
Fund pay the Distributor a monthly distribution fee at an annual rate of 0.75%
of the average daily net assets of the Fund's Class B and Class C shares, along
with a service fee at an annual rate of 0.25% of the average daily net assets of
the Class B and Class C shares of the Fund for a total 12b-1 fee of 1.00%. Class
I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares was $4,336
and $37,527, respectively for the six-month period ended April 30, 2010. The
Fund was also advised that the Distributor retained contingent deferred sales
charges on redemptions of Investor Class, Class A, Class B and Class C shares of
$15, $5,517, $11,066 and $26,830, respectively, for the six-month period ended
April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 18,986
- -----------------------------------------------
Class A 123,164
- -----------------------------------------------
Class B 17,660
- -----------------------------------------------
Class C 129,750
- -----------------------------------------------
Class I 81,949
- -----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class A $13,779,370 3.4%
- --------------------------------------------------
Class C 1,176 0.0++
- --------------------------------------------------
Class I 1,248 0.0++
- --------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $18,660.
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $57,209,756 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the Fund through
the years indicated. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to shareholders. No capital gain distributions shall be
made until any capital loss carryforwards have been fully utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2012 $ 229
2013 3,166
2014 1,437
2015 14,042
2016 30,852
2017 7,484
- ---------------------------------- -----
Total $57,210
- ---------------------------------- -----
</Table>
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $20,517,068
- ------------------------------------------------
</Table>
mainstayinvestments.com 33
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 5--COMMITMENTS AND CONTINGENCIES:
At April 30, 2010, the Fund had unfunded loan commitments pursuant to the
following loan agreements:
<Table>
<Caption>
UNFUNDED UNREALIZED
BORROWER COMMITMENT APPRECIATION
Smurfit-Stone Container
Enterprises, Inc.
Exit Term Loan B
due 2/22/16 $6,000,000 $22,458
- -----------------------------------------------------
Total $6,000,000 $22,458
- -----------------------------------------------------
</Table>
Each of these commitments is available until the maturity date of the security.
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 7--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $282,833 and $48,418
respectively.
NOTE 9--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 316,573 $ 2,905,653
Shares issued to
shareholders in
reinvestment of dividends 36,656 335,914
Shares redeemed (255,640) (2,334,884)
--------------------------
Net increase in shares
outstanding before
conversion 97,589 906,683
Shares converted into
Investor Class (See Note
1) 162,288 1,486,145
Shares converted from
Investor Class (See Note
1) (122,065) (1,116,528)
--------------------------
Net increase 137,812 $ 1,276,300
==========================
Year ended October 31,
2009:
Shares sold 621,695 $ 5,051,927
Shares issued to
shareholders in
reinvestment of dividends 71,701 572,545
Shares redeemed (540,765) (4,257,327)
--------------------------
Net increase in shares
outstanding before
conversion 152,631 1,367,145
Shares converted into
Investor Class (See Note
1) 371,044 2,903,552
Shares converted from
Investor Class (See Note
1) (189,252) (1,603,624)
--------------------------
Net increase 334,423 $ 2,667,073
==========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 14,819,608 $ 136,376,020
Shares issued to
shareholders in
reinvestment of dividends 455,337 4,176,138
Shares redeemed (6,885,567) (62,986,068)
--------------------------
Net increase in shares
outstanding before
conversion 8,389,378 77,566,090
Shares converted into Class
A (See Note 1) 280,634 2,559,502
Shares converted from Class
A (See Note 1) (50,254) (466,860)
Shares converted from Class
A (a) (2,653,153) (24,329,410)
--------------------------
Net increase 5,966,605 $ 55,329,322
==========================
Year ended October 31,
2009:
Shares sold 21,167,269 $ 169,838,447
Shares issued to
shareholders in
reinvestment of dividends 833,402 6,629,136
Shares redeemed (16,855,822) (134,432,276)
--------------------------
Net increase in shares
outstanding before
conversion 5,144,849 42,035,307
Shares converted into Class
A (See Note 1) 503,694 4,134,469
Shares converted from Class
A (See Note 1) (151,827) (1,175,334)
--------------------------
Net increase 5,496,716 $ 44,994,442
==========================
</Table>
34 MainStay Floating Rate Fund
<Table>
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 256,739 $ 2,360,356
Shares issued to
shareholders in
reinvestment of dividends 23,171 212,407
Shares redeemed (234,684) (2,147,418)
--------------------------
Net increase in shares
outstanding before
conversion 45,226 425,345
Shares converted from Class
B (See Note 1) (270,481) (2,462,259)
--------------------------
Net decrease (225,255) $ (2,036,914)
==========================
Year ended October 31,
2009:
Shares sold 674,434 $ 5,487,250
Shares issued to
shareholders in
reinvestment of dividends 58,377 460,250
Shares redeemed (658,005) (5,145,435)
--------------------------
Net increase in shares
outstanding before
conversion 74,806 802,065
Shares converted from Class
B (See Note 1) (533,376) (4,259,063)
--------------------------
Net decrease (458,570) $ (3,456,998)
==========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 4,806,463 $ 44,131,630
Shares issued to
shareholders in
reinvestment of dividends 130,885 1,200,044
Shares redeemed (2,214,420) (20,218,902)
--------------------------
Net increase 2,722,928 $ 25,112,772
==========================
Year ended October 31,
2009:
Shares sold 5,869,742 $ 47,315,775
Shares issued to
shareholders in
reinvestment of dividends 253,730 2,012,712
Shares redeemed (5,067,606) (40,167,184)
--------------------------
Net increase 1,055,866 $ 9,161,303
==========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 6,679,578 $ 61,754,518
Shares issued to
shareholders in
reinvestment of dividends 426,649 3,910,528
Shares redeemed (1,602,778) (14,737,866)
--------------------------
Net increase in shares
outstanding before
conversion 5,503,449 50,927,180
Shares converted into Class
I (a) 2,653,153 24,329,410
--------------------------
Net increase 8,156,602 $ 75,256,590
==========================
Year ended October 31,
2009:
Shares sold 10,629,149 $ 87,159,551
Shares issued to
shareholders in
reinvestment of dividends 652,317 5,273,388
Shares redeemed (1,275,274) (9,801,018)
--------------------------
Net increase 10,006,192 $ 82,631,921
==========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 10--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 11--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
mainstayinvestments.com 35
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; or
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request (i) by calling 800-MAINSTAY (624-6782);
(ii) by visiting the Fund's website at mainstayinvestments.com; or (iii) on the
SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling (1-800-SEC-0330).
36 MainStay Floating Rate Fund
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18328 MS121-10 MSFR10-06/10
A4
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY GROWTH EQUITY FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY GROWTH EQUITY FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 18
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 25
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 25
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (11/4/05)
- -------------------------------------------------------
With sales charges 4.09% 21.11% -0.41%
Excluding sales charges 10.15 28.16 0.85
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH RUSSELL 1000(R)
EQUITY FUND GROWTH INDEX
--------------- ---------------
11/4/05 9450 10000
10017 10553
11123 11846
11495 11818
7660 8087
4/30/10 9818 11173
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (11/4/05)
- -------------------------------------------------------
With sales charges 4.22% 21.27% -0.35%
Excluding sales charges 10.29 28.33 0.92
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH RUSSELL 1000(R)
EQUITY FUND GROWTH INDEX
--------------- ---------------
11/4/05 23625 25000
25043 26382
27807 29614
28762 29545
19181 20218
4/30/10 24614 27934
</Table>
CLASS B SHARES--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (11/4/05)
- -------------------------------------------------------
With sales charges 4.62% 22.05% -0.38%
Excluding sales charges 9.62 27.05 0.07
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH RUSSELL 1000(R)
EQUITY FUND GROWTH INDEX
--------------- ---------------
11/4/05 10000 10000
10560 10553
11640 11846
11903 11818
7895 8087
4/30/10 9832 11173
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For information on current fee waivers and/or expense limitations,
please refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (11/4/05)
- -------------------------------------------------------
With sales charges 8.73% 26.18% 0.09%
Excluding sales charges 9.73 27.18 0.09
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH RUSSELL 1000(R)
EQUITY FUND GROWTH INDEX
--------------- ---------------
11/4/05 10000 10000
10560 10553
11640 11846
11903 11818
7895 8087
4/30/10 10040 11173
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (11/4/05)
- ----------------------------------------------
10.49% 28.77% 1.22%
</Table>
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY GROWTH RUSSELL 1000(R)
EQUITY FUND GROWTH INDEX
--------------- ---------------
11/4/05 10000 10000
10610 10553
11808 11846
12255 11818
8202 8087
4/30/10 10561 11173
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
Russell 1000(R) Growth Index(3) 15.79% 38.16% 2.50%
Average Lipper large-cap growth fund(4) 14.71 34.87 0.68
</Table>
A shares from inception through February 27, 2008, adjusted for differences
in certain contractual expenses and fees. Unadjusted, the performance shown
for Investor Class shares might have been lower.
3. The Russell 1000(R) Growth Index 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 measures the performance of the
1,000 largest companies in the Russell 3000(R) Index, which represents
approximately 92% of the total market capitalization of the Russell 3000(R)
Index. The Russell 3000(R) Index measures the performance of the 3,000
largest U.S. companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. Total returns assume
reinvestment of all dividends and capital gains. The Russell 1000(R) Growth
Index is the Fund's broad-based securities market index for comparison
purposes. An investment cannot be made directly in an index.
4. The average Lipper large-cap growth fund is representative of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies
with market capitalization (on a three-year weighted basis) above Lipper's
U.S. Diversified Equity large-cap floor. Large-cap growth funds typically
have an above-average price-to-earning ratio, price-to-book ratio, and three-
year sales-per-share growth value, compared to the S&P 500(R) Index. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on average total returns of similar
funds with all dividends and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Growth Equity Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY GROWTH EQUITY FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,101.50 $ 7.92 $1,017.30 $ 7.60
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,102.90 $ 6.31 $1,018.80 $ 6.06
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,096.20 $11.80 $1,013.50 $11.33
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,098.60 $11.81 $1,013.50 $11.33
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,104.90 $ 5.06 $1,020.00 $ 4.86
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.52% for Investor Class, 1.21% for Class A, 2.27% for Class B and Class C
and 0.97% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Computers & Peripherals 8.1%
IT Services 7.8
Software 7.8
Communications Equipment 5.4
Machinery 5.3
Health Care Providers & Services 5.2
Energy Equipment & Services 4.3
Pharmaceuticals 4.2
Beverages 3.7
Biotechnology 3.6
Internet Software & Services 3.4
Hotels, Restaurants & Leisure 3.3
Health Care Equipment & Supplies 3.2
Food & Staples Retailing 3.1
Internet & Catalog Retail 3.1
Road & Rail 2.5
Aerospace & Defense 2.3
Exchange Traded Funds 2.2
Capital Markets 2.1
Semiconductors & Semiconductor
Equipment 2.1
Household Products 2.0
Media 1.6
Specialty Retail 1.4
Textiles, Apparel & Luxury Goods 1.4
Wireless Telecommunication Services 1.4
Consumer Finance 1.3
Diversified Financial Services 1.2
Metals & Mining 1.2
Oil, Gas & Consumable Fuels 1.2
Household Durables 1.1
Multiline Retail 1.0
Food Products 0.9
Construction & Engineering 0.5
Electronic Equipment & Instruments 0.5
Chemicals 0.3
Short-Term Investment 0.4
Other Assets, Less Liabilities -0.1
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 10 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Microsoft Corp.
2. Apple, Inc.
3. Hewlett-Packard Co.
4. PepsiCo, Inc.
5. McDonald's Corp.
6. International Business Machines Corp.
7. Union Pacific Corp.
8. Cisco Systems, Inc.
9. Oracle Corp.
10. Abbott Laboratories
</Table>
8 MainStay Growth Equity Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGER HARISH KUMAR, PHD, CFA, OF MADISON
SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY GROWTH EQUITY FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Growth Equity Fund returned 10.15% for
Investor Class shares, 10.29% for Class A shares, 9.62% for Class B shares and
9.73% for Class C shares for the six months ended April 30, 2010. Over the same
period, the Fund's Class I shares returned 10.49%. All share classes
underperformed the 14.71% return of the average Lipper(1) large-cap growth fund
and the 15.79% return of the Russell 1000(R) Growth Index(2) for the six months
ended April 30, 2010. The Russell 1000(R) Growth Index is the Fund's broad-based
securities-market index. See pages 5 and 6 for Fund returns with sales charges.
WHAT ACCOUNTED FOR THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING PERIOD?
The Fund underperformed the Russell 1000(R) Growth Index primarily because of
stock selection in the health care and consumer staples sectors.
DURING THE REPORTING PERIOD, WHICH INDUSTRIES WERE THE STRONGEST CONTRIBUTORS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH STOCKS WERE PARTICULARLY WEAK?
On an absolute basis, the industries that made the strongest contributions to
the Fund's performance were computers & peripherals, software and machinery.
Industries that detracted on an absolute basis included food & staples
retailing, capital markets and multiline retail.
DURING THE REPORTING PERIOD, WHICH STOCKS WERE STRONG PERFORMERS AND WHICH
STOCKS WERE WEAK?
The stocks that were the strongest contributors to the Fund's absolute
performance included information technology companies Apple and Microsoft and
rail transportation provider Union Pacific. On an absolute basis, major
detractors included retail drugstore chain CVS Caremark, digital wireless
telecommunications company Qualcomm and medical products supplier Baxter
International.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During the reporting period, we initiated new positions for the Fund in
diversified consumer products manufacturer Procter & Gamble and Internet
software & services provider Yahoo! Significant sales during the reporting
period included aerospace & defense company United Technologies and agricultural
chemicals manufacturer Monsanto.
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE OVER THE COURSE OF THE REPORTING
PERIOD?
During the reporting period, we increased the Fund's weightings relative to the
Russell 1000(R) Growth Index in the health care and information technology
sectors. Over the same period, we decreased the Fund's weightings in consumer
discretionary and financials.
HOW WAS THE FUND POSITIONED AT THE END OF APRIL 2010, AND HOW DID THIS
POSITIONING AFFECT THE FUND'S PERFORMANCE?
The Fund's sector-group positioning is a result of our bottom-up stock selection
process rather than a top-down macroeconomic viewpoint. As of April 30, 2010,
the Fund was overweight relative to the Russell 1000(R) Growth Index in energy
and telecommunication services. Both of these positions helped the Fund's
relative performance during the reporting period. On the same date, the Fund
held underweight positions relative to the Russell 1000(R) Growth Index in
materials and consumer staples. During the reporting period, both of these
positions detracted from the Fund's performance relative to the benchmark.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 1000(R) Growth
Index.
The opinions expressed are those of the portfolio manager as of the date of this
report and are subject to change. There is no guarantee that any forecast made
will come to pass. This material does not constitute investment advice and is
not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 97.5%+
- -------------------------------------------------------
AEROSPACE & DEFENSE 2.3%
Boeing Co. (The) 61,066 $ 4,423,011
General Dynamics Corp. 45,051 3,440,094
Rockwell Collins, Inc. 88,603 5,759,195
------------
13,622,300
------------
BEVERAGES 3.7%
Coca-Cola Co. (The) 111,933 5,982,819
V PepsiCo, Inc. 244,673 15,957,573
------------
21,940,392
------------
BIOTECHNOLOGY 3.6%
Amgen, Inc. (a) 119,162 6,835,132
Celgene Corp. (a) 109,083 6,757,692
Gilead Sciences, Inc. (a) 192,459 7,634,849
------------
21,227,673
------------
CAPITAL MARKETS 2.1%
Ameriprise Financial, Inc. 49,939 2,315,172
Blackstone Group L.P. (The) 321,365 4,492,683
Goldman Sachs Group, Inc.
(The) 38,712 5,620,982
------------
12,428,837
------------
CHEMICALS 0.3%
Celanese Corp. Series A 45,388 1,451,962
------------
COMMUNICATIONS EQUIPMENT 5.4%
V Cisco Systems, Inc. (a) 542,485 14,603,696
Juniper Networks, Inc. (a) 239,883 6,815,076
QUALCOMM, Inc. 261,982 10,149,183
------------
31,567,955
------------
COMPUTERS & PERIPHERALS 8.1%
V Apple, Inc. (a) 96,270 25,138,022
Dell, Inc. (a) 242,069 3,916,677
V Hewlett-Packard Co. 354,235 18,409,593
------------
47,464,292
------------
CONSTRUCTION & ENGINEERING 0.5%
URS Corp. (a) 53,996 2,772,695
------------
CONSUMER FINANCE 1.3%
American Express Co. 168,994 7,794,003
------------
DIVERSIFIED FINANCIAL SERVICES 1.2%
JPMorgan Chase & Co. 170,302 7,251,459
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 0.5%
Jabil Circuit, Inc. 181,596 2,782,051
------------
ENERGY EQUIPMENT & SERVICES 4.3%
FMC Technologies, Inc. (a) 91,299 6,180,030
Halliburton Co. 155,765 4,774,197
Schlumberger, Ltd. 143,784 10,269,053
Transocean, Ltd. (a) 59,280 4,294,836
------------
25,518,116
------------
FOOD & STAPLES RETAILING 3.1%
Costco Wholesale Corp. 107,885 6,373,846
Wal-Mart Stores, Inc. 217,303 11,658,306
------------
18,032,152
------------
FOOD PRODUCTS 0.9%
General Mills, Inc. 77,430 5,511,467
------------
HEALTH CARE EQUIPMENT & SUPPLIES 3.2%
Baxter International, Inc. 123,980 5,854,335
CareFusion Corp. (a) 113,396 3,127,462
Hospira, Inc. (a) 134,964 7,259,713
Inverness Medical
Innovations, Inc. (a) 63,556 2,528,258
------------
18,769,768
------------
HEALTH CARE PROVIDERS & SERVICES 5.2%
AmerisourceBergen Corp. 258,392 7,971,393
DaVita, Inc. (a) 69,740 4,353,868
Medco Health Solutions, Inc.
(a) 200,281 11,800,557
UnitedHealth Group, Inc. 202,962 6,151,778
------------
30,277,596
------------
HOTELS, RESTAURANTS & LEISURE 3.3%
V McDonald's Corp. 215,713 15,227,181
Starwood Hotels & Resorts
Worldwide, Inc. 74,161 4,042,516
------------
19,269,697
------------
HOUSEHOLD DURABLES 1.1%
Fortune Brands, Inc. 60,703 3,182,051
KB Home 176,643 3,273,195
------------
6,455,246
------------
HOUSEHOLD PRODUCTS 2.0%
Procter & Gamble Co. (The) 185,849 11,552,374
------------
INTERNET & CATALOG RETAIL 3.1%
Amazon.com, Inc. (a) 82,608 11,322,252
Priceline.com, Inc. (a) 27,133 7,110,203
------------
18,432,455
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
10 MainStay Growth Equity 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)
INTERNET SOFTWARE & SERVICES 3.4%
Google, Inc. Class A (a) 22,981 $ 12,075,137
Yahoo!, Inc. (a) 476,737 7,880,462
------------
19,955,599
------------
IT SERVICES 7.8%
Accenture PLC Class A 203,761 8,892,130
Cognizant Technology
Solutions Corp. Class A (a) 201,628 10,319,321
V International Business
Machines Corp. 117,322 15,134,538
MasterCard, Inc. Class A 16,690 4,139,788
Visa, Inc. Class A 79,720 7,193,135
------------
45,678,912
------------
MACHINERY 5.3%
Cummins, Inc. 71,452 5,160,978
Danaher Corp. 72,923 6,145,951
Deere & Co. 107,685 6,441,717
Flowserve Corp. 49,528 5,674,918
Ingersoll-Rand PLC 78,539 2,904,372
Joy Global, Inc. 79,135 4,495,659
------------
30,823,595
------------
MEDIA 1.6%
Discovery Communications,
Inc. Class A (a) 69,548 2,691,507
News Corp. Class A 423,604 6,531,974
------------
9,223,481
------------
METALS & MINING 1.2%
Freeport-McMoRan Copper &
Gold, Inc. 48,320 3,649,610
United States Steel Corp. 63,734 3,483,700
------------
7,133,310
------------
MULTILINE RETAIL 1.0%
Target Corp. 106,342 6,047,670
------------
OIL, GAS & CONSUMABLE FUELS 1.2%
Occidental Petroleum Corp. 55,484 4,919,211
Southwestern Energy Co. (a) 57,789 2,293,068
------------
7,212,279
------------
PHARMACEUTICALS 4.2%
V Abbott Laboratories 284,572 14,558,704
Merck & Co., Inc. 157,155 5,506,711
Teva Pharmaceutical
Industries, Ltd., Sponsored
ADR (b) 74,600 4,381,258
------------
24,446,673
------------
ROAD & RAIL 2.5%
V Union Pacific Corp. 194,400 14,708,304
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.1%
Lam Research Corp. (a) 144,482 5,858,745
Texas Instruments, Inc. 252,923 6,578,527
------------
12,437,272
------------
SOFTWARE 7.8%
Electronic Arts, Inc. (a) 152,679 2,957,392
V Microsoft Corp. 861,952 26,324,014
V Oracle Corp. 564,295 14,581,383
Sybase, Inc. (a) 51,265 2,223,876
------------
46,086,665
------------
SPECIALTY RETAIL 1.4%
GameStop Corp. Class A (a) 96,074 2,335,559
O'Reilly Automotive, Inc. (a) 119,625 5,848,466
------------
8,184,025
------------
TEXTILES, APPAREL & LUXURY GOODS 1.4%
NIKE, Inc. Class B 72,363 5,493,075
Warnaco Group, Inc. (The) (a) 60,351 2,887,192
------------
8,380,267
------------
WIRELESS TELECOMMUNICATION SERVICES 1.4%
American Tower Corp. Class A
(a) 141,938 5,792,490
Leap Wireless International,
Inc. (a) 134,225 2,459,002
8,251,492
------------
Total Common Stocks
(Cost $515,897,016) 572,692,034
------------
EXCHANGE TRADED FUNDS 2.2% (C)
- -------------------------------------------------------
iShares Russell 1000 Growth
Index Fund 38,537 2,023,578
S&P 500 Index-SPDR Trust
Series 1 94,723 11,258,776
------------
Total Exchange Traded Funds
(Cost $13,331,057) 13,282,354
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 0.4%
- -------------------------------------------------------
REPURCHASE AGREEMENT 0.4%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$2,245,056
(Collateralized by a United
States Treasury Bill with a
rate of 0.135% and a
maturity date of 5/27/10,
with a Principal Amount of
$2,295,000 and a Market
Value of $2,294,771) $2,245,054 $ 2,245,054
------------
Total Short-Term Investment
(Cost $2,245,054) 2,245,054
------------
Total Investments
(Cost $531,473,127) (d) 100.1% 588,219,442
Other Assets, Less
Liabilities (0.1) (867,851)
---------- ------------
Net Assets 100.0% $587,351,591
========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) Exchange Traded Fund-An investment
vehicle that represents a basket of
securities that is traded on an exchange.
(d) At April 30, 2010, cost is $535,195,684
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 68,763,099
Gross unrealized depreciation (15,739,341)
------------
Net unrealized appreciation $ 53,023,758
============
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $572,692,034 $ -- $ -- $572,692,034
Exchange Traded Funds 13,282,354 -- -- 13,282,354
Short-Term Investment
Repurchase Agreement -- 2,245,054 -- 2,245,054
------------ ---------- -------- ------------
Total Investments in Securities $585,974,388 $2,245,054 $-- $588,219,442
============ ========== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
12 MainStay Growth Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $531,473,127) $588,219,442
Receivables:
Dividends and interest 485,872
Fund shares sold 90,484
Other assets 110,180
------------
Total assets 588,905,978
------------
LIABILITIES:
Payables:
Transfer agent (See Note 3) 490,697
Fund shares redeemed 416,662
Manager (See Note 3) 343,635
NYLIFE Distributors (See Note 3) 192,325
Shareholder communication 66,030
Professional fees 40,819
Trustees 3,041
Custodian 578
Accrued expenses 600
------------
Total liabilities 1,554,387
------------
Net assets $587,351,591
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 57,850
Additional paid-in capital 522,883,334
------------
522,941,184
Accumulated distributions in excess
of net investment income (1,048,492)
Accumulated net realized gain on
investments and foreign currency
transactions 8,712,584
Net unrealized appreciation on
investments 56,746,315
------------
Net assets $587,351,591
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $250,840,389
============
Shares of beneficial interest
outstanding 24,569,374
============
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 A
Net assets applicable to
outstanding shares $218,024,171
============
Shares of beneficial interest
outstanding 21,352,729
============
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 $108,703,416
============
Shares of beneficial interest
outstanding 10,964,503
============
Net asset value and offering price
per share outstanding $ 9.91
============
CLASS C
Net assets applicable to
outstanding shares $ 2,985,762
============
Shares of beneficial interest
outstanding 301,134
============
Net asset value and offering price
per share outstanding $ 9.92
============
CLASS I
Net assets applicable to
outstanding shares $ 6,797,853
============
Shares of beneficial interest
outstanding 662,476
============
Net asset value and offering price
per share outstanding $ 10.26
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 2,916,946
Interest 643
------------
Total income 2,917,589
------------
EXPENSES:
Manager (See Note 3) 1,796,776
Distribution/Service--Investor
Class (See Note 3) 268,602
Distribution/Service--Class A
(See Note 3) 232,094
Distribution/Service--Class B
(See Note 3) 485,231
Distribution/Service--Class C
(See Note 3) 13,084
Transfer agent (See Note 3) 973,854
Professional fees 62,026
Registration 51,258
Shareholder communication 50,018
Trustees 10,766
Custodian 9,444
Miscellaneous 12,918
------------
Total expenses 3,966,071
------------
Net investment loss (1,048,482)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Security transactions 41,895,902
Foreign currency transactions 60
------------
Net realized gain on investments
and foreign currency transactions 41,895,962
------------
Net change in unrealized
appreciation on investments (16,647,995)
------------
Net realized and unrealized gain on
investments and foreign currency
transactions 25,247,967
------------
Net increase in net assets
resulting from operations $ 24,199,485
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$19,254.
14 MainStay Growth Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income
(loss) $ (1,048,482) $ 397,169
Net realized gain (loss)
on investments and
foreign currency
transactions 41,895,962 (12,318,335)
Net change in unrealized
appreciation
(depreciation) on
investments (16,647,995) 15,484,579
--------------------------
Net increase in net assets
resulting from operations 24,199,485 3,563,413
--------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (213) --
Class A (727) (70)
Class I (285,841) (326,941)
--------------------------
Total dividends to
shareholders (286,781) (327,011)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 11,716,254 4,679,040
Net asset value of shares
issued in connection with
the acquisition of
MainStay Capital
Appreciation Fund (See
Note 9) 587,431,416 --
Net asset value of shares
issued to shareholders in
reinvestment of dividends 217,948 299,520
Cost of shares redeemed (72,453,366) (47,293,441)
--------------------------
Increase (decrease) in
net assets derived from
capital share
transactions 526,912,252 (42,314,881)
--------------------------
Net increase (decrease)
in net assets 550,824,956 (39,078,479)
NET ASSETS:
Beginning of period 36,526,635 75,605,114
--------------------------
End of period $587,351,591 $ 36,526,635
==========================
Accumulated undistributed
(distributions in excess
of) net investment income
at end of period $ (1,048,492) $ 286,771
==========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
INVESTOR CLASS ------------------------
------------------------------------------------- YEAR
FEBRUARY 28, ENDED
SIX MONTHS 2008** SIX MONTHS OCTO-
ENDED YEAR ENDED THROUGH ENDED BER
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, 31,
2010* 2009 2008 2010* 2009
Net asset value at beginning of
period $ 9.32 $ 8.26 $ 11.79 $ 9.32 $ 8.26
-------- ------ ------- -------- ------
Net investment income (loss) (0.02)(a) 0.02(a) (0.02) (0.00)++(a) 0.02 (a)
Net realized and unrealized gain
(loss) on investments 0.96 1.04 (3.51) 0.96 1.05
-------- ------ ------- -------- ------
Total from investment operations 0.94 1.06 (3.53) 0.96 1.07
-------- ------ ------- -------- ------
Less dividends and distributions:
From net investment income (0.05) -- -- (0.07) (0.01)
From net realized gain on
investments -- -- -- -- --
-------- ------ ------- -------- ------
Total dividends and distributions (0.05) -- -- (0.07) (0.01)
-------- ------ ------- -------- ------
Net asset value at end of period $ 10.21 $ 9.32 $ 8.26 $ 10.21 $ 9.32
======== ====== ======= ======== ======
Total investment return (b) 10.15%(d) 12.83%(c) (29.94%)(d) 10.29%(d) 13.01%
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.39%)++ 0.21% (0.35%)++ (0.08%)++ 0.26%
Net expenses 1.52% ++ 1.41% 1.31% ++ 1.21% ++ 1.31%
Expenses (before waiver) 1.52% ++ 1.41% 1.61% ++ 1.21% ++ 1.32%
Portfolio turnover rate 76% 156% 291% 76% 156%
Net assets at end of period (in
000's) $250,840 $ 37 $ 24 $218,024 $ 92
<Caption>
CLASS A
----------------------------------------
NOVEMBER 4,
2005**
YEAR ENDED OCTOBER THROUGH
31, OCTOBER 31,
2008 2007 2006
Net asset value at beginning of
period $ 13.19 $11.01 $10.00
------- ------ ------
Net investment income (loss) (0.02) 0.01 (0.01)
Net realized and unrealized gain
(loss) on investments (4.84) 2.25 1.02
------- ------ ------
Total from investment operations (4.86) 2.26 1.01
------- ------ ------
Less dividends and distributions:
From net investment income -- -- --
From net realized gain on
investments (0.07) (0.08) --
------- ------ ------
Total dividends and distributions (0.07) (0.08) --
------- ------ ------
Net asset value at end of period $ 8.26 $13.19 $11.01
======= ====== ======
Total investment return (b) (37.06%) 20.51% 10.20%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.16%) 0.08% (0.12%)++
Net expenses 1.17% 1.25% 1.25% ++
Expenses (before waiver) 1.18% 1.37% 1.71% ++
Portfolio turnover rate 291% 279% 138%
Net assets at end of period (in
000's) $ 49 $ 66 $ 55
</Table>
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
NOVEMBER 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $ 9.03 $ 8.06 $ 12.99 $10.93 $10.00
------ ------ ------- ------ ------
Net investment income (loss) (0.06)(a) (0.04)(a) (0.12) (0.08) (0.09)
Net realized and unrealized gain
(loss) on investments 0.95 1.01 (4.74) 2.22 1.02
------ ------ ------- ------ ------
Total from investment operations 0.89 0.97 (4.86) 2.14 0.93
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income -- -- -- -- --
From net realized gain on
investments -- -- (0.07) (0.08) --
------ ------ ------- ------ ------
Total dividends and distributions -- -- (0.07) (0.08) --
------ ------ ------- ------ ------
Net asset value at end of period $ 9.92 $ 9.03 $ 8.06 $12.99 $10.93
====== ====== ======= ====== ======
Total investment return (b) 9.86%(c)(d) 12.03%(c) (37.63%) 19.56% 9.40%(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (1.14%)++ (0.52%) (1.04%) (0.67%) (0.87%)++
Net expenses 2.27% ++ 2.16% 2.06% 2.00% 2.00% ++
Expenses (before waiver) 2.27% ++ 2.16% 2.26% 2.12% 2.46% ++
Portfolio turnover rate 76% 156% 291% 279% 138%
Net assets at end of period (in
000's) $2,986 $ 45 $ 40 $ 65 $ 55
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
(d) Total return is not annualized.
</Table>
16 MainStay Growth Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------------------
NOVEMBER 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006
$ 9.04 $ 8.07 $ 12.99 $10.93 $10.00
-------- ------ ------- ------ ------
(0.05)(a) (0.07)(a) (0.10) (0.08) (0.09)
0.92 1.04 (4.75) 2.22 1.02
-------- ------ ------- ------ ------
0.87 0.97 (4.85) 2.14 0.93
-------- ------ ------- ------ ------
-- -- -- -- --
-- -- (0.07) (0.08) --
-------- ------ ------- ------ ------
-- -- (0.07) (0.08) --
-------- ------ ------- ------ ------
$ 9.91 $ 9.04 $ 8.07 $12.99 $10.93
======== ====== ======= ====== ======
9.62%(d) 12.02% (37.55%) 19.67% 9.30%(d)
(1.13%)++ (0.82%) (1.04%) (0.67%) (0.87%)++
2.27% ++ 2.18% 2.06% 2.00% 2.00% ++
2.27% ++ 2.18% 2.26% 2.12% 2.46% ++
76% 156% 291% 279% 138%
$108,703 $ 122 $ 42 $ 65 $ 55
</Table>
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------
NOVEMBER 4,
SIX MONTHS 2005**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007 2006
$ 9.36 $ 8.30 $ 13.24 $ 11.04 $ 10.00
------ ------- ------- -------- -------
0.01 (a) 0.06 (a) 0.02 0.02 0.01
0.98 1.04 (4.87) 2.28 1.03
------ ------- ------- -------- -------
0.99 1.10 (4.85) 2.30 1.04
------ ------- ------- -------- -------
(0.09) (0.04) (0.02) (0.02) --
-- -- (0.07) (0.08) --
------ ------- ------- -------- -------
(0.09) (0.04) (0.09) (0.10) --
------ ------- ------- -------- -------
$10.26 $ 9.36 $ 8.30 $ 13.24 $ 11.04
====== ======= ======= ======== =======
10.49%(d) 13.29% (36.80%) 20.93% 10.40%(d)
0.14%++ 0.74% 0.21% 0.31% 0.11%++
0.97%++ 1.03% 0.81% 0.92% 1.00%++
0.97%++ 1.05% 0.81% 0.92% 1.46%++
76% 156% 291% 279% 138%
$6,798 $36,230 $75,450 $173,475 $26,586
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Growth Equity Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Growth Equity Fund,
a series of Eclipse Funds Inc. (the "Predecessor Fund"). The reorganization of
the Predecessor Fund with and into the Fund, which was not subject to
shareholder approval under applicable law, occurred on February 26, 2010. All
information regarding and references to periods prior to the commencement of
operations of the Fund relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class A shares, Class B
shares, Class C shares and Class I shares commenced operations on November 4,
2005. Investor Class shares commenced operations on February 28, 2008. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class B shares and Class
C shares are offered at NAV without an initial sales charge, although a
declining contingent deferred sales charge may be imposed on redemptions made
within six years of purchase of Class B shares and a 1.00% contingent deferred
sales charge may be imposed on redemptions made within one year of purchase of
Class C shares. Class I shares are offered at NAV and are not subject to a sales
charge. Depending upon eligibility, Investor Class shares may convert to Class A
shares and Class A shares may convert to Investor Class shares. The five classes
of shares have the same voting (except for issues that relate solely to one
class), dividend, liquidation and other rights, and the same terms and
conditions, except that Class B and Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek long-term growth of capital.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Investments in other mutual funds are valued at their NAVs as of the close of
the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
18 MainStay Growth Equity Fund
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under
mainstayinvestments.com 19
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
the 1940 Act to be collateralized loans by a Fund to the seller secured by the
securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(I) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Madison
Square Investors LLC ("Madison Square Investors" or "Subadvisor"), a registered
investment adviser and an indirect, wholly-owned subsidiary of New York Life,
serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio
management of the Fund. Pursuant to the terms of a Subadvisory Agreement between
New York Life Investments and the Subadvisor, New York Life Investments pays for
the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.70% on assets up to $500 million and 0.675% on assets over $500 million. The
effective management fee rate (exclusive of any applicable
waivers/reimbursements) was 0.70% for the six-month period ended April 30, 2010.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $1,796,776.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
20 MainStay Growth Equity Fund
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Pursuant to the Class B and Class C Plans, Class B and Class C shares of the
Fund pay the Distributor a monthly distribution fee at an annual rate of 0.75%
of the average daily net assets of the Fund's Class B and Class C shares, along
with a service fee at an annual rate of 0.25% of the average daily net assets of
the Class B and Class C shares of the Fund for a total 12b-1 fee of 1.00%. Class
I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were
$15,157 and $3,392, respectively, for the six-month period ended April 30, 2010.
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 $641,
$72,225 and $163, respectively, for the six-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $534,064
- -----------------------------------------------
Class A 176,636
- -----------------------------------------------
Class B 241,636
- -----------------------------------------------
Class C 6,509
- -----------------------------------------------
Class I 15,009
- -----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $21,768 0.0%++
- --------------------------------------------------
Class A 88,509 0.0++
- --------------------------------------------------
Class C 74 0.0++
- --------------------------------------------------
Class I 1,090 0.0++
- --------------------------------------------------
</Table>
++ Less than one cent per share.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $13,102.
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $29,460,822 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the Fund through
the years indicated. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to shareholders. No capital gain distributions shall be
made until any capital loss carryforwards have been fully utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $17,421
2017 12,040
- ---------------------------------- -----
Total $29,461
- ---------------------------------- -----
</Table>
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $327,011
- -----------------------------------------------
</Table>
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $378,121 and $423,890,
respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 324,265 $ 3,253,494
Shares issued in connection
with the acquisition of
MainStay Capital
Appreciation Fund 25,405,384 249,912,764
Shares issued to
shareholders in
reinvestment of dividends 22 213
Shares redeemed (1,492,133) (14,898,403)
------------------------
Net increase in shares
outstanding before
conversion 24,237,538 238,268,068
Shares converted into
Investor Class (See Note
1) 805,947 8,029,750
Shares converted from
Investor Class (See Note
1) (478,104) (4,829,504)
------------------------
Net increase 24,565,381 $241,468,314
========================
Year ended October 31, 2009:
Shares sold 978 $ 8,948
------------------------
Net increase in shares
outstanding before
conversion 978 8,948
Shares converted into
Investor Class (See Note
1) 162 1,097
------------------------
Net increase 1,140 $ 10,045
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 422,143 $ 4,230,025
Shares issued in connection
with the acquisition of
MainStay Capital
Appreciation Fund 21,838,919 214,573,935
Shares issued to
shareholders in
reinvestment of dividends 41 399
Shares redeemed (1,611,694) (16,082,243)
------------------------
Net increase in shares
outstanding before
conversion 20,649,409 202,722,116
Shares converted into Class
A (See Note 1) 771,164 7,746,230
Shares converted from Class
A (See Note 1) (77,747) (796,134)
------------------------
Net increase 21,342,826 $209,672,212
========================
Year ended October 31, 2009:
Shares sold 4,903 $ 44,229
Shares issued to
shareholders in
reinvestment of dividends 1 11
Shares redeemed (943) (7,041)
------------------------
Net increase 3,961 $ 37,199
========================
</Table>
22 MainStay Growth Equity Fund
<Table>
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 387,449 $ 3,841,380
Shares issued in connection
with the acquisition of
MainStay Capital
Appreciation Fund 12,472,995 119,463,886
Shares redeemed (860,615) (8,349,026)
------------------------
Net increase in shares
outstanding before
conversion 11,999,829 114,956,240
Shares converted from Class
B (See Note 1) (1,048,815) (10,150,342)
------------------------
Net increase 10,951,014 $104,805,898
========================
Year ended October 31, 2009:
Shares sold 16,456 $ 130,751
Shares redeemed (8,068) (70,305)
------------------------
Net increase in shares
outstanding before
conversion 8,388 60,446
Shares converted from Class
B (See Note 1) (166) (1,097)
------------------------
Net increase 8,222 $ 59,349
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 14,668 $ 143,499
Shares issued in connection
with the acquisition of
MainStay Capital
Appreciation Fund 313,217 3,001,872
Shares redeemed (31,751) (312,252)
------------------------
Net increase 296,134 $ 2,833,119
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 24,879 $ 247,856
Shares issued in connection
with the acquisition of
MainStay Capital
Appreciation Fund 48,621 478,959
Shares issued to
shareholders in
reinvestment of dividends 22,291 217,336
Shares redeemed (3,302,559) (32,811,442)
------------------------
Net decrease (3,206,768) $(31,867,291)
========================
Year ended October 31, 2009:
Shares sold 561,272 $ 4,495,112
Shares issued to
shareholders in
reinvestment of dividends 40,041 299,509
Shares redeemed (5,817,316) (47,216,095)
------------------------
Net decrease (5,216,003) $(42,421,474)
========================
</Table>
Class C shares had no activity for the six months period ended April 30, 2010
and year ended October 31, 2009.
NOTE 9--FUND ACQUISITION:
At a meeting held on June 23, 2009, the Board of Trustees approved a plan of
reorganization where by the Fund would acquire the assets, including the
investments, and assume the identified liabilities of MainStay Capital
Appreciation Fund, a series of The MainStay Funds. Shareholders of the MainStay
Capital Appreciation Fund approved this reorganization on November 16, 2009,
which was then completed on November 24, 2009. The aggregate net assets of the
Fund immediately before the acquisition were $32,383,788 and the combined net
assets after the acquisition were $619,815,204.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
MAINSTAY CAPITAL
APPRECIATION FUND SHARES VALUE
Investor Class 9,208,553 $249,912,764
- ------------------------------------------------------
Class A 7,862,472 214,573,935
- ------------------------------------------------------
Class B 4,991,180 119,463,886
- ------------------------------------------------------
Class C 125,395 3,001,872
- ------------------------------------------------------
Class I 17,134 478,959
- ------------------------------------------------------
</Table>
In exchange for the MainStay Capital Appreciation Fund shares and net assets,
the Fund issued 25,405,384 Investor Class Shares; 21,838,919 Class A shares;
12,472,995 Class B shares; 313,217 Class C shares and 48,621 Class I shares.
MainStay Capital Appreciation Fund's net assets after adjustments for any
permanent book-to-tax differences at the acquisition date were as follows, which
include the following amounts of capital stock, unrealized appreciation,
accumulated net realized loss and undistributed net investment loss:
<Table>
<Caption>
ACCUMULATED UNDISTRIBUTED
TOTAL NET UNREALIZED NET REALIZED NET INVESTMENT
ASSETS CAPITAL STOCK APPRECIATION LOSS LOSS
MainStay Capital Appreciation
Fund $587,431,416 $613,141,766 $69,756,562 $(95,112,046) $(354,866)
- ----------------------------------------------------------------------------------------------------------------
</Table>
mainstayinvestments.com 23
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
Assuming the acquisition had been completed on November 1, 2010, the beginning
of the annual reporting period of the Fund, the Fund's pro forma results of
operations for the period ended April 30, 2010, are as follows:
<Table>
Net investment loss $(1,417,792)
- ------------------------------------------------
Net gain on investments $59,817,466
- ------------------------------------------------
Net increase in net assets
resulting from operations $58,399,674
- ------------------------------------------------
</Table>
Because the combined investment portfolios have been managed as a single
integrated portfolio since the acquisition was completed, it is not practicable
to separate the amounts of revenue and earnings of the MainStay Capital
Appreciation Fund that have been included in the Fund's Statement of Operations
since October 31, 2009.
In December 2007, the Financial Accounting Standards Board issued Accounting
Standards Codification (ASC) 805 (formerly FAS 141R Business Combinations),
which requires the following disclosures by the acquirer, among other things,
when a transaction or other event meets the definition of a business
combination:
- - The identification of the acquiree
- - Recognizing and measuring identifiable assets acquired and liabilities
assumed, at the acquisition date, generally at their fair values
- - Disclosure, by the acquirer, of information that enables users of its
financial statements to evaluate the nature and financial effect of a business
combination that occurs during the current reporting period
ASC 805 requires prospective application to business combinations for which the
acquisition date occurs in an annual reporting period beginning on or after
December 15, 2008.
In accordance with ASC 805, for financial reporting purposes, assets received
and shares issued by the Fund were recorded at fair value; however, the cost
basis of the investments received from MainStay Capital Appreciation Fund was
carried forward to align ongoing reporting of the Fund's realized and unrealized
gains and losses with amounts distributable to shareholders for tax purposes.
ASC 805 requires disclosure in this semi-annual report, and in the Fund's annual
report as of October 31, 2010, of the Fund's pro-forma results of operations,
including net investment income, net gain (loss) on investments and net increase
(decrease) in net assets resulting from operations, assuming the acquisition had
been completed on November 1, 2009, the beginning of the annual reporting period
of the Fund, through the end of the applicable reporting period.
ASC 805 also requires the Fund to report, if practicable, the amounts of revenue
and earnings of the acquiree since the acquisition date included in the combined
entity's income statement for the reporting period. Because the combined
investment portfolios have been managed as a single integrated portfolio since
the acquisition was completed, it is not practicable to separate the amounts of
revenue and earnings of the MainStay Capital Appreciation Fund that will be
included in the Fund's Statement of Operations since November 24, 2009.
NOTE 10--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 11--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
24 MainStay Growth Equity Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; or
(ii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request (i) by calling 800-MAINSTAY (624-6782);
(ii) by visiting the Fund's website at mainstayinvestments.com; or (iii) on the
SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 25
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18293 MS121-10 MSGE10-06/10
B8
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY HIGH YIELD MUNICIPAL BOND FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during this period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six months ended April 30, 2010, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the six-month period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
During the period covered by this report, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the period covered by this report. Of course, past performance is
no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY HIGH YIELD MUNICIPAL BOND FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 17
- ---------------------------------------------
BOARD CONSIDERATION AND APPROVAL OF
MANAGEMENT AGREEMENT AND SUBADVISORY
AGREEMENT 23
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 26
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 26
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMENCEMENT
AVERAGE ANNUAL OF OPERATIONS
TOTAL RETURNS (3/31/10)
- ----------------------------------------
With sales charges -2.80%
Excluding sales charges 1.78
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY HIGH BARCLAYS CAPITAL HIGH YIELD
YIELD MUNICIPAL MUNICIPAL BOND MUNICIPAL COMPOSITE
BOND FUND INDEX INDEX
--------------- ---------------- -------------------
3/31/10 9550.00 10000.00 10000.00
4/30/10 9720.00 10122.00 10144.00
</Table>
CLASS A SHARES--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMENCEMENT
AVERAGE ANNUAL OF OPERATIONS
TOTAL RETURNS (3/31/10)
- ----------------------------------------
With sales charges -2.71%
Excluding sales charges 1.88
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY HIGH BARCLAYS CAPITAL HIGH YIELD
YIELD MUNICIPAL MUNICIPAL BOND MUNICIPAL COMPOSITE
BOND FUND INDEX INDEX
--------------- ---------------- -------------------
4/30/00 23875.00 25000.00 25000.00
4/30/10 24323.00 25304.00 25359.00
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMENCEMENT
AVERAGE ANNUAL OF OPERATIONS
TOTAL RETURNS (3/31/10)
- ----------------------------------------
With sales charges 0.84%
Excluding sales charges 1.84
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY HIGH BARCLAYS CAPITAL HIGH YIELD
YIELD MUNICIPAL MUNICIPAL BOND MUNICIPAL COMPOSITE
BOND FUND INDEX INDEX
--------------- ---------------- -------------------
4/30/00 10000.00 10000.00 10000.00
4/30/10 10084.00 10122.00 10144.00
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 4.50% and an
annual 12b-1 fee of 0.25%. 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%. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns
may have been lower. For information on current fee waivers and/or expense
limitations, please refer to the notes to the financial statements.
2. The Barclays Capital Municipal Bond Index includes approximately 15,000
municipal bonds, rated Baa or better by Moody's, with a maturity of at least
two years. Bonds subject to the Alternative Minimum Tax or with floating or
zero coupons are excluded. Total returns assume the reinvestment of all
dividends and capital gains. The Barclays Capital Municipal Bond Index is the
Fund's broad-based securities market index for comparison purposes. An
investment cannot be made directly in an index.
3. The High Yield Municipal Bond Composite Index is comprised of the Barclays
Capital High Yield Municipal Bond Index and
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
COMMENCEMENT
AVERAGE ANNUAL OF OPERATIONS
TOTAL RETURNS (3/31/10)
- -------------------------------
1.89%
</Table>
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY HIGH BARCLAYS CAPITAL HIGH YIELD
YIELD MUNICIPAL MUNICIPAL BOND MUNICIPAL COMPOSITE
BOND FUND INDEX INDEX
--------------- ---------------- -------------------
3/31/10 10000 10000 10000
4/30/10 10189 10122 10144
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SINCE
INCEPTION
Barclays Capital Municipal Bond Index(2) 1.22%
High Yield Municipal Composite Index(3) 1.44
Average Lipper high yield municipal debt fund(4) 1.57
</Table>
the Barclays Capital Municipal Bond Index weighted 60%/40%, respectively. The
Barclays Capital High Yield Municipal Bond Index includes bonds that must be
non-rated or be rated Ba1 or below with an outstanding par value of at least
$3 million and at least one year from their maturity date. The Barclays
Capital Municipal Bond Index includes approximately 15,000 municipal bonds,
rated Baa or better by Moody's, with a maturity of at least two years. Bonds
subject to the Alternative Minimum Tax or with floating or zero coupons are
excluded.
4. The average Lipper high yield municipal debt fund is representative of funds
that invest at least 50% of assets in lower-rated municipal debt issues. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on average total returns of similar
funds with all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay High Yield Municipal Bond Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY HIGH YIELD MUNICIPAL BOND
FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the period from March 31, 2010 to April 30, 2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the period and held for the entire
period from March 31, 2010 to April 30, 2010.
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 period ended April 30, 2010. 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 period shown. You may use this information to compare
the ongoing costs of investing in the Fund with the ongoing costs of investing
in other Funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 3/31/10(3) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES(2) $1,000.00 $1,017.80 $0.73 $1,003.50 $0.72
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES(2) $1,000.00 $1,018.80 $0.73 $1,003.50 $0.72
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES(2) $1,000.00 $1,018.40 $1.37 $1,002.90 $1.36
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES(2) $1,000.00 $1,018.90 $0.51 $1,003.70 $0.51
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.85% for Investor Class, 0.85% for Class A, 1.60% for Class C and 0.60% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 31 days for Investor Class, Class A, Class C and Class
I (to reflect the since-inception period). The table above represents actual
expenses incurred during the one-half year period.
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010, and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $4.26 for Investor Class, $4.31 for Class A, $8.05 for Class C and $3.01
for Class I and the ending account value would have been $1,020.60 for
Investor Class, $1,020.50 for Class A, $1,016.80 for Class C and $1,021.80
for Class I.
3. Investor Class, Class A, Class C and Class I shares commenced operations on
March 31, 2010.
mainstayinvestments.com 7
STATE COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
New Jersey 8.5%
Alabama 8.3
Ohio 8.1
Florida 6.8
Texas 6.5
California 6.1
Colorado 11.7
Michigan 10.7
Pennsylvania 6.1
Missouri 4.5
Tennessee 4.5
Minnesota 4.2
Massachusetts 4.1
Louisiana 4.0
Nevada 1.8
New Hampshire 1.3
District of Columbia 0.4
Other Assets, Less Liabilities 2.4
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 10 for specific holdings within
these categories.
TOP TEN ISSUERS HELD AS OF APRIL 30, 2010
<Table>
1. Harrisburg, Pennsylvania, Authority
Revenue, University of Science, 6.00%,
due 9/1/36
2. Miami Beach Health Facilities Authority,
Hospital Revenue, Refunding, Mount Sinai
Medical Center of Florida,
6.75%, due 11/15/21
3. Arnold Retail Corridor Transportation
Development District, 6.65%,
due 5/1/38
4. Alabama Water Pollution Control
Authority Refunding, Revolving Fund
Loan, 4.125%, due 2/15/14
5. Michigan Public Educational Facilities
Authority Revenue, 8.00%, due 4/1/40
6. New Jersey Economic Development
Authority Revenue, Cigarette Tax, 5.50%,
due 6/15/31
7. Texas Private Activity Bond Surface
Transportation Corp. Revenue, 6.875%,
due 12/31/39
8. New Jersey Economic Development
Authority Special Facilities Revenue,
Continental Airlines Project, 6.25%, due
9/15/29
9. Buckeye, Ohio, Tobacco Settlement
Financing Authority,
5.75%, due 6/1/34
10. Washington County Housing &
Redevelopment Authority, Hospital
Facilities Revenue, Healtheast Project,
5.50%,
due 11/15/27
</Table>
8 MainStay High Yield Municipal Bond Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS JOHN LOFFREDO, CFA, ROBERT DIMELLA,
CFA, AND MICHAEL PETTY OF MACKAY SHIELDS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY HIGH YIELD MUNICIPAL BOND FUND PERFORM RELATIVE TO ITS PEERS
AND ITS BENCHMARK DURING THE PERIOD FROM THE FUND'S COMMENCEMENT ON MARCH 31,
2010, THROUGH APRIL 30, 2010?
Excluding all sales charges, MainStay High Yield Municipal Bond Fund returned
1.78% for Investor Class shares, 1.88% for Class A shares and 1.84% for Class C
shares from the Fund's commencement on March 31, 2010, through April 30, 2010.
Over the same period, the Fund's Class I shares returned 1.89%. All share
classes outperformed the 1.57% return of the average Lipper(1) high yield
municipal debt fund and the 1.22% return of the Barclays Capital Municipal Bond
Index(2) from March 31 through April 30, 2010. The Barclays Capital Municipal
Bond Index is the Fund's broad-based securities-market index. This Fund
commenced operations on March 31, 2010. See page 5 for Fund returns with sales
charges.
WHAT MAJOR FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
The most significant factors influencing the municipal market during the
reporting period were spread(3) tightening and the decrease in tax-exempt
supply. The Build America Bond program allowed municipal issuers to access the
taxable debt market with the federal government subsidizing a significant
portion of the interest expense over the life of the bonds. Since the program
made taxable issuance more affordable than municipal issuance, new issues in the
municipal market declined substantially.
During the reporting period, the main risk to the high-yield municipal bond
market was the potential for high-profile municipal defaults or bankruptcies.
WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE REPORTING PERIOD?
The Fund outperformed its peers and its benchmark during the reporting period
largely because of security selection and our ability to purchase bonds that had
higher coupon structures. Our investment decisions reflected initial purchases
for the Fund. We looked to build a widely diversified Fund with an emphasis on a
weighted average dollar price below par.
DURING THE REPORTING PERIOD, WHICH MARKET SEGMENTS WERE STRONG CONTRIBUTORS TO
THE FUND'S PERFORMANCE AND WHICH SEGMENTS DETRACTED?
On the basis of impact, which takes weightings and total returns into account,
the strongest-contributing market segments to the Fund's absolute performance
were tobacco, industrial development and health care bonds. The largest
detractor was a higher-than-normal exposure to cash equivalents during the
initial purchase phase, as these securities lagged the overall municipal market.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
All purchases were significant, as we built all of the Fund's investment
portfolio during the reporting period. Although the Fund sold some cash
alternatives to build its investment portfolio, there were no other sales during
the reporting period.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 5 for more information on the Barclays Capital Municipal
Bond Index.
3. The terms "spread" and "yield spread" may refer to the difference in yield
between a security or type of security and comparable U.S. Treasury issues.
The terms may also refer to the difference in yield between two specific
securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MUNICIPAL BONDS 97.6%+
- -----------------------------------------------------
ALABAMA 8.3%
V Alabama Water Pollution
Control Authority
Refunding, Revolving Fund
Loan
Series B, Insured: AMBAC
4.125%, due 2/15/14 (a)(b) $ 550,000 $ 498,762
Selma Industrial Development
Board Enviromental
Improvement Revenue,
International Paper Company
Projects Series A
4.75%, due 12/1/30 500,000 428,660
-----------
927,422
-----------
CALIFORNIA 6.1%
California Infrastructure &
Economic Development Bank
Revenue, Stockton Port
District Project, Insured:
ACA
5.50%, due 7/1/32 (b)(c) 350,000 281,953
Inland Empire Tobacco
Securitization Authority
TOB Settlement
Series A
4.625%, due 6/1/21 500,000 400,155
-----------
682,108
-----------
COLORADO 11.7%
Arkansas River Power
Authority Revenue, Insured:
XLCA
5.25%, due 10/1/40 (b)(d) 400,000 363,428
Denver Convention Center
Hotel Authority Revenue,
Refunding
Series, Insured: XLCA
4.75%, due 12/1/35 (b)(d) 165,000 135,039
Fronterra Village
Metropolitan District No.
2, Colorado, Refunding &
Improvement, Insured:
RADIAN
4.875%, due 12/1/27 (b)(e) 500,000 375,895
North Range Village
Metropolitan District,
Colorado, Refunding &
Improvement, Insured: CIFG
4.25%, due 12/1/36 (b)(f) 600,000 426,090
-----------
1,300,452
-----------
DISTRICT OF COLUMBIA 0.4%
District of Columbia Revenue,
Friendship Public Charter
School, Insured: ACA
5.25%, due 6/1/33 (b)(c) 50,000 43,382
-----------
FLORIDA 6.8%
Escambia County Health
Facilities Authority
Revenue, Baptist Hospital,
Project Series A
6.00%, due 8/15/36 250,000 251,115
V Miami Beach Health
Facilities Authority,
Hospital Revenue,
Refunding, Mount Sinai
Medical Center of Florida
6.75%, due 11/15/21 500,000 511,830
-----------
762,945
-----------
LOUISIANA 4.0%
Louisiana Public Facilities
Authority Revenue, Black
and Gold Facilities,
Project
Series A, Insured: CIFG
5.00%, due 7/1/39(b)(f) 500,000 440,825
-----------
MASSACHUSETTS 4.1%
Massachusetts Port Authority
Facilities Revenue, Delta
Airlines, Project
Series A, Insured: AMBAC
5.50%, due 1/1/19 (a)(b) 500,000 460,665
-----------
MICHIGAN 10.7%
Detroit, Michigan Capital
Improvement
Series A-1
5.00%, due 4/1/16 300,000 275,946
V Michigan Public
Educational Facilities
Authority Revenue
8.00%, due 4/1/40 500,000 497,695
Michigan Tobacco Settlement
Finance Authority
Series A
6.00%, due 6/1/34 500,000 423,280
-----------
1,196,921
-----------
MINNESOTA 4.2%
V Washington County Housing
& Redevelopment Authority,
Hospital Facilities
Revenue, Healtheast Project
5.50%, due 11/15/27 500,000 463,380
-----------
MISSOURI 4.5%
V Arnold Retail Corridor
Transportation Development
District
6.65%, due 5/1/38 500,000 499,370
-----------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest issuers held, as of April 30, 2010. May be
subject to change daily.
10 MainStay High Yield Municipal 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
MUNICIPAL BONDS (CONTINUED)
NEVADA 1.8%
Director of the State of
Nevada Department of
Business and Industry Lease
Revenue, Tahoe Regional
Planning Agency Project
Series A, Insured: AMBAC
4.50%, due 6/1/37 (a)(b) $290,000 $ 196,347
-----------
NEW HAMPSHIRE 1.3%
New Hampshire Health &
Education Facilities
Authority Revenue, Franklin
Pierce College, Insured:
ACA
6.05%, due 10/1/34 (b)(c) 165,000 141,143
-----------
NEW JERSEY 8.5%
V New Jersey Economic
Development Authority
Revenue, Cigarette Tax
5.50%, due 6/15/31 500,000 475,990
V New Jersey Economic
Development Authority
Special Facilities Revenue,
Continental Airlines
Project
6.25%, due 9/15/29 500,000 472,120
-----------
948,110
-----------
OHIO 8.1%
V Buckeye, Ohio, Tobacco
Settlement Financing
Authority
Series A-2
5.75%, due 6/1/34 600,000 472,086
Toledo-Lucas County Port
Authority Special
Assessment Revenue, Crocker
Park Public Improvement,
Project
5.375%, due 12/1/35 500,000 433,060
-----------
905,146
-----------
PENNSYLVANIA 6.1%
V Harrisburg, Pennsylvania,
Authority Revenue,
University of Science
Series B
6.00%, due 9/1/36 600,000 523,692
Harrisburg, Pennsylvania,
Capital Appreciation,
Refunding
Series D, Insured: AMBAC
(zero coupon), due 3/15/11
(a)(b) 100,000 92,046
Series F, Insured: AMBAC
(zero coupon), due 9/15/14
(a)(b) 100,000 69,651
-----------
685,389
-----------
TENNESSEE 4.5%
Johnson City Health &
Educational Facilities
Board Hospital Revenue,
Mountain States Health
Alliance
6.00%, due 7/1/38 300,000 303,384
Sevier County Tennessee
Public Building Authority
0.54%, due 6/1/34 (b)(g) 200,000 200,000
-----------
503,384
-----------
TEXAS 6.5%
Capital Area Cultural
Education Facilities
Finance Corp. Revenue,
Roman Catholic Diocese
Series B
6.125%, due 4/1/45 250,000 251,367
V Texas Private Activity
Bond Surface Transportation
Corp. Revenue
6.875%, due 12/31/39 450,000 472,122
-----------
723,489
-----------
Total Long-Term Municipal
Bonds
(Cost $10,717,357) 10,880,478
-----------
Total Investments
(Cost $10,717,357) (h) 97.6% 10,880,478
Other Assets, Less
Liabilities 2.4 264,273
--------- -----------
Net Assets 100.0% $11,144,751
========= ===========
</Table>
<Table>
(a) AMBAC--Ambac Assurance Corp.
(b) The debt is guaranteed under the Federal
Deposit Insurance Corporation (FDIC)
Temporary Liquidity Guarantee Program and
is backed by the full faith and credit of
the United States. The expiration date of
the FDIC's guarantee is the earlier of
the maturity date of the debt or June 30,
2012.
(c) ACA--ACA Financial Guaranty Corp.
(d) XLCA--XL Capital Assurance, Inc.
(e) RADIAN--Radian Asset Assurance Inc.
(f) CIFG--CIFG Group
(g) Floating rate--Rate shown is the rate in
effect at April 30, 2010.
(h) At April 30, 2010, cost is $10,717,357
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $173,449
Gross unrealized depreciation (10,328)
--------
Net unrealized appreciation $163,121
========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Municipal Bonds $ -- $10,880,478 $ -- $10,880,478
-------- ----------- -------- -----------
Total Investments in Securities $-- $10,880,478 $-- $10,880,478
======== =========== ======== ===========
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
The Fund commenced operations on March 31, 2010 and as a result at April 30,
2010, the Fund did not have any transfers between Level 1 and Level 2 or hold
any investments with significant unobservable inputs (Level 3).
12 MainStay High Yield Municipal Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $10,717,357) $10,880,478
Cash 114,737
Receivables:
Interest 185,750
Fund shares sold 42,735
Manager (See Note 3) 18,091
Other assets 8,241
-----------
Total assets 11,250,032
-----------
LIABILITIES:
Payables:
Investment securities purchased 92,853
Professional fees 5,826
Shareholder communication 4,325
Custodian 809
Trustees 152
NYLIFE Distributors (See Note 3) 138
Accrued expenses 659
Dividend payable 519
-----------
Total liabilities 105,281
-----------
Net assets $11,144,751
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 1,097
Additional paid-in capital 10,979,756
-----------
10,980,853
Accumulated undistributed net
investment income 777
Net unrealized appreciation on
investments 163,121
-----------
Net assets $11,144,751
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 52,855
===========
Shares of beneficial interest
outstanding 5,205
===========
Net asset value per share
outstanding $ 10.15
Maximum sales charge (4.50% of
offering price) 0.48
-----------
Maximum offering price per share
outstanding $ 10.63
===========
CLASS A
Net assets applicable to outstanding
shares $ 804,817
===========
Shares of beneficial interest
outstanding 79,182
===========
Net asset value per share
outstanding $ 10.16
Maximum sales charge (4.50% of
offering price) 0.48
-----------
Maximum offering price per share
outstanding $ 10.64
===========
CLASS C
Net assets applicable to outstanding
shares $ 120,363
===========
Shares of beneficial interest
outstanding 11,852
===========
Net asset value and offering price
per share outstanding $ 10.16
===========
CLASS I
Net assets applicable to outstanding
shares $10,166,716
===========
Shares of beneficial interest
outstanding 1,001,004
===========
Net asset value and offering price
per share outstanding $ 10.16
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 31, 2010 (COMMENCEMENT OF OPERATIONS) THROUGH APRIL 30,
2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $ 37,658
--------
EXPENSES:
Registration 5,840
Professional fees 5,826
Offering (See Note 2) 5,306
Manager (See Note 3) 4,897
Shareholder communication 4,325
Custodian 809
Trustees 152
Distribution/Service--Investor
Class (See Note 3) 6
Distribution/Service--Class A (See
Note 3) 76
Distribution/Service--Class C (See
Note 3) 56
Miscellaneous 1,026
--------
Total expenses before
waiver/reimbursement 28,319
Expense waiver/reimbursement from
Manager (See Note 3) (22,837)
--------
Net expenses 5,482
--------
Net investment income 32,176
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net change in unrealized appreciation
(depreciation) on investments 163,121
--------
Net increase in net assets resulting
from operations $195,297
========
</Table>
14 MainStay High Yield Municipal 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 PERIOD MARCH 31, 2010 (COMMENCEMENT OF OPERATIONS) THROUGH ENDED APRIL
30, 2010
<Table>
<Caption>
2010
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 32,176
Net change in unrealized
appreciation on investments 163,121
-----------
Net increase in net assets
resulting from operations 195,297
-----------
Dividends to shareholders:
From net investment income:
Investor Class (144)
Class A (2,147)
Class C (281)
Class I (28,827)
-----------
Total dividends to shareholders (31,399)
-----------
Capital share transactions:
Net proceeds from sale of shares 10,949,974
Net asset value of shares issued
to shareholders in reinvestment
of dividends 30,879
-----------
Increase in net assets derived
from capital share transactions 10,980,853
-----------
Net increase in net assets 11,144,751
NET ASSETS:
Beginning of period --
-----------
End of period $11,144,751
===========
Accumulated undistributed net
investment income at end of period $ 777
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS CLASS A CLASS C CLASS I
-------------- --------- --------- ---------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2010** 2010** 2010** 2010**
THROUGH THROUGH THROUGH THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
2010* 2010* 2010* 2010*
Net asset value at beginning of
period $10.00 $10.00 $10.00 $ 10.00
------ ------ ------ -------
Net investment income 0.02 0.02 0.01 0.03
Net realized and unrealized gain on
investments 0.16 0.17 0.17 0.16
------ ------ ------ -------
Total from investment operations 0.18 0.19 0.18 0.19
------ ------ ------ -------
Less dividends:
From net investment income (0.03) (0.03) (0.02) (0.03)
------ ------ ------ -------
Net asset value at end of period $10.15 $10.16 $10.16 $ 10.16
====== ====== ====== =======
Total investment return (a) 1.78%(b) 1.88%(b) 1.84%(b) 1.89%(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.71%++ 4.55%++ 3.30%++ 3.58%++
Net expenses 0.85%++ 0.85%++ 1.60%++ 0.60%++
Expenses (before
waiver/reimbursement) 3.42%++ 3.42%++ 4.17%++ 3.17%++
Portfolio turnover rate 57% 57% 57% 57%
Net assets at end of period (in
000's) $ 53 $ 805 $ 120 $10,167
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
(a) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(b) Total return is not annualized.
</Table>
16 MainStay High Yield Municipal Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay High Yield Municipal Bond Fund (the
"Fund"), a diversified fund.
The Fund currently offers four classes of shares. Investor Class shares, Class A
shares, Class C shares and Class I shares commenced operations on March 31,
2010. Investor Class and Class A shares are offered at net asset value ("NAV")
per share plus an initial sales charge. No sales charge applies on investments
of $1 million or more (and certain other qualified purchases) in Investor Class
and 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 C
shares are offered at NAV without an initial sales charge, although a 1.00%
contingent deferred sales charge may be imposed on redemptions made within one
year of purchase of Class C shares. Class I shares are offered at NAV and are
not subject to a sales charge. Depending upon eligibility, Investor Class shares
may convert to Class A shares and Class A shares may convert to Investor Class
shares. The four classes of shares have the same voting (except for issues that
relate solely to one class), dividend, liquidation and other rights, and the
same terms and conditions, except that Class C shares are subject to higher
distribution and/or service fee rates than Investor Class and Class A shares
under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I
shares are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek to a high level of income exempt from
Federal income taxes. Total return is a secondary objective.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the Fund's Manager (as defined in Note 3(A))
in consultation with the Fund's Subadvisor, if any (as defined in Note 3(A)),
whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the Fund's Manager, in
consultation with the Fund's Subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Futures contracts are valued at the last posted
settlement price on the market where such futures are primarily traded. Options
contracts are valued at the last posted settlement price on the market where
such options are principally traded.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability developed based on market data
obtained from sources independent of the reporting entity. Unobservable inputs
are inputs that reflect the reporting entity's own assumptions about the
assumptions market participants would use in pricing the asset or
mainstayinvestments.com 17
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
liability developed based on the information available in the circumstances. The
inputs or methodology used for valuing securities may not be an indication of
the risks associated with investing in those securities. The three-tier
hierarchy of inputs is summarized in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the
period ended April 30, 2010 maximized the use of observable inputs and minimized
the use of unobservable inputs. The Fund may have utilized some of the following
fair value techniques: multi-dimensional relational pricing models, option
adjusted spread pricing and estimating the price that would have prevailed in a
liquid market for an international equity security given information available
at the time of evaluation, when there are significant events after the close of
local foreign markets. For the period ended April 30, 2010, there have been no
changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income monthly and distributions of net realized
capital and currency gains, if any, annually, Unless the shareholder elects
otherwise, all dividends and distributions are reinvested in the same class of
shares of the Fund, at NAV. Dividends and distributions to shareholders are
determined in accordance with federal income tax regulations and may differ from
GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Interest income is
accrued as earned using the effective interest rate method. Discounts and
premiums on securities purchased, other than short-term investments, for the
Fund are accreted and amortized, respectively, on the effective interest rate
method over the life of the respective securities or, in the case of a callable
security, over the period to the first date of call. Discounts and premiums on
short-term investments are accreted and amortized, respectively, on the
straight-line method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) PURCHASED AND WRITTEN OPTIONS. The Fund may write covered call and put
options on its portfolio securities or foreign currencies. These securities are
subject to income price risk in the normal course of investing in these
transactions. Premiums received are recorded as assets, and the market value of
the written options are recorded as liabilities. The liabilities are
subsequently
18 MainStay High Yield Municipal Bond Fund
adjusted and unrealized appreciation or depreciation is recorded to reflect the
current value of the options written. Premiums received from writing options
that expire are treated as realized gains. Premiums received from writing
options that 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, the Fund foregoes the opportunity for capital
appreciation above the exercise price should the price of the underlying
security or foreign currency increase. The 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. When writing a
covered call option, the Fund, in return for the premium on the option, gives up
the opportunity to profit from a price increase in the underlying securities
above the exercise price. However, as long as the obligation as the writer
continues, the Fund has retained the risk of loss should the price of the
underlying security decline. After writing a put option, the Fund may incur risk
exposure 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. The Fund writes covered call options to try to
realize greater return on the sale of a stock. The Fund writes put options to
help protect against unanticipated adverse developments.
The Fund may purchase call and put options on its portfolio securities or
foreign currencies. The Fund may purchase call options to protect against an
increase in the price of the security or foreign currency it anticipates
purchasing or to increase its current return. The Fund may purchase put options
on its securities or foreign currencies to protect against a decline in the
value of the security or foreign currency or to close out covered written put
positions. The Fund may also purchase options to seek to enhance returns. Risks
may arise from an imperfect correlation between the change in market value of
the securities or foreign currencies held by the Fund and the prices of options
relating to the securities or foreign currencies purchased or sold by the Fund
and from the possible lack of a liquid secondary market for an option. The
maximum risk exposure for any purchased option is limited to the premium
initially paid for the option. The Fund did not invest in purchased or written
options during the period ended April 30, 2010.
(H) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(I) FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a financial
instrument (e.g., foreign currency, interest rate, security, or securities
index.) The Fund is subject to equity price risk and interest rate risk in the
normal course of investing in these transactions. The Fund enters into futures
contracts for hedging purposes, managing the duration and yield curve profile,
market exposure or to enhance income. 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 have minimal counterparty risk as they are
conducted through regulated exchanges that guarantee the futures against default
by the counterparty. The Fund invests in futures contracts to help manage the
duration and yield curve of the portfolio. The Fund's investment in futures
contracts and other derivatives may increase the volatility of the Fund's NAV
and may result
mainstayinvestments.com 19
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
in a loss to the Fund. The Fund did not invest in futures contracts during the
period ended April 30, 2010.
(J) SWAP AGREEMENTS. The Fund enters into interest rate swap agreements
("swaps") for the purpose of attempting to protect against changes in interest
rates or for other portfolio management purposes. In a standard swaps
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a notional amount. Credit default swaps are
contracts whereby one party makes periodic payments to a counterparty in
exchange for the right to receive a specified return in the event of a default
by a third party on its obligation. Credit default swaps may be used to provide
a measure of protection against defaults of sovereign or corporate issuers. In
connection with these agreements, cash or securities may be set aside as
collateral in accordance with the terms of the swap agreement.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an agreed-
upon level, while the seller of an interest rate floor is obligated to make
payments to the extent that a specified interest rate falls below an agreed-upon
level. An interest rate collar combines elements of buying a cap and selling a
floor.
The Fund bears the risk of loss of the amount expected to be received under a
swap agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Fund may be able to eliminate its exposure under a swap
agreement either by assignment or other disposition, or by entering into an
offsetting swap agreement with the same party or a similarly creditworthy party.
Swaps are marked to market daily based upon quotations from market makers and
vendors and the change in value, if any, is recorded as unrealized gain or loss.
Payments received or made on swap contracts are recorded as realized gain or
loss. Gains or losses are realized upon early termination of the swap
agreements. These financial instruments are not actively traded on financial
markets. Entering into these agreements involves elements of credit, market and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements may
default on its obligation to perform or disagree as to the meaning of the
contractual terms in the agreements and that there may be unfavorable changes in
interest rates or the price of the index or security underlying these
transactions. The Fund did not hold securities that were valued in such a
manner. The Fund did not invest in swap contracts during the period ended April
30, 2010.
(K) CONCENTRATION OF RISK. The ability of issuers of debt securities held by
the Fund to meet their obligations may be affected by economic or political
developments in a specific country, industry or region.
(L) OFFERING COSTS. Costs incurred by the Fund in connection with the
commencement of the Fund's operations were being amortized on a straight line
basis over twelve months.
(M) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. MacKay
Shields LLC (the "Subadvisor"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and
is responsible for the day-to-day portfolio management of the Fund. Pursuant to
the terms of a Subadvisory Agreement between New York Life Investments and the
Subadvisor, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of 0.55% of the Fund's average daily net assets.
Effective March 30, 2010, New York Life Investments entered into a written
expense limitation agreement under
20 MainStay High Yield Municipal Bond Fund
which it has agreed to waive a portion of the management fee or reimburse
expenses to the extent necessary to ensure that the total ordinary operating
expenses (total ordinary operating expenses excludes taxes, interest,
litigation, extraordinary expenses, brokerage, other transaction expenses
relating to the purchase or sale of portfolio investments, and the fees and
expenses of any other funds in which the Fund invests) for the Fund's Class A
shares do not exceed 0.85% of its average net assets. New York Life Investments
will apply an equivalent waiver or reimbursement, in an equal number of basis
points, to the other share classes of the Fund. This agreement expires on March
31, 2011 and it reviewed annually by the Board in connection with its review of
the Fund's advisory agreements. Based on its review, the Board may agree to
maintain, modify or terminate the agreement.
For the period ended April 30, 2010, New York Life Investments earned fees from
the Fund in the amount of $4,897 and waived/reimbursed its fees in the amount of
$22,837.
State Street Bank and Trust Company ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the Fund pursuant to an agreement with New York Life Investments. These services
include calculating the daily NAVs of the Fund, maintaining the general ledger
and sub-ledger accounts for the calculation of the Fund's respective NAVs, and
assisting New York Life Investments in conducting various aspects of the Fund's
administrative operations. For providing these services to the Fund, State
Street is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Fund at an annual rate of 0.25% of the average
daily net assets of the Fund's Investor Class and Class A shares, which is an
expense of the Investor Class and Class A shares of the Fund for distribution or
service activities as designated by the Distributor. Pursuant to the Class C
Plans, the Fund pays the Distributor a monthly distribution fee, which is an
expense of the Class C shares of the Fund, at the annual rate of 0.75% of the
average daily net assets of the Fund's Class C shares, along with a shareholder
service fee at the annual rate of 0.25% of the average daily net assets of the
Class C shares of the Fund for a total 12b-1 fee of 1.00%. Class I shares are
not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares was $132
and $1,160, respectively, for the period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. The Fund did not incur any transfer agent
expenses for the period ended April 30, 2010.
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Investor Class $ 25,375 48.0%
- ---------------------------------------------------
Class A 25,400 3.2
- ---------------------------------------------------
Class C 25,400 21.1
- ---------------------------------------------------
Class I 10,083,800 99.2
- ---------------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the period ended April 30,
2010, these fees, which are included in professional fees shown on the Statement
of Operations, were $149.
NOTE 4--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the period ended April 30, 2010, purchases and sales of securities, other
than short-term securities, were $16,570 and $5,855, respectively.
NOTE 6--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS (A) SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 5,191 $ 52,328
Shares issued to shareholders
in reinvestment of
dividends 14 144
----------------------
Net increase 5,205 $ 52,472
======================
<Caption>
CLASS A (A) SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 79,011 $ 796,375
Shares issued to shareholders
in reinvestment of
dividends 171 1,737
----------------------
Net increase 79,182 $ 798,112
======================
<Caption>
CLASS C (A) SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 11,835 $ 119,271
Shares issued to shareholders
in reinvestment of
dividends 17 171
----------------------
Net increase 11,852 $ 119,442
======================
<Caption>
CLASS I (A) SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 998,167 $ 9,982,000
Shares issued to shareholders
in reinvestment of
dividends 2,837 28,827
----------------------
Net increase 1,001,004 $10,010,827
======================
(a) The Fund commenced investment operations on March
31, 2010.
</Table>
NOTE 7--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 8--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal period ended April 30, 2010, events and transactions
subsequent to April 30, 2010 through the date the financial statements were
issued have been evaluated by the Fund's management for possible adjustment
and/or disclosure. No subsequent events requiring financial statement adjustment
or disclosure have been identified.
22 MainStay High Yield Municipal Bond Fund
BOARD CONSIDERATION AND APPROVAL OF MANAGEMENT AGREEMENT AND SUBADVISORY
AGREEMENT
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940 Act")
requires that each mutual fund's board of trustees, including a majority of
trustees who are not "interested persons" of the fund, as defined in the 1940
Act ("Independent Trustees"), annually review and approve the fund's investment
advisory agreements. At its March 15-16, 2010 meeting, the Board of
Directors/Trustees of the MainStay Group of Funds ("Board") unanimously approved
the Management Agreement between the MainStay High Yield Municipal Bond Fund
("Fund") and New York Life Investment Management LLC ("New York Life
Investments"), and the Subadvisory Agreement between New York Life Investments
and MacKay Shields LLC ("MacKay Shields") on behalf of the Fund.
In reaching its decisions to approve the Agreements set forth above (the
"Agreements"), the Board considered information prepared specifically in
connection with the contract review process that took place in advance of its
March 2010 meeting, which included responses from New York Life Investments and
MacKay Shields to a comprehensive list of questions encompassing a variety of
topics prepared on behalf of the Board by independent legal counsel to the
Board. The Board also considered relevant information previously provided to the
Board in connection with its review of the investment advisory agreements for
other MainStay Funds.
In determining to approve the Agreements, the members of the Board reviewed and
evaluated all of the information and factors they believed to be relevant and
appropriate in light of legal advice furnished to them by independent legal
counsel and through the exercise of their own business judgment. The broad
factors considered by the Board are discussed in greater detail below, and
included, among other things: (i) the nature, extent, and quality of the
services to be provided to the Fund by New York Life Investments and MacKay
Shields; (ii) the qualifications of the proposed portfolio managers for the Fund
and the historical investment performance of products previously managed by such
portfolio managers with similar investment strategies to the Fund; (iii) the
anticipated costs of the services to be provided, and profits expected to be
realized, by New York Life Investments and its affiliates, including MacKay
Shields as subadviser to the Fund, from their relationship with the Fund; (iv)
the extent to which economies of scale may be realized as the Fund grows, and
the extent to which economies of scale may benefit Fund investors; and (v) the
reasonableness of the Fund's proposed management and subadvisory fee levels and
overall total ordinary operating expenses, particularly as compared to similar
funds and portfolios.
While individual members of the Board may have weighed certain factors
differently, the Board's decisions to approve the Agreements were based on a
comprehensive consideration of all the information provided to the Board,
including information provided to the Board specifically in connection with the
contract review processes. In addition to considering the above-referenced
factors, the Board observed that in the marketplace there are a range of
investment options available to future shareholders of the Fund, and that such
shareholders, having had the opportunity to consider alternative investment
products and services, will have chosen to invest in the Fund. A more detailed
discussion of the factors that figured prominently in the Board's decisions to
approve the Agreements is provided below.
NATURE, EXTENT AND QUALITY OF SERVICES TO BE PROVIDED BY NEW YORK LIFE
INVESTMENTS AND MACKAY SHIELDS
In considering the approval of the Agreements, the Board examined the nature,
extent and quality of the services that New York Life Investments proposed to
provide to the Fund. The Board evaluated New York Life Investments' experience
in serving as manager of other mutual funds, a variety of other investment
advisory clients, including other pooled investment vehicles, and experience
with overseeing affiliated and non-affiliated subadvisers. The Board considered
the experience of senior personnel at New York Life Investments proposed to
provide management and administrative services to the Fund, as well as New York
Life Investments' reputation and financial condition. The Board considered New
York Life Investments' performance in fulfilling its responsibilities for
overseeing the legal and compliance environment of the MainStay Group of Funds
generally, including its oversight of MacKay Shields' compliance with the
policies and investment objectives of other MainStay Funds, and New York Life
Investments' performance with respect to the implementation of Board directives
regarding other MainStay Funds. In addition, the Board noted that New York Life
Investments also is responsible for paying all of the salaries and expenses for
the Fund's officers. The Board also considered the benefits to shareholders of
being part of the MainStay Group of Funds, including the privilege of exchanging
investments between the same class of shares without the imposition of a sales
charge, as described more fully in the Fund's prospectus.
The Board also examined the nature, extent and quality of the services that
MacKay Shields proposed to provide to the Fund. The Board evaluated MacKay
Shields' experience in serving as subadviser to other mutual funds under the
Board's supervision and managing other portfolios, including those with similar
investment strategies to the Fund. It examined MacKay Shields' track record and
experience in providing investment advisory services, the experience of
investment advisory, senior management and administrative personnel at MacKay
Shields, and MacKay Shields' overall legal and compliance environment. The Board
also reviewed MacKay Shields' willingness to invest in personnel designed to
benefit the Fund. In this regard, the Board considered the experience of the
Fund's proposed portfolio
mainstayinvestments.com 23
managers, including with respect to other products with similar investment
strategies to the Fund, the number of accounts managed by the portfolio managers
and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its
overall determinations regarding the Agreements, that the Fund likely would
benefit from the nature, extent and quality of these services as a result of New
York Life Investments' and MacKay Shields' experience, personnel, operations and
resources.
INVESTMENT PERFORMANCE
In connection with the Board's consideration of the Agreements, the Board noted
that the Fund had no investment performance track record since the Fund had not
yet been offered to shareholders. The Board discussed with management and the
Fund's proposed portfolio management team the Fund's investment process,
strategies and risks. Additionally, the Board considered the historical
performance of other investment portfolios with similar investment strategies
that are or have been managed by the proposed portfolio managers for the Fund.
Based on these considerations, the Board concluded that the Fund was likely to
be managed responsibly and capably by MacKay Shields.
COSTS OF THE SERVICES PROVIDED, AND PROFITS TO BE REALIZED, BY NEW YORK LIFE
INVESTMENTS AND MACKAY SHIELDS
The Board considered the anticipated costs of the services to be provided by New
York Life Investments and MacKay Shields under the Agreements, and the profits
expected to be realized by New York Life Investments and its affiliates due to
their relationships with the Fund. Because MacKay Shields is an affiliate of New
York Life Investments whose subadvisory fees are paid directly by New York Life
Investments, the Board considered expected cost and profitability information
for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs and profits of New York Life Investments and its
affiliates, including MacKay Shields, due to their relationships with the Fund,
the Board considered, among other things, each party's investments in personnel,
systems, equipment and other resources necessary to manage the Fund, and the
fact that New York Life Investments will be responsible for paying the
subadvisory fees for the Fund. The Board acknowledged that New York Life
Investments and MacKay Shields must be in a position to pay and retain
experienced professional personnel to provide services to the Fund, and that New
York Life Investments' ability to maintain a strong financial position is
important in order for New York Life Investments to continue to provide high-
quality ongoing services to the Fund. The Board noted, for example, increased
costs borne by New York Life Investments and its affiliates due to new and
ongoing regulatory and compliance requirements. The Board also noted that the
Fund will benefit from the allocation of certain fixed costs across the MainStay
Group of Funds.
The Board also reviewed information from New York Life Investments and its
affiliates regarding their anticipated profitability due to their overall
relationships with the Fund. For New York Life Investments and MacKay Shields,
the Board considered information illustrating the revenues and expenses to be
allocated to the Fund.
The Board noted the difficulty in obtaining reliable comparative data about
mutual fund managers' profitability, since such information generally is not
publicly available and may be impacted by numerous factors, including the
structure of a fund manager's organization, the types of funds it manages, and
the manager's capital structure and costs of capital. While recognizing the
difficulty in evaluating a manager's profitability with respect to the Fund, and
noting that other profitability methodologies may also be reasonable, the Board
concluded that the profitability methodology presented by New York Life
Investments to the Board with respect to the Fund was reasonable in all material
respects.
In considering the anticipated costs and profitability of the Fund, the Board
also considered certain fall-out benefits that may be realized by New York Life
Investments and its affiliates due to their relationships with the Fund. The
Board further considered that, in addition to fees earned by New York Life
Investments for managing the Fund, New York Life Investments' affiliates would
also earn revenues from serving the Fund in various other capacities, including
as the Fund's transfer agent and distributor. The information provided to the
Board indicated that the profitability to New York Life Investments and its
affiliates arising directly from these other arrangements would not be
excessive. The Board noted that, although it assessed the overall profitability
of the Fund to New York Life Investments and its affiliates as part of the
annual contract review process, when considering the reasonableness of the fees
to be paid to New York Life Investments and its affiliates under the Agreements,
the Board considered the profitability of New York Life Investments'
relationship with the Fund on a pre-tax basis, and without regard to
distribution expenses.
After evaluating the information presented to the Board, the Board concluded,
within the context of its overall determinations regarding the Agreements, that
the profits expected to be realized by New York Life Investments and its
affiliates (including MacKay Shields) due to their relationships with the Fund
would be fair and reasonable.
24 MainStay High Yield Municipal Bond Fund
BOARD CONSIDERATION AND APPROVAL OF MANAGEMENT AGREEMENT AND SUBADVISORY
AGREEMENT (CONTINUED)
EXTENT TO WHICH ECONOMIES OF SCALE MAY BE REALIZED AS THE FUND GROWS
The Board also considered whether the Fund's proposed expense structure
permitted economies of scale to be shared with Fund investors. The Board
reviewed information from New York Life Investments showing how the Fund's
management fee hypothetically would compare with fees paid for similar services
by peer funds at varying asset levels. The Board noted the extent to which the
Fund will benefit from expense waivers or reimbursements. While recognizing that
any precise determination of future economies of scale is necessarily
subjective, the Board considered the extent to which New York Life Investments
and MacKay Shields may realize a larger profit margin as the Fund's assets grow
over time.
Based on this information, the Board concluded, within the context of its
overall determinations regarding the Agreements, that the Fund's expense
structure appropriately reflects economies of scale for the benefit of Fund
investors. The Board noted, however, that it would continue to evaluate the
reasonableness of the Fund's expense structure as the Fund grows over time,
including considering the imposition of breakpoints as the Fund's assets grow
over time.
MANAGEMENT AND SUBADVISORY FEES AND TOTAL ORDINARY OPERATING EXPENSES
The Board evaluated the reasonableness of the fees to be paid under the
Agreements and the Fund's anticipated total ordinary operating expenses. The
Board primarily considered the reasonableness of the overall management fees to
be paid by the Fund to New York Life Investments, since the fees to be paid to
MacKay Shields will be paid by New York Life Investments, not the Fund. The
Board also considered the impact of the Fund's contractual expense limitation
arrangements pursuant to which New York Life Investments has agreed to limit the
Fund's total ordinary operating expenses.
In assessing the reasonableness of the Fund's fees and expenses, the Board
considered comparative data provided by New York Life Investments with respect
to the fees and expenses charged by similar mutual funds managed by other
investment advisers. In addition, the Board considered information provided by
New York Life Investments and MacKay Shields on fees charged to other investment
advisory clients, including institutional separate accounts and other funds with
similar investment objectives as the Fund. In this regard, the Board took into
account explanations from New York Life Investments and MacKay Shields about the
different scope of services provided to retail mutual funds as compared with
other investment advisory clients.
After considering all of the factors outlined above--including the
reasonableness of the Fund's proposed management fee, share class structure and
transfer agent fee schedule--the Board accepted New York Life Investments'
proposed expense limitations on the Fund's share classes. The Board further
acknowledged that New York Life Investments may determine voluntarily to waive
expenses of Fund share classes. Based on these considerations, the Board also
concluded that the Fund's management and subadvisory fees and anticipated total
ordinary operating expenses were within a range that is competitive and, within
the context of the Board's overall conclusions regarding the Agreements, support
a conclusion that these fees and expenses are reasonable.
CONCLUSION
On the basis of the information provided to it and its evaluation thereof, the
Board, including the Independent Trustees, unanimously voted to approve the
Agreements.
mainstayinvestments.com 25
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; or
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX, once
it is filed, will be available free of charge upon request (i) by calling 800-
MAINSTAY (624-6782); (ii) by visiting the Fund's website at
mainstayinvestments.com; or (iii) on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
will be available without charge on the SEC's website at www.sec.gov or by
calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and
review copies of Form N-Q by visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330).
26 MainStay High Yield Municipal Bond Fund
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18329 MS121-10 MSMHY10-06/10
F5
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY ICAP FUNDS
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY ICAP FUNDS
SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
MAINSTAY ICAP EQUITY FUND 5
- ---------------------------------------------
MAINSTAY ICAP SELECT EQUITY FUND 22
- ---------------------------------------------
MAINSTAY ICAP GLOBAL FUND 38
- ---------------------------------------------
MAINSTAY ICAP INTERNATIONAL FUND 51
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 68
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 85
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 85
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO EACH FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF EACH FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF EACH FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
MAINSTAY ICAP EQUITY FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges 8.34% 32.16% 2.70% 2.53%
Excluding sales charges 14.64 39.85 3.86 3.11
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 9450 10000 10000
10253 8703 10635
9675 7604 9054
7967 6592 7731
9755 8100 9890
10618 8614 10851
12961 9941 13074
14980 11456 15325
14376 10920 13981
9178 7064 8381
4/30/10 12836 9808 11894
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges 8.52% 32.50% 2.76% 2.56%
Excluding sales charges 14.84 40.21 3.92 3.14
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 23625 25000 25000
25632 21757 26587
24188 19010 22636
19919 16480 19327
24387 20250 24725
26545 21534 27129
32402 24853 32686
37451 28640 38312
35940 27301 34954
22950 17660 20952
4/30/10 32179 24520 29736
</Table>
CLASS C SHARES(3)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges 13.19% 37.75% 3.08% 2.34%
Excluding sales charges 14.19 38.75 3.08 2.34
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10768 8703 10635
10086 7604 9054
8244 6592 7731
10017 8100 9890
10822 8614 10851
13112 9941 13074
15043 11456 15325
14326 10920 13981
9079 7064 8381
4/30/10 12597 9808 11894
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.50% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge, are
subject to a contingent deferred sales charge ("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 or
individual 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 0.25%. Class R1 and R2 shares are available only
through corporate-sponsored retirement programs, which include certain
program requirements.
THE FOOTNOTES ON THE NEXT TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
15.02% 40.69% 4.26% 3.44%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10877 8703 10635
10290 7604 9054
8495 6592 7731
10426 8100 9890
11377 8614 10851
13923 9941 13074
16142 11456 15325
15548 10920 13981
9965 7064 8381
4/30/10 14020 9808 11894
</Table>
CLASS R1 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
14.95% 40.45% 4.16% 3.33%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P(R) 500 S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10866 8703 10635
10269 7604 9054
8469 6592 7731
10385 8100 9890
11321 8614 10851
13839 9941 13074
16034 11456 15325
15430 10920 13981
9885 7064 8381
4/30/10 13883 9808 11894
</Table>
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
14.81% 40.16% 3.90% 3.08%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10839 8703 10635
10218 7604 9054
8406 6592 7731
10281 8100 9890
11180 8614 10851
13633 9941 13074
15754 11456 15325
15124 10920 13981
9660 7064 8381
4/30/10 13540 9808 11894
</Table>
Class R3 shares are sold with no initial sales charge or CDSC, have an annual
12b-1 fee of 0.50% and are available in certain individual retirement
accounts or in certain retirement plans for service and distribution.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. Effective August 31, 2006, ICAP Equity Fund was renamed
MainStay ICAP Equity Fund. At that time, the Fund's existing no-load shares
were redesignated as Class I shares.
2. Performance figures for Investor Class shares, first offered April 29, 2008,
include the historical performance of Class A shares through April 28, 2008,
adjusted for differences in certain contractual expenses and fees.
3. Performance figures for Class A, C, R1, R2 and R3 shares, first offered
August 31, 2006, include the historical performance of Class I shares through
August 30, 2006, adjusted for differences in certain contractual expenses and
fees for Class A, C, R1, R2 and R3 shares.
4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard index for measuring large-cap U.S.
stock market performance. The S&P 500(R) Index is considered to be the Fund's
broad-based securities market index for comparison purposes.
THE 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.
6 MainStay ICAP Equity Fund
CLASS R3 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
14.66% 39.77% 3.65% 2.82%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
EQUITY FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10812 8703 10635
10167 7604 9054
8343 6592 7731
10179 8100 9890
11041 8614 10851
13430 9941 13074
15479 11456 15325
14823 10920 13981
9450 7064 8381
4/30/10 13208 9808 11894
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
S&P 500(R) Index(4) 15.66% 38.84% 2.63% -0.19%
S&P 500/Citigroup Value Index(5) 17.98 41.93 1.85 1.75
Average Lipper large-cap value fund(6) 14.65 38.20 1.63 2.89
</Table>
Results assume reinvestment of all dividends and capital gains. An investment
cannot be made directly in an index.
5. The S&P 500/Citigroup Value Index represents approximately half of the market
capitalization of the stocks in the S&P 500(R) Index that, on a growth-value
spectrum, have been identified as falling either wholly or partially within
the value half of the spectrum based on multiple factors. Results assume
reinvestment of all dividends and capital gains. An investment cannot be made
directly in an index.
6. The average Lipper large-cap value fund is representative of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies
with market capitalizations (on a three-year weighted basis) above Lipper's
U.S. Diversified Equity large-cap floor. Large-cap value funds typically have
a below average price-to-earnings ratio, price-to-book ratio, and three-year
sales-per-share growth value, compared to the S&P 500(R) Index. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on total returns with all dividend and
capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 7
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ICAP EQUITY FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,146.40 $ 8.36 $1,017.00 $ 7.85
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,148.40 $ 6.29 $1,018.90 $ 5.91
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,141.90 $12.27 $1,013.30 $11.53
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,150.20 $ 4.80 $1,020.30 $ 4.51
- -------------------------------------------------------------------------------------------------------
CLASS R1 SHARES $1,000.00 $1,149.50 $ 5.49 $1,019.70 $ 5.16
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,148.10 $ 6.87 $1,018.40 $ 6.46
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,146.60 $ 8.14 $1,017.20 $ 7.65
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.57% for Investor Class, 1.18% for Class A, 2.31% for Class C, 0.90% for
Class I, 1.03% for Class R1, 1.29% for Class R2 and 1.53% for Class R3)
multiplied by the average account value over the period, divided by 365 and
multiplied by 181 (to reflect the one-half year period). The table above
represents the actual expenses incurred during the one-half year period.
8 MainStay ICAP Equity Fund
SECTOR COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Financials 18.0%
Energy 14.2
Information Technology 12.6
Health Care 12.3
Industrials 12.2
Consumer Discretionary 10.3
Consumer Staples 7.3
Materials 5.0
Telecommunication Services 4.5
Short-Term Investment 3.3
Other Assets, Less Liabilities 0.3
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 12 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Wells Fargo & Co.
2. PepsiCo, Inc.
3. Lowe's Cos., Inc.
4. ConocoPhillips
5. Chevron Corp.
6. Viacom, Inc. Class B
7. U.S. Bancorp
8. Honeywell International, Inc.
9. Newmont Mining Corp.
10. Sanofi-Aventis, Sponsored ADR
</Table>
mainstayinvestments.com 9
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS JERROLD K. SENSER, CFA, AND THOMAS R.
WENZEL, CFA, OF INSTITUTIONAL CAPITAL LLC (ICAP), THE FUND'S SUBADVISOR.
HOW DID MAINSTAY ICAP EQUITY FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay ICAP Equity Fund returned 14.64% for
Investor Class shares, 14.84% for Class A shares and 14.19% for Class C shares
for the six months ended April 30, 2010. Over the same period, the Fund's Class
I shares returned 15.02%, Class R1 shares returned 14.95%, Class R2 shares
returned 14.81% and Class R3 shares returned 14.66%. Class A, Class I, Class R1,
Class R2 and Class R3 shares outperformed--and Investor Class and Class C shares
underperformed--the 14.65% return of the average Lipper(1) large-cap value fund
for the same time period. All share classes underperformed the 15.66% return of
the S&P 500(R) Index(2) for the six months ended April 30, 2010. The S&P 500(R)
Index is the Fund's broad-based securities-market index. See page 5 for Fund
returns with sales charges.
WHAT FACTORS ACCOUNTED FOR THE FUND'S PERFOR- MANCE RELATIVE TO THE S&P 500(R)
INDEX DURING
THE REPORTING PERIOD?
The Fund underperformed the S&P 500(R) Index during the reporting period
primarily because of weak stock selection in the consumer staples, health care
and financials sectors. These effects were partially offset by favorable stock
selection in the materials, energy and industrials sectors.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS DETRACTED FROM PERFORMANCE?
Relative to the S&P 500(R) Index, the Fund's strongest-contributing sector
during the reporting period was industrials, followed by materials and energy.
The sectors that detracted the most from the Fund's performance relative to the
Index included health care, consumer staples and financials.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL STOCKS WERE POSITIVE CONTRIBUTORS
TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH STOCKS DETRACTED?
On an absolute basis, the stocks that made the strongest positive contributions
to the Fund's performance during the reporting period were home improvement
retailer Lowe's, diversified manufacturer Honeywell International and railroad
operator CSX. Each of these holdings benefited from a recovering economy and a
pickup in consumer and business activity.
Major detractors from the Fund's performance on an absolute basis included
pharmacy retailer and benefits manager CVS Caremark, diversified health care
company Sanofi-Aventis and brewer Molson Coors. Shares of CVS Caremark
underperformed the S&P 500(R) Index because of disappointing sales and because
gains from the integration of CVS and Caremark did not materialize as
anticipated. We sold the Fund's position in CVS Caremark during the reporting
period. Sanofi-Aventis and Molson Coors remained
in the Fund at the end of the reporting period, as
we continued to find these stocks attractive.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During a reporting period characterized by ongoing, if somewhat restrained,
economic recovery, the stock market was volatile but continued to rebound
overall. In this environment, we looked for stocks with attractive valuations
and specific catalysts that might trigger appreciation over a 12- to 18-month
time frame.
We added integrated oil firm ConocoPhillips to the Fund during the reporting
period. The investment reflected our belief that the stock was attractively
valued and that its management was focused on improving returns by divesting
underperforming assets, cutting costs and capital expenditures, and then using
free cash flow to reduce debt and repurchase shares. We also added insurance
carrier Aflac. We believed that the company's investment portfolio performance
and its sales in Japan would exceed expectations.
In addition to the sales already mentioned, we sold the Fund's position in
financial services provider Capital One Financial and semiconductor manufacturer
Intel. Each was sold when we found other stocks that we believed had greater
upside potential and were more attractive on a relative valuation basis.
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
During the reporting period, the Fund increased its sector exposure relative to
the S&P 500(R) Index in information technology and energy. With these increases,
the Fund shifted to an overweight posi-
tion in energy relative to the S&P 500(R) Index but remained underweight in
information technology.
Over the same period, the Fund decreased its allocations relative to the S&P
500(R) Index in consumer
1. See footnote on page 7 for more information about Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500(R) Index.
10 MainStay ICAP Equity Fund
staples and financials. The reduced allocations made the Fund less overweight
relative to the S&P 500(R) Index in financials and more underweight relative to
the Index in consumer staples.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was overweight relative to the S&P 500(R) Index
in the energy and telecom-munication services sectors and underweight relative
to the Index in information technology and consumer staples. This positioning
reflected our views of the prospects for the economy and the relative
attractiveness of individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 96.4%+
- -------------------------------------------------------
CONSUMER DISCRETIONARY 10.3%
Johnson Controls, Inc. 512,850 $ 17,226,631
V Lowe's Cos., Inc. 1,271,050 34,470,876
McDonald's Corp. 133,850 9,448,472
V Viacom, Inc. Class B (a) 881,741 31,151,910
------------
92,297,889
------------
CONSUMER STAPLES 7.3%
Coca-Cola Co. (The) 317,400 16,965,030
Molson Coors Brewing Co.
Class B 261,950 11,620,102
V PepsiCo, Inc. 555,138 36,206,100
------------
64,791,232
------------
ENERGY 14.2%
V Chevron Corp. 386,350 31,464,344
V ConocoPhillips 558,750 33,072,412
Halliburton Co. 562,050 17,226,833
Marathon Oil Corp. 768,000 24,691,200
Occidental Petroleum Corp. 225,012 19,949,564
------------
126,404,353
------------
FINANCIALS 18.0%
Aflac, Inc. 397,300 20,246,408
Aon Corp. 422,350 17,932,981
BB&T Corp. 595,850 19,806,054
JPMorgan Chase & Co. 615,416 26,204,413
TD Ameritrade Holding Corp.
(a) 453,000 9,069,060
V U.S. Bancorp 1,118,600 29,944,922
V Wells Fargo & Co. 1,127,500 37,331,525
------------
160,535,363
------------
HEALTH CARE 12.3%
Covidien PLC 443,300 21,273,967
DaVita, Inc.(a) 129,650 8,094,050
Merck & Co., Inc. 707,080 24,776,083
Pfizer, Inc. 1,636,350 27,359,772
V Sanofi-Aventis, Sponsored
ADR (a)(b) 831,900 28,376,109
------------
109,879,981
------------
INDUSTRIALS 12.2%
Caterpillar, Inc. 369,300 25,145,637
CSX Corp. 355,450 19,922,973
Cummins, Inc. 149,100 10,769,493
V Honeywell International,
Inc. 612,818 29,090,470
Masco Corp. 712,150 11,558,195
Robert Half International,
Inc. 174,050 4,765,489
Textron, Inc. 346,100 7,904,924
------------
109,157,181
------------
INFORMATION TECHNOLOGY 12.6%
Accenture PLC Class A 354,600 15,474,744
Cisco Systems, Inc. (a) 663,100 17,850,652
Hewlett-Packard Co. 452,459 23,514,294
MasterCard, Inc. Class A 37,850 9,388,314
QUALCOMM, Inc. 484,700 18,777,278
Texas Instruments, Inc. 1,045,218 27,186,120
------------
112,191,402
------------
MATERIALS 5.0%
V Newmont Mining Corp. 507,000 28,432,560
Owens-Illinois, Inc.(a) 455,700 16,150,008
------------
44,582,568
------------
TELECOMMUNICATION SERVICES 4.5%
BCE, Inc. 624,150 18,786,915
Vodafone Group PLC,
Sponsored ADR (b) 981,200 21,782,640
------------
40,569,555
------------
Total Common Stocks
(Cost $670,721,358) 860,409,524
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 3.3%
- -------------------------------------------------------
REPURCHASE AGREEMENT 3.3%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$30,054,298
(Collateralized by a
United States
Treasury Bill with rate of
0.107%
and a maturity date of
6/3/10, with
a Principal Amount of
$30,660,000
and a Market Value of
$30,656,934) $30,054,272 30,054,272
------------
Total Short-Term Investment
(Cost $30,054,272) 30,054,272
------------
Total Investments
(Cost $700,775,630) (c) 99.7% 890,463,796
Other Assets, Less
Liabilities 0.3 2,332,736
----------- ------------
Net Assets 100.0% $892,796,532
=========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) At April 30, 2010, cost is $735,394,794
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $191,847,039
Gross unrealized depreciation (36,778,037)
------------
Net unrealized appreciation $155,069,002
============
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
12 MainStay ICAP Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $860,409,524 $ -- $ -- $860,409,524
Short-Term Investment
Repurchase Agreement -- 30,054,272 -- 30,054,272
------------ ----------- -------- ------------
Total Investments in Securities $860,409,524 $30,054,272 $-- $890,463,796
============ =========== ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $700,775,630) $ 890,463,796
Receivables:
Investment securities sold 3,503,423
Fund shares sold 1,461,331
Dividends and interest 885,763
Other assets 71,749
-------------
Total assets 896,386,062
-------------
LIABILITIES:
Payables:
Investment securities purchased 2,551,624
Manager (See Note 3) 570,966
Fund shares redeemed 231,813
Transfer agent (See Note 3) 115,038
Shareholder communication 70,481
Professional fees 21,622
NYLIFE Distributors (See Note 3) 15,868
Trustees 2,774
Custodian 2,624
Accrued expenses 6,720
-------------
Total liabilities 3,589,530
-------------
Net assets $ 892,796,532
=============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 26,081
Additional paid-in capital 993,433,310
-------------
993,459,391
Accumulated undistributed net
investment income 166,163
Accumulated net realized loss on
investments and foreign currency
transactions (290,517,188)
Net unrealized appreciation on
investments 189,688,166
-------------
Net assets $ 892,796,532
=============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 12,629,524
=============
Shares of beneficial interest
outstanding 369,801
=============
Net asset value per share
outstanding $ 34.15
Maximum sales charge (5.50% of
offering price) 1.99
-------------
Maximum offering price per share
outstanding $ 36.14
=============
CLASS A
Net assets applicable to
outstanding shares $ 29,765,525
=============
Shares of beneficial interest
outstanding 870,760
=============
Net asset value per share
outstanding $ 34.18
Maximum sales charge (5.50% of
offering price) 1.99
-------------
Maximum offering price per share
outstanding $ 36.17
=============
CLASS C
Net assets applicable to
outstanding shares $ 7,149,063
=============
Shares of beneficial interest
outstanding 210,551
=============
Net asset value and offering price
per share outstanding $ 33.95
=============
CLASS I
Net assets applicable to
outstanding shares $ 835,629,343
=============
Shares of beneficial interest
outstanding 24,407,487
=============
Net asset value and offering price
per share outstanding $ 34.24
=============
CLASS R1
Net assets applicable to
outstanding shares $ 2,677,250
=============
Shares of beneficial interest
outstanding 78,161
=============
Net asset value and offering price
per share outstanding $ 34.25
=============
CLASS R2
Net assets applicable to
outstanding shares $ 3,451,800
=============
Shares of beneficial interest
outstanding 100,958
=============
Net asset value and offering price
per share outstanding $ 34.19
=============
CLASS R3
Net assets applicable to
outstanding shares $ 1,494,027
=============
Shares of beneficial interest
outstanding 43,743
=============
Net asset value and offering price
per share outstanding $ 34.15
=============
</Table>
14 MainStay ICAP Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 8,065,756
Interest 859
------------
Total income 8,066,615
------------
EXPENSES:
Manager (See Note 3) 3,216,362
Transfer agent (See Note 3) 335,315
Distribution/Service--Investor
Class (See Note 3) 15,134
Distribution/Service--Class A
(See Note 3) 34,508
Distribution/Service--Class C
(See Note 3) 31,121
Distribution/Service--Class R2
(See Note 3) 3,578
Distribution/Service--Class R3
(See Note 3) 1,632
Professional fees 70,896
Shareholder communication 63,808
Registration 50,960
Trustees 13,917
Custodian 10,387
Shareholder service (See Note 3) 2,978
Miscellaneous 27,297
------------
Total expenses before waiver 3,877,893
Expense waiver from Manager (See
Note 3) (127,014)
------------
Net expenses 3,750,879
------------
Net investment income 4,315,736
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Security transactions 27,466,449
Foreign currency transactions 10,328
------------
Net realized gain on investments
and foreign currency transactions 27,476,777
------------
Net change in unrealized
appreciation on investments 81,769,719
------------
Net realized and unrealized gain on
investments and foreign currency
transactions 109,246,496
------------
Net increase in net assets
resulting from operations $113,562,232
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$80,737.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 4,315,736 $ 11,875,074
Net realized gain (loss)
on investments and
foreign currency
transactions 27,476,777 (231,299,237)
Net change in unrealized
appreciation
(depreciation) on
investments 81,769,719 295,413,981
---------------------------
Net increase in net assets
resulting from operations 113,562,232 75,989,818
---------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (42,232) (212,789)
Class A (123,814) (414,134)
Class C (11,585) (59,656)
Class I (4,329,910) (16,296,994)
Class R1 (12,422) (37,929)
Class R2 (13,370) (34,582)
Class R3 (3,008) (3,304)
---------------------------
Total dividends to
shareholders (4,536,341) (17,059,388)
---------------------------
Capital share transactions:
Net proceeds from sale of
shares 110,904,537 161,741,286
Net asset value of shares
issued to shareholders in
reinvestment of dividends 4,425,097 16,634,734
Cost of shares redeemed (83,593,332) (257,593,968)
---------------------------
Increase (decrease) in
net assets derived from
capital share
transactions 31,736,302 (79,217,948)
---------------------------
Net increase (decrease)
in net assets 140,762,193 (20,287,518)
NET ASSETS:
Beginning of period 752,034,339 772,321,857
---------------------------
End of period $892,796,532 $ 752,034,339
===========================
Accumulated undistributed
net investment income at
end of period $ 166,163 $ 386,768
===========================
</Table>
16 MainStay ICAP Equity 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
APRIL 29,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 29.89 $ 26.95 $ 39.51
------- ------- -------
Net investment income 0.07 (a) 0.32 (a) 0.27
Net realized and unrealized gain
(loss) on investments 4.30 3.15 (12.55)
------- ------- -------
Total from investment operations 4.37 3.47 (12.28)
------- ------- -------
Less dividends and distributions:
From net investment income (0.11) (0.53) (0.28)
From net realized gain on
investments -- -- --
------- ------- -------
Total dividends and distributions (0.11) (0.53) (0.28)
------- ------- -------
Net asset value at end of period $ 34.15 $ 29.89 $ 26.95
======= ======= =======
Total investment return (b) 14.64%(c) 13.32% (31.24%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.45%++ 1.24% 1.54% ++
Net expenses 1.57%++ 1.29% 1.19% ++
Expenses (before
waiver/reimbursement) 1.57%++ 1.69% 1.61% ++
Portfolio turnover rate 28% 93% 106%
Net assets at end of period (in
000's) $12,630 $11,465 $10,798
</Table>
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $29.78 $26.86 $ 41.43 $44.96 $44.82
------ ------ ------- ------ ------
Net investment income (loss) (0.06)(a) 0.13 (a) 0.19 0.34 0.08 (a)
Net realized and unrealized gain
(loss) on investments 4.29 3.13 (14.55) 1.85 4.03
------ ------ ------- ------ ------
Total from investment operations 4.23 3.26 (14.36) 2.19 4.11
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income (0.06) (0.34) (0.21) (0.31) (0.24)
From net realized gain on
investments -- -- -- (5.41) (3.73)
------ ------ ------- ------ ------
Total dividends and distributions (0.06) (0.34) (0.21) (5.72) (3.97)
------ ------ ------- ------ ------
Net asset value at end of period $33.95 $29.78 $ 26.86 $41.43 $44.96
====== ====== ======= ====== ======
Total investment return (b) 14.19% (c) 12.51% (34.82%)(c) 4.99% 9.30%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.35%)++ 0.52% 0.65% ++ 0.49% 0.54%++
Net expenses 2.31% ++ 2.04% 1.94% ++ 1.93% 2.05%++
Expenses (before
waiver/reimbursement) 2.31% ++ 2.44% 2.30% ++ 2.11% 2.14%++
Portfolio turnover rate 28% 93% 106% 71% 80%
Net assets at end of period (in
000's) $7,149 $5,206 $ 4,996 $8,606 $1,922
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
</Table>
18 MainStay ICAP Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
- ------------------------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
$ 29.89 $ 26.93 $ 41.53 $ 45.01 $44.82
------- ------- ------- ------- ------
0.13 (a) 0.35 (a) 0.42 0.66 0.20 (a)
4.30 3.15 (14.59) 1.88 4.02
------- ------- ------- ------- ------
4.43 3.50 (14.17) 2.54 4.22
------- ------- ------- ------- ------
(0.14) (0.54) (0.43) (0.61) (0.30)
-- -- -- (5.41) (3.73)
------- ------- ------- ------- ------
(0.14) (0.54) (0.43) (6.02) (4.03)
------- ------- ------- ------- ------
$ 34.18 $ 29.89 $ 26.93 $ 41.53 $45.01
======= ======= ======= ======= ======
14.84%(c) 13.46% (34.38%)(c) 5.78% 9.55%(c)
0.82%++ 1.35% 1.38% ++ 1.22% 1.28%++
1.18%++ 1.18% 1.18% ++ 1.18% 1.30%++
1.18%++ 1.26% 1.35% ++ 1.36% 1.39%++
28% 93% 106% 71% 80%
$29,766 $25,257 $21,826 $51,349 $6,798
</Table>
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2008***
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31,
2010* 2009 2008 2007 2006 2005
$ 29.93 $ 26.97 $ 41.57 $ 45.03 $ 41.17 $ 44.01
-------- -------- -------- ---------- -------- --------
0.18 (a) 0.45 (a) 0.54 0.77 0.63 (a) 0.65
4.31 3.14 (14.62) 1.94 7.59 4.17
-------- -------- -------- ---------- -------- --------
4.49 3.59 (14.08) 2.71 8.22 4.82
-------- -------- -------- ---------- -------- --------
(0.18) (0.63) (0.52) (0.76) (0.63) (0.64)
-- -- -- (5.41) (3.73) (7.02)
-------- -------- -------- ---------- -------- --------
(0.18) (0.63) (0.52) (6.17) (4.36) (7.66)
-------- -------- -------- ---------- -------- --------
$ 34.24 $ 29.93 $ 26.97 $ 41.57 $ 45.03 $ 41.17
======== ======== ======== ========== ======== ========
15.02%(c) 13.86% (34.18%)(c) 6.20% 20.17% 10.91%
1.11%++ 1.76% 1.79% ++ 1.63% 1.42% 1.37%
0.90%++ 0.83% 0.80% ++ 0.80% 0.80% 0.80%
0.93%++ 1.02% 0.96% ++ 0.92% 0.88% 0.88%
28% 93% 106% 71% 80% 86%
$835,629 $705,425 $732,479 $1,041,210 $982,543 $800,011
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R1
----------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $29.94 $26.98 $ 41.59 $45.00 $44.82
------ ------ ------- ------ ------
Net investment income 0.16 (a) 0.39 (a) 0.52 0.77 0.22 (a)
Net realized and unrealized gain
(loss) on investments 4.31 3.18 (14.64) 1.94 4.03
------ ------ ------- ------ ------
Total from investment operations 4.47 3.57 (14.12) 2.71 4.25
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income (0.16) (0.61) (0.49) (0.71) (0.34)
From net realized gain on
investments -- -- -- (5.41) (3.73)
------ ------ ------- ------ ------
Total dividends and distributions (0.16) (0.61) (0.49) (6.12) (4.07)
------ ------ ------- ------ ------
Net asset value at end of period $34.25 $29.94 $ 26.98 $41.59 $45.00
====== ====== ======= ====== ======
Total investment return (b) 14.95%(c) 13.73% (34.24%)(c) 6.10% 9.67%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.98%++ 1.49% 1.66% ++ 1.72% 1.38% ++
Net expenses 1.03%++ 0.94% 0.90% ++ 0.90% 0.90% ++
Expenses (before
waiver/reimbursement) 1.03%++ 1.11% 1.06% ++ 1.02% 0.99% ++
Portfolio turnover rate 28% 93% 106% 71% 80%
Net assets at end of period (in
000's) $2,677 $2,268 $ 1,370 $1,097 $ 40
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $29.89 $26.93 $ 41.52 $45.00 $44.82
------ ------ ------- ------ ------
Net investment income 0.04 (a) 0.23 (a) 0.38 0.57 0.13 (a)
Net realized and unrealized gain
(loss) on investments 4.34 3.21 (14.61) 1.86 4.06
------ ------ ------- ------ ------
Total from investment operations 4.38 3.44 (14.23) 2.43 4.19
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income (0.12) (0.48) (0.36) (0.50) (0.28)
From net realized gain on
investments -- -- -- (5.41) (3.73)
------ ------ ------- ------ ------
Total dividends and distributions (0.12) (0.48) (0.36) (5.91) (4.01)
------ ------ ------- ------ ------
Net asset value at end of period $34.15 $29.89 $ 26.93 $41.52 $45.00
====== ====== ======= ====== ======
Total investment return (b) 14.66%(c) 13.22% (34.51%)(c) 5.55% 9.49%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.27%++ 0.88% 1.16% ++ 0.98% 0.86% ++
Net expenses 1.53%++ 1.45% 1.40% ++ 1.40% 1.40% ++
Expenses (before
waiver/reimbursement) 1.53%++ 1.60% 1.57% ++ 1.52% 1.49% ++
Portfolio turnover rate 28% 93% 106% 71% 80%
Net assets at end of period (in
000's) $1,494 $ 365 $ 72 $ 67 $ 27
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
</Table>
20 MainStay ICAP Equity Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R2
------------------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
$29.90 $26.94 $ 41.54 $45.02 $44.82
------ ------ ------- ------ ------
0.10 (a) 0.33 (a) 0.44 0.63 0.12 (a)
4.33 3.17 (14.62) 1.92 4.13
------ ------ ------- ------ ------
4.43 3.50 (14.18) 2.55 4.25
------ ------ ------- ------ ------
(0.14) (0.54) (0.42) (0.62) (0.32)
-- -- -- (5.41) (3.73)
------ ------ ------- ------ ------
(0.14) (0.54) (0.42) (6.03) (4.05)
------ ------ ------- ------ ------
$34.19 $29.90 $ 26.94 $41.54 $45.02
====== ====== ======= ====== ======
14.81%(c) 13.47% (34.38%)(c) 5.82% 9.58%(c)
0.64%++ 1.27% 1.43% ++ 1.29% 0.77%++
1.29%++ 1.19% 1.15% ++ 1.15% 1.15%++
1.29%++ 1.36% 1.31% ++ 1.27% 1.24%++
28% 93% 106% 71% 80%
$3,452 $2,050 $ 781 $1,156 $1,161
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
MAINSTAY ICAP SELECT EQUITY FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges 8.99% 31.45% 3.10% 3.85%
Excluding sales charges 15.33 39.10 4.27 4.44
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
SELECT FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 9450 10000 10000
10099 8703 10635
9252 7604 9054
7875 6592 7731
10539 8100 9890
11839 8614 10851
14293 9941 13074
16662 11456 15325
15967 10920 13981
10492 7064 8381
4/30/10 14595 9808 11894
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges 9.14% 31.84% 3.19% 3.90%
Excluding sales charges 15.50 39.51 4.36 4.49
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
SELECT EQUITY INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 23625 25000 25000
25247 21757 26587
23129 19010 22636
19686 16480 19327
26347 20250 24725
29596 21534 27129
35733 24853 32686
41655 28640 38312
39918 27301 34954
26266 17660 20952
4/30/10 36644 24520 29736
</Table>
CLASS B SHARES(4)--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges 9.92% 33.15% 3.16% 3.67%
Excluding sales charges 14.92 38.15 3.51 3.67
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
SELECT FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10607 8703 10635
9644 7604 9054
8147 6592 7731
10822 8100 9890
12066 8614 10851
14459 9941 13074
16730 11456 15325
15918 10920 13981
10379 7064 8381
4/30/10 14338 9808 11894
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.50% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge, are
subject to a contingent deferred sales charge ("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 or
individual 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 0.25%. Class R1 and R2 shares are available only
through corporate-sponsored retirement programs, which include certain
program requirements. Class R3 shares are sold with no initial sales charge
or CDSC, have an annual 12b-1 fee of 0.50% and
THE FOOTNOTES ON THE NEXT TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
22 MainStay ICAP Select Equity Fund
CLASS C SHARES(3)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges 13.92% 37.15% 3.51% 3.67%
Excluding sales charges 14.92 38.15 3.51 3.67
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
SELECT EQUITY INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10607 8703 10635
9644 7604 9054
8147 6592 7731
10822 8100 9890
12066 8614 10851
14459 9941 13074
16730 11456 15325
15918 10920 13981
10379 7064 8381
4/30/10 14338 9808 11894
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
15.68% 39.91% 4.65% 4.76%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP
SELECT EQUITY S&P 500(R) S&P 500/CITIGROUP
FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10713 8703 10635
9839 7604 9054
8396 6592 7731
11264 8100 9890
12685 8614 10851
15354 9941 13074
17943 11456 15325
17258 10920 13981
11383 7064 8381
4/30/10 15926 9808 11894
</Table>
CLASS R1 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
15.58% 39.57% 4.54% 4.65%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP
SELECT EQUITY S&P 500(R) S&P 500/CITIGROUP
FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10703 8703 10635
9819 7604 9054
8370 6592 7731
11219 8100 9890
12622 8614 10851
15262 9941 13074
17824 11456 15325
17127 10920 13981
11292 7064 8381
4/30/10 15760 9808 11894
</Table>
are available in certain individual retirement accounts or in certain
retirement plans for service and distribution. Performance figures reflect
certain fee waivers and/or expense limitations, without which total returns
would have been lower. For information on current fee waivers and/or expense
limitations, please refer to the notes to the financial statements. Effective
August 31, 2006, ICAP Select Equity Fund was renamed MainStay ICAP Select
Equity Fund. At that time, the Fund's existing no-load shares were
redesignated as Class I shares.
2. Performance figures for Investor Class shares, first offered April 29, 2008,
include the historical performance of Class A shares through April 28, 2008,
adjusted for differences in certain contractual expenses and fees.
3. Performance figures for Class A, C, R1, R2 and R3 shares, first offered
August 31, 2006, includes the historical performance of Class I shares
through August 30, 2006, adjusted for differences in certain contractual
expenses and fees for Class A, C, R1, R2 and R3 shares.
4. Performance figures for Class B shares, first offered November 13, 2009,
include the historical performance of Class I shares through November 12,
2009, adjusted for differences in certain contractual expenses and fees.
THE 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.
mainstayinvestments.com 23
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
15.41% 39.32% 4.28% 4.39%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP
SELECT EQUITY S&P 500(R) S&P 500/CITIGROUP
FUND INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10676 8703 10635
9770 7604 9054
8308 6592 7731
11108 8100 9890
12465 8614 10851
15034 9941 13074
17510 11456 15325
16784 10920 13981
11031 7064 8381
4/30/10 15368 9808 11894
</Table>
CLASS R3 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
15.29% 38.98% 4.03% 4.14%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP S&P 500(R) S&P 500/CITIGROUP
SELECT EQUITY INDEX VALUE INDEX
------------- ---------- -----------------
4/30/00 10000 10000 10000
10649 8703 10635
9722 7604 9054
8246 6592 7731
10997 8100 9890
12310 8614 10851
14811 9941 13074
17207 11456 15325
16457 10920 13981
10792 7064 8381
4/30/10 14999 9808 11894
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
S&P 500(R) Index(5) 15.66% 38.84% 2.63% -0.19%
S&P 500/Citigroup Value Index(6) 17.98 41.93 1.85 1.75
Average Lipper large-cap value fund(7) 14.65 38.20 1.63 2.89
</Table>
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard index for measuring large-cap U.S.
stock market performance. The S&P 500(R) Index is considered to be the Fund's
broad-based securities market index for comparison purposes. Results assume
reinvestment of all dividends and capital gains. An investment cannot be made
directly in an index.
6. The S&P 500/Citigroup Value Index represents approximately half of the market
capitalization of the stocks in the S&P 500(R) Index that, on a growth-value
spectrum, have been identified as falling either wholly or partially within
the value half of the spectrum based on multiple factors. Results assume
reinvestment of all dividends and capital gains. An investment cannot be made
directly in an index.
7. The average Lipper large-cap value fund is representative of funds that, by
portfolio practice, invest at least 75% of their equity assets in companies
with market capitalizations (on a three-year weighted basis) above Lipper's
U.S. Diversified Equity large-cap floor. Large-cap value funds typically have
a below average price-to-earnings ratio, price-to-book ratio, and three-year
sales-per-share growth value, compared to the S&P 500(R) Index. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on total returns with all dividend and
capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
24 MainStay ICAP Select Equity Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ICAP SELECT EQUITY FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09(3) 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,153.30 $ 7.85 $1,017.50 $ 7.35
- --------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,155.00 $ 6.30 $1,018.90 $ 5.91
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES(2) $1,000.00 $1,096.60 $10.78 $1,012.90 $10.35
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,149.20 $11.78 $1,013.80 $11.03
- --------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,156.80 $ 4.81 $1,020.30 $ 4.51
- --------------------------------------------------------------------------------------------------------
CLASS R1 SHARES $1,000.00 $1,155.80 $ 5.72 $1,019.50 $ 5.36
- --------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,154.10 $ 7.05 $1,018.20 $ 6.61
- --------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,152.90 $ 8.38 $1,017.00 $7.85
- --------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.47% for Investor Class, 1.18% for Class A, 2.22% for Class B , 2.21% for
Class C, 0.90% for Class I, 1.07% for Class R1, 1.32% for Class R2 and 1.57%
for Class R3) multiplied by the average account value over the period,
divided by 365 and multiplied by 181 days for Investor Class, Class A, Class
C, Class I, Class R1, Class R2 and Class R3 (to reflect the one-half year
period) and 169 days for Class B (to reflect the since-inception period).
2. Expenses paid during the period reflect ongoing costs for the period from
inception through April 30, 2010. Had these shares been offered for the full
six-month period ended April 30, 2010 and had the Fund provided a
hypothetical 5% annualized return, expenses paid during the period would have
been $11.08 and the ending account value would have been $1,013.80.
3. Class B shares began investment activity on November 13, 2009.
mainstayinvestments.com 25
SECTOR COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Financials 17.9%
Energy 14.0
Health Care 13.8
Industrials 13.5
Information Technology 12.8
Consumer Discretionary 10.3
Consumer Staples 5.3
Materials 4.1
Telecommunication Services 2.5
Short-Term Investment 3.6
Other Assets, Less Liabilities 2.2
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 29 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. PepsiCo, Inc.
2. ConocoPhillips
3. Wells Fargo & Co.
4. Sanofi-Aventis, Sponsored ADR
5. Newmont Mining Corp.
6. Lowe's Cos., Inc.
7. Honeywell International, Inc.
8. Caterpillar, Inc.
9. Merck & Co., Inc.
10. Marathon Oil Corp.
</Table>
26 MainStay ICAP Select Equity Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS JERROLD K. SENSER, CFA, AND THOMAS R.
WENZEL, CFA, OF INSTITUTIONAL CAPITAL LLC (ICAP), THE FUND'S SUBADVISOR.
HOW DID MAINSTAY ICAP SELECT EQUITY FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay ICAP Select Equity Fund returned 15.33%
for Investor Class shares, 15.50% for Class A shares and 14.92% for Class B and
Class C shares for the six months ended April 30, 2010. Over the same period,
the Fund's Class I shares returned 15.68%, Class R1 shares returned 15.58%,
Class R2 shares returned 15.41% and Class R3 shares returned 15.29%. All shares
classes outperformed the 14.65% return of the average Lipper(1) large-cap value
fund for the same time period. Class I shares outperformed--and all other share
classes underperformed--the 15.66% return of the S&P 500(R) Index(2) for the six
months ended April 30, 2010. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See pages 22 and 23 for Fund returns with sales
charges.
WHAT FACTORS ACCOUNTED FOR THE FUND'S PERFOR-
MANCE RELATIVE TO THE S&P 500(R) INDEX DURING
THE REPORTING PERIOD?
Favorable stock selection in the energy and industrials sectors contributed
positively to Fund performance as did an overweight position relative to the S&P
500(R) Index in industrials. Stock selection in the consumer staples, health
care and financials sectors detracted from the Fund's performance relative to
the Index.
DURING THE REPORTING PERIOD, WHICH SECTORS MADE THE STRONGEST CONTRIBUTIONS TO
THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS DETRACTED FROM PERFORMANCE?
Relative to the S&P 500(R) Index, the Fund's strongest-contributing sector
during the reporting period was industrials, followed by energy and materials.
The sectors that detracted the most from the Fund's performance relative to the
Index included health care, consumer staples and financials.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL STOCKS WERE STRONG CONTRIBUTORS TO
THE FUND'S ABSOLUTE PERFORMANCE AND WHICH STOCKS DETRACTED?
On an absolute basis, the holdings that made the strongest positive
contributions to the Fund's absolute performance during the reporting period
were home improvement retailer Lowe's, diversified manufacturer Honeywell
International and railroad operator CSX. Each of these three holdings benefited
from a recovering economy and a pickup in consumer and business activity.
Major detractors from performance on an absolute basis included pharmacy
retailer and benefits manager CVS Caremark, diversified health care company
Sanofi-Aventis and casualty insurer ACE. CVS Caremark performed poorly, as sales
disappointed. We sold the Fund's position in CVS Caremark during the reporting
period because the gains we expected from the integration of CVS and Caremark
failed to materialize. We eliminated the Fund's position in ACE, as our outlook
for anticipated pricing improvement and competitive advantages weakened and
other stocks looked more attractive. Sanofi-Aventis remained in the Fund at the
end of the reporting period, as we continued to find the stock attractive.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During a reporting period characterized by ongoing, if somewhat restrained,
economic recovery, the stock market was volatile but continued to rebound
overall. In this environment, we looked for stocks with attractive valuations
and specific catalysts that might trigger appreciation over a 12- to 18-month
time frame.
We added integrated oil firm ConocoPhillips to the Fund during the reporting
period. We felt that the stock was attractively valued and that its manage-ment
was focused on improving returns by divesting underperforming assets, cutting
costs and capital expenditures, and then using free cash flow to reduce debt and
repurchase shares. The Fund also added insurance carrier Aflac. We believed that
the com-
pany's investment portfolio performance and its sales in Japan would exceed
expectations.
In addition to the sales already mentioned, we sold the Fund's position in
financial services provider Capital One Financial and semiconductor manufacturer
Intel. Both stocks were sold when we found other stocks that we believed had
greater upside potential and were more attractive on a relative valuation basis.
WERE THERE ANY SIGNIFICANT SECTOR WEIGHTING CHANGES DURING THE REPORTING PERIOD?
During the reporting period, the Fund increased its sector weightings relative
to the S&P 500(R) Index in information technology and energy. With these
1. See footnote on page 24 for more information about Lipper Inc.
2. See footnote on page 24 for more information on the S&P 500 Index.
mainstayinvestments.com 27
increases, the Fund shifted to an overweight position relative to the S&P 500(R)
Index in energy but remained underweight in information technology.
Over the same period, the Fund decreased its exposure to consumer staples and
financials. These changes made the Fund less overweight relative to the S&P
500(R) Index in financials and more underweight relative to the Index in
consumer staples.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was overweight relative to the S&P 500(R) Index
in the energy and industrials sectors and underweight relative to the Index in
information technology and consumer staples. This positioning reflected our view
of prospects for the economy and the relative attractiveness of individual
holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
28 MainStay ICAP Select Equity Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 94.2%+
- ---------------------------------------------------------
CONSUMER DISCRETIONARY 10.3%
Johnson Controls, Inc. 2,326,740 $ 78,155,197
V Lowe's Cos., Inc. 4,269,380 115,785,586
Viacom, Inc. Class B (a) 2,791,452 98,621,999
--------------
292,562,782
--------------
CONSUMER STAPLES 5.3%
V PepsiCo, Inc. 2,321,397 151,401,512
--------------
ENERGY 14.0%
V ConocoPhillips 2,243,100 132,769,089
Halliburton Co. 2,453,335 75,194,718
V Marathon Oil Corp. 3,183,678 102,355,247
Occidental Petroleum Corp. 987,171 87,522,581
--------------
397,841,635
--------------
FINANCIALS 17.9%
Aflac, Inc. 1,353,200 68,959,072
Aon Corp. 1,377,600 58,492,896
BB&T Corp. 2,042,300 67,886,052
JPMorgan Chase & Co. 1,987,549 84,629,837
U.S. Bancorp 3,772,000 100,976,440
V Wells Fargo & Co. 3,846,128 127,345,298
--------------
508,289,595
--------------
HEALTH CARE 13.8%
Covidien PLC 1,466,590 70,381,654
V Merck & Co., Inc. 3,010,530 105,488,971
Pfizer, Inc. 5,751,110 96,158,559
V Sanofi-Aventis,
Sponsored ADR (a)(b) 3,467,050 118,261,076
--------------
390,290,260
--------------
INDUSTRIALS 13.5%
V Caterpillar, Inc. 1,558,903 106,145,705
CSX Corp. 1,480,440 82,978,662
Cummins, Inc. 773,712 55,885,218
V Honeywell International,
Inc. 2,241,076 106,383,878
Textron, Inc. 1,433,600 32,743,424
--------------
384,136,887
--------------
INFORMATION TECHNOLOGY 12.8%
Accenture PLC Class A 945,850 41,276,894
Cisco Systems, Inc. (a) 2,597,050 69,912,586
Hewlett-Packard Co. 1,506,187 78,276,538
QUALCOMM, Inc. 1,865,350 72,263,659
Texas Instruments, Inc. 3,898,870 101,409,609
--------------
363,139,286
--------------
MATERIALS 4.1%
V Newmont Mining Corp. 2,069,740 116,071,019
--------------
TELECOMMUNICATION SERVICES 2.5%
Vodafone Group PLC,
Sponsored ADR (b) 3,137,550 69,653,610
--------------
Total Common Stocks
(Cost $2,178,269,771) 2,673,386,586
--------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 3.6%
- ---------------------------------------------------------
REPURCHASE AGREEMENT 3.6%
State Street Bank and Trust
Co. 0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$100,718,441
(Collateralized by a
United States Treasury
Bill with a rate of
0.144% and a maturity
date of 7/15/10, with a
Principal Amount of
$102,765,000 and a Market
Value of $102,734,171) $100,718,357 100,718,357
--------------
Total Short-Term Investment
(Cost $100,718,357) 100,718,357
--------------
Total Investments
(Cost $2,278,988,128) (c) 97.8% 2,774,104,943
Other Assets, Less
Liabilities 2.2 63,010,273
------------ --------------
Net Assets 100.0% $2,837,115,216
============ ==============
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) At April 30, 2010, cost is $2,335,021,706
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $516,561,402
Gross unrealized depreciation (77,478,165)
------------
Net unrealized appreciation $439,083,237
============
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
29
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $2,673,386,586 $ -- $ -- $2,673,386,586
Short-Term Investment
Repurchase Agreement -- 100,718,357 -- 100,718,357
-------------- ------------ -------- --------------
Total Investments in Securities $2,673,386,586 $100,718,357 $-- $2,774,104,943
============== ============ ======== ==============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
30 MainStay ICAP Select Equity Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $2,278,988,128) $2,774,104,943
Receivables:
Fund shares sold 65,311,389
Investment securities sold 9,281,317
Dividends and interest 2,774,556
Other assets 200,184
--------------
Total assets 2,851,672,389
--------------
LIABILITIES:
Payables:
Investment securities purchased 8,930,243
Fund shares redeemed 2,694,623
Manager (See Note 3) 1,698,386
Transfer agent (See Note 3) 661,077
NYLIFE Distributors (See Note 3) 301,828
Shareholder communication 248,866
Professional fees 9,212
Trustees 7,191
Custodian 2,866
Accrued expenses 2,876
Dividend payable 5
--------------
Total liabilities 14,557,173
--------------
Net assets $2,837,115,216
==============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 85,833
Additional paid-in capital 3,050,342,571
--------------
3,050,428,404
Accumulated undistributed net
investment income 284,800
Accumulated net realized loss on
investments (708,714,803)
Net unrealized appreciation on
investments 495,116,815
--------------
Net assets $2,837,115,216
==============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 186,900,008
==============
Shares of beneficial interest
outstanding 5,659,556
==============
Net asset value per share
outstanding $ 33.02
Maximum sales charge (5.50% of
offering price) 1.92
--------------
Maximum offering price per share
outstanding $ 34.94
==============
CLASS A
Net assets applicable to
outstanding shares $ 465,096,542
==============
Shares of beneficial interest
outstanding 14,079,776
==============
Net asset value per share
outstanding $ 33.03
Maximum sales charge (5.50% of
offering price) 1.92
--------------
Maximum offering price per share
outstanding $ 34.95
==============
CLASS B
Net assets applicable to
outstanding shares $ 102,435,022
==============
Shares of beneficial interest
outstanding 3,121,241
==============
Net asset value and offering price
per share outstanding $ 32.82
==============
CLASS C
Net assets applicable to
outstanding shares $ 93,492,635
==============
Shares of beneficial interest
outstanding 2,848,782
==============
Net asset value and offering price
per share outstanding $ 32.82
==============
CLASS I
Net assets applicable to
outstanding shares $1,943,734,641
==============
Shares of beneficial interest
outstanding 58,747,837
==============
Net asset value and offering price
per share outstanding $ 33.09
==============
CLASS R1
Net assets applicable to
outstanding shares $ 15,553,685
==============
Shares of beneficial interest
outstanding 469,981
==============
Net asset value and offering price
per share outstanding $ 33.09
==============
CLASS R2
Net assets applicable to
outstanding shares $ 23,714,891
==============
Shares of beneficial interest
outstanding 717,899
==============
Net asset value and offering price
per share outstanding $ 33.03
==============
CLASS R3
Net assets applicable to
outstanding shares $ 6,187,792
==============
Shares of beneficial interest
outstanding 187,521
==============
Net asset value and offering price
per share outstanding $ 33.00
==============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
31
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 21,544,090
Interest 3,863
------------
Total income 21,547,953
------------
EXPENSES:
Manager (See Note 3) 9,734,356
Transfer agent (See Note 3) 1,957,879
Distribution/Service--Investor
Class (See Note 3) 206,272
Distribution/Service--Class A
(See Note 3) 510,167
Distribution/Service--Class B
(See Note 3) 463,163
Distribution/Service--Class C
(See Note 3) 401,077
Distribution/Service--Class R2
(See Note 3) 25,105
Distribution/Service--Class R3
(See Note 3) 13,130
Professional fees 179,572
Shareholder communication 166,929
Registration 124,588
Trustees 41,443
Custodian 20,699
Shareholder service (See Note 3) 20,037
Miscellaneous 60,231
------------
Total expenses before waiver 13,924,648
Expense waiver from Manager (See
Note 3) (725,764)
------------
Net expenses 13,198,884
------------
Net investment income 8,349,069
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 59,657,904
Net change in unrealized
appreciation on investments 262,454,923
------------
Net realized and unrealized gain on
investments 322,112,827
------------
Net increase in net assets
resulting from operations $330,461,896
============
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$37,976.
32 MainStay ICAP Select Equity Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 8,349,069 $ 20,335,188
Net realized gain (loss)
on investments 59,657,904 (444,231,673)
Net change in unrealized
appreciation
(depreciation) on
investments 262,454,923 608,693,467
------------------------------
Net increase in net
assets resulting from
operations 330,461,896 184,796,982
------------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (18,068) (92,937)
Class A (901,226) (1,892,680)
Class C -- (232,390)
Class I (7,695,633) (19,547,122)
Class R1 (57,032) (120,361)
Class R2 (41,457) (134,929)
Class R3 (6,285) (34,328)
------------------------------
Total dividends to
shareholders (8,719,701) (22,054,747)
------------------------------
Capital share
transactions:
Net proceeds from sale
of shares 529,319,670 561,820,873
Net asset value of
shares issued in
connection with the
acquisition of MainStay
Value Fund (See Note
10) 354,083,152 --
Net asset value of
shares issued in
connection with the
acquisition of MainStay
Mid Cap Value Fund (See
Note 10) 152,265,264 --
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends 7,797,327 19,471,340
Cost of shares redeemed (268,243,283) (516,758,908)
------------------------------
Increase in net assets
derived from capital
share transactions 775,222,130 64,533,305
------------------------------
Net increase in net
assets 1,096,964,325 227,275,540
NET ASSETS:
Beginning of period 1,740,150,891 1,512,875,351
------------------------------
End of period $2,837,115,216 $1,740,150,891
==============================
Accumulated undistributed
net investment income at
end of period $ 284,800 $ 655,432
==============================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
33
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------
APRIL 29,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
-------------------------------------
2010* 2009 2008
Net asset value at
beginning of period $ 28.68 $25.62 $ 36.87
-------- ------ -------
Net investment income
(loss) 0.04 (a) 0.25 0.25 (a)
Net realized and
unrealized gain (loss)
on investments 4.35 3.10 (11.25)
-------- ------ -------
Total from investment
operations 4.39 3.35 (11.00)
-------- ------ -------
Less dividends and
distributions:
From net investment
income (0.05) (0.29) (0.25)
From net realized gain
on investments -- -- --
-------- ------ -------
Total dividends and
distributions (0.05) (0.29) (0.25)
-------- ------ -------
Net asset value at end of
period $ 33.02 $28.68 $ 25.62
======== ====== =======
Total investment return
(b) 15.33%(c) 13.33% (29.97%)(c)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income
(loss) 0.26%++ 0.99% 1.49% ++
Net expenses 1.47%++ 1.30% 1.15% ++
Expenses (before
reimbursement) 1.52%++ 1.45% 1.31% ++
Portfolio turnover rate 26% 101% 117%
Net assets at end of
period (in 000's) $186,900 $9,808 $ 7,601
</Table>
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------------
2010* 2009 2008 2007 2006
Net asset value at
beginning of period $ 28.56 $ 25.53 $ 38.68 $ 41.56 $39.46
------- ------- ------- ------- ------
Net investment income
(loss) (0.07)(a) 0.07 0.18 (a) 0.14 (a) 0.13 (a)
Net realized and unrealized
gain (loss) on
investments 4.33 3.09 (13.12) 2.24 3.63
------- ------- ------- ------- ------
Total from investment
operations 4.26 3.16 (12.94) 2.38 3.76
------- ------- ------- ------- ------
Less dividends and
distributions:
From net investment
income -- (0.13) (0.21) (0.25) (0.23)
From net realized gain on
investments -- -- -- (5.01) (1.43)
------- ------- ------- ------- ------
Total dividends and
distributions -- (0.13) (0.21) (5.26) (1.66)
------- ------- ------- ------- ------
Net asset value at end of
period $ 32.82 $ 28.56 $ 25.53 $ 38.68 $41.56
======= ======= ======= ======= ======
Total investment return (b) 14.92% (c) 12.50% (33.59%)(c) 5.83% 9.59%(c)
Ratios (to average net
assets)/Supplemental
Data:
Net investment income
(loss) (0.46%)++ 0.28% 0.65% ++ 0.33% 0.91%++
Net expenses 2.21% ++ 2.05% 1.91% ++ 1.90% 1.95%++
Expenses (before
reimbursement) 2.27% ++ 2.21% 2.05% ++ 2.01% 2.04%++
Portfolio turnover rate 26% 101% 117% 123% 115%
Net assets at end of period
(in 000's) $93,493 $55,841 $47,831 $45,789 $3,293
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
</Table>
34 MainStay ICAP Select Equity Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A CLASS B
-------------------------------------------------------------------------------- ------------
JANUARY 1, SEPTEMBER 1, NOVEMBER 13,
SIX MONTHS 2008*** 2006** 2009**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, APRIL 30,
--------------------------------------------------------------------------------------------------
2010* 2009 2008 2007 2006 2010*
$ 28.69 $ 25.62 $ 38.79 $ 41.60 $ 39.46 $ 29.93
-------- -------- -------- -------- ------- --------
0.09 (a) 0.32 0.42 (a) 0.48 (a) 0.24 (a) (0.08)(a)
4.35 3.09 (13.18) 2.23 3.62 2.97
-------- -------- -------- -------- ------- --------
4.44 3.41 (12.76) 2.71 3.86 2.89
-------- -------- -------- -------- ------- --------
(0.10) (0.34) (0.41) (0.51) (0.29) --
-- -- -- (5.01) (1.43) --
-------- -------- -------- -------- ------- --------
(0.10) (0.34) (0.41) (5.52) (1.72) --
-------- -------- -------- -------- ------- --------
$ 33.03 $ 28.69 $ 25.62 $ 38.79 $ 41.60 $ 32.82
======== ======== ======== ======== ======= ========
15.50%(c) 13.58% (33.14%)(c) 6.62% 9.84%(c) 9.66% (c)
0.57%++ 1.21% 1.47% ++ 1.09% 1.73%++ (0.52%)++
1.18%++ 1.09% 1.10% ++ 1.15% 1.20%++ 2.22% ++
1.22%++ 1.28% 1.24% ++ 1.26% 1.29%++ 2.27% ++
26% 101% 117% 123% 115% 26%
$465,097 $190,956 $142,130 $161,070 $16,514 $102,435
</Table>
<Table>
<Caption>
CLASS I
- ---------------------------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2008***
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------
2010* 2009 2008 2007 2006 2005 2004
$ 28.74 $ 25.67 $ 38.84 $ 41.62 $ 36.17 $ 34.35 $ 29.79
---------- ---------- ---------- ---------- ---------- -------- --------
0.14 (a) 0.37 0.51 (a) 0.64 (a) 0.57 (a) 0.45 0.56
4.36 3.10 (13.20) 2.21 6.83 2.70 4.76
---------- ---------- ---------- ---------- ---------- -------- --------
4.50 3.47 (12.69) 2.85 7.40 3.15 5.32
---------- ---------- ---------- ---------- ---------- -------- --------
(0.15) (0.40) (0.48) (0.62) (0.52) (0.45) (0.56)
-- -- -- (5.01) (1.43) (0.88) (0.20)
---------- ---------- ---------- ---------- ---------- -------- --------
(0.15) (0.40) (0.48) (5.63) (1.95) (1.33) (0.76)
---------- ---------- ---------- ---------- ---------- -------- --------
$ 33.09 $ 28.74 $ 25.67 $ 38.84 $ 41.62 $ 36.17 $ 34.35
========== ========== ========== ========== ========== ======== ========
15.68%(c) 13.89% (32.99%)(c) 6.95% 20.60% 9.22% 17.98%
0.89%++ 1.50% 1.78% ++ 1.44% 1.45% 1.38% 2.18%
0.90%++ 0.83% 0.80% ++ 0.80% 0.80% 0.80% 0.80%
0.97%++ 1.03% 0.94% ++ 0.91% 0.88% 0.93% 1.01%
26% 101% 117% 123% 115% 170% 198%
$1,943,735 $1,454,261 $1,296,268 $1,863,460 $1,519,408 $676,703 $285,529
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
35
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R1
---------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------------
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $ 28.74 $ 25.68 $ 38.85 $41.62 $39.46
------- ------- ------- ------ ------
Net investment income 0.11 (a) 0.35 0.42 (a) 0.59 (a) 0.26 (a)
Net realized and unrealized gain
(loss) on investments 4.36 3.08 (13.13) 2.24 3.63
------- ------- ------- ------ ------
Total from investment operations 4.47 3.43 (12.71) 2.83 3.89
------- ------- ------- ------ ------
Less dividends and distributions:
From net investment income (0.12) (0.37) (0.46) (0.59) (0.30)
From net realized gain on
investments -- -- -- (5.01) (1.43)
------- ------- ------- ------ ------
Total dividends and distributions (0.12) (0.37) (0.46) (5.60) (1.73)
------- ------- ------- ------ ------
Net asset value at end of period $ 33.09 $ 28.74 $ 25.68 $38.85 $41.62
======= ======= ======= ====== ======
Total investment return (b) 15.58%(c) 13.69% (33.03%)(c) 6.87% 9.94%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.73%++ 1.23% 1.55% ++ 1.33% 1.89%++
Net expenses 1.07%++ 0.98% 0.91% ++ 0.90% 0.90%++
Expenses (before reimbursement) 1.07%++ 1.13% 1.06% ++ 1.01% 0.99%++
Portfolio turnover rate 26% 101% 117% 123% 115%
Net assets at end of period (in
000's) $15,554 $13,628 $ 5,286 $1,440 $ 63
</Table>
<Table>
<Caption>
CLASS R3
---------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------------
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $28.66 $25.60 $ 38.76 $41.58 $39.46
------ ------ ------- ------ ------
Net investment income 0.03 (a) 0.21 0.28 (a) 0.31 (a) 0.14 (a)
Net realized and unrealized gain
(loss) on investments 4.35 3.10 (13.10) 2.29 3.67
------ ------ ------- ------ ------
Total from investment operations 4.38 3.31 (12.82) 2.60 3.81
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income (0.04) (0.25) (0.34) (0.41) (0.26)
From net realized gain on
investments -- -- -- (5.01) (1.43)
------ ------ ------- ------ ------
Total dividends and distributions (0.04) (0.25) (0.34) (5.42) (1.69)
------ ------ ------- ------ ------
Net asset value at end of period $33.00 $28.66 $ 25.60 $38.76 $41.58
====== ====== ======= ====== ======
Total investment return (b) 15.29%(c) 13.16% (33.29%)(c) 6.30% 9.77%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.21%++ 0.78% 1.02% ++ 0.70% 1.00%++
Net expenses 1.57%++ 1.47% 1.40% ++ 1.40% 1.40%++
Expenses (before reimbursement) 1.57%++ 1.63% 1.55% ++ 1.51% 1.49%++
Portfolio turnover rate 26% 101% 117% 123% 115%
Net assets at end of period (in
000's) $6,188 $4,558 $ 2,963 $ 185 $ 27
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
</Table>
36 MainStay ICAP Select Equity Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R2
- ---------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
---------------------------------------------------------------------------------
2010* 2009 2008 2007 2006
$ 28.69 $ 25.63 $ 38.80 $ 41.60 $39.46
------- ------- ------- ------- ------
0.07 (a) 0.26 0.40 (a) 0.53 (a) 0.17 (a)
4.35 3.11 (13.18) 2.18 3.68
------- ------- ------- ------- ------
4.42 3.37 (12.78) 2.71 3.85
------- ------- ------- ------- ------
(0.08) (0.31) (0.39) (0.50) (0.28)
-- -- -- (5.01) (1.43)
------- ------- ------- ------- ------
(0.08) (0.31) (0.39) (5.51) (1.71)
------- ------- ------- ------- ------
33.03 $ 28.69 $ 25.63 $ 38.80 $41.60
======= ======= ======= ======= ======
15.41%(c) 13.46% (33.18%)(c) 6.56% 9.85%(c)
0.44%++ 1.07% 1.42% ++ 1.18% 1.25%++
1.32%++ 1.22% 1.15% ++ 1.15% 1.15%++
1.32%++ 1.38% 1.29% ++ 1.26% 1.24%++
26% 101% 117% 123% 115%
$23,715 $11,099 $10,796 $12,712 $ 27
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
37
MAINSTAY ICAP GLOBAL FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (4/30/08)
- -------------------------------------------------------
With sales charges 2.15% 26.70% -10.24%
Excluding sales charges 8.10 34.08 -7.67
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay ICAP MSCI World
Global Fund Index
------------- ----------
04/30/08 9450 10000
6009 6067
04/30/10 8056 8313
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (4/30/08)
- -------------------------------------------------------
With sales charges 2.27% 27.03% -10.11%
Excluding sales charges 8.22 34.43 -7.53
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay ICAP MSCI World
Global Fund Index
------------- ----------
04/30/08 23625 25000
15027 15168
4/30/010 20201 20782
</Table>
CLASS C SHARES--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (4/30/08)
- -------------------------------------------------------
With sales charges 6.71% 32.25% -8.31%
Excluding sales charges 7.71 33.25 -8.31
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay ICAP MSCI World
Global Fund Index
------------- ----------
04/30/08 10000 10000
6309 6067
4/30/10 8407 8313
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.50% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge, are
subject to a contingent deferred sales charge ("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 or
individual investors with a minimum initial investment of $5 million.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements.
2. The MSCI World Index is considered to be representative of the global stock
market. Results assume reinvestment of all dividends and capital gains. The
MSCI World Index is considered to be the Fund's broad-based securities market
index for
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
38 MainStay ICAP Global Fund
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (4/30/08)
- ----------------------------------------------
8.29% 34.62% -7.33%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MainStay ICAP MSCI World
Global Fund Index
------------- ----------
04/30/08 10000 10000
6379 6067
4/30/10 8587 8313
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
MSCI World Index(2) 9.40% 37.02% -8.82%
Average Lipper global multi-cap core fund(3) 10.82 37.46 -7.53
</Table>
comparison purposes. An investment cannot be made directly in an index.
3. The average Lipper global multi-cap core fund is representative of funds
that, by portfolio practice, invest in a variety of market capitalization
ranges without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Global multi-cap core
funds typically have an average price-to-cash flow ratio, price-to-book
ratio, and three-year sales-per-share growth value compared to the
S&P/Citigroup BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is
an independent monitor of fund performance. Results are based on total
returns with all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 39
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ICAP GLOBAL FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,081.00 $ 6.19 $1,018.80 $ 6.01
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,082.20 $ 5.94 $1,019.10 $ 5.76
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,077.10 $10.04 $1,015.10 $ 9.74
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,082.90 $ 4.65 $1,020.30 $4.51
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.20% for Investor Class, 1.15% for Class A, 1.95% for Class C and 0.90% for
Class I) multiplied by the average account value over the period, divided by
365 and multiplied by 181 (to reflect the one-half year period). The table
above represents the actual expenses incurred during the one-half year
period.
40 MainStay ICAP Global Fund
SECTOR COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Financials 19.2%
Industrials 16.7
Consumer Discretionary 13.5
Health Care 12.3
Energy 11.9
Information Technology 9.2
Materials 6.3
Utilities 3.6
Telecommunication Services 2.9
Consumer Staples 2.6
Short-Term Investment 2.8
Other Assets, Less Liabilities -1.0
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 44 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Sanofi-Aventis
2. Wells Fargo & Co.
3. BP PLC, Sponsored ADR
4. ConocoPhillips
5. Viacom, Inc. Class B
6. PepsiCo, Inc.
7. Marathon Oil Corp.
8. Daimler A.G.
9. Newmont Mining Corp.
10. Pfizer, Inc.
</Table>
mainstayinvestments.com 41
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS JERROLD K. SENSER, CFA, AND THOMAS R.
WENZEL, CFA, OF INSTITUTIONAL CAPITAL LLC (ICAP), THE FUND'S SUBADVISOR.
HOW DID MAINSTAY ICAP GLOBAL FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay ICAP Global Fund returned 8.10% for
Investor Class shares, 8.22% for Class A shares and 7.71% for Class C shares for
the six months ended April 30, 2010. Over the same period, the Fund's Class I
shares returned 8.29%. All share classes underperformed the 10.82% return of the
average Lipper(1) global multi-cap core fund and the 9.40% return of the MSCI
World Index(2) for the six months ended April 30, 2010. The MSCI World Index is
the Fund's broad-based securities-market index. See page 38 for Fund returns
with sales charges.
WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE RELATIVE TO THE MSCI WORLD INDEX
DURING THE REPORTING PERIOD?
The Fund underperformed the MSCI World Index during the reporting period
primarily because of weak stock selection in the health care, utilities and
consumer discretionary sectors. The effects were partially offset by favorable
stock selection in the materials sector and by an overweight position relative
to the MSCI World Index in industrials.
DURING THE REPORTING PERIOD, WHICH FUND SECTORS MADE THE STRONGEST CONTRIBUTIONS
TO THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS DETRACTED THE MOST?
During the reporting period, the sector that made
the strongest contribution to the Fund's performance relative to the MSCI World
Index was industrials, followed by energy and telecommunication services. The
sectors that detracted the most from the Fund's performance relative to the
Index were health care, utilities and financials.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL STOCKS MADE THE GREATEST POSITIVE
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH STOCKS DETRACTED?
On an absolute basis, the stocks that made the strongest positive contributions
to the Fund's performance during the reporting period included home improvement
retailer Lowe's, cable network and entertainment company Viacom and regional
bank BB&T. Lowe's benefited from the prospect that the housing market was
stabilizing and from a pickup in consumer spending. Viacom's stock rose on
improve-ment in the advertising market. Shares of BB&T strengthened as
conditions in the credit markets and the overall economy improved.
Major detractors from performance on an absolute basis included Spanish bank
Banco Santander, French bank Societe Generale and diversified health care
company Sanofi-Aventis. Banco Santander and Societe Generale were weak because
of rising concerns about Europe's sovereign debt during the reporting period. We
sold the Fund's position in Societe Generale during the reporting period when we
found other stocks to be more attractive. Banco Santander and Sanofi-Aventis
remained in the Fund at the end of the reporting period.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During a reporting period characterized by ongoing, if somewhat restrained,
economic recovery, the stock market was volatile but continued to rebound
overall. In this environment, we looked for stocks with attractive valuations
and specific catalysts that may trigger appreciation over a 12- to 18-month time
frame.
We added integrated oil firm ConocoPhillips to the Fund during the reporting
period. The investment reflected our belief that the stock was attractively
valued and that its management was focused on improving returns by divesting
underperforming assets, cutting costs and capital expenditures, and then using
free cash flow to reduce debt and repurchase shares. The Fund also added a
position in Bridgestone, the largest tire supplier in the world. At the time of
purchase, we believed pent-up demand would be unleashed in both the replacement
and original auto-equipment markets and might well result in improved sales
growth and profit margins for the company.
In addition to the sales already mentioned, we sold the Fund's position in
semiconductor manufacturer Intel when we found other stocks that we felt had
greater upside potential and were more attractive on a relative valuation basis.
We also sold the Fund's position in Saipem, an Italian company that specializes
in construction and drilling for the oil and gas industry worldwide, as it
reached our target price.
WERE THERE ANY SIGNIFICANT CHANGES IN THE FUND'S SECTOR WEIGHTINGS DURING THE
REPORTING PERIOD?
During the reporting period, the Fund increased its sector exposure relative to
the MSCI World Index in energy and materials. With these increases, the Fund
1. See footnote on page 39 for more information about Lipper Inc.
2. See footnote on page 38 for more information on the MSCI World Index.
42 MainStay ICAP Global Fund
shifted to an overweight position relative to the MSCI World Index in energy,
but remained underweight in materials.
Over the same period, we decreased the Fund's exposure to financials and
industrials. These changes reduced the Fund's overweight position in industrials
relative to the MSCI World Index and shifted the Fund's allocation to financials
to an underweight position relative to the Index.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was overweight relative to the MSCI World Index
in the industrials and consumer discretionary sectors and underweight relative
to the Index in consumer staples and information technology. This positioning
reflected our views of prospects for the economy and the relative attractiveness
of individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 43
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 98.2%+
- ------------------------------------------------------
CONSUMER DISCRETIONARY 13.5%
Bridgestone Corp. 23,300 $ 388,813
British Sky Broadcasting
Group PLC 82,550 774,223
China Dongxiang Group Co. 249,000 166,993
V Daimler A.G. (a) 18,350 946,890
Genting Berhad 150,500 326,394
Johnson Controls, Inc. 16,950 569,350
Lowe's Cos., Inc. 31,950 866,484
Nissan Motor Co., Ltd. (a) 36,300 317,945
TUI Travel PLC 89,800 384,059
V Viacom, Inc. Class B (a) 32,000 1,130,560
-----------
5,871,711
-----------
CONSUMER STAPLES 2.6%
V PepsiCo, Inc. 17,100 1,115,262
-----------
ENERGY 11.9%
V BP PLC, Sponsored ADR (b) 23,050 1,202,057
V ConocoPhillips 19,500 1,154,205
Halliburton Co. 21,400 655,910
V Marathon Oil Corp. 33,550 1,078,633
Occidental Petroleum Corp. 6,400 567,424
Repsol YPF S.A. 22,100 518,720
-----------
5,176,949
-----------
FINANCIALS 19.2%
Aflac, Inc. 12,700 647,192
Aon Corp. 11,450 486,167
Banco Santander S.A. 44,875 563,788
BB&T Corp. 24,150 802,746
Credit Suisse Group A.G.,
Sponsored ADR (a)(b) 19,450 888,865
Intesa Sanpaolo S.p.A. (a) 204,200 672,027
Mitsubishi Estate Co., Ltd. 24,100 435,635
Standard Chartered PLC 28,100 749,024
Tokio Marine Holdings, Inc. 14,500 431,849
U.S. Bancorp 31,050 831,208
UBS A.G. (a) 36,400 562,362
V Wells Fargo & Co. 38,350 1,269,768
-----------
8,340,631
-----------
HEALTH CARE 12.3%
Bayer A.G. 6,550 419,070
Covidien PLC 11,050 530,290
GlaxoSmithKline PLC 29,700 550,041
Merck & Co., Inc. 21,579 756,128
V Pfizer, Inc. 53,350 892,012
Roche Holding A.G., Sponsored
ADR (b) 20,550 809,670
V Sanofi-Aventis (a) 20,100 1,376,315
-----------
5,333,526
-----------
INDUSTRIALS 16.7%
ABB, Ltd. (a) 15,300 294,446
Caterpillar, Inc. 10,800 735,372
China Communications
Construction Co., Ltd.
Class H 317,500 297,969
CSX Corp. 7,900 442,795
Cummins, Inc. 4,000 288,920
Honeywell International, Inc. 18,100 859,207
Hutchison Whampoa, Ltd. 100,300 687,258
KOMATSU, Ltd. 26,050 525,734
Mitsubishi Corp. 32,200 764,098
Siemens A.G. 6,200 612,949
Sime Darby Berhad 182,400 498,021
Textron, Inc. 17,200 392,848
TNT N.V. 27,610 847,557
-----------
7,247,174
-----------
INFORMATION TECHNOLOGY 9.2%
Accenture PLC Class A 7,800 340,392
Cisco Systems, Inc. (a) 16,700 449,564
Hewlett-Packard Co. 10,600 550,882
HOYA Corp. 26,250 722,039
Murata Manufacturing Co.,
Ltd. 3,500 206,018
QUALCOMM, Inc. 16,700 646,958
SAP A.G. 8,850 426,355
Texas Instruments, Inc. 25,450 661,954
-----------
4,004,162
-----------
MATERIALS 6.3%
Anglo American PLC (a) 13,350 571,765
Holcim, Ltd. (a) 9,600 719,877
V Newmont Mining Corp. 16,350 916,908
Yara International A.S.A. 15,100 527,109
-----------
2,735,659
-----------
TELECOMMUNICATION SERVICES 2.9%
BCE, Inc. 13,650 410,865
Vodafone Group PLC, Sponsored
ADR (b) 37,900 841,380
-----------
1,252,245
-----------
UTILITIES 3.6%
Energias de Portugal S.A. 168,600 599,321
GDF Suez S.A. 13,626 485,516
Suez Environnement S.A. 22,637 491,013
-----------
1,575,850
-----------
Total Common Stocks
(Cost $37,367,848) 42,653,169
-----------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
44 MainStay ICAP Global Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 2.8%
- ------------------------------------------------------
REPURCHASE AGREEMENT 2.8%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$1,224,334 (Collateralized
by a United States
Treasury Bill with a rate
of 0.144%
and a maturity date of
7/15/10, with
a Principal Amount of
$1,250,000
and a Market Value of
$1,249,625) $1,224,333 $ 1,224,333
-----------
Total Short-Term Investment
(Cost $1,224,333) 1,224,333
-----------
Total Investments
(Cost $38,592,181) (c) 101.0% 43,877,502
Other Assets, Less
Liabilities (1.0) (430,541)
---------- -----------
Net Assets 100.0% $43,446,961
========== ===========
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) At April 30, 2010, cost is $39,717,574
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 6,090,897
Gross unrealized depreciation (1,930,969)
-----------
Net unrealized appreciation $ 4,159,928
===========
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks (b) $23,791,977 $18,861,192 $ -- $42,653,169
Short-Term Investment
Repurchase Agreement -- 1,224,333 -- 1,224,333
----------- ----------- -------- -----------
Total Investments in Securities $23,791,977 $20,085,525 $-- $43,877,502
=========== =========== ======== ===========
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 2 assets represent the following international equities: Sanofi-
Aventis, KOMATSU, Ltd., UBS A.G., Bridgestone Corp., ABB, Ltd., Holcim,
Ltd., TUI Travel PLC, British Sky Broadcasting Group PLC, Energias de
Portugal S.A., TNT N.V., Daimler A.G., Siemens A.G., Hutchison Whampoa,
Ltd., Mitsubishi Corp., GDF Suez S.A., Sime Darby Berhad, Suez Environnement
S.A., Standard Chartered PLC, Banco Santander S.A., China Communications
Construction Co., Ltd. Class H, Murata Manufacturing Co., Ltd., HOYA Corp.,
Mitsubishi Estate Co., Ltd., Yara International A.S.A., China Dongxiang
Group Co., Genting Berhad, Nissan Motor Co., Ltd., Repsol YPF S.A., Intesa
Sanpaolo S.p.A., Tokio Marine Holdings, Inc., Bayer A.G., GlaxoSmithKline
PLC, SAP A.G. and Anglo American PLC.
As of the six-month period ending April 30, 2010, securities with a total value
of $18,291,843 transferred from Level 1 to Level 2 due to certain international
equities being fair valued at period end by applying factors provided by a third
party vendor in accordance with the Fund's policies and procedures. Fair values
for these instruments at the reporting date are based on quoted market prices or
binding dealer price quotations.
The Fund recognizes transfers between the levels as of the beginning of the
period.
At April 30, 2010, the Fund did not hold any investments with significant
unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
45
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The table below sets forth the diversification of the ICAP Global Fund Portfolio
investments by country.
COUNTRY COMPOSITION
<Table>
<Caption>
VALUE PERCENT+
Canada $ 410,865 0.9%
Cayman Islands 166,993 0.4
China 297,969 0.7
France 2,352,844 5.4
Germany 2,405,264 5.6
Hong Kong 687,258 1.6
Ireland 870,682 2.0
Italy 672,027 1.5
Japan 3,792,131 8.7
Malaysia 824,415 1.9
Netherlands 847,557 2.0
Norway 527,109 1.2
Portugal 599,321 1.4
Spain 1,082,508 2.5
Switzerland 3,275,220 7.5
United Kingdom 5,072,549 11.7
United States 19,992,790 46.0
----------- -----
43,877,502 101.0
Other Assets, Less
Liabilities (430,541) (1.0)
----------- -----
Net Assets $43,446,961 100%
=========== =====
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
</Table>
46 MainStay ICAP Global Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $38,592,181) $ 43,877,502
Cash denominated in foreign
currencies
(identified cost $1) 1
Receivables:
Investment securities sold 416,813
Dividends and interest 82,190
Fund shares sold 6,800
Other assets 49,212
------------
Total assets 44,432,518
------------
LIABILITIES:
Payables:
Investment securities purchased 845,104
Fund shares redeemed 80,891
Professional fees 21,189
Manager (See Note 3) 18,673
Custodian 8,955
Shareholder communication 8,068
Transfer agent (See Note 3) 1,882
NYLIFE Distributors (See Note 3) 652
Trustees 143
------------
Total liabilities 985,557
------------
Net assets $ 43,446,961
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 5,238
Additional paid-in capital 51,849,599
------------
51,854,837
Accumulated undistributed net
investment income 126,424
Accumulated net realized loss on
investments and foreign currency
transactions (13,819,008)
Net unrealized appreciation on
investments 5,285,321
Net unrealized depreciation on
translation of other assets and
liabilities in foreign currencies (613)
------------
Net assets $ 43,446,961
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 346,881
============
Shares of beneficial interest
outstanding 41,919
============
Net asset value per share
outstanding $ 8.27
Maximum sales charge (5.50% of
offering price) 0.48
------------
Maximum offering price per share
outstanding $ 8.75
============
CLASS A
Net assets applicable to
outstanding shares $ 2,003,376
============
Shares of beneficial interest
outstanding 241,787
============
Net asset value per share
outstanding $ 8.29
Maximum sales charge (5.50% of
offering price) 0.48
------------
Maximum offering price per share
outstanding $ 8.77
============
CLASS C
Net assets applicable to
outstanding shares $ 183,361
============
Shares of beneficial interest
outstanding 22,248
============
Net asset value and offering price
per share outstanding $ 8.24
============
CLASS I
Net assets applicable to
outstanding shares $ 40,913,343
============
Shares of beneficial interest
outstanding 4,931,724
============
Net asset value and offering price
per share outstanding $ 8.30
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
47
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 369,333
Interest 46
----------
Total income 369,379
----------
EXPENSES:
Manager (See Note 3) 166,664
Registration 29,123
Professional fees 21,299
Custodian 18,046
Transfer agent (See Note 3) 5,893
Shareholder communication 5,613
Distribution/Service--Investor
Class (See Note 3) 344
Distribution/Service--Class A (See
Note 3) 1,994
Distribution/Service--Class C (See
Note 3) 853
Trustees 720
Miscellaneous 6,276
----------
Total expenses before waiver 256,825
Expense waiver from Manager (See
Note 3) (66,012)
----------
Net expenses 190,813
----------
Net investment income 178,566
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions 1,467,399
Foreign currency transactions (365)
----------
Net realized gain on investments and
foreign currency transactions 1,467,034
----------
Net change in unrealized
appreciation (depreciation) on:
Investments 1,583,534
Translation of other assets and
liabilities in foreign
currencies (393)
----------
Net change in unrealized
appreciation on investments and
foreign currency transactions 1,583,141
----------
Net realized and unrealized gain on
investments and foreign currency
transactions 3,050,175
----------
Net increase in net assets resulting
from operations $3,228,741
==========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$10,534.
48 MainStay ICAP Global Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 178,566 $ 655,062
Net realized gain (loss) on
investments and foreign
currency transactions 1,467,034 (9,655,924)
Net change in unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions 1,583,141 15,782,393
------------------------
Net increase in net assets
resulting from operations 3,228,741 6,781,531
------------------------
Dividends to shareholders:
From net investment income:
Investor Class (606) (1,920)
Class A (2,815) (11,621)
Class C -- (775)
Class I (134,305) (791,051)
------------------------
Total dividends to
shareholders (137,726) (805,367)
------------------------
Capital share transactions:
Net proceeds from sale of
shares 1,821,135 1,425,690
Net asset value of shares
issued to shareholders in
reinvestment of dividends 8,573 39,822
Cost of shares redeemed (a) (305,493) (721,819)
------------------------
Increase in net assets
derived from capital
share transactions 1,524,215 743,693
------------------------
Net increase in net
assets 4,615,230 6,719,857
NET ASSETS:
Beginning of period 38,831,731 32,111,874
------------------------
End of period $43,446,961 $38,831,731
========================
Accumulated undistributed net
investment income at end of
period $ 126,424 $ 85,584
========================
</Table>
(a) Cost of shares redeemed net of redemption fees of $19 for the six-month
period ended April 30, 2010 and $2 for the year ended October 31, 2009. (See
Note 2(L)).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
49
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
------------------------------------------------ CLASS A
APRIL 30, -----------------------------
SIX MONTHS 2008** SIX MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2010* 2009
Net asset value at beginning of
period $ 7.67 $ 6.46 $ 10.00 $ 7.68 $ 6.47
------ ------ ------- ------ ------
Net investment income 0.02 (a) 0.11 0.08 (a) 0.03 (a) 0.10
Net realized and unrealized gain
(loss) on investments 0.60 1.24 (3.57) 0.60 1.26
Net realized and unrealized loss on
foreign currency transactions (0.00)++ (0.00)++ (0.00)++ (0.00)++ (0.00)++
------ ------ ------- ------ ------
Total from investment operations 0.62 1.35 (3.49) 0.63 1.36
------ ------ ------- ------ ------
Less dividends:
From net investment income (0.02) (0.14) (0.05) (0.02) (0.15)
------ ------ ------- ------ ------
Redemption fee (a) (d) -- -- 0.00 ++ 0.00 ++ 0.00 ++
------ ------ ------- ------ ------
Net asset value at end of period $ 8.27 $ 7.67 $ 6.46 $ 8.29 $ 7.68
====== ====== ======= ====== ======
Total investment return (b) 8.10%(c) 21.46% (35.07%)(c) 8.22%(c) 21.49%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.60%++ 1.57% 1.84% ++ 0.63%++ 1.63%
Net expenses 1.20%++ 1.20% 1.20% ++ 1.15%++ 1.15%
Expenses (before waiver) 1.63%++ 1.68% 2.18% ++ 1.46%++ 1.46%
Portfolio turnover rate 42% 106% 75% 42% 106%
Net assets at end of period (in
000's) $ 347 $ 209 $ 56 $2,003 $ 801
<Caption>
CLASS A
-----------
APRIL 30,
2008**
THROUGH
OCTOBER 31,
2008
Net asset value at beginning of
period $ 10.00
-------
Net investment income 0.09 (a)
Net realized and unrealized gain
(loss) on investments (3.57)
Net realized and unrealized loss on
foreign currency transactions (0.00)++
-------
Total from investment operations (3.48)
-------
Less dividends:
From net investment income (0.05)
-------
Redemption fee (a) (d) 0.00 ++
-------
Net asset value at end of period $ 6.47
=======
Total investment return (b) (34.97%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.02% ++
Net expenses 1.15% ++
Expenses (before waiver) 1.99% ++
Portfolio turnover rate 75%
Net assets at end of period (in
000's) $ 374
</Table>
<Table>
<Caption>
CLASS C
------------------------------------------------ CLASS I
APRIL 30, -----------------------------
SIX MONTHS 2008** SIX MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2010* 2009
Net asset value at beginning of
period $ 7.65 $ 6.45 $ 10.00 $ 7.69 $ 6.47
------ ------ ------- ------- -------
Net investment income (loss) (0.01)(a) 0.06 0.05 (a) 0.04 (a) 0.13
Net realized and unrealized gain
(loss) on investments 0.60 1.24 (3.57) 0.60 1.25
Net realized and unrealized loss on
foreign currency transactions (0.00)++ (0.00)++ (0.00)++ (0.00)++ (0.00)++
------ ------ ------- ------- -------
Total from investment operations 0.59 1.30 (3.52) 0.64 1.38
------ ------ ------- ------- -------
Less dividends:
From net investment income -- (0.10) (0.03) (0.03) (0.16)
------ ------ ------- ------- -------
Redemption fee (a) (d) -- -- 0.00 ++ 0.00 ++ --
------ ------ ------- ------- -------
Net asset value at end of period $ 8.24 $ 7.65 $ 6.45 $ 8.30 $ 7.69
====== ====== ======= ======= =======
Total investment return (b) 7.71% (c) 20.56% (35.26%)(c) 8.29%(c) 21.74%
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.17%)++ 0.71% 1.15% ++ 0.87%++ 2.02%
Net expenses 1.95% ++ 1.95% 1.95% ++ 0.90%++ 0.90%
Expenses (before waiver) 2.38% ++ 2.42% 2.93% ++ 1.22%++ 1.20%
Portfolio turnover rate 42% 106% 75% 42% 106%
Net assets at end of period (in
000's) $ 183 $ 142 $ 20 $40,913 $37,680
<Caption>
CLASS I
-----------
APRIL 30,
2008**
THROUGH
OCTOBER 31,
2008
Net asset value at beginning of
period $ 10.00
-------
Net investment income (loss) 0.10 (a)
Net realized and unrealized gain
(loss) on investments (3.58)
Net realized and unrealized loss on
foreign currency transactions (0.00)++
-------
Total from investment operations (3.48)
-------
Less dividends:
From net investment income (0.05)
-------
Redemption fee (a) (d) 0.00 ++
-------
Net asset value at end of period $ 6.47
=======
Total investment return (b) (34.86%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 2.25% ++
Net expenses 0.90% ++
Expenses (before waiver) 1.74% ++
Portfolio turnover rate 75%
Net assets at end of period (in
000's) $31,662
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) Redemption fee was discontinued on April 1, 2010.
</Table>
50 MainStay ICAP Global Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
MAINSTAY ICAP INTERNATIONAL FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges -4.59% 20.33% 3.22% 4.02%
Excluding sales charges 0.96 27.33 4.39 4.61
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 9450 10000 10000
8467 8370 8662
8333 7208 7604
6963 6036 6451
9640 8464 8678
11958 9730 10267
16369 12988 13357
19226 15561 16963
19119 15285 16685
11645 8749 9112
4/30/10 14828 11761 12145
</Table>
CLASS A SHARES(3)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges -4.52% 20.51% 3.31% 4.06%
Excluding sales charges 1.04 27.52 4.49 4.65
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 23625 25000 25000
21167 20925 21656
20832 18021 19010
17408 15090 16127
24099 21161 21696
29896 24324 25667
40922 32470 33393
48064 38904 42406
47796 38212 41713
29199 21872 22779
4/30/10 37235 29402 30363
</Table>
CLASS C SHARES(3)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges -0.44% 25.34% 3.61% 3.82%
Excluding sales charges 0.56 26.34 3.61 3.82
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 10000 10000 10000
8893 8370 8662
8687 7208 7604
7204 6036 6451
9899 8464 8678
12188 9730 10267
16559 12988 13357
19294 15561 16963
19049 15285 16685
11516 8749 9112
4/30/10 14550 11761 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class and Class A
shares are sold with a maximum initial sales charge of 5.50% and an annual
12b-1 fee of 0.25%. Class C shares are sold with no initial sales charge, are
subject to a contingent deferred sales charge ("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 or
individual 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 0.25%. Class R1 and R2 shares are available only
through corporate-sponsored retirement programs, which include certain
program requirements.
THE FOOTNOTES ON THE NEXT TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 51
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
1.17% 27.91% 4.78% 4.93%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 10000 10000 10000
8982 8370 8662
8862 7208 7604
7424 6036 6451
10303 8464 8678
12813 9730 10267
17583 12988 13357
20693 15561 16963
20657 15285 16685
12651 8749 9112
4/30/10 16182 11761 12145
</Table>
CLASS R1 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
1.07% 27.69% 4.65% 4.81%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 10000 10000 10000
8973 8370 8662
8844 7208 7604
7402 6036 6451
10262 8464 8678
12750 9730 10267
17478 12988 13357
20547 15561 16963
20489 15285 16685
12532 8749 9112
4/30/10 16002 11761 12145
</Table>
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
0.96% 27.41% 4.41% 4.56%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 10000 10000 10000
8951 8370 8662
8800 7208 7604
7346 6036 6451
10160 8464 8678
12591 9730 10267
17218 12988 13357
20198 15561 16963
20093 15285 16685
12263 8749 9112
4/30/10 15623 11761 12145
</Table>
Class R3 shares are sold with no initial sales charge or CDSC, have an annual
12b-1 fee of 0.50% and are available in certain individual retirement
accounts or in certain retirement plans for service and distribution.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns would have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements. Effective August 31, 2006 ICAP International Fund was
renamed MainStay ICAP International Fund. At that time, the Fund's existing
no-load shares were redesignated as Class I shares.
2. Performance figures for Investor Class shares, first offered April 29, 2008,
include the historical performance of Class A shares through April 28, 2008,
adjusted for differences in certain contractual expenses and fees.
3. Performance figures for Class A, C, R1, R2 and R3 shares, first offered
August 31, 2006, include the historical performance of Class I shares through
August 30, 2006, adjusted for differences in certain contractual expenses and
fees for Class A, C, R1, R2 and R3 shares.
4. The MSCI EAFE(R) Index is an index of international stocks representing the
developed world outside North America. Results assume reinvestment of all
dividends and capital gains. The MSCI EAFE(R) Index is considered to be the
Fund's broad-based securities market index for comparison purposes. An
investment cannot be made directly in an index.
THE 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.
52 MainStay ICAP International Fund
CLASS R3 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ----------------------------------------------------
0.85% 27.06% 4.13% 4.29%
</Table>
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY ICAP MSCI EAFE(R) MSCI EUROPE
INTERNATIONAL FUND INDEX INDEX
------------------ ------------ -----------
4/30/00 10000 10000 10000
8928 8370 8662
8756 7208 7604
7291 6036 6451
10059 8464 8678
12435 9730 10267
16962 12988 13357
19841 15561 16963
19683 15285 16685
11982 8749 9112
4/30/10 15223 11761 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
MSCI EAFE Index(4) 2.48% 34.43% 3.86% 1.64%
MSCI Europe Index(5) -0.20 33.29 3.42 1.96
Average Lipper international large-cap value fund(6) 2.98 33.28 2.89 3.48
</Table>
5. The MSCI Europe Index--is generally representative of the European market for
large- to mid-capitalization stocks. Results assume reinvestment of all
dividends and capital gains. An investment cannot be made directly in an
index.
6. The average Lipper international large-cap value fund is representative of
funds that, by portfolio practice, invest at least 75% of their equity assets
in companies strictly outside of the U.S. with market capitalizations (on a
three-year weighted basis) above Lipper's international large-cap floor.
International large-cap value funds typically have a below-average price-to-
cash flow ratio, price-to-book ratio, and three-year sales-per-share growth
value compared to their large-cap-specific subset of the S&P/Citigroup World
ex-U.S. BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on total returns
with all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING TWO PAGES ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 53
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY ICAP INTERNATIONAL FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,009.60 $ 7.52 $1,017.30 $ 7.55
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,010.40 $ 6.48 $1,018.30 $ 6.51
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,005.60 $11.24 $1,013.60 $11.28
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,011.70 $ 4.74 $1,020.10 $ 4.76
- -------------------------------------------------------------------------------------------------------
CLASS R1 SHARES $1,000.00 $1,010.70 $ 5.73 $1,019.10 $ 5.76
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,009.60 $ 7.08 $1,017.80 $ 7.10
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,008.50 $ 8.32 $1,016.50 $ 8.35
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.51% for Investor Class, 1.30% for Class A, 2.26% for Class C, 0.95% for
Class I, 1.15% for Class R1, 1.42% for Class R2 and 1.67% for Class R3)
multiplied by the average account value over the period, divided by 365 and
multiplied by 181 (to reflect the one-half year period). The table above
represents the actual expenses incurred during the one-half year period.
54 MainStay ICAP International Fund
SECTOR COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Industrials 18.5%
Financials 18.0
Consumer Discretionary 13.2
Health Care 11.4
Materials 11.0
Utilities 7.1
Energy 6.3
Information Technology 6.0
Telecommunication Services 5.3
Short-Term Investment 4.9
Other Assets, Less Liabilities -1.7
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 58 for specific holdings within
these categories.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Daimler A.G.
2. Sanofi-Aventis
3. BP PLC, Sponsored ADR
4. TNT N.V.
5. British Sky Broadcasting Group PLC
6. Roche Holding A.G., Sponsored ADR
7. Credit Suisse Group A.G., Sponsored ADR
8. Vodafone Group PLC, Sponsored ADR
9. Hutchison Whampoa, Ltd.
10. Barrick Gold Corp.
</Table>
mainstayinvestments.com 55
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS JERROLD K. SENSER, CFA, AND THOMAS R.
WENZEL, CFA, OF INSTITUTIONAL CAPITAL LLC (ICAP), THE FUND'S SUBADVISOR.
HOW DID MAINSTAY ICAP INTERNATIONAL FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay ICAP International Fund returned 0.96% for
Investor Class shares, 1.04% for Class A shares and 0.56% for Class C shares for
the six months ended April 30, 2010. Over the same period, the Fund's Class I
shares returned 1.17%, Class R1 shares returned 1.07%, Class R2 shares returned
0.96% and Class R3 shares returned 0.85%. All share classes underperformed the
2.98% return of the average Lipper(1) international large-cap value fund and the
2.48% return of the MSCI EAFE(R) Index(2) for the six months ended April 30,
2010. The MSCI EAFE(R) Index is the Fund's broad-based securities-market index.
See page 51 for Fund returns with sales charges.
WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE RELATIVE TO THE MSCI EAFE(R) INDEX
DURING THE REPORTING PERIOD?
The Fund underperformed the MSCI EAFE(R) Index primarily because of weak stock
selection in the financials, utilities and consumer discretionary sectors. The
effects were partially offset by favorable stock selection in the
telecommunication services and materials sectors. The Fund's relative
performance also benefited from an overweight position in industrials.
DURING THE REPORTING PERIOD, WHICH FUND SECTORS MADE THE STRONGEST CONTRIBUTIONS
TO THE FUND'S RELATIVE PERFORMANCE AND WHICH SECTORS DETRACTED THE MOST?
During the reporting period, the sector that made the strongest contribution to
the Fund's performance relative to the MSCI EAFE(R) Index was industrials,
followed by telecommunication services and materials. The sectors that detracted
the most from the Fund's relative performance were utilities, health care and
consumer discretionary.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL STOCKS MADE THE GREATEST POSITIVE
CONTRIBUTIONS TO THE FUND'S PERFORMANCE AND WHICH STOCKS DETRACTED?
On an absolute basis, the stocks that made the strongest positive contributions
to the Fund's performance during the reporting period were Vallourec, a French
manufacturer of steel tubing for the oil and gas industry; Barrick Gold, a
Canadian gold mining firm; and Hoya, a Japanese optical glass manufacturer.
Vallourec's shares rose as the company benefited from high oil prices and
renewed exploration and production. Barrick Gold benefited from higher gold
prices. Hoya performed well as a recovering economy increased demand in the
company's core markets. Barrick Gold and Hoya remained in the Fund as of April
30, 2010, but we sold Vallourec as it reached our target price.
Major detractors from performance on an absolute basis included Spanish bank
Banco Santander, French bank Societe Generale and Portuguese electric utility
Energias de Portugal. Each was weak, as concerns increased during the reporting
period about Europe's sovereign debt. Banco Santander and Energias de Portugal
remained in the Fund at the end of the reporting period, but we sold the Fund's
position in Societe Generale because we found other stocks to be more
attractive.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During a reporting period characterized by ongoing, if somewhat restrained,
economic recovery, the stock market was volatile but continued to rebound
overall. In this environment, we looked for stocks with both attractive
valuations and specific catalysts that may trigger appreciation over a 12- to
18-month time frame.
We added a position in Bridgestone, the world's largest tire supplier, to the
Fund during the reporting period. At the time of purchase, we believed pent-up
demand would be unleashed in both the replacement and original auto-equipment
markets and might well result in improved sales growth and profit margins for
the company. The Fund also added Japanese insurer Tokio Marine. We felt that
stronger pricing within the insurance industry would drive better underwriting
profitability for the company and lead to improvement in its share price.
In addition to the sales already mentioned, we sold the Fund's position in
Saipem, an Italian company that specializes in construction and drilling for the
oil and gas industry worldwide. We also sold the Fund's holding in Pernod-
Ricard, a global leader in the wine and spirits industry. Saipem and Pernod-
Richard were sold as they reached their respective price targets.
WERE THERE ANY SIGNIFICANT CHANGES IN THE FUND'S SECTOR WEIGHTINGS DURING THE
REPORTING PERIOD?
During the reporting period, the Fund increased its exposure relative to the
MSCI EAFE(R) Index in the materials and health care sectors. With these
1. See footnote on page 53 for more information about Lipper Inc.
2. See footnote on page 52 for more information on the MSCI EAFE Index.
56 MainStay ICAP International Fund
increases, the Fund shifted to a slightly overweight position in materials
relative to the MSCI EAFE(R) Index and added to the Fund's already overweight
allocation in health care relative to the Index.
Over the same period, we decreased the Fund's exposure to consumer discretionary
and financials. These reductions made the Fund less overweight relative to the
MSCI EAFE(R) Index in consumer discretionary and more underweight relative to
the Index in financials.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was overweight relative to the MSCI EAFE(R) Index
in the industrials and consumer discretionary sectors and underweight relative
to the Index in consumer staples and financials. This positioning reflected our
views of the prospects for the economy and the relative attractiveness of
individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 57
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 96.8%+
- -------------------------------------------------------
CONSUMER DISCRETIONARY 13.2%
Bridgestone Corp. 845,000 $ 14,100,739
V British Sky Broadcasting
Group PLC 2,986,050 28,005,673
China Dongxiang Group Co. 5,130,100 3,440,528
V Daimler A.G. (a) 626,600 32,333,573
Genting Berhad 3,158,500 6,849,932
Nissan Motor Co., Ltd. (a) 1,072,100 9,390,321
TUI Travel PLC 2,692,300 11,514,499
------------
105,635,265
------------
ENERGY 6.3%
V BP PLC, Sponsored ADR (b) 594,500 31,003,175
Repsol YPF S.A. (a) 804,700 18,887,509
------------
49,890,684
------------
FINANCIALS 18.0%
Banco Santander S.A. 1,658,825 20,840,666
V Credit Suisse Group A.G.,
Sponsored ADR (a)(b) 598,100 27,333,170
Intesa Sanpaolo S.p.A. (a) 6,837,000 22,500,715
Mitsubishi Estate Co., Ltd. 982,700 17,763,415
Standard Chartered PLC 882,550 23,524,964
Tokio Marine Holdings, Inc. 527,900 15,722,278
UBS A.G. (a) 1,058,500 16,353,308
------------
144,038,516
------------
HEALTH CARE 11.4%
Bayer A.G. 207,550 13,279,090
GlaxoSmithKline PLC 969,200 17,949,480
V Roche Holding A.G.,
Sponsored ADR (b) 708,750 27,924,750
V Sanofi-Aventis (a) 467,800 32,031,846
------------
91,185,166
------------
INDUSTRIALS 18.5%
ABB, Ltd. (a) 554,700 10,675,119
China Communications
Construction Co., Ltd.
Class H 7,975,500 7,484,890
V Hutchison Whampoa, Ltd. 3,771,000 25,838,996
KOMATSU, Ltd. 879,950 17,758,893
Mitsubishi Corp. 889,200 21,100,502
Siemens A.G. 228,850 22,624,725
Sime Darby Berhad 4,532,500 12,375,447
V TNT N.V. 966,667 29,674,232
------------
147,532,804
------------
INFORMATION TECHNOLOGY 6.0%
HOYA Corp. 871,050 23,959,310
Murata Manufacturing Co.,
Ltd. 149,700 8,811,682
SAP A.G. 314,750 15,163,293
------------
47,934,285
------------
MATERIALS 11.0%
Anglo American PLC (a) 477,600 20,455,068
V Barrick Gold Corp. 586,250 25,531,187
Holcim, Ltd. (a) 324,600 24,340,833
Yara International A.S.A. 500,050 17,455,669
------------
87,782,757
------------
TELECOMMUNICATION SERVICES 5.3%
BCE, Inc. 523,250 15,749,825
V Vodafone Group PLC,
Sponsored ADR (b) 1,177,850 26,148,270
------------
41,898,095
------------
UTILITIES 7.1%
Energias de Portugal S.A. 6,566,050 23,340,272
GDF Suez S.A. 497,700 17,733,830
Suez Environnement S.A. 727,450 15,778,940
------------
56,853,042
------------
Total Common Stocks
(Cost $726,916,810) 772,750,614
------------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT 4.9%
- -------------------------------------------------------
REPURCHASE AGREEMENT 4.9%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$38,983,636
(Collateralized by a
United States Treasury
Bill with a rate of 0.107%
and a maturity date of
6/3/10, with
a Principal Amount of
$39,770,000
and a Market Value of
$39,766,023) $38,983,604 38,983,604
------------
Total Short-Term Investment
(Cost $38,983,604) 38,983,604
------------
Total Investments
(Cost $765,900,414) (c) 101.7% 811,734,218
Other Assets, Less
Liabilities (1.7) (13,332,147)
----------- ------------
Net Assets 100.0% $798,402,071
=========== ============
</Table>
<Table>
(a) Non-income producing security.
(b) ADR--American Depositary Receipt.
(c) At April 30, 2010, cost is $795,532,303
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 66,565,974
Gross unrealized depreciation (50,364,059)
------------
Net unrealized appreciation $ 16,201,915
============
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
58 MainStay ICAP International Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks (b) $153,690,377 $619,060,237 $ -- $772,750,614
Short-Term Investment
Repurchase Agreement -- 38,983,604 -- 38,983,604
------------ ------------ -------- ------------
Total Investments in Securities $153,690,377 $658,043,841 $-- $811,734,218
============ ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) Level 1 assets represents all ADRs, and BCE, Inc. and Barrick Gold Corp.
listed under Canada and United States, respectively.
As of the six-month period ending April 30, 2010, securities with a total value
of $551,441,778 transferred from Level 1 to Level 2 due to certain international
equities being fair valued at period end by applying factors provided by a third
party vendor in accordance with the Fund's policies and procedures. Fair values
for these instruments at the reporting date are based on quoted market prices or
binding dealer price quotations.
The Fund recognizes transfers between the levels as of the beginning of the
period.
At April 30, 2010, the Fund did not hold any investments with significant
unobservable inputs (Level 3).
The table below sets forth the diversification of the ICAP International Fund
Portfolio investments by country.
COUNTRY COMPOSITION (UNAUDITED)
<Table>
<Caption>
VALUE PERCENT+
Canada $ 41,281,012 5.2%
Cayman Islands 3,440,528 0.4
China 7,484,890 1.0
France 65,544,616 8.2
Germany 83,400,681 10.4
Hong Kong 25,838,996 3.2
Italy 22,500,715 2.8
Japan 128,607,140 16.2
Malaysia 19,225,379 2.5
Netherlands 29,674,232 3.7
Norway 17,455,669 2.2
Portugal 23,340,272 2.9
Spain 39,728,175 5.0
Switzerland 106,627,180 13.3
United Kingdom 158,601,129 19.8
United States 38,983,604 4.9
------------ -----
811,734,218 101.7
Other Assets, Less
Liabilities (13,332,147) (1.7)
------------ -----
Net Assets $798,402,071 100.0%
============ =====
</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. mainstayinvestments.com
59
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $765,900,414) $ 811,734,218
Receivables:
Investment securities sold 8,093,243
Fund shares sold 3,159,514
Dividends and interest 1,617,744
Other assets 82,908
-------------
Total assets 824,687,627
-------------
LIABILITIES:
Payables:
Investment securities purchased 22,419,345
Fund shares redeemed 3,071,482
Manager (See Note 3) 479,779
Transfer agent (See Note 3) 163,576
NYLIFE Distributors (See Note 3) 65,350
Shareholder communication 34,497
Professional fees 30,997
Custodian 18,062
Trustees 2,317
Accrued expenses 151
-------------
Total liabilities 26,285,556
-------------
Net assets $ 798,402,071
=============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 29,159
Additional paid-in capital 995,223,897
-------------
995,253,056
Accumulated undistributed net
investment income 2,269,637
Accumulated net realized loss on
investments and foreign currency
transactions (244,972,685)
Net unrealized appreciation on
investments 45,833,804
Net unrealized appreciation on
translation of other assets and
liabilities in foreign currencies 18,259
-------------
Net assets $ 798,402,071
=============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 10,277,785
=============
Shares of beneficial interest
outstanding 376,363
=============
Net asset value per share
outstanding $ 27.31
Maximum sales charge (5.50% of
offering price) 1.59
-------------
Maximum offering price per share
outstanding $ 28.90
=============
CLASS A
Net assets applicable to
outstanding shares $ 179,484,308
=============
Shares of beneficial interest
outstanding 6,565,821
=============
Net asset value per share
outstanding $ 27.34
Maximum sales charge (5.50% of
offering price) 1.59
-------------
Maximum offering price per share
outstanding $ 28.93
=============
CLASS C
Net assets applicable to
outstanding shares $ 17,475,200
=============
Shares of beneficial interest
outstanding 646,673
=============
Net asset value and offering price
per share outstanding $ 27.02
=============
CLASS I
Net assets applicable to
outstanding shares $ 548,901,869
=============
Shares of beneficial interest
outstanding 20,021,568
=============
Net asset value and offering price
per share outstanding $ 27.42
=============
CLASS R1
Net assets applicable to
outstanding shares $ 928,437
=============
Shares of beneficial interest
outstanding 33,927
=============
Net asset value and offering price
per share outstanding $ 27.37
=============
CLASS R2
Net assets applicable to
outstanding shares $ 33,194,501
=============
Shares of beneficial interest
outstanding 1,215,456
=============
Net asset value and offering price
per share outstanding $ 27.31
=============
CLASS R3
Net assets applicable to
outstanding shares $ 8,139,971
=============
Shares of beneficial interest
outstanding 299,458
=============
Net asset value and offering price
per share outstanding $ 27.18
=============
</Table>
60 MainStay ICAP International Fund The notes to the financial statements
are an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends (a) $ 6,364,588
Interest 12,811
-----------
Total income 6,377,399
-----------
EXPENSES:
Manager (See Note 3) 3,005,887
Transfer agent (See Note 3) 663,165
Distribution/Service--Investor
Class (See Note 3) 13,180
Distribution/Service--Class A (See
Note 3) 203,051
Distribution/Service--Class C (See
Note 3) 95,675
Distribution/Service--Class R2
(See Note 3) 39,787
Distribution/Service--Class R3
(See Note 3) 18,712
Custodian 132,848
Professional fees 75,769
Shareholder communication 61,535
Registration 56,494
Shareholder service (See Note 3) 20,187
Trustees 12,815
Miscellaneous 30,820
-----------
Total expenses before waiver 4,429,925
Expense waiver from Manager (See
Note 3) (322,182)
-----------
Net expenses 4,107,743
-----------
Net investment income 2,269,656
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Security transactions 11,927,023
Foreign currency transactions 12,065
-----------
Net realized gain on investments and
foreign currency transactions 11,939,088
-----------
Net change in unrealized
appreciation on:
Investments (6,189,560)
Translation of other assets and
liabilities in foreign
currencies 15,068
-----------
Net change in unrealized
appreciation on investments and
foreign currency transactions (6,174,492)
-----------
Net realized and unrealized gain on
investments and foreign currency
transactions 5,764,596
-----------
Net increase in net assets resulting
from operations $ 8,034,252
===========
</Table>
(a) Dividends recorded net of foreign withholding taxes in the amount of
$366,548.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
61
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 2,269,656 $ 13,132,464
Net realized gain (loss)
on investments and
foreign currency
transactions 11,939,088 (159,878,463)
Net change in unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions (6,174,492) 278,129,831
---------------------------
Net increase in net assets
resulting from operations 8,034,252 131,383,832
---------------------------
Dividends to shareholders:
From net investment
income:
Investor Class -- (292,614)
Class A -- (2,743,928)
Class C -- (426,524)
Class I (712,195) (15,483,286)
Class R1 (389) (17,537)
Class R2 -- (527,311)
Class R3 -- (85,060)
---------------------------
Total dividends to
shareholders (712,584) (19,576,260)
---------------------------
Capital share transactions:
Net proceeds from sale of
shares 180,488,734 234,821,866
Net asset value of shares
issued to shareholders in
reinvestment of dividends 643,845 17,612,157
Cost of shares redeemed
(a) (80,126,607) (175,793,428)
---------------------------
Increase in net assets
derived from capital
share transactions 101,005,972 76,640,595
---------------------------
Net increase in net
assets 108,327,640 188,448,167
NET ASSETS:
Beginning of period 690,074,431 501,626,264
---------------------------
End of period $798,402,071 $ 690,074,431
===========================
Accumulated undistributed
net investment income at
end of period $ 2,269,637 $ 712,565
===========================
</Table>
(a) Cost of shares redeemed net of redemption fees of $16,689 for the period
ended April 30, 2010, $46,772 for the year ended October 31, 2009 (See Note
2(L)).
62 MainStay ICAP International 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
63
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
------------------------------------------------
APRIL 29,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 27.05 $ 22.19 $ 36.83
------- ------- -------
Net investment income 0.02(a) 0.49 (a) 0.47 (a)
Net realized and unrealized gain
(loss) on investments 0.24 5.13 (14.56)
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.00++ (0.01) (0.01)
------- ------- -------
Total from investment operations 0.26 5.61 (14.10)
------- ------- -------
Less dividends and distributions:
From net investment income -- (0.75) (0.54)
From net realized gain on
investments -- -- --
------- ------- -------
Total dividends and distributions -- (0.75) (0.54)
------- ------- -------
Redemption fee (g) 0.00++(a) 0.00 ++(a) 0.00 ++(a)
------- ------- -------
Net asset value at end of period $ 27.31 $ 27.05 $ 22.19
======= ======= =======
Total investment return (b) 0.96%(c) 25.99% (38.80%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.16%++ 2.14% 2.96% ++
Net expenses 1.51%++ 1.38% 1.24% ++
Expenses (before
waiver/reimbursement) 1.51%++ 1.62% 1.49% ++
Portfolio turnover rate 42% 96% 79%
Net assets at end of period (in
000's) $10,278 $10,373 $ 8,674
</Table>
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $ 26.87 $ 22.02 $ 38.04 $ 39.03 $37.00
------- ------- ------- ------- ------
Net investment income (loss) (0.08)(a) 0.29 (a) 0.54 (a) 0.25 (a) (0.09)(a)
Net realized and unrealized gain
(loss) on investments 0.23 5.13 (16.12) 3.66 3.56
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.00 ++ (0.01) (0.01) -- --
------- ------- ------- ------- ------
Total from investment operations 0.15 5.41 (15.59) 3.91 3.47
------- ------- ------- ------- ------
Less dividends and distributions:
From net investment income -- (0.56) (0.43) (0.48) (0.74)
From net realized gain on
investments -- -- -- (4.42) (0.70)
------- ------- ------- ------- ------
Total dividends and distributions -- (0.56) (0.43) (4.90) (1.44)
------- ------- ------- ------- ------
Redemption fee (g) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a)
------- ------- ------- ------- ------
Net asset value at end of period $ 27.02 $ 26.87 $ 22.02 $ 38.04 $39.03
======= ======= ======= ======= ======
Total investment return (b) 0.56% (c) 25.06% (41.39%)(c) 10.35% 9.44% (c)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) (0.58%) ++ 1.30% 1.98% ++ 0.60% (0.69%)++
Net expenses 2.26% ++ 2.13% 1.96% ++ 1.90% 1.90% ++
Expenses (before
waiver/reimbursement) 2.26% ++ 2.37% 2.17% ++ 2.08% 2.22% ++(d)
Portfolio turnover rate 42% 96% 79% 109% 155%
Net assets at end of period (in
000's) $17,475 $19,244 $19,586 $32,652 $7,266
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
(d) Includes nonrecurring reimbursements from affiliates for IRS interest charge.
If these nonrecurring reimbursements had not been made, the total return would
have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C,
Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period
ending December 31, 2006.
(e) The redemption fees have been reclassified from net realized and unrealized
gain on investments to a separate line, "redemption fee," to conform to the
current year presentation.
(f) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
(g) Redemption fee was discontinued on April 1, 2010.
</Table>
64 MainStay ICAP International 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
----------------------------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
2010* 2009 2008 2007 2006
$ 27.05 $ 22.19 $ 38.22 $ 39.09 $ 37.00
-------- -------- ------- -------- -------
0.05(a) 0.50 (a) 0.77 (a) 0.57 (a) 0.00 ++(a)
0.24 5.19 (16.22) 3.67 3.58
0.00 ++ (0.01) (0.01) -- --
-------- -------- ------- -------- -------
0.29 5.68 (15.46) 4.24 3.58
-------- -------- ------- -------- -------
-- (0.82) (0.57) (0.69) (0.79)
-- -- -- (4.42) (0.70)
-------- -------- ------- -------- -------
-- (0.82) (0.57) (5.11) (1.49)
-------- -------- ------- -------- -------
0.00++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a)
-------- -------- ------- -------- -------
$ 27.34 $ 27.05 $ 22.19 $ 38.22 $ 39.09
======== ======== ======= ======== =======
1.07%(c)(f) 26.36% (40.97%)(c) 11.20% 9.74%(c)(d)
0.39%++ 2.13% 2.78% ++ 1.36% 0.04%++
1.30%++ 1.14% 1.10% ++ 1.15% 1.15%++
1.32%++ 1.37% 1.31% ++ 1.33% 1.47%++(d)
42% 96% 79% 109% 155%
$179,484 $138,355 $73,122 $121,098 $20,516
</Table>
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------------------------------
JANUARY 1,
SIX MONTHS 2008***
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31,
2010* 2009 2008 2007 2006 2005
$ 27.12 $ 22.25 $ 38.26 $ 39.10 $ 32.89 $ 30.18
-------- -------- -------- -------- -------- --------
0.10 (a) 0.60 (a) 0.87 (a) 0.78 (a) 0.77 (a) 0.55
0.24 5.15 (16.26) 3.59 7.16 5.20 (e)
0.00 ++ (0.01) (0.01) -- -- --
-------- -------- -------- -------- -------- --------
0.34 5.74 (15.40) 4.37 7.93 5.75
-------- -------- -------- -------- -------- --------
(0.04) (0.87) (0.61) (0.79) (1.03) (0.54)
-- -- -- (4.42) (0.70) (2.50)
-------- -------- -------- -------- -------- --------
(0.04) (0.87) (0.61) (5.21) (1.73) (3.04)
-------- -------- -------- -------- -------- --------
0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.01 (a) 0.00 ++(e)
-------- -------- -------- -------- -------- --------
$ 27.42 $ 27.12 $ 22.25 $ 38.26 $ 39.10 $ 32.89
======== ======== ======== ======== ======== ========
1.17%(c) 26.71% (40.81%)(c) 11.52% 24.30%(d) 19.15%
0.75%++ 2.59% 3.12% ++ 1.86% 2.09% 2.05%
0.95%++ 0.85% 0.80% ++ 0.80% 0.80% 0.80%
1.07%++ 1.13% 1.01% ++ 0.98% 1.01%(d) 1.12%
42% 96% 79% 109% 155% 139%
$548,902 $487,411 $389,517 $753,984 $568,662 $179,787
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
65
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS R1
--------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $27.07 $22.22 $ 38.23 $39.08 $37.00
------ ------ ------- ------ ------
Net investment income (loss) 0.08 (a) 0.59 (a) 0.82 (a) 0.47 (a) 0.13 (a)
Net realized and unrealized gain
(loss) on investments 0.23 5.12 (16.22) 3.86 3.46
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.00 ++ (0.01) (0.01) -- --
------ ------ ------- ------ ------
Total from investment operations 0.31 5.70 (15.41) 4.33 3.59
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income (0.01) (0.85) (0.60) (0.76) (0.81)
From net realized gain on
investments -- -- -- (4.42) (0.70)
------ ------ ------- ------ ------
Total dividends and distributions (0.01) (0.85) (0.60) (5.18) (1.51)
------ ------ ------- ------ ------
Redemption fee (e) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a)
------ ------ ------- ------ ------
Net asset value at end of period $27.37 $27.07 $ 22.22 $38.23 $39.08
====== ====== ======= ====== ======
Total investment return (b) 1.07%(c) 26.56% (40.89%)(c) 11.41% 9.78%(c)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income (loss) 0.56%++ 2.54% 2.95% ++ 1.12% 1.04%++
Net expenses 1.15%++ 0.99% 0.90% ++ 0.90% 0.90%++
Expenses (before
waiver/reimbursement) 1.17%++ 1.22% 1.11% ++ 1.08% 1.22%++(d)
Portfolio turnover rate 42% 96% 79% 109% 155%
Net assets at end of period (in
000's) $ 928 $ 675 $ 170 $ 418 $ 27
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------
2010* 2009 2008 2007 2006
Net asset value at beginning of
period $26.95 $22.13 $ 38.13 $39.06 $37.00
------ ------ ------- ------ ------
Net investment income 0.01 (a) 0.39 (a) 0.75 (a) 0.21 (a) 0.07 (a)
Net realized and unrealized gain
(loss) on investments 0.22 5.19 (16.24) 3.89 3.45
Net realized and unrealized gain
(loss) on foreign currency
transactions 0.00 ++ (0.01) (0.01) -- --
------ ------ ------- ------ ------
Total from investment operations 0.23 5.57 (15.50) 4.10 3.52
------ ------ ------- ------ ------
Less dividends and distributions:
From net investment income -- (0.75) (0.50) (0.61) (0.76)
From net realized gain on
investments -- -- -- (4.42) (0.70)
------ ------ ------- ------ ------
Total dividends and distributions -- (0.75) (0.50) (5.03) (1.46)
------ ------ ------- ------ ------
Redemption fee (e) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) --
------ ------ ------- ------ ------
Net asset value at end of period $27.18 $26.95 $ 22.13 $38.13 $39.06
====== ====== ======= ====== ======
Total investment return (b) 0.85%(c) 25.87% (41.11%)(c) 10.82% 9.60%(c)(d)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.04%++ 1.60% 2.77% ++ 0.49% 0.55%++
Net expenses 1.67%++ 1.54% 1.40% ++ 1.40% 1.40%++
Expenses (before
waiver/reimbursement) 1.67%++ 1.72% 1.62% ++ 1.58% 1.72%++(d)
Portfolio turnover rate 42% 96% 79% 109% 155%
Net assets at end of period (in
000's) $8,140 $6,536 $ 1,112 $ 289 $ 27
</Table>
<Table>
* Unaudited.
** Commencement of operations.
*** The Fund changed its fiscal year end from December 31 to October 31.
++ Annualized.
++ Less than one cent per share.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R1, Class R2 and
Class R3 shares are not subject to sales charges.
(c) Total return is not annualized.
(d) Includes nonrecurring reimbursements from affiliates for IRS interest charge.
If these nonrecurring reimbursements had not been made, the total return would
have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C,
Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period
ending December 31, 2006.
(e) Redemption fee was discontinued on April 1, 2010.
</Table>
66 MainStay ICAP International 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 R2
- -------------------------------------------------------------------------------
JANUARY 1, SEPTEMBER 1,
SIX MONTHS 2008*** 2006**
ENDED YEAR ENDED THROUGH YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31,
- --------------
2010* 2009 2008 2007 2006
$ 27.05 $ 22.18 $ 38.20 $ 39.08 $37.00
------- ------- ------- ------- ------
0.04(a) 0.44 (a) 0.74 (a) 0.35 (a) (0.03)(a)
0.22 5.23 (16.20) 3.88 3.61
0.00++ (0.01) (0.01) -- --
------- ------- ------- ------- ------
0.26 5.66 (15.47) 4.23 3.58
------- ------- ------- ------- ------
-- (0.79) (0.55) (0.69) (0.80)
-- -- -- (4.42) (0.70)
------- ------- ------- ------- ------
-- (0.79) (0.55) (5.11) (1.50)
------- ------- ------- ------- ------
0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a) 0.00 ++(a)
------- ------- ------- ------- ------
$ 27.31 $ 27.05 $ 22.18 $ 38.20 $39.08
======= ======= ======= ======= ======
0.96%(c) 26.27% (41.00%)(c) 11.16% 9.72% (c)(d)
0.29%++ 1.84% 2.72% ++ 0.83% (0.20%)++
1.42%++ 1.27% 1.15% ++ 1.15% 1.15% ++
1.42%++ 1.47% 1.36% ++ 1.33% 1.47% ++(d)
42% 96% 79% 109% 155%
$33,195 $27,480 $ 9,445 $12,816 $2,533
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
67
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
as an open-end management investment company, and is comprised of twenty-nine
funds (collectively referred to as the ''Funds" and each individually, referred
to as a "Fund"). These financial statements and notes relate to the MainStay
ICAP Equity Fund, MainStay ICAP Global Fund, MainStay ICAP International Fund
and MainStay ICAP Select Equity Fund (collectively, referred to as the "ICAP
Funds" and each individually referred to as an "ICAP Fund"). Each is a
diversified fund. Each ICAP Fund is the successor of a series of ICAP Funds,
Inc. with the same name (each a "Predecessor Fund"). The reorganizations of the
Predecessor Funds with and into the respective ICAP Funds, which were not
subject to shareholder approval under applicable law, occurred on February 26,
2010. All information regarding and references to periods prior to the
commencement of operations of each ICAP Fund relate to the respective
Predecessor Fund.
The ICAP Funds through each Predecessor Fund, commenced operations on the dates
indicated below:
<Table>
<Caption>
COMMENCEMENT
OF OPERATIONS FUNDS
April 30, 2008 MainStay ICAP Global Fund
- -----------------------------------------------------------
December 31, 1997 MainStay ICAP Select Equity Fund
MainStay ICAP International Fund
- -----------------------------------------------------------
December 31, 1994 MainStay ICAP Equity Fund
- -----------------------------------------------------------
</Table>
The MainStay ICAP International Fund and MainStay ICAP Equity Fund offer seven
classes of shares: Investor Class, Class A, Class C, Class I, Class R1, Class R2
and Class R3 shares. Each of these share classes, other than Investor Class and
Class I shares, commenced operations on August 31, 2006. Class I shares
commenced operations (under a former designation) on December 31, 1994 for
MainStay ICAP Equity Fund and on December 31, 1997 for MainStay ICAP
International Fund. Investor Class shares commenced operations on April 29, 2008
for MainStay ICAP Equity Fund and MainStay ICAP International Fund. The MainStay
ICAP Global Fund offers four classes of shares: Investor Class, Class A, Class C
and Class I shares. All share classes of the MainStay ICAP Global Fund commenced
operations on April 30, 2008. The MainStay ICAP Select Equity Fund offers eight
classes of shares: Investor Class, Class A, Class B, Class C, Class I, Class R1,
Class R2 and Class R3 shares. Each of these share classes, other than Investor
Class and Class I shares, commenced operations on August 31, 2006. Investor
Class shares commenced operations on April, 29, 2008, and Class I shares
commenced operations on December 31, 1997 (under a former designation). Class B
shares for MainStay ICAP Select Equity Fund commenced operations on November 13,
2009.
Investor Class and Class A shares are offered at net asset value ("NAV") per
share plus an initial sales charge. No sales charge applies on investments of $1
million or more (and certain other qualified purchases) in Investor Class and
Class A shares, but a contingent deferred sales charge is imposed on certain
redemptions of such shares within one year of the date of purchase. Class B
shares and Class C shares are offered at NAV without an initial sales charge,
although a declining contingent deferred sales charge may be imposed on
redemptions made within six years of purchase of Class B shares and a 1.00%
contingent deferred sales charge may be imposed on redemptions made within one
year of purchase of Class C shares. Class I, Class R1, Class R2 and Class R3
shares are offered at NAV without imposition of a front-end sales charge or a
contingent deferred sales charge. Depending upon eligibility, Class B shares
convert to either Investor Class or Class A shares eight years after the date
they were purchased. Additionally, depending upon eligibility, Investor Class
shares may convert to Class A shares and Class A shares may convert to Investor
Class shares. Each class of shares have the same voting (except for issues that
relate solely to one class), dividend, liquidation and other rights, and the
same terms and conditions, except that the classes are subject to different
distribution and/or service fee rates. Investor Class, Class A, Class C, Class
R2 and Class R3 shares each bear distribution and/or service fee payments under
distribution and service plans pursuant to Rule 12b-1 under the 1940 Act. Class
R1, Class R2 and Class R3 shares are authorized to pay a shareholder service fee
to New York Life Investment Management LLC, its affiliates, or third-party
service providers, as compensation for services rendered to shareholders of
Class R1, Class R2 or Class R3 shares.
The investment objective for each of the ICAP Funds is as follows:
The MAINSTAY ICAP EQUITY FUND seeks a superior total return with only a moderate
degree of risk.
The MAINSTAY ICAP SELECT EQUITY FUND seeks a superior total return.
The MAINSTAY ICAP GLOBAL FUND seeks a superior total return.
The MAINSTAY ICAP INTERNATIONAL FUND seeks a superior total return with income
as a secondary objective.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The ICAP Funds prepare their financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") 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 regular trading on the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the ICAP
68 MainStay ICAP Funds
Funds are open for business ("valuation date"). Securities that are not traded
on the valuation date are valued at the mean of the latest quoted bid and asked
prices. Prices normally are taken from the principal market in which each
security trades. Investments in other mutual funds are valued at their NAVs as
of the close of the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost. Investments in money market funds are valued daily at their
NAV.
Certain events may occur between the time that foreign markets close, on which
securities held by certain of the ICAP Funds principally trade, and the time at
which the ICAP Funds' NAVs are calculated. These events may include, but are not
limited to, situations relating to a single 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, as defined in Note 3(A),
conclude that such events may have affected the accuracy of the last price
reported on the local foreign market, the Manager or Subadvisor may, pursuant to
procedures adopted by the ICAP Funds' Board, adjust the value of the local price
to reflect the impact on the price of such securities as a result of such
events. Additionally, international equity securities are also fair valued
whenever the movement of a particular index exceeds certain thresholds. In such
cases, the securities are fair valued by applying factors provided by a third
party vendor in accordance with the ICAP Funds' policies and procedures. At
April 30, 2010, certain foreign equity securities held by the ICAP Funds were
fair valued.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the ICAP Funds' Board to represent fair value.
Equity and non-equity securities which may be valued in this manner include, but
are not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the ICAP Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the ICAP Funds did not
hold securities that were valued in such a manner.
"Fair value" is defined as the price that the ICAP Fund would receive upon
selling an investment in an orderly transaction to an independent buyer in the
principal or most advantageous market of the investment. Fair value measurements
are determined within a frame work that has established a three-tier hierarchy
which maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the ICAP Fund's own
assumptions about the assumptions that market participants would use in
determining the fair value of investments)
The aggregate value by input level, as of April 30, 2010, for each ICAP Fund's
investments is included at the end of each ICAP Fund's Portfolio of Investments.
The valuation techniques used by the ICAP Funds to measure fair value during the
six-month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The ICAP Funds may have utilized some
of the following fair value techniques: multi-dimensional relational pricing
models, option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of
mainstayinvestments.com 69
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
evaluation, when there are significant events after the close of local foreign
markets. For the six-month period ended April 30, 2010, there have been no
changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. Each of the ICAP Funds is treated as a separate
entity for federal income tax purposes. The ICAP Funds' policy is to comply with
the requirements of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code") applicable to regulated investment companies and to distribute
all of the taxable income to the shareholders of each ICAP Fund within the
allowable time limits. Therefore, no federal income tax provision is required.
Investment income received by the ICAP Funds from foreign sources may be subject
to foreign income taxes. These foreign income taxes are generally withheld at
the source.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the ICAP Funds' tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the ICAP Funds' financial statements. The ICAP Funds'
federal and state income and federal excise tax returns for tax years for which
the applicable statutes of limitations have not expired are subject to
examination by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. Dividends from net investment income are
declared and paid quarterly for the MainStay ICAP Equity Fund and MainStay ICAP
Select Equity Fund, to the extent that income is available. For the MainStay
ICAP Global Fund and MainStay ICAP International Fund, income dividends are
normally paid less frequently, typically on a semi-annual or annual basis.
Distributions from net realized capital gains, if any, are declared and paid
annually. Unless the shareholder elects otherwise, all dividends and
distributions are reinvested in the same class of shares of the respective ICAP
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The ICAP Funds record security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on securities
purchased, other than short-term investments, for the ICAP Funds are accreted
and amortized, respectively, on the effective interest rate method over the life
of the respective securities or, in the case of a callable security, over the
period to the first date of call. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight line
method.
Investment income and realized and unrealized gains and losses on investments of
the ICAP Funds are allocated to separate classes of shares pro rata based upon
their relative net assets on the date the income is earned or realized and
unrealized gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual ICAP Funds
in proportion to the net assets of the respective ICAP Funds when the expenses
are incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by each ICAP Fund,
including those of related parties to the ICAP Funds, are shown in the Statement
of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) RECLASSIFICATION. Certain prior year amounts have been reclassified to
conform with the current year presentation.
(H) REPURCHASE AGREEMENTS. The ICAP Funds may enter into repurchase agreements
to earn income. The ICAP Funds may enter into repurchase agreements only with
financial institutions that are deemed by the Manager or Subadvisor to be
creditworthy, pursuant to guidelines established by the ICAP Funds' Board.
Repurchase agreements are considered under the 1940 Act to be collateralized
loans by a Fund to the seller secured by the securities transferred to the Fund.
When the ICAP Funds invest in repurchase agreements, the ICAP Funds' custodian
takes possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
ICAP Funds have the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the
70 MainStay ICAP Funds
other party to the agreement, realization and/or retention of the collateral may
be subject to legal proceedings and possible realized loss to the respective
ICAP Fund.
(I) FOREIGN CURRENCY TRANSACTIONS. The books and records of the ICAP Funds are
kept in U.S. dollars. Prices of securities denominated in foreign currency
amounts are translated into U.S. dollars at the mean between the buying and
selling exchange rates last quoted by any major U.S. bank at the following
dates:
(i) market value of investment securities, other assets and liabilities--at
the valuation date, and
(ii) purchases and sales of investment securities, income and expenses--at the
date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are
presented at the exchange rates and market values at the close of the period.
The realized and unrealized changes in net assets arising from fluctuations in
exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on foreign currency forward contracts, net currency gains or losses
realized as a result of differences between the amounts of securities sale
proceeds or purchase cost, dividends, interest and withholding taxes as recorded
on the ICAP Funds' books, and the U.S. dollar equivalent amount actually
received or paid. Net currency gains or losses from valuing such foreign
currency denominated assets and liabilities, other than investments at valuation
date exchange rates, are reflected in unrealized foreign exchange gains or
losses. (See Note 5.)
(J) SECURITIES LENDING. In order to realize additional income, the ICAP Funds
may engage in securities lending, subject to the limitations set forth in the
1940 Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the ICAP Funds do engage in securities lending, the
ICAP Funds will lend through their custodian, State Street Bank and Trust
Company ("State Street"). State Street will manage the ICAP Funds' cash
collateral in accordance with the Lending Agreement between the ICAP Funds and
State Street, and indemnify the ICAP Funds' portfolios against counterparty
risk. The loans will be collateralized by cash or securities at least equal at
all times to the market value of the securities loaned. Collateral will consist
of U.S. Government securities, cash equivalents or irrevocable letters of
credit. The ICAP Funds may bear the risk of delay in recovery of, or loss of
rights in, the securities loaned should the borrower of the securities
experience financial difficulty. The ICAP Funds may also record realized gain or
loss on securities deemed sold due to a borrower's inability to return
securities on loan. The ICAP Funds will receive compensation for lending their
securities in the form of fees or retain a portion of interest on the investment
of any cash received as collateral. The ICAP Funds also will continue to receive
interest and dividends on the securities loaned and any gain or loss in the
market price of the securities loaned that may occur during the term of the loan
will be for the account of the ICAP Funds.
Although the ICAP Funds and New York Life Investments (as defined in Note 3(A))
have temporarily suspended securities lending, the ICAP Funds and New York Life
Investments reserve the right to reinstitute lending when deemed appropriate.
The ICAP Funds had no portfolio securities on loan as of April 30, 2010.
(K) RIGHTS/WARRANTS. A right is a certificate that permits the holder to
purchase a certain number of shares, or a fractional share, of a new stock from
the issuer at a specific price. A warrant is an instrument that entitles the
holder to buy an equity security at a specific price for a specific period of
time. The ICAP Funds enter into rights and warrants when securities are acquired
through a corporate action. With respect to warrants in international markets,
the securities are only purchased when the underlying security can not be
purchased due to the many restrictions an industry and/or country might place on
foreign investors. These investments can provide a greater potential for profit
or loss than an equivalent investment in the underlying security. Prices of
these investments do not necessarily move in tandem with the prices of the
underlying securities, and are speculative investments.
There is risk involved in the purchase of rights and warrants in that these
investments are speculative investments. The ICAP Funds could also lose the
entire value of the investment in warrants if the warrant is not exercised by
the date of its expiration. The ICAP Funds invest in warrants only if received
as part of a corporate action. The securities are sold as soon as the
opportunity becomes available. The ICAP Funds are exposed to risk until each
sale is completed.
(L) REDEMPTION FEE. Prior to April 1, 2010, the MainStay ICAP Global Fund and
MainStay ICAP International Fund imposed a 2.00% redemption fee on redemptions
(including exchanges) of ICAP Fund shares made within 60 days of their date of
purchase for any class. The redemption fee was designed to offset brokerage
commissions and other costs associated with short-term trading and was not
assessed on the shares acquired through the reinvestment of dividends or
distributions paid by the ICAP Fund. The redemption fees are included in the
Statement of Changes in Net Assets and are retained by these ICAP Funds.
(M) CONCENTRATION OF RISK. The ICAP Funds may invest in foreign securities,
which carry certain risks that are in addition to the usual risks inherent in
domestic instruments. These risks include those resulting from currency
fluctuations, future adverse political or economic developments and possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions.
mainstayinvestments.com 71
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
These risks are likely to be greater in emerging markets than in developed
markets.
(N) OFFERING COSTS. Costs incurred by the MainStay ICAP Global Fund in
connection with the commencement of the MainStay ICAP Global Fund's operations
were amortized on a straight line basis over the first twelve months of the
MainStay ICAP Global Fund's operations.
(O) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the ICAP Funds enter into contracts with third-party service providers
that contain a variety of representations and warranties and which provide
general indemnifications. The ICAP Funds' maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the ICAP Funds that have not yet occurred. Based on experience,
management is of the view that the risk of loss in connection with these
potential indemnification obligations is remote. However, there can be no
assurance that material liabilities related to such obligations will not arise
in the future, which could adversely impact the ICAP Funds.
(P) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the ICAP Funds' derivative and hedging activities,
including how such activities are accounted for and their effect on the ICAP
Funds' financial positions, performance and cash flows. These derivatives are
not accounted for as hedging instruments.
Fair value of Derivatives as of April 30, 2010:
The effect of derivative instruments on the Statement of Operations for the six-
month period ended April 30, 2010.
MAINSTAY ICAP GLOBAL FUND
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights (2) 6,550 6,550
================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
MAINSTAY ICAP INTERNATIONAL FUND
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
EQUITY
CONTRACTS
RISK TOTAL
Rights (2) 214,210 214,210
==================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the ICAP Funds' Manager, pursuant to a Management Agreement,
as amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the ICAP Funds.
Except for the portions of salaries and expenses that are the responsibilities
of the ICAP Funds, the Manager also pays the salaries and expenses of all
personnel affiliated with the ICAP Funds and the operational expenses of the
ICAP Funds. Institutional Capital LLC ("ICAP" or "Subadvisor"), a registered
investment adviser and an indirect, wholly-owned subsidiary of New York Life,
serves as Subadvisor to the ICAP Funds and is responsible for the day-to-day
portfolio management of the ICAP Funds. Pursuant to the terms of a Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
Each ICAP Fund pays the Manager a monthly fee for services performed and
facilities furnished at an annual rate of 0.80% of the average daily net assets
of each ICAP Fund. The effective management fee rate (exclusive of any
applicable waivers/reimbursements) was 0.80% for each of the ICAP Funds for the
six-month period ended April 30, 2010.
Effective April 1, 2010, New York Life Investments agreed to voluntarily waive
or reimburse the expenses of the Class R1 Shares of the MainStay ICAP Equity
Fund so that the total ordinary operating expenses (total ordinary operating
expenses excludes taxes, interest, litigation, extraordinary expenses,
brokerage, and other transaction expenses relating to the purchase or sale of
portfolio investments and the fees and expenses of any other funds in which the
Fund invests) of the class do not exceed 0.99% of its average daily net assets.
Effective February 26, 2010, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
MainStay
72 MainStay ICAP Funds
ICAP Equity Fund's management fee or reimburse the expenses of the Class I
Shares of the MainStay ICAP Equity Fund so that the total ordinary operating
expenses of the class (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, brokerage and other transaction
expenses relating to the purchase or sale of portfolio investments and the fees
and expenses of any other funds in which the ICAP Fund invests) do not exceed
0.90% of its average daily net assets. This agreement expires on February 28,
2011 and is reviewed annually by the Board in connection with its review of the
Fund's investment advisory agreements. Based on its review, the Board may agree
to maintain, modify or terminate the agreement.
Effective August 1, 2009, New York Life Investments agreed to voluntarily waive
or reimburse the expenses of the appropriate class of the MainStay ICAP Equity
Fund so that the total ordinary operating expenses (total ordinary operating
expenses excludes taxes, interest, litigation, extraordinary expenses,
brokerage, and other transaction expenses relating to the purchase or sale of
portfolio investments and the fees and expenses of any other funds in which the
Fund invests) of a class do not exceed the following percentages: Investor
Class, 1.85%; and Class C, 2.60%. These voluntary waivers or reimbursements may
be discontinued at any time without notice.
Effective February 26, 2010, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
MainStay ICAP Select Equity Fund's management fee or reimburse the expenses of
the appropriate class of the MainStay ICAP Select Equity Fund so that the total
ordinary operating expenses (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, brokerage, other transaction
expenses relating to the purchase or sale of portfolio investments, and the fees
and expenses of any other funds in which the ICAP Fund invests) of a class do
not exceed the following percentages of average daily net assets: Class A, 1.18%
and Class I, 0.90%. This agreement expires on February 28, 2011 and is reviewed
annually by the Board in connection with its review of the Fund's investment
advisory agreements. Based on its review, the Board may agree to maintain,
modify or terminate the agreement.
Effective November 13, 2009, New York Life Investments agreed to voluntarily
waive or reimburse the expenses of the appropriate class of the MainStay ICAP
Select Equity Fund so that the total ordinary operating expenses (total ordinary
operating expenses excludes taxes, interest, litigation, extraordinary expenses,
brokerage, and other transaction expenses relating to the purchase or sale of
portfolio investments and the fees and expenses of any other funds in which the
Fund invests) of a class do not exceed the following percentages of average net
assets: Investor Class, 1.47%; Class B, 2.22%; Class C 2.22%; Class R1, 1.14%;
Class R2, 1.39%; Class R3, 1.64%. This voluntary waiver or reimbursement will be
in effect until November 12, 2010 unless extended by New York Life Investments
and approved by the Fund's Board of Trustees.
For the period August 1, 2009 through February 25, 2010, New York Life
Investments had agreed to voluntarily waive or reimburse the expenses of the
appropriate class of the MainStay ICAP Select Equity Fund so that the total
ordinary operating expenses (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, brokerage, and other transaction
expenses relating to the purchase or sale of portfolio investments and the fees
and expenses of any other funds in which the Fund invests) of the class did not
exceed the following percentages: Class A, 1.18%; Class I, 0.90%.
Effective August 1, 2009, New York Life Investments has entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
MainStay ICAP Global Fund's management fee or reimburse the expenses of the
appropriate class of the MainStay ICAP Global Fund so that the total ordinary
operating expenses (total ordinary operating expenses excluding taxes, interest,
litigation, extraordinary expenses, and brokerage and other transaction expenses
relating to the purchase or sale of portfolio investments and the fees and
expenses of any other funds in which the ICAP Fund invests) of a class do not
exceed the following percentages of average daily net assets: Investor Class,
1.20%; Class A, 1.15%; Class C, 1.95%; and Class I, 0.90%. The expense
limitation agreement may be modified or terminated only with the approval of the
Board. This agreement expires February 28, 2011 and is reviewed annually by the
Board in connection with its review of the Fund's investment advisory
agreements. Based on its review, the Board may agree to maintain, modify or
terminate the agreement.
Effective April 1, 2010, New York Life Investments agreed to voluntarily waive
or reimburse the expenses of the Class R1 Shares of the MainStay ICAP
International Fund so that the total ordinary operating expenses (total ordinary
operating expenses excludes taxes, interest, litigation, extraordinary expenses,
brokerage, and other transaction expenses relating to the purchase or sale of
portfolio investments and the fees and expenses of any other funds in which the
Fund invests) of the class do not exceed 1.05% of its average daily net assets.
Effective February 26, 2010, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
MainStay ICAP International Fund's management fee or reimburse the expenses of
the appropriate class of the MainStay ICAP International Fund so that the total
ordinary operating expenses (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, and brokerage and other
transaction expenses relating to the purchase or sale of portfolio investments
and the fees and expenses of any other funds in which the ICAP Fund invests) of
a class
mainstayinvestments.com 73
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
do not exceed the following percentages of average daily net assets: Class A,
1.30% and Class I, 0.95%. This agreement expires on February 28, 2011 and is
reviewed annually by the Board in connection with its review of the Fund's
investment advisory agreements. Based on its review, the Board may agree to
maintain, modify or terminate the agreement.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the ICAP Funds and waived/reimbursed such amounts pursuant to the
contractual expenses limitations described above as follows:
<Table>
<Caption>
FEES
REIMBURSED/
FEES EARNED WAIVED
MainStay ICAP Equity Fund $3,216,362 $127,014
- -----------------------------------------------------
MainStay ICAP Select Equity
Fund 9,734,356 725,764
- -----------------------------------------------------
MainStay ICAP Global Fund 166,664 66,012
- -----------------------------------------------------
MainStay ICAP International
Fund 3,005,887 322,182
- -----------------------------------------------------
</Table>
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the ICAP Funds pursuant to an
agreement with New York Life Investments. These services include calculating the
daily NAVs of the ICAP Funds, maintaining the general ledger and sub-ledger
accounts for the calculation of the ICAP Funds' respective NAVs, and assisting
New York Life Investments in conducting various aspects of the ICAP Funds'
administrative operations. For providing these services to the ICAP Funds, State
Street is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the ICAP Funds, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The ICAP
Funds have adopted distribution and service plans, (the "Plans") in accordance
with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class, Class A and Class R2 Plans, the Distributor
receives a monthly distribution fee from applicable Investor Class, Class A and
Class R2 shares at an annual rate of 0.25% of the average daily net assets of
the Investor Class, Class A and Class R2 shares for distribution or service
activities as designated by the Distributor. Pursuant to the Class B and Class C
Plan, applicable Class B and Class C shares pay the Distributor a monthly
distribution fee at an annual rate of 0.75% of the average daily net assets of
the ICAP Funds' Class B and Class C shares, along with a service fee, at an
annual rate of 0.25% of the average daily net assets of the Class B and Class C
shares of the ICAP Funds for a total 12b-1 fee of 1.00%. Pursuant to the Class
R3 Plan, the Distributor receives a monthly distribution fee from each
applicable ICAP Fund at an annual rate of 0.25% for the distribution and 0.25%
for the service of the average daily net assets of the ICAP Fund's Class R3
shares, which is an expense of the Class R3 shares of the ICAP Fund for
distribution and service activities as designated by the Distributor.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the ICAP Funds' shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and
Class R3 shares, the Manager has agreed to provide, through its affiliates or
independent third parties, various shareholder and administrative support
services to shareholders of the Class R1, Class R2 and Class R3 shares of the
Funds that offer these share classes. For its services, the Manager is entitled
to a Shareholder Service Fee accrued daily and paid monthly at an annual rate of
0.10% of the average daily net assets attributable to the Class R1, Class R2 and
Class R3 shares of each application ICAP Fund.
Shareholder Service Fees incurred by each ICAP Fund for the six-month period
ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY ICAP EQUITY FUND
Class R1 $1,220
- ----------------------------------------------
Class R2 1,432
- ----------------------------------------------
Class R3 326
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP SELECT EQUITY FUND
Class R1 $ 7,367
- ----------------------------------------------
Class R2 10,044
- ----------------------------------------------
Class R3 2,626
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP INTERNATIONAL FUND
Class R1 $ 529
- ----------------------------------------------
Class R2 15,915
- ----------------------------------------------
Class R3 3,743
- ----------------------------------------------
</Table>
(C) SALES CHARGES. The ICAP Funds were advised by the Distributor that the
amount of sales charges retained on sales of Investor Class and Class A shares
for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY ICAP EQUITY FUND
Investor Class $4,361
- ----------------------------------------------
Class A 3,122
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP SELECT EQUITY FUND
Investor Class $21,862
- ----------------------------------------------
Class A 30,754
- ----------------------------------------------
</Table>
74 MainStay ICAP Funds
<Table>
<Caption>
MAINSTAY ICAP GLOBAL FUND
Investor Class $650
- ---------------------------------------------
Class A 773
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP INTERNATIONAL FUND
Investor Class $4,091
- ----------------------------------------------
Class A 6,792
- ----------------------------------------------
</Table>
The ICAP Funds were also advised that the Distributor retained contingent
deferred sales charges on redemptions of Investor Class, Class A, Class B and
Class C shares, for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY ICAP EQUITY FUND
Class C $225
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP SELECT EQUITY FUND
Investor Class $ 100
- ----------------------------------------------
Class A 290
- ----------------------------------------------
Class B 46,550
- ----------------------------------------------
Class C 4,473
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP GLOBAL FUND
Class C $118
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP INTERNATIONAL FUND
Class C $534
- ---------------------------------------------
</Table>
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the ICAP
Funds' transfer, dividend disbursing and shareholder servicing agent pursuant to
an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service
Company LLC has entered into an agreement with Boston Financial Data Services,
Inc. ("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
ICAP Funds for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY ICAP EQUITY FUND TOTAL
Investor Class $ 27,433
- -----------------------------------------------
Class A 10,328
- -----------------------------------------------
Class C 14,113
- -----------------------------------------------
Class I 281,227
- -----------------------------------------------
Class R1 912
- -----------------------------------------------
Class R2 1,064
- -----------------------------------------------
Class R3 238
- -----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP SELECT EQUITY FUND TOTAL
Investor Class $351,236
- -----------------------------------------------
Class A 242,294
- -----------------------------------------------
Class B 197,873
- -----------------------------------------------
Class C 167,139
- -----------------------------------------------
Class I 975,562
- -----------------------------------------------
Class R1 8,729
- -----------------------------------------------
Class R2 11,933
- -----------------------------------------------
Class R3 3,113
- -----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP GLOBAL FUND TOTAL
Investor Class $ 268
- ----------------------------------------------
Class A 209
- ----------------------------------------------
Class C 165
- ----------------------------------------------
Class I 5,251
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP INTERNATIONAL FUND TOTAL
Investor Class $ 19,106
- -----------------------------------------------
Class A 137,453
- -----------------------------------------------
Class C 34,856
- -----------------------------------------------
Class I 437,567
- -----------------------------------------------
Class R1 895
- -----------------------------------------------
Class R2 26,956
- -----------------------------------------------
Class R3 6,332
- -----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the ICAP Funds have implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. As of April 30, 2010, New York Life and its affiliates
beneficially held shares of the ICAP Funds with the following values and
percentages of net assets as follows:
<Table>
<Caption>
PERCENTAGE OF
MAINSTAY ICAP EQUITY FUND VALUE NET ASSETS
Class A $ 27,198 0.1%
- --------------------------------------------------------
Class C 25,195 0.4
- --------------------------------------------------------
Class I 55,998,565 6.7
- --------------------------------------------------------
Class R1 25,009 0.9
- --------------------------------------------------------
Class R2 24,781 0.7
- --------------------------------------------------------
Class R3 24,560 1.6
- --------------------------------------------------------
</Table>
mainstayinvestments.com 75
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
MAINSTAY ICAP SELECT EQUITY PERCENTAGE OF
FUND VALUE NET ASSETS
Class A $156,035 0.0%++
- -------------------------------------------------------
Class C 25,344 0.0 ++
- -------------------------------------------------------
Class I 2,480 0.0 ++
- -------------------------------------------------------
Class R1 28,310 0.2
- -------------------------------------------------------
Class R2 28,028 0.1
- -------------------------------------------------------
Class R3 25,390 0.4
- -------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
MAINSTAY ICAP GLOBAL FUND VALUE NET ASSETS
Class A $ 41,450 2.1%
- ----------------------------------------------------------
Class C 20,600 11.2
- ----------------------------------------------------------
Class I 39,121,033 95.6
- ----------------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY ICAP PERCENTAGE OF
INTERNATIONAL FUND VALUE NET ASSETS
Class A $ 22,988 0.0%++
- ------------------------------------------------------
Class C 22,255 0.1%
- ------------------------------------------------------
Class I 2,717,291 0.5%
- ------------------------------------------------------
Class R1 23,119 2.5%
- ------------------------------------------------------
Class R2 22,933 0.1%
- ------------------------------------------------------
Class R3 22,702 0.3%
- ------------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the ICAP Funds by the Office of the General Counsel of New
York Life Investments is payable directly by the ICAP Funds. For the six-month
period ended April 30, 2010, these fees, which are included in professional fees
shown on the Statement of Operations, were as follows:
<Table>
MainStay ICAP Equity Fund $24,830
- ----------------------------------------------
MainStay ICAP Select Equity Fund 73,153
- ----------------------------------------------
MainStay ICAP Global Fund 1,295
- ----------------------------------------------
MainStay ICAP International Fund 23,146
- ----------------------------------------------
</Table>
NOTE 4--FEDERAL INCOME TAX:
As of October 31, 2009, for federal income tax purposes, capital loss
carryforwards of $283,374,801 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the
MainStay ICAP Equity Fund through the years indicated. To the extent that these
loss carryforwards are used to offset future capital gains, it is probable that
the capital gains so offset will not be distributed to shareholders. No capital
gain distributions shall be made until any capital loss carryforwards have been
fully utilized or expired.
MAINSTAY ICAP EQUITY FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 72,168
2017 211,207
- ---------------------------------- -----
Total $283,375
- ---------------------------------- -----
</Table>
As of October 31, 2009, for federal income tax purposes, capital loss
carryforwards of $712,339,129 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the
MainStay ICAP Select Equity Fund through the years indicated. To the extent that
these loss carryforwards are used to offset future capital gains, it is probable
that the capital gains so offset will not be distributed to shareholders. No
capital gain distributions shall be made until any capital loss carryforwards
have been fully utilized or expired.
MAINSTAY ICAP SELECT EQUITY FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 288,247
2017 424,092
- ---------------------------------- -----
Total $ 712,339
- ---------------------------------- -----
</Table>
As of October 31, 2009, for federal income tax purposes, capital loss
carryforwards of $14,160,649 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the
MainStay ICAP Global Fund through the years indicated. To the extent that these
loss carryforwards are used to offset future capital gains, it is probable that
the capital gains so offset will not be distributed to shareholders. No capital
gain distributions shall be made until any capital loss carryforwards have been
fully utilized or expired.
MAINSTAY ICAP GLOBAL FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 5,025
2017 9,136
- ---------------------------------- -----
Total $14,161
- ---------------------------------- -----
</Table>
As of October 31, 2009, for federal income tax purposes, capital loss
carryforwards of $227,279,884 were available as shown in the table below, to the
extent provided by the regulations to offset future realized gains of the
MainStay ICAP International Fund through the years indicated. To the extent that
these loss carryforwards are used to offset future capital gains, it is probable
that the capital gains so offset will not be distributed to shareholders. No
capital gain distributions shall be made until any capital loss carryforwards
have been fully utilized or expired.
76 MainStay ICAP Funds
MAINSTAY ICAP INTERNATIONAL FUND
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 81,013
2017 146,267
- ---------------------------------- -----
Total $227,280
- ---------------------------------- -----
</Table>
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statements of Changes in Net Assets, were as follows:
<Table>
<Caption>
2009
----------------------------------------
TAX-BASED TAX-BASED
DISTRIBUTIONS FROM DISTRIBUTIONS FROM
ORDINARY INCOME LONG-TERM GAINS
MainStay ICAP
Equity Fund $17,059,388 $--
- -------------------------------------------------------------
MainStay ICAP
Select Equity
Fund 22,054,747 --
- -------------------------------------------------------------
MainStay ICAP
Global Fund 805,367 --
- -------------------------------------------------------------
MainStay ICAP
International
Fund 19,576,260 --
- -------------------------------------------------------------
</Table>
NOTE 5--FOREIGN CURRENCY TRANSACTIONS:
MAINSTAY ICAP GLOBAL FUND
As of April 30, 2010, the Fund held the following foreign currency:
<Table>
<Caption>
CURRENCY COST VALUE
Pound Sterling GBP 1 USD 1 USD 1
- ---------------------------------------------------
</Table>
MAINSTAY ICAP INTERNATIONAL FUND
As of April 30, 2010, the Fund held the following foreign currency:
<Table>
<Caption>
CURRENCY COST VALUE
Japanese Yen (a) JPY (2) USD -- (b) USD -- (b)
- ---------------------------------------------------------
</Table>
(a) Currency was overdrawn as of April 30, 2010.
(b) Less than one dollar.
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the ICAP Funds.
Custodial fees are charged to the ICAP Funds based on the market value of
securities in the ICAP Funds and the number of certain cash transactions
incurred by the ICAP Funds.
NOTE 7--LINE OF CREDIT:
The ICAP Funds and certain affiliated funds maintain a line of credit of
$125,000,000 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 line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay ICAP Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the ICAP Funds on the line of
credit during the six-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchase and sales of
securities, other than short-term securities and securities subject to
repurchase transactions, were as follows:
<Table>
<Caption>
MAINSTAY ICAP MAINSTAY ICAP MAINSTAY ICAP MAINSTAY ICAP
EQUITY FUND SELECT EQUITY FUND GLOBAL FUND INTERNATIONAL FUND
-------------------- -------------------- ------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government
Securities $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------------------
All others 241,999 220,650 816,976 607,327 18,711 16,960 399,863 306,838
- ----------------------------------------------------------------------------------------------------------------
Total $241,999 $220,650 $816,976 $607,327 $18,711 $16,960 $399,863 $306,838
- ----------------------------------------------------------------------------------------------------------------
</Table>
mainstayinvestments.com 77
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 9--CAPITAL SHARE TRANSACTIONS:
MAINSTAY ICAP EQUITY FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 24,610 $ 804,891
Shares issued to
shareholders in
reinvestment of dividends 1,260 42,099
Shares redeemed (34,812) (1,132,350)
--------------------------
Net decrease in shares
outstanding before
conversion (8,942) (285,360)
Shares converted into
Investor Class (See Note
1) 1,806 60,533
Shares converted from
Investor Class (See Note
1) (6,640) (219,333)
--------------------------
Net decrease (13,776) $ (444,160)
==========================
Year ended October 31,
2009:
Shares sold 155,273 $ 4,050,825
Shares issued to
shareholders in
reinvestment of dividends 8,703 211,877
Shares redeemed (95,502) (2,372,844)
--------------------------
Net increase in shares
outstanding before
conversion 68,474 1,889,858
Shares converted into
Investor Class (See Note
1) 34,877 817,911
Shares converted from
Investor Class (See Note
1) (120,460) (3,366,847)
--------------------------
Net decrease (17,109) $ (659,078)
==========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 108,222 $ 3,497,328
Shares issued to
shareholders in
reinvestment of dividends 3,372 112,739
Shares redeemed (64,360) (2,088,602)
--------------------------
Net increase in shares
outstanding before
conversion 47,234 1,521,465
Shares converted from
Investor Class (See Note
1) 6,633 219,333
Shares converted from Class
A (See Note 1) (1,803) (60,533)
Shares converted from Class
A (a) (26,387) (838,842)
--------------------------
Net increase 25,677 $ 841,423
==========================
Year ended October 31,
2009:
Shares sold 218,596 $ 5,591,661
Shares issued to
shareholders in
reinvestment of dividends 14,833 366,013
Shares redeemed (284,302) (7,018,555)
--------------------------
Net decrease in shares
outstanding before
conversion (50,873) (1,060,881)
Shares converted into Class
A
(See Note 1) 120,503 3,366,847
Shares converted from Class
A
(See Note 1) (34,891) (817,911)
--------------------------
Net increase 34,739 $ 1,488,055
==========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 54,510 $ 1,738,354
Shares issued to
shareholders in
reinvestment of dividends 266 8,855
Shares redeemed (19,031) (604,012)
--------------------------
Net increase 35,745 $ 1,143,197
==========================
Year ended October 31,
2009:
Shares sold 48,645 $ 1,271,125
Shares issued to
shareholders in
reinvestment of dividends 1,890 44,684
Shares redeemed (61,739) (1,479,484)
--------------------------
Net decrease (11,204) $ (163,675)
==========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 3,137,247 $ 102,123,564
Shares issued to
shareholders in
reinvestment of dividends 127,052 4,232,604
Shares redeemed (2,455,155) (79,176,569)
--------------------------
Net increase in shares
outstanding before
conversion 809,144 27,179,599
Shares converted into Class
I (a) 26,346 838,842
--------------------------
Net increase 835,490 $ 28,018,441
==========================
Year ended October 31,
2009:
Shares sold 5,878,925 $ 147,627,970
Shares issued to
shareholders in
reinvestment of dividends 648,973 15,940,062
Shares redeemed (10,111,545) (245,242,091)
--------------------------
Net decrease (3,583,647) $ (81,674,059)
==========================
<Caption>
CLASS R1 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 10,862 $ 352,023
Shares issued to
shareholders in
reinvestment of dividends 371 12,422
Shares redeemed (8,803) (282,963)
--------------------------
Net increase 2,430 $ 81,482
==========================
Year ended October 31,
2009:
Shares sold 52,515 $ 1,389,303
Shares issued to
shareholders in
reinvestment of dividends 1,441 34,212
Shares redeemed (29,004) (772,201)
--------------------------
Net increase 24,952 $ 651,314
==========================
</Table>
78 MainStay ICAP Funds
<Table>
<Caption>
CLASS R2 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 39,378 $ 1,268,658
Shares issued to
shareholders in
reinvestment of dividends 400 13,370
Shares redeemed (7,399) (240,879)
--------------------------
Net increase 32,379 $ 1,041,149
==========================
Year ended October 31,
2009:
Shares sold 62,808 $ 1,507,886
Shares issued to
shareholders in
reinvestment of dividends 1,417 34,582
Shares redeemed (24,638) (654,859)
--------------------------
Net increase 39,587 $ 887,609
==========================
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 33,514 $ 1,119,719
Shares issued to
shareholders in
reinvestment of dividends 90 3,008
Shares redeemed (2,059) (67,957)
--------------------------
Net increase 31,545 $ 1,054,770
==========================
Year ended October 31,
2009:
Shares sold 11,461 $ 302,516
Shares issued to
shareholders in
reinvestment of dividends 135 3,304
Shares redeemed (2,056) (53,934)
--------------------------
Net increase 9,540 $ 251,886
==========================
</Table>
MAINSTAY ICAP SELECT EQUITY FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 164,900 $ 5,173,679
Shares issued in connection
with the acquisition of
MainStay Value Fund 4,410,690 132,367,008
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 1,165,123 35,331,544
Shares issued to
shareholders in
reinvestment of dividends 594 17,969
Shares redeemed (368,035) (11,490,763)
--------------------------
Net increase in shares
outstanding before
conversion 5,373,272 161,399,437
Shares converted into
Investor Class (See Note
1) 207,022 6,470,098
Shares converted from
Investor Class (See Note
1) (262,712) (8,230,986)
--------------------------
Net increase 5,317,582 $ 159,638,549
==========================
Year ended October 31,
2009:
Shares sold 96,980 $ 2,443,406
Shares issued to
shareholders in
reinvestment of dividends 3,898 92,326
Shares redeemed (62,230) (1,498,756)
--------------------------
Net increase in shares
outstanding before
conversion 38,648 1,036,976
Shares converted into
Investor Class (See Note
1) 41,986 953,234
Shares converted from
Investor Class (See Note
1) (35,330) (981,824)
--------------------------
Net increase 45,304 $ 1,008,386
==========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 2,537,980 $ 78,825,438
Shares issued in connection
with the acquisition of
MainStay Value Fund 4,823,914 144,765,185
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 1,763,625 53,479,447
Shares issued to
shareholders in
reinvestment of dividends 23,268 729,027
Shares redeemed (1,425,400) (44,383,535)
--------------------------
Net increase in shares
outstanding before
conversion 7,723,387 233,415,562
Shares converted from
Investor Class (See Note
1) 424,246 13,248,629
Shares converted from Class
A
(See Note 1) (31,113) (1,005,874)
Shares converted from Class
A (a) (692,144) (21,241,909)
--------------------------
Net increase 7,424,376 $ 224,416,408
==========================
Year ended October 31,
2009:
Shares sold 3,708,624 $ 93,587,880
Shares issued to
shareholders in
reinvestment of dividends 57,161 1,368,353
Shares redeemed (2,651,274) (61,217,542)
--------------------------
Net increase in shares
outstanding before
conversion 1,114,511 33,738,691
Shares converted into Class
A
(See Note 1) 35,317 981,824
Shares converted from Class
A
(See Note 1) (41,968) (953,234)
--------------------------
Net increase 1,107,860 $ 33,767,281
==========================
<Caption>
CLASS B SHARES AMOUNT
Period ended April 30, 2010
(b):
Shares sold 130,433 $ 4,058,353
Shares issued in connection
with the acquisition of
MainStay Value Fund 1,913,939 57,278,639
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 1,701,453 51,439,350
Shares redeemed (285,488) (8,837,344)
--------------------------
Net increase in shares
outstanding before
conversion 3,460,337 103,938,998
Shares converted from Class
B
(See Note 1) (339,096) (10,481,867)
--------------------------
Net increase 3,121,241 $ 93,457,131
==========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 596,165 $ 18,529,677
Shares issued in connection
with the acquisition of
MainStay Value Fund 181,117 5,420,299
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 382,905 11,576,242
Shares redeemed (266,680) (8,226,562)
--------------------------
Net increase 893,507 $ 27,299,656
==========================
Year ended October 31,
2009:
Shares sold 678,909 $ 17,603,579
Shares issued to
shareholders in
reinvestment of dividends 5,904 134,003
Shares redeemed (602,800) (14,199,524)
--------------------------
Net increase 82,013 $ 3,538,058
==========================
</Table>
mainstayinvestments.com 79
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 12,912,948 $ 407,557,881
Shares issued in connection
with the acquisition of
MainStay Value Fund 472,783 14,204,015
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 9,175 278,552
Shares issued to
shareholders in
reinvestment of dividends 223,279 6,947,138
Shares redeemed (6,159,357) (190,569,192)
--------------------------
Net increase in shares
outstanding before
conversion 7,458,828 238,418,394
Shares converted into Class
I (a) 690,793 21,241,909
--------------------------
Net increase 8,149,621 $ 259,660,303
==========================
Year ended October 31,
2009:
Shares sold 17,585,338 $ 432,709,634
Shares issued to
shareholders in
reinvestment of dividends 732,424 17,592,778
Shares redeemed (18,222,855) (430,366,656)
--------------------------
Net increase 94,907 $ 19,935,756
==========================
<Caption>
CLASS R1 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 52,568 $ 1,657,323
Shares issued in connection
with the acquisition of
MainStay Value Fund 36 1,080
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 577 17,519
Shares issued to
shareholders in
reinvestment of dividends 1,822 56,638
Shares redeemed (59,128) (1,874,230)
--------------------------
Net decrease (4,125) $ (141,670)
==========================
Year ended October 31,
2009:
Shares sold 328,601 $ 7,820,283
Shares issued to
shareholders in
reinvestment of dividends 4,968 119,492
Shares redeemed (65,294) (1,566,471)
--------------------------
Net increase 268,275 $ 6,373,304
==========================
<Caption>
CLASS R2 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 400,796 $ 12,208,717
Shares issued in connection
with the acquisition of
MainStay Value Fund 1,563 46,926
Shares issued in connection
with the acquisition of
MainStay Mid Cap Value
Fund 4,702 142,610
Shares issued to
shareholders in
reinvestment of dividends 1,320 40,885
Shares redeemed (77,339) (2,421,598)
--------------------------
Net increase 331,042 $ 10,017,540
==========================
Year ended October 31,
2009:
Shares sold 223,318 $ 5,806,116
Shares issued to
shareholders in
reinvestment of dividends 5,664 134,621
Shares redeemed (263,400) (6,999,810)
--------------------------
Net decrease (34,418) $ (1,059,073)
==========================
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 42,387 $ 1,308,602
Shares issued to
shareholders in
reinvestment of dividends 186 5,670
Shares redeemed (14,072) (440,059)
--------------------------
Net increase 28,501 $ 874,213
==========================
Year ended October 31,
2009:
Shares sold 78,916 $ 1,849,975
Shares issued to
shareholders in
reinvestment of dividends 1,265 29,767
Shares redeemed (36,900) (910,149)
--------------------------
Net increase 43,281 $ 969,593
==========================
(b) Class B shares were first offered on November 11,
2009.
</Table>
MAINSTAY ICAP GLOBAL FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 17,087 $ 139,864
Shares issued to shareholders
in reinvestment of
dividends 75 606
Shares redeemed (2,478) (20,069)
---------------------
Net increase in shares
outstanding before
conversion 14,684 120,401
Shares converted from
Investor Class
(See Note 1) (2) (15)
---------------------
Net increase 14,682 $ 120,386
=====================
Year ended October 31, 2009:
Shares sold 22,325 $ 154,464
Shares issued to shareholders
in reinvestment of
dividends 290 1,864
Shares redeemed (5,048) (32,221)
---------------------
Net increase in shares
outstanding before
conversion 17,567 124,107
Shares converted into
Investor Class
(See Note 1) 1,691 13,310
Shares converted from
Investor Class
(See Note 1) (691) (5,477)
---------------------
Net increase 18,567 $ 131,940
=====================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 170,221 $1,388,203
Shares issued to shareholders
in reinvestment of
dividends 286 2,325
Shares redeemed (33,011) (263,214)
---------------------
Net increase in shares
outstanding before
conversion 137,496 1,127,314
Shares converted into Class A
(See Note 1) 2 15
---------------------
Net increase 137,498 $1,127,329
=====================
Year ended October 31, 2009:
Shares sold 108,041 $ 717,118
Shares issued to shareholders
in reinvestment of
dividends 1,603 10,084
Shares redeemed (62,174) (347,639)
---------------------
Net increase in shares
outstanding before
conversion 47,470 379,563
Shares converted into Class A
(See Note 1) 690 5,477
Shares converted from Class A
(See Note 1) (1,689) (13,310)
---------------------
Net increase 46,471 $ 371,730
=====================
</Table>
80 MainStay ICAP Funds
<Table>
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 6,357 $ 52,268
Shares redeemed (2,687) (22,109)
---------------------
Net increase 3,670 $ 30,159
=====================
Year ended October 31, 2009:
Shares sold 18,714 $ 126,935
Shares issued to shareholders
in reinvestment of
dividends 79 516
Shares redeemed (3,361) (18,771)
---------------------
Net increase 15,432 $ 108,680
=====================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 29,928 $ 240,800
Shares issued to shareholders
in reinvestment of
dividends 694 5,642
Shares redeemed (13) (101)
---------------------
Net increase 30,609 $ 246,341
=====================
Year ended October 31, 2009:
Shares sold 67,640 $ 427,173
Shares issued to shareholders
in reinvestment of
dividends 4,337 27,358
Shares redeemed (60,694) (323,188)
---------------------
Net increase 11,283 $ 131,343
=====================
</Table>
MAINSTAY ICAP INTERNATIONAL FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 32,097 $ 897,707
Shares redeemed (31,694) (882,471)
-------------------------
Net increase in shares
outstanding before
conversion 403 15,236
Shares converted into
Investor Class
(See Note 1) 4,277 119,915
Shares converted from
Investor Class (See Note
1) (11,779) (331,465)
-------------------------
Net decrease (7,099) $ (196,314)
=========================
Year ended October 31, 2009:
Shares sold 63,962 $ 1,482,231
Shares issued to
shareholders in
reinvestment of dividends 12,865 290,041
Shares redeemed (89,581) (1,951,794)
-------------------------
Net decrease in shares
outstanding before
conversion (12,754) (179,522)
Shares converted into
Investor Class
(See Note 1) 46,860 949,479
Shares converted from
Investor Class (See Note
1) (41,565) (1,084,050)
-------------------------
Net increase (7,459) $ (314,093)
=========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 2,140,517 $ 59,575,741
Shares redeemed (545,273) (15,190,708)
-------------------------
Net increase in shares
outstanding before
conversion 1,595,244 44,385,033
Shares converted from
Investor Class (See Note
1) 11,773 331,465
Shares converted from Class
A
(See Note 1) (4,274) (119,915)
Shares converted from Class
A (a) (151,149) (3,999,406)
-------------------------
Net increase 1,451,594 $ 40,597,177
=========================
Year ended October 31, 2009:
Shares sold 3,545,712 $ 87,678,985
Shares issued to
shareholders in
reinvestment of dividends 96,260 2,163,823
Shares redeemed (1,817,434) (39,822,743)
-------------------------
Net increase in shares
outstanding before
conversion 1,824,538 50,020,065
Shares converted into Class
A
(See Note 1) 41,561 1,084,050
Shares converted from Class
A
(See Note 1) (46,860) (949,479)
-------------------------
Net increase 1,819,239 $ 50,154,636
=========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 70,191 $ 1,936,781
Shares redeemed (139,644) (3,852,191)
-------------------------
Net decrease (69,453) $ (1,915,410)
=========================
Year ended October 31, 2009:
Shares sold 121,781 $ 2,836,278
Shares issued to
shareholders in
reinvestment of dividends 14,491 325,621
Shares redeemed (309,611) (6,689,312)
-------------------------
Net decrease (173,339) $ (3,527,413)
=========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 3,759,107 $ 102,891,696
Shares issued to
shareholders in
reinvestment of dividends 22,538 643,471
Shares redeemed (1,880,731) (52,521,109)
-------------------------
Net increase in shares
outstanding before
conversion 1,900,914 51,014,058
Shares converted into Class
I (a) 150,807 3,999,406
-------------------------
Net increase 2,051,721 $ 55,013,464
=========================
Year ended October 31, 2009:
Shares sold 5,192,587 $ 116,761,035
Shares issued to
shareholders in
reinvestment of dividends 635,554 14,308,357
Shares redeemed (5,367,884) (119,365,191)
-------------------------
Net increase 460,257 $ 11,704,201
=========================
</Table>
mainstayinvestments.com 81
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS R1 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 19,360 $ 533,631
Shares issued to
shareholders in
reinvestment of dividends 13 374
Shares redeemed (10,381) (284,172)
-------------------------
Net increase 8,992 $ 249,833
=========================
Year ended October 31, 2009:
Shares sold 20,763 $ 454,180
Shares issued to
shareholders in
reinvestment of dividends 730 16,424
Shares redeemed (4,218) (104,315)
-------------------------
Net increase 17,275 $ 366,289
=========================
<Caption>
CLASS R2 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 407,399 $ 11,510,331
Shares redeemed (208,035) (5,817,147)
-------------------------
Net increase 199,364 $ 5,693,184
=========================
Year ended October 31, 2009:
Shares sold 858,494 $ 20,091,113
Shares issued to
shareholders in
reinvestment of dividends 20,240 459,923
Shares redeemed (288,471) (6,704,961)
-------------------------
Net increase 590,263 $ 13,846,075
=========================
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 113,773 $ 3,142,847
Shares redeemed (56,815) (1,578,809)
-------------------------
Net increase 56,958 $ 1,564,038
=========================
Year ended October 31, 2009:
Shares sold 240,011 $ 5,518,044
Shares issued to
shareholders in
reinvestment of dividends 2,097 47,968
Shares redeemed (49,861) (1,155,112)
-------------------------
Net increase 192,247 $ 4,410,900
=========================
(a) In addition to any automatic conversion features
described above in Note 1 with respect to Investor
Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis
into another share class of the same ICAP Fund for
which you are eligible. However, the following
limitations apply:
</Table>
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the ICAP Funds
to request a voluntary conversion between shares classes of the same ICAP Fund.
You may be required to provide sufficient information to establish eligibility
to convert to the new share class. All permissible conversions will be made on
the basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 10--FUND ACQUISITIONS:
At a meeting held on June 23, 2009, the Board approved a plan of reorganization
whereby the MainStay ICAP Select Equity Fund would acquire the assets, including
the investments, and assume the liabilities of MainStay Value Fund, a series of
The MainStay Funds. Shareholders of the MainStay Value Fund approved this
reorganization on November 5, 2009, which was completed on November 12, 2009.
The aggregate net assets of the MainStay ICAP Select Equity Fund immediately
before the acquisition were $1,835,281,477 and the combined net assets after the
acquisition were $2,189,364,629.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
MainStay Value Fund
- ------------------------------------------------------
Investor Class 9,297,917 $132,367,008
- ------------------------------------------------------
Class A 10,189,206 144,765,185
- ------------------------------------------------------
Class B 4,043,817 57,278,639
- ------------------------------------------------------
Class C 382,552 5,420,299
- ------------------------------------------------------
Class I 993,600 14,204,015
- ------------------------------------------------------
Class R1 75 1,080
- ------------------------------------------------------
Class R2 3,285 46,926
- ------------------------------------------------------
</Table>
In exchange for the MainStay Value Fund shares and net assets, the MainStay ICAP
Select Equity Fund issued 4,410,690 Investor Class Shares; 4,823,914 Class A
shares; 1,913,939 Class B shares; 181,117 Class C shares; 472,783 Class I
shares; 36 Class R1 shares and 1,563 Class R2 shares.
MainStay Value Fund's net assets at the acquisition date were as follows, which
include the following amounts of capital stock, unrealized appreciation,
accumulated net realized loss and undistributed net investment loss:
<Table>
<Caption>
TOTAL CAPITAL UNREALIZED ACCUMULATED NET UNDISTRIBUTED NET
NET ASSETS STOCK APPRECIATION REALIZED LOSS INVESTMENT LOSS
MainStay
Value Fund $354,083,152 $425,289,747 $43,388,960 $(114,594,547) $(1,008)
- --------------------------------------------------------------------------------------------
</Table>
Assuming the acquisition had been completed on November 1, 2010, the beginning
of the annual reporting period of the MainStay ICAP Select Equity Fund, MainStay
ICAP
82 MainStay ICAP Funds
Select Equity Fund's pro forma results of operations for the period ended April
30, 2010, are as follows:
<Table>
Net investment income $ 8,489,313
- -------------------------------------------------
Net gain on investments $338,303,820
- -------------------------------------------------
Net increase in net assets
resulting from operations $346,793,133
- -------------------------------------------------
</Table>
Because the combined investment portfolios have been managed as a single
integrated portfolio since the acquisition was completed, it is not practicable
to separate the amounts of revenue and earnings of the MainStay Value Fund that
have been included in the MainStay ICAP Select Equity Fund's Statement of
Operations since October 31, 2009.
In December 2007, the Financial Accounting Standards Board issued Accounting
Standards Codification (ASC) 805 (formerly FAS 141R Business Combinations),
which requires the following disclosures by the acquirer, among other things,
when a transaction or other event meets the definition of a business
combination:
- - The identification of the acquiree
- - Recognizing and measuring identifiable assets acquired and liabilities
assumed, at the acquisition date, generally at their fair values
- - Disclosure, by the acquirer, of information that enables users of its
financial statements to evaluate the nature and financial effect of a business
combination that occurs during the current reporting period
ASC 805 requires prospective application to business combinations for which the
acquisition date occurs in an annual reporting period beginning on or after
December 15, 2008.
In accordance with ASC 805, for financial reporting purposes, assets received
and shares issued by the MainStay ICAP Select Equity Fund were recorded at fair
value; however, the cost basis of the investments received from MainStay Value
Fund was carried forward to align ongoing reporting of the MainStay ICAP Select
Equity Fund's realized and unrealized gains and losses with amounts
distributable to shareholders for tax purposes.
ASC 805 requires disclosure in this semi-annual report, and in the Fund's annual
report as of October 31, 2010, of the MainStay ICAP Select Equity Fund's pro-
forma results of operations, including net investment income, net gain (loss) on
investments and net increase (decrease) in net assets resulting from operations,
assuming the acquisition had been completed on November 1, 2009, the beginning
of the annual reporting period of the MainStay ICAP Select Equity Fund, through
the end of the applicable reporting period.
ASC 805 also requires the MainStay ICAP Select Equity Fund to report, if
practicable, the amounts of revenue and earnings of the acquiree since the
acquisition date included in the combined entity's income statement for the
reporting period. Because the combined investment portfolios have been managed
as a single integrated portfolio since the acquisition was completed, it is not
practicable to separate the amounts of revenue and earnings of the MainStay
Value Fund that will be included in the MainStay ICAP Select Equity Fund's
Statement of Operations since November 12, 2009.
Also at the meeting held on June 23, 2009, the Board approved a plan of
reorganization whereby the MainStay ICAP Select Equity Fund would acquire the
assets, including the investments, and assume the liabilities of MainStay Mid
Cap Value Fund, a series of The MainStay Funds. Shareholders of the MainStay Mid
Cap Value Fund approved this reorganization on November 16, 2009, which was
completed on November 24, 2009. The aggregate net assets of the MainStay ICAP
Select Equity Fund immediately before the acquisition were $2,229,459,923 and
the combined net assets after the acquisition were $2,381,725,187.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
MainStay Mid Cap Value Fund
- -----------------------------------------------------
Investor Class 3,220,243 $35,331,544
- -----------------------------------------------------
Class A 4,870,845 53,479,447
- -----------------------------------------------------
Class B 4,924,594 51,439,350
- -----------------------------------------------------
Class C 1,108,485 11,576,242
- -----------------------------------------------------
Class I 25,005 278,552
- -----------------------------------------------------
Class R1 1,568 17,519
- -----------------------------------------------------
Class R2 12,937 142,610
- -----------------------------------------------------
</Table>
In exchange for the MainStay Mid Cap Value Fund shares and net assets, the
MainStay ICAP Select Equity Fund issued 1,165,123 Investor Class Shares;
1,763,625 Class A shares; 1,701,453 Class B shares; 382,905 Class C shares;
9,175 Class I shares; 577 Class R1 shares and 4,702 Class R2 shares.
MainStay Mid Cap Value Fund's net assets at the acquisition date were as
follows, which include the following amounts of capital stock, unrealized
depreciation, accumulated net realized loss and undistributed net investment
income:
<Table>
<Caption>
TOTAL CAPITAL UNREALIZED ACCUMULATED NET UNDISTRIBUTED NET
NET ASSETS STOCK DEPRECIATION REALIZED LOSS INVESTMENT
MainStay Mid
Cap Value
Fund $152,265,264 $191,861,774 $(359,014) $(39,237,794) $298
- --------------------------------------------------------------------------------------------
</Table>
Assuming the acquisition had been completed on November 1, 2010, the beginning
of the annual reporting period of the MainStay ICAP Select Equity Fund, MainStay
mainstayinvestments.com 83
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
ICAP Select Equity Fund's pro forma results of operations for the period ended
April 30, 2010, are as follows:
<Table>
Net investment income $ 8,698,262
- -------------------------------------------------
Net gain on investments $329,441,955
- -------------------------------------------------
Net increase in net assets
resulting from operations $338,140,217
- -------------------------------------------------
</Table>
Because the combined investment portfolios have been managed as a single
integrated portfolio since the acquisition was completed, it is not practicable
to separate the amounts of revenue and earnings of the MainStay Mid Cap Value
Fund that have been included in the MainStay ICAP Select Equity Fund's Statement
of Operations since October 31, 2009.
In December 2007, the Financial Accounting Standards Board issued Accounting
Standards Codification (ASC) 805 (formerly FAS 141R Business Combinations),
which requires the following disclosures by the acquirer, among other things,
when a transaction or other event meets the definition of a business
combination:
- - The identification of the acquiree
- - Recognizing and measuring identifiable assets acquired and liabilities
assumed, at the acquisition date, generally at their fair values
- - Disclosure, by the acquirer, of information that enables users of its
financial statements to evaluate the nature and financial effect of a business
combination that occurs during the current reporting period
ASC 805 requires prospective application to business combinations for which the
acquisition date occurs in an annual reporting period beginning on or after
December 15, 2008.
In accordance with ASC 805, for financial reporting purposes, assets received
and shares issued by the MainStay ICAP Select Equity Fund were recorded at fair
value; however, the cost basis of the investments received from MainStay Mid Cap
Value Fund was carried forward to align ongoing reporting of the MainStay ICAP
Select Equity Fund's realized and unrealized gains and losses with amounts
distributable to shareholders for tax purposes.
ASC 805 requires disclosure in this semi-annual report, and in the Fund's annual
report as of October 31, 2010, of the MainStay ICAP Select Equity Fund's pro-
forma results of operations, including net investment income, net gain (loss) on
investments and net increase (decrease) in net assets resulting from operations,
assuming the acquisition had been completed on November 1, 2009, the beginning
of the annual reporting period of the MainStay ICAP Select Equity Fund, through
the end of the applicable reporting period.
ASC 805 also requires the MainStay ICAP Select Equity Fund to report, if
practicable, the amounts of revenue and earnings of the acquiree since the
acquisition date included in the combined entity's income statement for the
reporting period. Because the combined investment portfolios have been managed
as a single integrated portfolio since the acquisition was completed, it is not
practicable to separate the amounts of revenue and earnings of the MainStay Mid
Cap Value Fund that will be included in the MainStay ICAP Select Fund's
Statement of Operations since November 24, 2009.
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the ICAP Funds have adopted ASU 2010-06. The adoption of ASU
2010-06 has not impacted the amounts reported in the ICAP Funds' financial
statements; however, there are additional disclosures in each of the ICAP Funds'
Portfolio of Investments.
NOTE 12--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
84 MainStay ICAP Funds
PROXY VOTING POLICIES AND
PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Funds' securities is available without charge,
upon request, (i) by visiting the Funds' website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Funds are required to file with the SEC their proxy voting records for each
Fund for the 12-month period ending June 30 on Form N-PX. The most recent Form
N-PX or relevant Fund proxy voting record is available free of charge upon
request by calling 800-MAINSTAY (624-6782); visiting the Funds' website at
mainstayinvestments.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 or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 85
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18324 MS121-10 MSIC10-06/10
E1
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY INDEXED BOND FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look at the securities,
strategies and market conditions that affected your MainStay Fund(s) during the
six months ended April 30, 2010. Of course, past performance is no guarantee of
future results. Even in a rising market, we believe that maintaining a long-term
perspective can be valuable. At MainStay, we believe that in all markets, broad
diversification, gradual allocation adjustments and regular portfolio reviews
can help guide you toward your long-range financial goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY INDEXED BOND FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ---------------------------------------------
FINANCIAL STATEMENTS 29
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 34
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 40
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 40
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -1.24% 3.81% 4.30% 5.49%
Excluding sales charges 1.82 7.02 4.94 5.81
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP BROAD BARCLAYS CAPITAL
MAINSTAY INDEXED INVESTMENT GRADE U.S. AGGREGATE
BOND FUND BOND INDEX BOND INDEX
---------------- ---------------- ----------------
4/30/00 9700 10000 10000
10792 11237 11239
11533 12119 12119
12704 13386 13388
12821 13637 13632
13403 14372 14348
13389 14484 14450
14253 15557 15514
15208 16703 16579
15939 17538 17215
4/30/10 17058 18844 18643
</Table>
CLASS A SHARES(3)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -1.09% 3.94% 4.36% 5.51%
Excluding sales charges 1.97 7.15 5.00 5.84
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP BROAD BARCLAYS CAPITAL
MAINSTAY INDEXED INVESTMENT GRADE U.S. AGGREGATE
BOND FUND BOND INDEX BOND INDEX
---------------- ---------------- ----------------
4/30/00 24250 25000 25000
26980 28094 28096
28833 30298 30299
31760 33464 33469
32051 34094 34079
33507 35930 35870
33472 36210 36125
35633 38893 38784
38030 41757 41447
39907 43845 43037
4/30/10 42761 47110 46607
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ---------------------------------------------------
2.16% 7.66% 5.42% 6.17%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP BROAD BARCLAYS CAPITAL
MAINSTAY INDEXED INVESTMENT GRADE U.S. AGGREGATE
BOND FUND BOND INDEX BOND INDEX
---------------- ---------------- ----------------
4/30/00 10000 10000 10000
11150 11237 11239
11944 12119 12119
13187 13386 13388
13341 13637 13632
13977 14372 14348
14026 14484 14450
14978 15557 15514
16046 16703 16579
16902 17538 17215
4/30/10 18196 18844 18643
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 3.00% and an
annual 12b-1 fee of 0.25%. Class I shares are sold with no initial sales
charge or contingent deferred sales charge, have no annual 12b-1 fee, and are
generally available to corporate and institutional investors or individual
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. For information on current fee waivers
and/or expense limitations, please refer to the notes to the financial
statements. Performance data for the classes varies based on differences in
their fee and expense structures.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
Barclays Capital U.S. Aggregate Bond Index(4) 2.54% 8.30% 5.38% 6.43%
Citigroup Broad Investment Grade Bond Index(5) 2.14 7.44 5.57 6.54
Average Lipper intermediate investment grade debt fund(6) 4.04 15.23 4.50 5.80
</Table>
differences in certain contractual fees and expenses. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. Performance figures for Class A shares, first offered on January 2, 2004,
include the historical performance of Class I shares through December 31,
2003, adjusted for differences in certain contractual expenses and fees.
Unadjusted, the performance shown for Class A shares might have been lower.
4. The Barclays Capital U.S. Aggregate Bond Index consists of the following
Barclays Capital indices: the Government Bond Index, the Corporate Bond
Index, the Mortgage-Backed Securities Index and the Asset-Backed Securities
Index. To qualify for inclusion in the Barclays Capital U.S. 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 $250 million. Results assume reinvestment
of all income and capital gains. As of February 27, 2009, the Barclays
Capital U.S. Aggregate Bond Index is the Fund's broad-based securities market
index for comparison purposes. The Fund selected the Barclays Capital U.S.
Aggregate Bond Index because it believes that this index is more reflective
of the Fund's investment style. An investment cannot be made directly in an
index.
5. The Citigroup Broad Investment Grade Bond Index (BIG Index) 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 in an Index.
6. The average Lipper intermediate investment grade debt fund is representative
of funds that invest primarily in investment-grade debt issues (rated in the
top four grades) with dollar-weighted average maturities of one to ten years.
This benchmark is a product of Lipper Inc. Lipper Inc. is an independent
monitor of fund performance. Results are based on average total returns of
similar funds with all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Indexed Bond Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY INDEXED BOND FUND (UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,018.20 $4.60 $1,020.20 $4.61
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,019.70 $4.11 $1,020.70 $4.11
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,021.60 $2.16 $1,022.70 $2.16
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.92% for Investor Class, 0.82% for Class A and 0.43% for Class I)
multiplied by the average account value over the period, divided by 365 and
multiplied by 181 (to reflect the one-half year period). The table above
represents the actual expenses incurred during the one-half year period.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PORTFOLIO COMPOSITION PIE CHART)
<Table>
U.S. Government & Federal Agencies 72.1
Corporate Bonds 18.2
Yankee Bonds 3.6
Mortgage-Backed Securities 3.4
Short-Term Investments 2.8
Foreign Government Bonds 1.5
Asset-Backed Securities 0.5
Other Assets, Less Liabilities (2.1)
</Table>
See Portfolio of Investments beginning on page 11 for specific holdings within
these categories.
TOP TEN ISSUERS HELD AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. United States Treasury Notes, 0.75%-4.875%, due
11/15/11-2/15/20
2. Federal Home Loan Mortgage Corporation (Mortgage Pass-
Through Securities), 4.00%-8.00%, due 4/1/11-3/1/40
3. Federal National Mortgage Association (Mortgage Pass-Through
Securities), 4.00%-8.00%, due 8/1/10-12/1/39
4. Government National Mortgage Association (Mortgage Pass-
Through Securities), 4.00%-8.50%, due 9/15/11-3/15/40
5. Federal National Mortgage Association, 1.75%-6.21%, due
4/20/12-8/6/38
6. Federal Home Loan Mortgage Corporation, 1.125%-5.125%, due
7/12/10-3/27/19
7. United States Treasury Bonds, 4.375%-6.75%, due
8/15/26-11/15/39
8. JP Morgan Chase Commercial Mortgage Securities Corp.,
4.879%-5.92%, due 1/12/38-2/12/49
9. Bank of America Corp., 2.10%-5.65%, due 4/30/12-5/1/18
10. Goldman Sachs Group, Inc. (The), 1.625%-6.25%, due
7/15/11-1/18/18
</Table>
8 MainStay Indexed Bond Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS DONALD F. SEREK AND THOMAS J. GIRARD OF
NEW YORK LIFE INVESTMENTS,(1) THE FUND'S MANAGER.
HOW DID MAINSTAY INDEXED BOND FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Indexed Bond Fund returned 1.82% for
Investor Class shares and 1.97% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 2.16%.
All share classes underperformed the 4.04% return of the average Lipper(2)
intermediate investment grade debt fund for the six months ended April 30, 2010.
All share classes also underperformed the 2.54% return of the Barclays Capital
U.S. Aggregate Bond Index(3) for the reporting period. The Barclays Capital U.S.
Aggregate Bond Index is the Fund's broad-based securities-market index. See page
5 for Fund returns with sales charges.
WHAT FACTORS HAD A MAJOR IMPACT ON BOND MARKET PERFORMANCE DURING THE REPORTING
PERIOD?
During the six months ended April 30, 2010, the economic recovery appeared to
gain momentum and the financial markets continued to rebound. The equity markets
hit a low point in March of 2009, and spreads(4) on non-Treasury bonds appeared
to hit their widest levels at roughly the same time. Throughout the reporting
period, the equity markets recovered and spreads tightened significantly. Assets
also flowed out of money market funds in search of higher yields. A large
portion of that money was reallocated to the fixed-income market, particularly
to corporate bonds.
Because inflation remained relatively low, the Federal Reserve was able to sit
on the sidelines and exercise patience in its monetary policy decisions. It
allowed most of its emergency programs expire, with little discernable impact on
the bond market. Federal Reserve forecasts include keeping short-term interest
rates very low for an extended period of time.
The economy continued to show modest improvement during the reporting period,
but the recovery was subpar relative to other recoveries. The most glaring
weakness was the labor market, which has only recently begun to create jobs.
Unemployment remained unacceptably high, and policy makers appeared to be
waiting for meaningful improvements before significantly tightening monetary
policy.
Uncertainty about U.S. financial reform legislation and its impact on financial
institutions kept spreads on bank and finance paper wider than normal relative
to spreads on utility and industrial bonds. Concerns surrounding Greek sovereign
debt--and whether there would be a default or a bailout--created volatility in
the U.S. Treasury market and the corporate bond market.
HOW DID SECURITIES IN DIFFERENT RATING CATEGORIES PERFORM DURING THE REPORTING
PERIOD?
Broadly speaking, higher-risk bonds tended to outperform bonds with lower-risk.
By rating category, the Fund's best-performing sector was BBB-rated bonds.(5)
The worst-performing ratings category was AAA-rated bonds.
WHICH SECTORS WERE THE STRONGEST PERFORMERS DURING THE REPORTING PERIOD AND
WHICH SECTORS DETRACTED THE MOST?
The best-performing sectors were corporate bonds and commercial mortgage-backed
securities. During the reporting period, attractive valuations, high levels of
liquidity and continued risk-taking led investors to allocate significant
capital to corporate bonds, commercial mortgage-backed securities and other non-
Treasury debt instruments. As a result, spreads--or the differences in yield
between these securities and duration-equivalent(6) U.S. Treasurys--tightened
dramatically.
1. "New York Life Investments" is a service mark used by New York Life
Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Barclays Capital U.S.
Aggregate Bond Index.
4. The terms "spread" and "yield spread" may refer to the difference in yield
between a security or type of security and comparable U.S. Treasury issues.
The terms may also refer to the difference in yield between two specific
securities or types of securities at a given time.
5. 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 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.
6. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
mainstayinvestments.com 9
During the reporting period, the worst-performing sectors were U.S. Treasurys
and government agency securities. While these two sectors generated positive
total returns, they underperformed other sectors primarily because investors
manifested a thirst for higher yield, a willingness to take on more risk, and
ongoing concerns about the ever-increasing supply of government debt.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
Purchases and sales were limited to those needed to keep the Fund's exposures
consistent with those of the Barclays Capital U.S. Aggregate Bond 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 forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
10 MainStay Indexed Bond Fund
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS 99.3%+
ASSET-BACKED SECURITIES 0.5%
- -------------------------------------------------------
CREDIT CARDS 0.1%
Chase Issuance Trust
Series 2005, Class A-10
4.65%, due 12/17/12 $ 500,000 $ 509,419
------------
FINANCE-OTHER 0.2%
Equity One ABS, Inc.
Series 2003-4, Class AF6
4.833%, due 10/25/34 (a) 250,000 245,071
Mercedes-Benz Auto
Receivables Trust Series
2009-1, Class A3
1.67%, due 1/15/14 1,000,000 1,009,181
Residential Asset Mortgage
Products, Inc.
Series 2003-RZ5, Class A7
4.97%, due 9/25/33 (a) 174,277 171,928
Saxon Asset Securities Trust
Series 2003-1, Class AF5
5.455%, due 6/25/33 (a) 96,707 85,481
------------
1,511,661
------------
HOME EQUITY 0.2%
Citicorp Residential
Mortgage Securities, Inc.
Series 2006-3, Class A3
5.61%, due 11/25/36 (a) 685,148 674,558
JP Morgan Mortgage
Acquisition Corp.
Series 2007-HE1, Class AF3
6.174%, due 5/25/35 (a) 500,000 283,393
------------
957,951
------------
TRANSPORTATION 0.0%++
Continental Airlines, Inc.
Series 1992-2, Class A1
7.256%, due 3/15/20 55,319 56,564
------------
Total Asset-Backed
Securities
(Cost $3,242,462) 3,035,595
------------
CORPORATE BONDS 18.2%
- -------------------------------------------------------
BANKS 2.2%
V Bank of America Corp.
2.10%, due 4/30/12 (b) 2,000,000 2,038,368
4.75%, due 8/1/15 250,000 254,132
4.90%, due 5/1/13 500,000 526,054
5.25%, due 12/1/15 200,000 203,314
5.375%, due 6/15/14 300,000 316,613
5.42%, due 3/15/17 1,100,000 1,091,005
5.625%, due 10/14/16 100,000 103,776
5.65%, due 5/1/18 325,000 328,947
Bank One Corp.
5.90%, due 11/15/11 250,000 265,941
BB&T Corp.
3.375%, due 9/25/13 500,000 515,182
6.50%, due 8/1/11 100,000 105,363
Branch Banking & Trust Co.
4.875%, due 1/15/13 100,000 106,193
Capital One Bank USA N.A.
8.80%, due 7/15/19 500,000 613,123
Capital One Financial Corp.
5.25%, due 2/21/17 100,000 103,704
Fifth Third Bank
4.75%, due 2/1/15 250,000 254,636
JPMorgan Chase Bank N.A.
5.875%, due 6/13/16 150,000 161,653
6.00%, due 10/1/17 785,000 842,445
KeyBank N.A.
5.80%, due 7/1/14 375,000 397,806
Marshall & Ilsley Bank
5.00%, due 1/17/17 150,000 140,310
Mellon Funding Corp.
5.00%, due 12/1/14 250,000 271,772
Mercantile Bankshares Corp.
Series B
4.625%, due 4/15/13 100,000 104,467
Mercantile-Safe Deposit &
Trust Co.
5.70%, due 11/15/11 50,000 51,538
National City Bank of
Pennsylvania
6.25%, due 3/15/11 250,000 260,054
PNC Bank N.A.
5.25%, due 1/15/17 175,000 181,235
PNC Funding Corp.
5.125%, due 2/8/20 100,000 101,816
Sanwa Bank, Ltd.
7.40%, due 6/15/11 100,000 106,547
State Street Bank & Trust
Co.
5.25%, due 10/15/18 100,000 104,788
SunTrust Banks, Inc.
5.40%, due 4/1/20 100,000 96,600
5.45%, due 12/1/17 100,000 100,853
Swiss Bank Corp.
7.75%, due 9/1/26 100,000 114,341
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest issuers held, as of April 30, 2010, 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. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
U.S. Bank N.A.
4.80%, due 4/15/15 $ 100,000 $ 108,022
6.375%, due 8/1/11 250,000 265,721
Wachovia Bank N.A.
4.875%, due 2/1/15 575,000 603,071
5.00%, due 8/15/15 50,000 52,157
5.60%, due 3/15/16 200,000 217,716
6.60%, due 1/15/38 300,000 320,980
Wachovia Corp.
5.25%, due 8/1/14 100,000 106,089
5.50%, due 8/1/35 125,000 112,648
Wells Fargo & Co.
3.75%, due 10/1/14 250,000 254,960
Wells Fargo Bank N.A.
5.75%, due 5/16/16 350,000 380,426
5.95%, due 8/26/36 150,000 146,546
6.45%, due 2/1/11 550,000 572,889
------------
13,003,801
------------
CONSUMER 2.0%
Anheuser-Busch Cos., Inc.
6.45%, due 9/1/37 250,000 275,046
Anheuser-Busch InBev
Worldwide, Inc.
3.00%, due 10/15/12 500,000 514,237
Archer-Daniels-Midland Co.
5.45%, due 3/15/18 100,000 109,935
6.45%, due 1/15/38 200,000 228,085
Avon Products, Inc.
5.125%, due 1/15/11 50,000 51,568
Bottling Group LLC
5.50%, due 4/1/16 100,000 111,725
Bunge Limited Finance Corp.
5.35%, due 4/15/14 100,000 105,789
Campbell Soup Co.
4.50%, due 2/15/19 250,000 258,975
4.875%, due 10/1/13 100,000 109,736
Coca-Cola Enterprises, Inc.
7.00%, due 10/1/26 100,000 121,192
8.50%, due 2/1/22 252,000 331,428
Colgate-Palmolive Co.
3.15%, due 8/5/15 100,000 101,921
ConAgra Foods, Inc.
7.00%, due 10/1/28 100,000 112,848
7.875%, due 9/15/10 67,000 68,697
Costco Wholesale Corp.
5.50%, due 3/15/17 100,000 111,504
CVS Caremark Corp.
4.875%, due 9/15/14 50,000 53,677
6.25%, due 6/1/27 175,000 187,392
Dell, Inc.
4.70%, due 4/15/13 175,000 189,458
Dr. Pepper Snapple Group,
Inc.
2.35%, due 12/21/12 200,000 202,133
6.12%, due 5/1/13 100,000 111,305
General Mills, Inc.
5.65%, due 9/10/12 65,000 71,034
5.70%, due 2/15/17 100,000 111,383
H.J. Heinz Finance Co.
6.625%, due 7/15/11 300,000 319,516
Hershey Co. (The)
5.45%, due 9/1/16 100,000 108,708
Home Depot, Inc.
5.40%, due 3/1/16 200,000 219,372
5.875%, due 12/16/36 250,000 250,148
Kellogg Co.
Series B
7.45%, due 4/1/31 150,000 188,021
Kohl's Corp.
6.30%, due 3/1/11 200,000 208,229
Kraft Foods, Inc.
4.125%, due 2/9/16 500,000 512,748
5.25%, due 10/1/13 100,000 108,350
6.125%, due 2/1/18 250,000 276,158
6.50%, due 8/11/17 225,000 254,931
Kroger Co. (The)
5.50%, due 2/1/13 250,000 271,484
6.40%, due 8/15/17 175,000 198,917
Lowe's Cos., Inc.
6.65%, due 9/15/37 100,000 114,913
6.875%, due 2/15/28 100,000 115,508
McDonalds Corp.
5.80%, due 10/15/17 310,000 350,834
Mead Johnson Nutrition Co.
3.50%, due 11/1/14 (c) 250,000 253,217
Newell Rubbermaid, Inc.
6.75%, due 3/15/12 50,000 54,091
Pepsi Bottling Group, Inc.
7.00%, due 3/1/29 60,000 72,779
PepsiCo., Inc.
5.00%, due 6/1/18 500,000 535,734
5.15%, due 5/15/12 250,000 269,416
Pfizer, Inc.
6.20%, due 3/15/19 650,000 741,191
Philip Morris International,
Inc.
5.65%, due 5/16/18 325,000 355,447
Procter & Gamble Co. (The)
4.70%, due 2/15/19 250,000 261,176
4.85%, due 12/15/15 75,000 82,917
5.55%, due 3/5/37 100,000 104,580
</Table>
12 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)
CONSUMER (CONTINUED)
Procter & Gamble Co. (The) (continued)
5.80%, due 8/15/34 $ 75,000 $ 81,050
Safeway, Inc.
5.00%, due 8/15/19 100,000 103,063
5.80%, due 8/15/12 200,000 218,803
6.35%, due 8/15/17 100,000 113,793
Sara Lee Corp.
6.25%, due 9/15/11 150,000 159,191
Sysco Corp.
5.375%, due 9/21/35 100,000 100,200
Target Corp.
6.00%, due 1/15/18 250,000 286,165
6.50%, due 10/15/37 150,000 169,511
Wal-Mart Stores, Inc.
5.375%, due 4/5/17 350,000 387,509
6.50%, due 8/15/37 350,000 400,200
Yum! Brands, Inc.
6.25%, due 3/15/18 130,000 144,953
------------
11,931,891
------------
ELECTRIC 1.6%
Alabama Power Co.
5.55%, due 2/1/17 50,000 53,435
Alliant Energy Corp.
4.00%, due 10/15/14 100,000 101,459
Appalachian Power Co.
Series H
5.95%, due 5/15/33 100,000 100,887
Arizona Public Service Co.
6.375%, due 10/15/11 100,000 106,379
Baltimore Gas & Electric Co.
6.125%, due 7/1/13 100,000 110,965
CenterPoint Energy Houston
Electric LLC
Series K2
6.95%, due 3/15/33 100,000 112,682
Commonwealth Edison Co.
6.15%, due 9/15/17 300,000 335,467
Consolidated Edison Co. of
New York, Inc.
6.20%, due 6/15/36 100,000 109,207
6.30%, due 8/15/37 225,000 249,264
Constellation Energy Group,
Inc.
7.60%, due 4/1/32 100,000 118,273
Consumers Energy Co.
Series F
4.00%, due 5/15/10 250,000 250,110
Series B
5.375%, due 4/15/13 100,000 108,678
Detroit Edison Co. (The)
6.40%, due 10/1/13 275,000 311,345
Dominion Resources, Inc.
5.15%, due 7/15/15 100,000 108,308
DTE Energy Co.
7.05%, due 6/1/11 250,000 263,659
Duke Energy Carolinas LLC
5.10%, due 4/15/18 200,000 211,204
6.00%, due 1/15/38 200,000 216,244
Emerson Electric Co.
4.25%, due 11/15/20 400,000 399,659
Entergy Mississippi, Inc.
5.15%, due 2/1/13 75,000 79,808
FirstEnergy Corp.
Series B
6.45%, due 11/15/11 11,000 11,668
Series C
7.375%, due 11/15/31 200,000 213,391
Florida Power & Light
5.55%, due 11/1/17 100,000 109,667
5.95%, due 10/1/33 100,000 106,576
Florida Power Corp.
6.35%, due 9/15/37 150,000 168,399
Georgia Power Co.
5.65%, due 3/1/37 100,000 102,380
IES Utilities, Inc.
Series B
6.75%, due 3/15/11 100,000 104,875
Indiana Michigan Power Co.
7.00%, due 3/15/19 50,000 57,428
Jersey Central Power & Light
Co.
7.35%, due 2/1/19 35,000 41,413
Kansas City Power & Light
Co.
6.50%, due 11/15/11 50,000 53,426
MidAmerican Energy Holdings
Co.
5.875%, due 10/1/12 100,000 109,483
MidAmerican Funding LLC
6.75%, due 3/1/11 100,000 104,906
Nevada Power Co.
6.50%, due 4/15/12 50,000 54,242
6.50%, due 8/1/18 150,000 167,592
NiSource Finance Corp.
6.15%, due 3/1/13 175,000 191,209
Ohio Power Co.
Series K
6.00%, due 6/1/16 50,000 55,510
Series G
6.60%, due 2/15/33 150,000 163,463
Oncor Electric Delivery Co.
6.375%, due 5/1/12 100,000 108,434
7.00%, due 9/1/22 100,000 117,104
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
ELECTRIC (CONTINUED)
Pacific Gas & Electric Co.
5.625%, due 11/30/17 $ 500,000 $ 547,098
PacifiCorp
6.25%, due 10/15/37 150,000 165,176
Peco Energy Co.
5.95%, due 10/1/36 100,000 105,089
Pepco Holdings, Inc.
6.45%, due 8/15/12 100,000 108,858
7.45%, due 8/15/32 100,000 113,931
PPL Energy Supply LLC
5.40%, due 8/15/14 100,000 107,519
Progress Energy, Inc.
5.625%, due 1/15/16 250,000 272,602
PSE&G Power LLC
5.125%, due 4/15/20 (c)(d) 80,000 81,458
8.625%, due 4/15/31 50,000 65,682
PSI Energy, Inc.
5.00%, due 9/15/13 100,000 108,889
Public Service Electric &
Gas Co.
Series D
5.25%, due 7/1/35 50,000 49,113
Puget Sound Energy, Inc.
6.274%, due 3/15/37 100,000 107,418
San Diego Gas & Electric Co.
5.35%, due 5/15/35 25,000 25,072
SCANA Corp.
6.25%, due 2/1/12 100,000 107,176
South Carolina Electric &
Gas Co.
6.05%, due 1/15/38 100,000 107,333
6.50%, due 11/1/18 90,000 103,536
Southern California Edison
Co.
5.00%, due 1/15/14 225,000 244,799
6.00%, due 1/15/34 100,000 108,394
Southern Power Co.
4.875%, due 7/15/15 100,000 107,502
Series B
6.25%, due 7/15/12 150,000 164,202
Union Electric Co.
4.65%, due 10/1/13 100,000 107,012
5.40%, due 2/1/16 100,000 105,634
Virginia Electric and Power
Co.
5.00%, due 6/30/19 120,000 126,192
6.00%, due 1/15/36 100,000 106,411
6.00%, due 5/15/37 125,000 133,207
Wisconsin Energy Corp.
6.50%, due 4/1/11 175,000 183,854
Xcel Energy, Inc.
6.50%, due 7/1/36 200,000 217,880
------------
9,169,236
------------
ENERGY 1.1%
Amerada Hess Corp.
7.30%, due 8/15/31 100,000 116,561
Anadarko Petroleum Corp.
5.95%, due 9/15/16 325,000 360,771
6.45%, due 9/15/36 150,000 155,820
Apache Corp.
6.00%, due 1/15/37 150,000 162,410
Burlington Resources, Inc.
7.375%, due 3/1/29 104,000 122,336
Chevron Corp.
4.95%, due 3/3/19 250,000 268,274
ConocoPhillips
5.75%, due 2/1/19 250,000 278,857
5.90%, due 10/15/32 250,000 265,464
Devon Energy Corp.
5.625%, due 1/15/14 100,000 110,256
7.95%, due 4/15/32 50,000 64,358
Devon Financing Corp. LLC
6.875%, due 9/30/11 400,000 430,441
Duke Capital LLC
6.75%, due 2/15/32 125,000 133,326
Energy Transfer Partners,
L.P.
5.95%, due 2/1/15 130,000 142,658
6.70%, due 7/1/18 100,000 111,902
Enterprise Products
Operating, L.P.
Series B
6.875%, due 3/1/33 200,000 220,780
Halliburton Co.
5.50%, due 10/15/10 100,000 102,323
6.15%, due 9/15/19 250,000 284,079
Kinder Morgan Energy
Partners, L.P.
5.00%, due 12/15/13 150,000 162,040
5.80%, due 3/15/35 250,000 243,247
6.75%, due 3/15/11 200,000 209,302
Marathon Oil Corp.
6.00%, due 10/1/17 100,000 109,387
6.80%, due 3/15/32 100,000 111,891
ONEOK Partners, L.P.
6.15%, due 10/1/16 200,000 222,396
ONEOK, Inc.
7.125%, due 4/15/11 100,000 105,618
Pemex Project Funding Master
Trust
6.625%, due 6/15/35 250,000 247,443
Plains All American
Pipeline, L.P./PAA Finance
Corp.
6.65%, due 1/15/37 65,000 68,962
</Table>
14 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)
ENERGY (CONTINUED)
Spectra Energy Capital LLC
6.20%, due 4/15/18 $ 50,000 $ 54,858
Tennessee Gas Pipeline Co.
7.50%, due 4/1/17 300,000 343,305
Valero Energy Corp.
4.50%, due 2/1/15 175,000 179,574
6.625%, due 6/15/37 100,000 100,556
7.50%, due 4/15/32 100,000 107,915
Williams Cos., Inc.
8.75%, due 3/15/32 185,000 235,017
Williams Partners, L.P.
3.80%, due 2/15/15 (c) 300,000 301,669
XTO Energy, Inc.
4.90%, due 2/1/14 75,000 82,136
6.10%, due 4/1/36 60,000 66,899
6.75%, due 8/1/37 100,000 120,109
------------
6,402,940
------------
FINANCE-OTHER 3.6%
AIG SunAmerica Global
Financing VI
6.30%, due 5/10/11 (c) 250,000 256,718
American Express Co.
5.50%, due 9/12/16 75,000 79,953
6.15%, due 8/28/17 525,000 575,615
American Express Credit
Corp.
7.30%, due 8/20/13 600,000 683,837
American General Finance
Corp.
Series I
5.40%, due 12/1/15 350,000 290,277
AvalonBay Communities, Inc.
4.95%, due 3/15/13 100,000 105,636
Bear Stearns Cos., Inc.
(The)
5.30%, due 10/30/15 100,000 107,672
5.50%, due 8/15/11 100,000 105,296
5.70%, due 11/15/14 250,000 274,319
7.25%, due 2/1/18 400,000 461,447
Boston Properties, Inc.
6.25%, due 1/15/13 100,000 108,798
Camden Property Trust
5.00%, due 6/15/15 100,000 100,548
Capital One Bank
5.125%, due 2/15/14 100,000 106,559
Caterpillar Financial
Services Corp.
6.20%, due 9/30/13 250,000 282,393
Citigroup, Inc.
4.70%, due 5/29/15 300,000 300,754
4.875%, due 5/7/15 350,000 349,188
5.50%, due 10/15/14 1,000,000 1,038,829
5.875%, due 2/22/33 600,000 532,235
6.125%, due 11/21/17 1,000,000 1,039,054
6.375%, due 8/12/14 300,000 323,642
Colonial Realty, L.P.
4.80%, due 4/1/11 14,000 13,808
Countrywide Financial Corp.
6.25%, due 5/15/16 200,000 207,867
Credit Suisse First Boston
USA, Inc.
4.875%, due 1/15/15 575,000 615,475
5.125%, due 1/15/14 100,000 107,684
6.50%, due 1/15/12 250,000 271,315
Developers Diversified
Realty Corp.
5.00%, due 5/3/10 50,000 50,000
ERP Operating, L.P.
5.125%, due 3/15/16 50,000 52,042
5.375%, due 8/1/16 50,000 52,735
V Goldman Sachs Group, Inc.
(The)
1.625%, due 7/15/11 (b) 2,000,000 2,019,214
5.15%, due 1/15/14 625,000 650,096
5.35%, due 1/15/16 350,000 356,680
5.95%, due 1/18/18 1,000,000 1,025,759
6.25%, due 9/1/17 350,000 366,329
Hospitality Properties Trust
5.125%, due 2/15/15 50,000 49,781
John Deere Capital Corp.
7.00%, due 3/15/12 250,000 276,871
JPMorgan Chase & Co.
2.20%, due 6/15/12 (b) 1,000,000 1,021,548
4.875%, due 3/15/14 250,000 264,866
5.15%, due 10/1/15 500,000 534,199
5.75%, due 1/2/13 200,000 216,744
Kimco Realty Corp.
5.783%, due 3/15/16 50,000 53,149
Liberty Property, L.P.
5.125%, due 3/2/15 100,000 100,788
8.50%, due 8/1/10 100,000 101,182
Merrill Lynch & Co., Inc.
Series C
5.00%, due 1/15/15 150,000 154,488
Series B
5.30%, due 9/30/15 250,000 260,471
5.70%, due 5/2/17 100,000 100,378
5.77%, due 7/25/11 200,000 210,210
6.40%, due 8/28/17 400,000 419,898
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
FINANCE-OTHER (CONTINUED)
Morgan Stanley
Series E
5.45%, due 1/9/17 $ 425,000 $ 431,058
5.625%, due 1/9/12 350,000 369,098
6.00%, due 5/13/14 750,000 806,790
6.00%, due 4/28/15 850,000 908,305
6.25%, due 8/28/17 400,000 414,360
National Rural Utilities
Cooperative Finance Corp.
5.45%, due 2/1/18 150,000 161,642
8.00%, due 3/1/32 75,000 92,801
Pricoa Global Funding I
4.625%, due 6/25/12 (c) 100,000 105,117
ProLogis
5.625%, due 11/15/15 100,000 99,995
6.625%, due 5/15/18 50,000 49,540
Regency Centers, L.P.
5.25%, due 8/1/15 100,000 101,835
Simon Property Group, L.P.
5.25%, due 12/1/16 200,000 207,329
SLM Corp.
5.625%, due 8/1/33 250,000 189,375
Toyota Motor Credit Corp.
5.45%, due 5/18/11 150,000 156,490
U.S. Bancorp
1.80%, due 5/15/12 (b) 700,000 709,406
Unilever Capital Corp.
5.90%, due 11/15/32 100,000 108,124
------------
21,587,612
------------
GAS 0.1%
AGL Capital Corp.
4.45%, due 4/15/13 100,000 104,861
Occidental Petroleum Corp.
4.125%, due 6/1/16 250,000 263,522
Sempra Energy
6.00%, due 2/1/13 100,000 108,268
6.50%, due 6/1/16 75,000 85,272
------------
561,923
------------
INDEPENDENT 1.0%
American General Finance
Corp.
Series H
4.00%, due 3/15/11 250,000 245,465
Ameriprise Financial, Inc.
5.35%, due 11/15/10 3,000 3,068
CitiFinancial Credit Co.
8.70%, due 6/15/10 227,000 228,898
General Electric Capital
Corp.
5.00%, due 1/8/16 375,000 397,067
5.40%, due 2/15/17 200,000 212,158
5.875%, due 1/14/38 525,000 518,932
6.00%, due 6/15/12 1,125,000 1,222,159
Series A
6.75%, due 3/15/32 650,000 708,872
HSBC Bank USA N.A.
4.625%, due 4/1/14 925,000 972,425
HSBC Finance Corp.
5.50%, due 1/19/16 850,000 911,132
6.375%, due 10/15/11 300,000 318,141
Toll Brothers Finance Corp.
5.15%, due 5/15/15 50,000 50,248
------------
5,788,565
------------
INSURANCE 0.9%
Ace INA Holdings, Inc.
5.70%, due 2/15/17 60,000 64,936
5.875%, due 6/15/14 105,000 116,729
Aegon Funding Corp.
5.75%, due 12/15/20 100,000 99,843
Allstate Corp. (The)
5.00%, due 8/15/14 425,000 459,741
American International
Group, Inc.
4.70%, due 10/1/10 100,000 100,585
5.85%, due 1/16/18 300,000 279,256
6.25%, due 5/1/36 200,000 173,825
Aon Corp.
7.375%, due 12/14/12 100,000 111,975
Assurant, Inc.
5.625%, due 2/15/14 100,000 105,573
Berkshire Hathaway Finance
Corp.
4.85%, due 1/15/15 400,000 435,934
5.00%, due 8/15/13 500,000 546,359
Chubb Corp.
5.20%, due 4/1/13 100,000 106,935
5.75%, due 5/15/18 100,000 109,373
CIGNA Corp.
7.00%, due 1/15/11 125,000 129,486
Genworth Financial, Inc.
Class A
4.95%, due 10/1/15 75,000 74,258
5.75%, due 6/15/14 50,000 51,333
Hartford Financial Services
Group,
Inc. (The)
7.90%, due 6/15/10 100,000 100,828
Hartford Life Global Funding
Trusts
5.20%, due 2/15/11 155,000 159,856
Lincoln National Corp.
4.75%, due 2/15/14 150,000 154,490
</Table>
16 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)
Marsh & McLennan Cos., Inc.
5.375%, due 7/15/14 $ 100,000 $ 105,294
MetLife Global Funding I
5.125%, due 6/10/14 (c) 220,000 237,989
MetLife, Inc.
5.00%, due 11/24/13 50,000 53,582
5.00%, due 6/15/15 225,000 238,659
5.70%, due 6/15/35 100,000 99,021
6.125%, due 12/1/11 100,000 106,845
Nationwide Financial
Services, Inc.
5.10%, due 10/1/15 25,000 25,257
Principal Financial Group,
Inc.
6.05%, due 10/15/36 100,000 97,677
Principal Life Income
Fundings Trust 5.20%, due
11/15/10 50,000 51,182
Progressive Corp. (The)
6.25%, due 12/1/32 50,000 52,372
6.375%, due 1/15/12 200,000 215,733
Protective Life Corp.
4.875%, due 11/1/14 100,000 100,414
Prudential Financial, Inc.
Series B
5.10%, due 9/20/14 250,000 267,515
5.70%, due 12/14/36 100,000 97,718
St. Paul Travelers Cos.,
Inc. (The)
5.50%, due 12/1/15 100,000 109,828
6.75%, due 6/20/36 75,000 84,834
Travelers Cos., Inc. (The)
5.375%, due 6/15/12 100,000 107,917
Travelers Property Casualty
Corp.
5.00%, due 3/15/13 100,000 107,649
------------
5,540,801
------------
MANUFACTURING 2.3%
3M Co.
5.70%, due 3/15/37 150,000 160,355
Air Products & Chemicals,
Inc.
4.15%, due 2/1/13 100,000 105,164
Alcoa, Inc.
5.72%, due 2/23/19 187,000 184,570
5.95%, due 2/1/37 100,000 87,587
Black & Decker Corp.
4.75%, due 11/1/14 50,000 52,959
Boeing Co. (The)
4.875%, due 2/15/20 180,000 188,033
6.125%, due 2/15/33 250,000 272,184
Caterpillar, Inc.
6.05%, due 8/15/36 313,000 338,579
Cooper Industries, Inc.
5.25%, due 11/15/12 50,000 54,286
CRH America, Inc.
5.30%, due 10/15/13 100,000 107,306
6.00%, due 9/30/16 100,000 109,445
DaimlerChrysler N.A. Holding
Corp.
4.875%, due 6/15/10 100,000 100,418
7.75%, due 1/18/11 150,000 156,992
8.50%, due 1/18/31 300,000 379,804
Danaher Corp.
5.625%, due 1/15/18 100,000 110,224
Deere & Co.
4.375%, due 10/16/19 100,000 102,449
7.125%, due 3/3/31 125,000 151,045
Dover Corp.
5.45%, due 3/15/18 100,000 107,281
Dow Chemical Co. (The)
6.00%, due 10/1/12 850,000 926,769
E.I. du Pont de Nemours &
Co.
4.625%, due 1/15/20 200,000 205,723
4.75%, due 11/15/12 280,000 301,274
Eastman Chemical Co.
7.25%, due 1/15/24 100,000 116,566
Electronic Data Systems
Corp.
Series B
6.00%, due 8/1/13 100,000 112,187
General Dynamics Corp.
4.25%, due 5/15/13 350,000 374,702
General Electric Co.
5.25%, due 12/6/17 500,000 531,800
Goodrich Corp.
7.00%, due 4/15/38 50,000 54,571
Hewlett-Packard Co.
5.25%, due 3/1/12 350,000 375,433
Honeywell International,
Inc.
5.30%, due 3/1/18 250,000 270,301
5.70%, due 3/15/37 100,000 103,786
6.125%, due 11/1/11 100,000 107,814
International Business
Machines Corp.
5.70%, due 9/14/17 700,000 788,390
5.875%, due 11/29/32 100,000 107,375
6.50%, due 1/15/28 100,000 114,157
7.50%, due 6/15/13 100,000 116,578
8.375%, due 11/1/19 100,000 131,660
International Paper Co.
5.25%, due 4/1/16 100,000 104,596
5.30%, due 4/1/15 250,000 265,595
ITT Corp.
4.90%, due 5/1/14 250,000 268,315
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
MANUFACTURING (CONTINUED)
Johnson Controls, Inc.
5.50%, due 1/15/16 $ 50,000 $ 54,496
6.00%, due 1/15/36 50,000 50,454
Lockheed Martin Corp.
4.25%, due 11/15/19 500,000 497,778
7.65%, due 5/1/16 250,000 304,988
Lubrizol Corp.
5.50%, due 10/1/14 100,000 108,992
MDC Holdings, Inc.
5.375%, due 7/1/15 50,000 50,818
Microsoft Corp.
4.20%, due 6/1/19 250,000 259,358
Monsanto Co.
7.375%, due 8/15/12 100,000 112,782
Newmont Mining Corp.
5.125%, due 10/1/19 150,000 154,631
8.625%, due 5/15/11 50,000 53,441
Northrop Grumman Corp.
5.05%, due 8/1/19 100,000 104,455
7.125%, due 2/15/11 100,000 104,744
7.75%, due 3/1/16 250,000 305,246
7.875%, due 3/1/26 100,000 125,328
Nucor Corp.
5.00%, due 12/1/12 245,000 266,723
Pitney Bowes, Inc.
3.875%, due 6/15/13 150,000 158,076
5.75%, due 9/15/17 100,000 108,975
PPG Industries, Inc.
5.75%, due 3/15/13 100,000 109,221
Praxair, Inc.
3.95%, due 6/1/13 200,000 210,781
Raytheon Co.
6.40%, due 12/15/18 200,000 230,458
Rohm & Haas Co.
7.85%, due 7/15/29 100,000 112,655
United Technologies Corp.
4.50%, due 4/15/20 250,000 256,823
4.875%, due 5/1/15 200,000 219,288
6.125%, due 2/1/19 250,000 286,604
VF Corp.
6.45%, due 11/1/37 50,000 53,647
Vulcan Materials Co.
5.60%, due 11/30/12 75,000 81,020
6.30%, due 6/15/13 150,000 165,417
Weyerhaeuser Co.
6.75%, due 3/15/12 200,000 215,297
7.375%, due 3/15/32 100,000 100,704
Xerox Corp.
6.35%, due 5/15/18 100,000 109,798
6.40%, due 3/15/16 160,000 177,313
------------
13,296,584
------------
SERVICE 2.3%
Abbott Laboratories
5.875%, due 5/15/16 200,000 228,495
6.15%, due 11/30/37 100,000 111,616
Aetna, Inc.
6.00%, due 6/15/16 175,000 194,266
7.875%, due 3/1/11 100,000 105,509
Allergan, Inc.
5.75%, due 4/1/16 50,000 56,700
Amgen, Inc.
4.85%, due 11/18/14 100,000 109,254
5.85%, due 6/1/17 150,000 168,958
6.40%, due 2/1/39 100,000 110,892
Baxter International, Inc.
4.625%, due 3/15/15 50,000 54,380
5.90%, due 9/1/16 100,000 114,401
Bristol-Myers Squibb Co.
5.45%, due 5/1/18 100,000 109,760
5.875%, due 11/15/36 150,000 158,449
7.15%, due 6/15/23 50,000 59,816
CareFusion Corp.
5.125%, due 8/1/14 100,000 106,996
Cintas Corp.
6.00%, due 6/1/12 100,000 109,260
Clorox Co. (The)
5.00%, due 1/15/15 50,000 54,255
Comcast Corp.
4.95%, due 6/15/16 100,000 105,428
5.65%, due 6/15/35 200,000 190,242
5.875%, due 2/15/18 275,000 296,550
6.45%, due 3/15/37 250,000 261,839
Cox Communications, Inc.
5.45%, due 12/15/14 100,000 109,392
7.125%, due 10/1/12 200,000 224,415
DIRECTV Holdings LLC
5.20%, due 3/15/20 (c) 150,000 151,246
Eli Lilly & Co.
4.50%, due 3/15/18 100,000 102,706
7.125%, due 6/1/25 100,000 117,968
FedEx Corp.
8.00%, due 1/15/19 50,000 62,431
Fortune Brands, Inc.
5.375%, due 1/15/16 100,000 105,312
5.875%, due 1/15/36 25,000 23,117
Genentech, Inc.
4.75%, due 7/15/15 100,000 107,632
</Table>
18 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)
GlaxoSmithKline Capital,
Inc.
4.375%, due 4/15/14 $ 200,000 $ 214,512
6.375%, due 5/15/38 250,000 283,025
Historic TW, Inc.
6.625%, due 5/15/29 250,000 268,497
Johnson & Johnson
5.15%, due 7/15/18 250,000 273,376
6.95%, due 9/1/29 100,000 122,556
Kimberly-Clark Corp.
6.375%, due 1/1/28 100,000 110,636
6.625%, due 8/1/37 100,000 118,813
L-3 Communications Corp.
5.20%, due 10/15/19 (c) 100,000 102,693
Marriott International, Inc.
5.625%, due 2/15/13 50,000 53,318
McKesson Corp.
5.70%, due 3/1/17 50,000 54,465
Medtronic, Inc.
4.45%, due 3/15/20 100,000 101,593
Series B
4.75%, due 9/15/15 50,000 54,419
Merck & Co., Inc.
4.75%, due 3/1/15 100,000 108,814
5.00%, due 6/30/19 250,000 267,639
NBC Universal, Inc.
5.15%, due 4/30/20 (c) 500,000 505,835
News America, Inc.
5.30%, due 12/15/14 300,000 329,709
6.40%, due 12/15/35 175,000 183,997
7.25%, due 5/18/18 100,000 117,307
Oracle Corp.
5.00%, due 7/8/19 250,000 266,456
5.25%, due 1/15/16 250,000 277,828
Quest Diagnostics, Inc.
4.75%, due 1/30/20 100,000 99,674
R.R. Donnelley & Sons Co.
5.50%, due 5/15/15 100,000 101,990
Republic Services, Inc.
5.00%, due 3/1/20 (c) 300,000 301,343
6.75%, due 8/15/11 50,000 53,126
Schering-Plough Corp.
6.00%, due 9/15/17 250,000 285,687
6.50%, due 12/1/33 100,000 115,608
Science Applications
International Corp.
6.25%, due 7/1/12 100,000 109,427
St. Jude Medical, Inc.
3.75%, due 7/15/14 150,000 155,357
Teva Pharmaceutical Finance
LLC
6.15%, due 2/1/36 50,000 53,942
Time Warner Cable, Inc.
6.20%, due 7/1/13 500,000 557,245
6.55%, due 5/1/37 275,000 289,433
6.75%, due 7/1/18 250,000 283,444
Time Warner Cos., Inc.
6.95%, due 1/15/28 200,000 221,469
Time Warner, Inc.
7.625%, due 4/15/31 375,000 435,764
UnitedHealth Group, Inc.
5.375%, due 3/15/16 100,000 106,476
6.00%, due 6/15/17 330,000 354,534
Valspar Corp.
5.625%, due 5/1/12 250,000 266,867
Viacom, Inc.
5.625%, due 8/15/12 350,000 376,161
6.875%, due 4/30/36 250,000 273,396
Walt Disney Co. (The)
6.375%, due 3/1/12 250,000 273,568
Waste Management, Inc.
5.00%, due 3/15/14 50,000 53,602
7.125%, due 12/15/17 100,000 116,192
7.75%, due 5/15/32 75,000 90,820
WellPoint, Inc.
5.95%, due 12/15/34 250,000 250,624
6.80%, due 8/1/12 100,000 110,674
Western Union Co. (The)
5.93%, due 10/1/16 130,000 144,694
Wyeth
5.50%, due 3/15/13 100,000 109,962
6.00%, due 2/15/36 200,000 215,699
6.45%, due 2/1/24 100,000 116,230
Wyndham Worldwide Corp.
6.00%, due 12/1/16 50,000 49,791
------------
13,499,572
------------
TELECOMMUNICATION 0.8%
AT&T, Inc.
6.30%, due 1/15/38 300,000 311,676
6.80%, due 5/15/36 265,000 289,809
BellSouth Corp.
6.00%, due 11/15/34 100,000 99,629
6.875%, due 10/15/31 250,000 272,078
CenturyTel, Inc.
Series H
8.375%, due 10/15/10 100,000 103,328
Cingular Wireless LLC
6.50%, due 12/15/11 100,000 108,301
Cisco Systems, Inc.
4.45%, due 1/15/20 250,000 253,131
5.50%, due 2/22/16 425,000 479,341
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATION (CONTINUED)
Embarq Corp.
7.995%, due 6/1/36 $ 200,000 $ 214,154
Harris Corp.
5.00%, due 10/1/15 50,000 52,327
Motorola, Inc.
7.50%, due 5/15/25 100,000 110,741
New Cingular Wireless
Services, Inc.
8.125%, due 5/1/12 100,000 112,982
8.75%, due 3/1/31 100,000 131,871
SBC Communications, Inc.
5.10%, due 9/15/14 700,000 764,407
6.15%, due 9/15/34 250,000 253,174
Verizon Communications, Inc.
5.85%, due 9/15/35 300,000 298,835
6.10%, due 4/15/18 170,000 188,102
6.35%, due 4/1/19 250,000 280,864
6.40%, due 2/15/38 175,000 187,387
Verizon Global Funding Corp.
7.75%, due 12/1/30 350,000 423,738
------------
4,935,875
------------
TRANSPORTATION 0.3%
Burlington Northern Santa Fe
Corp.
6.15%, due 5/1/37 175,000 187,296
6.20%, due 8/15/36 50,000 53,308
7.125%, due 12/15/10 100,000 103,966
CSX Corp.
5.60%, due 5/1/17 100,000 107,452
CSX Transportation, Inc.
7.875%, due 5/15/43 100,000 120,501
Norfolk Southern Corp.
7.05%, due 5/1/37 100,000 119,759
7.25%, due 2/15/31 100,000 119,436
Southwest Airlines Co.
5.25%, due 10/1/14 75,000 78,318
TTX Co.
5.00%, due 4/1/12 (c) 100,000 104,893
Union Pacific Corp.
5.375%, due 5/1/14 250,000 270,698
5.65%, due 5/1/17 100,000 108,189
6.125%, due 1/15/12 100,000 107,954
6.65%, due 1/15/11 100,000 103,846
7.00%, due 2/1/16 50,000 57,916
United Parcel Service, Inc.
5.50%, due 1/15/18 100,000 110,798
6.20%, due 1/15/38 200,000 225,020
------------
1,979,350
------------
WATER 0.0%++
American Water Capital Corp.
6.085%, due 10/15/17 100,000 109,104
------------
Total Corporate Bonds
(Cost $102,659,396) 107,807,254
------------
FOREIGN GOVERNMENT BONDS 1.5%
- -------------------------------------------------------
FOREIGN GOVERNMENTS 1.5%
Federal Republic of Brazil
6.00%, due 1/17/17 2,200,000 2,409,000
Malaysian Government
7.50%, due 7/15/11 100,000 107,226
Province of Manitoba Canada
2.125%, due 4/22/13 250,000 253,217
Province of Ontario
2.625%, due 1/20/12 250,000 256,875
2.95%, due 2/5/15 250,000 251,861
4.00%, due 10/7/19 225,000 222,713
4.10%, due 6/16/14 250,000 265,148
4.375%, due 2/15/13 50,000 53,347
4.95%, due 11/28/16 300,000 328,603
Province of Quebec
5.125%, due 11/14/16 285,000 315,642
Series NJ
7.50%, due 7/15/23 302,000 385,762
Republic of Chile
5.50%, due 1/15/13 100,000 109,000
Republic of Italy
6.875%, due 9/27/23 750,000 867,624
Republic of Korea
5.75%, due 4/16/14 500,000 548,647
Republic of Poland
5.25%, due 1/15/14 100,000 107,497
Republic of South Africa
7.375%, due 4/25/12 100,000 109,000
United Mexican States
5.625%, due 1/15/17 400,000 429,000
Series MTNA
5.875%, due 1/15/14 1,500,000 1,676,250
Series MTNA
7.50%, due 1/14/12 250,000 275,250
------------
Total Foreign Government
Bonds
(Cost $8,501,666) 8,971,662
------------
</Table>
20 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
MORTGAGE-BACKED SECURITIES 3.4%
- -------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) 3.4%
Banc of America Commercial
Mortgage, Inc.
Series 2005-4, Class A3
4.891%, due 7/10/45 $ 2,714,000 $ 2,839,772
Bear Stearns Commercial
Mortgage Securities
Series 2007-PW15, Class
AAB
5.315%, due 2/11/44 1,350,000 1,406,119
Series 2006-PW13, Class A3
5.518%, due 9/11/41 500,000 525,069
Credit Suisse Mortgage
Capital Certificates
Series 2006-C5, Class A3
5.311%, due 12/15/39 2,000,000 1,975,397
Greenwich Capital Commercial
Funding Corp.
Series 2005-GG5, Class A5
5.224%, due 4/10/37 1,000,000 1,015,867
Series 2006-GG7, Class A4
6.085%, due 7/10/38 (e) 1,000,000 1,039,871
V JP Morgan Chase
Commercial Mortgage
Securities Corp.
Series 2003-CB7, Class A4
4.879%, due 1/12/38 1,000,000 1,050,864
Series 2004-CB9, Class A2
5.108%, due 6/12/41 1,802,875 1,852,163
Series 2007-CB18, Class A4
5.44%, due 6/12/47 1,245,000 1,230,794
Series 2007-CB19, Class
ASB
5.92%, due 2/12/49 (e) 1,090,000 1,143,922
Morgan Stanley Capital I
Series 2005-IQ10, Class
AAB
5.178%, due 9/15/42 2,170,000 2,279,332
Series 2007-IQ14, Class
AAB
5.654%, due 4/15/49 500,000 523,011
Series 2006-IQ11, Class A4
5.941%, due 10/15/42 (e) 1,400,000 1,476,372
Wachovia Bank Commercial
Mortgage Trust Series
2004-C12, Class A4
5.414%, due 7/15/41 (e) 1,765,000 1,850,891
------------
Total Mortgage-Backed
Securities
(Cost $14,865,968) 20,209,444
------------
U.S. GOVERNMENT & FEDERAL AGENCIES 72.1%
- -------------------------------------------------------
V FEDERAL HOME LOAN MORTGAGE CORPORATION 3.7%
1.125%, due 12/15/11 5,075,000 5,089,129
2.125%, due 9/21/12 5,500,000 5,590,585
3.75%, due 3/27/19 2,300,000 2,273,509
4.125%, due 7/12/10 1,085,000 1,093,111
4.50%, due 1/15/15 2,000,000 2,171,066
4.75%, due 1/19/16 2,000,000 2,180,726
5.00%, due 7/15/14 1,000,000 1,107,265
5.125%, due 10/18/16 2,430,000 2,686,163
------------
22,191,554
------------
V FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) 18.7%
4.00%, due 8/1/20 380,106 394,772
4.00%, due 1/1/25 4,477,141 4,560,339
4.00%, due 3/1/25 996,089 1,014,599
4.00%, due 4/1/25 1,500,000 1,527,891
4.00%, due 5/1/39 3,392,674 3,318,635
4.00%, due 7/1/39 2,942,481 2,878,267
4.00%, due 12/1/39 992,512 970,852
4.50%, due 4/1/20 3,085,847 3,252,642
4.50%, due 4/1/20 TBA (f) 3,000,000 3,118,125
4.50%, due 6/1/23 319,885 333,377
4.50%, due 12/1/23 923,941 962,910
4.50%, due 7/1/24 127,528 132,747
4.50%, due 8/1/33 281,120 287,317
4.50%, due 6/1/34 445,264 453,409
4.50%, due 6/1/35 640,294 651,206
4.50%, due 8/1/35 647,987 659,029
4.50%, due 3/1/36 288,646 293,565
4.50%, due 4/1/39 1,847,892 1,865,524
4.50%, due 6/1/39 11,273,064 11,380,628
4.50%, due 7/1/39 729,329 736,288
4.50%, due 9/1/39 2,401,701 2,424,617
4.50%, due 10/1/39 2,933,193 2,961,181
4.50%, due 1/1/40 1,989,800 2,008,786
4.50%, due 2/1/40 2,995,565 3,024,148
5.00%, due 1/1/25 4,174,572 4,420,300
5.00%, due 8/1/35 5,786,908 6,021,820
5.00%, due 10/1/36 147,246 153,039
5.00%, due 6/1/37 6,001,627 6,232,127
5.00%, due 11/1/37 308,565 320,416
5.00%, due 5/1/38 462,225 479,977
5.00%, due 9/1/38 1,212,795 1,258,615
5.00%, due 3/1/39 447,146 463,900
5.00%, due 10/1/39 3,852,393 3,996,738
5.00%, due 3/1/40 1,997,705 2,072,557
5.005%, due 3/1/39 (e) 472,508 496,533
5.019%, due 4/1/39 (e) 747,793 788,013
5.50%, due 2/1/18 304,033 327,150
5.50%, due 1/1/22 713,226 765,673
5.50%, due 3/1/23 157,966 169,203
5.50%, due 6/1/23 353,498 378,644
5.50%, due 9/1/35 667,572 707,633
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
5.50%, due 9/1/36 $ 27,996 $ 29,633
5.50%, due 4/1/37 7,830,534 8,281,655
5.50%, due 6/1/37 1,246,336 1,318,138
5.50%, due 7/1/37 362,894 383,800
5.50%, due 8/1/37 1,616,088 1,709,190
5.50%, due 11/1/37 1,157,941 1,224,651
5.50%, due 1/1/38 1,304,599 1,380,241
5.50%, due 6/1/38 3,089,840 3,267,847
5.50%, due 8/1/38 840,567 888,993
5.50%, due 10/1/38 824,312 871,801
5.50%, due 12/1/38 1,560,215 1,650,100
5.50%, due 1/1/39 829,735 877,537
5.817%, due 10/1/37 (e) 1,699,034 1,800,105
6.00%, due 8/1/17 231,857 249,957
6.00%, due 6/1/21 130,436 140,781
6.00%, due 9/1/21 202,358 218,408
6.00%, due 11/1/22 199,451 215,145
6.00%, due 4/1/36 676,023 725,387
6.00%, due 8/1/36 354,342 380,217
6.00%, due 11/1/37 2,136,530 2,290,538
6.00%, due 10/1/38 129,274 138,524
6.152%, due 10/1/36 (e) 1,375,291 1,476,522
6.50%, due 4/1/11 555 569
6.50%, due 5/1/11 1,265 1,320
6.50%, due 10/1/11 827 856
6.50%, due 6/1/14 12,802 13,645
6.50%, due 4/1/17 10,179 11,000
6.50%, due 5/1/17 30,641 33,161
6.50%, due 11/1/25 24,965 27,349
6.50%, due 5/1/26 2,640 2,882
6.50%, due 3/1/27 9,852 10,830
6.50%, due 5/1/31 13,571 14,925
6.50%, due 8/1/31 10,977 12,072
6.50%, due 1/1/32 84,661 93,105
6.50%, due 3/1/32 71,882 79,052
6.50%, due 4/1/32 30,283 33,303
6.50%, due 7/1/32 34,227 37,640
6.50%, due 1/1/34 84,863 92,956
6.50%, due 1/1/37 410,107 445,885
6.50%, due 9/1/37 834,504 906,263
7.00%, due 6/1/11 977 1,009
7.00%, due 11/1/11 438 457
7.00%, due 4/1/26 8,811 9,906
7.00%, due 7/1/26 826 929
7.00%, due 12/1/27 13,299 14,900
7.00%, due 1/1/30 6,838 7,649
7.00%, due 3/1/31 41,536 46,321
7.00%, due 10/1/31 18,139 20,229
7.00%, due 3/1/32 68,851 76,782
7.00%, due 9/1/33 240,071 267,520
7.00%, due 11/1/36 149,533 165,307
7.00%, due 12/1/37 371,228 410,260
7.50%, due 1/1/16 5,782 6,235
7.50%, due 1/1/26 2,488 2,823
7.50%, due 2/1/32 44,105 50,269
8.00%, due 7/1/26 4,654 5,354
------------
110,685,125
------------
V FEDERAL NATIONAL MORTGAGE ASSOCIATION 4.0%
1.75%, due 2/22/13 3,000,000 3,011,253
1.875%, due 4/20/12 6,100,000 6,189,810
2.625%, due 11/20/14 2,000,000 2,016,566
2.75%, due 3/13/14 1,000,000 1,021,294
3.00%, due 9/16/14 3,000,000 3,076,548
4.875%, due 5/18/12 7,000,000 7,522,655
6.21%, due 8/6/38 475,000 556,607
------------
23,394,733
------------
V FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) 9.7%
4.00%, due 3/1/22 355,719 362,441
4.50%, due 2/1/23 228,011 237,486
4.50%, due 3/1/23 322,795 336,208
5.00%, due 3/1/21 34,935 37,024
5.00%, due 6/1/22 630,836 666,786
5.00%, due 4/1/23 298,580 315,596
5.00%, due 1/1/24 396,619 419,222
5.00%, due 12/1/35 TBA (f) 3,500,000 3,622,500
5.00%, due 5/1/37 343,351 356,162
5.00%, due 6/1/38 909,797 943,175
5.00%, due 10/1/39 2,886,835 2,991,844
5.00%, due 12/1/39 3,307,177 3,427,476
5.50%, due 8/1/17 39,166 42,101
5.50%, due 7/1/22 633,724 677,948
5.50%, due 11/1/23 342,567 366,454
5.50%, due 5/1/35 458,683 484,847
5.50%, due 6/1/35 232,908 246,193
5.50%, due 7/1/35 1,377,388 1,455,955
5.50%, due 8/1/35 800,108 845,747
5.50%, due 9/1/35 568,247 600,661
5.50%, due 11/1/35 2,823,948 2,985,031
5.50%, due 4/1/36 559,372 591,280
5.50%, due 6/1/36 459,508 485,002
5.50%, due 1/1/37 646,230 682,082
5.50%, due 3/1/37 2,212,173 2,333,050
5.50%, due 4/1/37 238,165 251,178
5.50%, due 1/1/38 2,499,999 2,636,603
5.50%, due 10/1/38 425,008 448,231
</Table>
22 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)
5.515%, due 11/1/38 (e) $ 1,861,056 $ 1,971,470
6.00%, due 6/1/16 46,748 50,456
6.00%, due 7/1/16 20,312 21,923
6.00%, due 9/1/16 29,907 32,279
6.00%, due 9/1/17 16,039 17,336
6.00%, due 1/1/36 20,092 21,500
6.00%, due 7/1/36 5,097,845 5,442,320
6.00%, due 8/1/36 571,437 610,051
6.00%, due 9/1/36 950,297 1,014,511
6.00%, due 10/1/36 237,017 253,033
6.00%, due 11/1/36 443,807 473,796
6.00%, due 12/1/36 334,079 356,653
6.00%, due 4/1/37 1,756,588 1,873,598
6.00%, due 6/1/37 582,468 620,371
6.00%, due 7/1/37 4,551,301 4,847,470
6.00%, due 8/1/37 544,298 579,717
6.00%, due 12/1/37 968,640 1,031,672
6.00%, due 2/1/38 2,202,706 2,345,759
6.00%, due 4/1/38 621,050 661,464
6.00%, due 5/1/38 880,430 937,172
6.50%, due 3/1/11 50 51
6.50%, due 4/1/11 748 765
6.50%, due 6/1/11 80 82
6.50%, due 9/1/11 2,821 2,913
6.50%, due 10/1/11 12,618 13,004
6.50%, due 11/1/11 1,935 2,008
6.50%, due 6/1/15 34,813 36,945
6.50%, due 2/1/28 12,351 13,477
6.50%, due 7/1/32 18,949 20,878
6.50%, due 8/1/32 211,379 232,893
6.50%, due 1/1/35 257,250 279,575
6.50%, due 8/1/35 323,781 351,879
6.50%, due 9/1/35 7,715 8,384
6.50%, due 3/1/36 120,833 130,942
6.50%, due 4/1/36 338,947 367,302
6.50%, due 7/1/36 635,645 688,820
6.50%, due 8/1/36 230,972 250,294
6.50%, due 9/1/36 390,809 423,503
6.50%, due 10/1/36 141,469 153,303
6.50%, due 11/1/36 221,987 240,557
6.50%, due 8/1/37 6,053 6,550
6.50%, due 10/1/37 576,788 624,138
6.50%, due 11/1/37 210,738 228,038
6.50%, due 12/1/37 243,385 263,366
6.50%, due 2/1/38 516,903 559,338
7.00%, due 5/1/11 604 623
7.00%, due 6/1/11 706 729
7.00%, due 10/1/11 69 72
7.00%, due 11/1/11 3,015 3,130
7.00%, due 9/1/37 173,232 191,538
7.00%, due 10/1/37 14,713 16,268
7.00%, due 11/1/37 300,175 331,896
7.50%, due 7/1/30 10,216 11,542
7.50%, due 7/1/31 47,716 53,937
7.50%, due 8/1/31 504 569
8.00%, due 8/1/10 4 4
8.00%, due 9/1/11 198 201
8.00%, due 11/1/11 1,428 1,494
8.00%, due 1/1/25 214 247
8.00%, due 6/1/25 291 336
8.00%, due 9/1/25 1,189 1,374
8.00%, due 2/1/26 431 498
8.00%, due 9/1/26 7,209 8,333
8.00%, due 10/1/26 1,473 1,704
8.00%, due 11/1/26 1,735 2,005
8.00%, due 4/1/27 2,751 3,182
8.00%, due 6/1/27 19,860 22,974
8.00%, due 12/1/27 8,769 9,975
8.00%, due 1/1/28 31,590 36,542
------------
57,609,012
------------
V GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) 5.8%
4.00%, due 5/15/39 985,130 972,077
4.00%, due 11/15/39 991,846 978,704
4.50%, due 3/15/39 472,766 481,069
4.50%, due 5/15/39 1,480,586 1,506,589
4.50%, due 7/15/39 2,436,671 2,479,465
4.50%, due 1/15/40 498,124 506,872
4.50%, due 2/15/40 1,495,576 1,521,842
4.50%, due 3/15/40 998,585 1,016,123
5.00%, due 4/20/33 223,322 234,327
5.00%, due 8/15/33 97,844 102,929
5.00%, due 2/15/36 378,316 395,848
5.00%, due 6/20/36 556,982 581,726
5.00%, due 9/15/37 94,871 99,208
5.00%, due 5/1/38 TBA (f) 3,000,000 3,127,968
5.00%, due 1/15/39 436,778 456,474
5.00%, due 3/15/39 925,613 967,352
5.00%, due 5/15/39 1,694,358 1,773,239
5.00%, due 8/15/39 964,953 1,008,466
5.00%, due 9/15/39 492,751 514,971
5.00%, due 10/15/39 993,109 1,037,892
5.50%, due 3/15/33 1,581,314 1,692,302
5.50%, due 7/15/34 295,744 316,178
5.50%, due 7/20/34 204,481 218,537
5.50%, due 9/15/35 488,354 521,486
5.50%, due 10/15/35 160,565 171,458
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
23
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
5.50%, due 12/20/35 $ 505,099 $ 538,938
5.50%, due 6/1/36 TBA (f) 1,000,000 1,061,562
5.50%, due 1/15/37 235,942 251,101
5.50%, due 6/15/38 473,593 503,725
5.50%, due 11/15/38 209,721 223,065
5.50%, due 1/15/39 867,038 922,204
5.50%, due 8/15/39 890,863 949,451
6.00%, due 3/20/29 51,881 56,539
6.00%, due 1/15/32 108,723 118,402
6.00%, due 12/15/32 44,797 48,786
6.00%, due 3/20/33 259,778 282,907
6.00%, due 2/15/34 237,763 257,446
6.00%, due 1/20/35 143,210 154,914
6.00%, due 6/15/35 153,871 166,032
6.00%, due 9/15/35 329,918 355,992
6.00%, due 5/15/36 465,620 501,109
6.00%, due 9/15/36 214,231 230,559
6.00%, due 10/15/36 701,440 754,903
6.00%, due 5/15/37 314,261 337,625
6.00%, due 6/15/37 179,516 193,167
6.00%, due 8/15/37 218,841 235,111
6.00%, due 11/15/37 139,686 150,071
6.00%, due 12/15/37 261,741 281,200
6.00%, due 1/15/38 326,228 350,379
6.00%, due 5/15/38 309,778 332,711
6.00%, due 9/15/38 236,774 254,302
6.50%, due 3/20/31 32,086 35,534
6.50%, due 1/15/32 40,321 44,325
6.50%, due 6/15/35 3,016 3,286
6.50%, due 12/15/35 34,141 37,190
6.50%, due 1/15/36 339,047 368,057
6.50%, due 9/15/36 141,234 153,318
6.50%, due 9/15/37 150,024 162,603
6.50%, due 10/15/37 196,010 212,444
6.50%, due 11/15/38 528,909 573,173
7.00%, due 11/15/11 3,168 3,251
7.00%, due 2/15/26 1,571 1,760
7.00%, due 6/15/29 606 679
7.00%, due 12/15/29 5,493 6,162
7.00%, due 5/15/31 2,630 2,954
7.00%, due 8/15/31 19,935 22,391
7.00%, due 8/20/31 41,587 46,606
7.00%, due 8/15/32 67,086 75,342
7.50%, due 9/15/11 6,954 7,143
7.50%, due 3/15/26 5,046 5,689
7.50%, due 10/15/26 10,578 11,926
7.50%, due 11/15/26 1,391 1,568
7.50%, due 1/15/30 15,614 17,651
7.50%, due 10/15/30 7,722 8,729
7.50%, due 3/15/32 34,433 38,921
8.00%, due 6/15/26 290 333
8.00%, due 9/15/26 1,679 1,927
8.00%, due 10/15/26 486 558
8.00%, due 11/15/26 2,073 2,371
8.00%, due 5/15/27 299 343
8.00%, due 7/15/27 994 1,143
8.00%, due 9/15/27 584 671
8.00%, due 11/15/30 34,186 39,363
8.50%, due 7/15/26 1,144 1,328
8.50%, due 11/15/26 6,290 7,301
------------
34,091,343
------------
V UNITED STATES TREASURY BONDS 2.4%
4.375%, due 11/15/39 13,385,000 13,050,375
6.75%, due 8/15/26 1,000,000 1,297,031
------------
14,347,406
------------
V UNITED STATES TREASURY NOTES 27.8%
0.75%, due 11/30/11 5,000,000 4,999,610
1.00%, due 12/31/11 6,000,000 6,019,452
1.00%, due 3/31/12 7,650,000 7,660,481
1.125%, due 12/15/11 2,000,000 2,011,718
1.125%, due 12/15/12 16,350,000 16,277,193
1.75%, due 11/15/11 2,700,000 2,742,714
1.75%, due 4/15/13 29,080,800 29,298,906
2.125%, due 11/30/14 16,000,000 15,906,256
2.25%, due 1/31/15 4,000,000 3,985,000
2.375%, due 3/31/16 3,000,000 2,930,859
2.50%, due 3/31/15 13,100,000 13,165,500
2.625%, due 6/30/14 500,000 510,781
2.625%, due 12/31/14 4,435,000 4,500,141
3.125%, due 1/31/17 16,700,000 16,761,322
3.25%, due 3/31/17 1,000,000 1,009,375
3.375%, due 11/15/19 19,105,000 18,706,489
3.625%, due 2/15/20 11,015,000 10,982,297
4.625%, due 7/31/12 3,500,000 3,778,908
4.875%, due 6/30/12 3,500,000 3,787,658
------------
165,034,660
------------
Total U.S. Government & Federal Agencies
(Cost $418,912,382) 427,353,833
------------
YANKEE BONDS 3.6% (G)
- -------------------------------------------------------
BANKS 0.9%
Bank of Nova Scotia
3.40%, due 1/22/15 175,000 177,273
Deutsche Bank A.G.
6.00%, due 9/1/17 325,000 359,508
</Table>
24 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)
BANKS (CONTINUED)
Eksportfinans A/S
5.50%, due 5/25/16 $ 200,000 $ 224,073
European Investment Bank
2.75%, due 3/23/15 250,000 250,125
HSBC Bank PLC
6.95%, due 3/15/11 200,000 209,511
Inter-American Development
Bank
6.80%, due 10/15/25 604,000 715,487
Korea Development Bank
5.30%, due 1/17/13 125,000 133,312
Kreditanstalt fuer
Wiederaufbau
4.50%, due 7/16/18 350,000 372,223
Series G
4.875%, due 1/17/17 1,000,000 1,092,175
Landwirtschaftliche
Rentenbank
5.125%, due 2/1/17 375,000 413,457
Oesterreichische
Kontrollbank A.G.
4.75%, due 10/16/12 500,000 538,560
Royal Bank of Canada
5.65%, due 7/20/11 150,000 158,397
Royal Bank of Scotland Group
PLC
5.00%, due 11/12/13 100,000 98,547
5.05%, due 1/8/15 100,000 96,638
Santander Financial
Issuances
6.375%, due 2/15/11 100,000 104,020
UBS A.G.
5.875%, due 7/15/16 125,000 132,551
5.875%, due 12/20/17 200,000 211,549
Westpac Banking Corp.
4.625%, due 6/1/18 50,000 49,218
------------
5,336,624
------------
CONSUMER 0.2%
Diageo Capital PLC
5.125%, due 1/30/12 100,000 106,151
5.875%, due 9/30/36 150,000 159,896
Diageo Finance B.V.
3.25%, due 1/15/15 100,000 101,275
Molson Coors Capital Finance
ULC
4.85%, due 9/22/10 250,000 254,124
Novartis Capital Corp.
4.125%, due 2/10/14 100,000 106,686
Novartis Securities
Investment, Ltd.
5.125%, due 2/10/19 450,000 483,609
------------
1,211,741
------------
ELECTRIC 0.1%
Hydro Quebec
Series JL
6.30%, due 5/11/11 250,000 264,781
Scottish Power PLC
5.375%, due 3/15/15 100,000 106,967
------------
371,748
------------
ENERGY 0.8%
Anadarko Finance Co.
6.75%, due 5/1/11 100,000 104,983
Apache Finance Canada Corp.
4.375%, due 5/15/15 100,000 106,485
Canadian Natural Resources,
Ltd.
5.45%, due 10/1/12 250,000 269,988
5.85%, due 2/1/35 105,000 104,866
6.50%, due 2/15/37 75,000 81,988
EnCana Corp.
4.75%, due 10/15/13 100,000 107,899
6.30%, due 11/1/11 100,000 107,153
6.50%, due 8/15/34 85,000 92,935
6.50%, due 2/1/38 125,000 136,451
Nexen, Inc.
5.20%, due 3/10/15 350,000 374,030
Norsk Hydro ASA
7.75%, due 6/15/23 125,000 159,561
Petro-Canada
4.00%, due 7/15/13 100,000 103,891
6.05%, due 5/15/18 225,000 248,102
Petrobras International
Finance Co.
5.875%, due 3/1/18 150,000 159,486
Shell International Finance
B.V.
4.00%, due 3/21/14 400,000 423,844
4.30%, due 9/22/19 125,000 126,430
Suncor Energy, Inc.
6.10%, due 6/1/18 100,000 110,363
6.50%, due 6/15/38 100,000 107,615
Talisman Energy, Inc.
5.125%, due 5/15/15 50,000 53,618
6.25%, due 2/1/38 55,000 57,769
TransCanada Pipelines, Ltd.
4.00%, due 6/15/13 300,000 314,862
4.875%, due 1/15/15 380,000 408,535
5.85%, due 3/15/36 100,000 103,122
Transocean, Inc.
6.00%, due 3/15/18 125,000 136,850
7.375%, due 4/15/18 100,000 118,387
Weatherford International,
Inc.
4.95%, due 10/15/13 100,000 106,643
6.35%, due 6/15/17 225,000 248,286
------------
4,474,142
------------
FINANCE-OTHER 0.2%
BP Capital Markets PLC
5.25%, due 11/7/13 250,000 276,003
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
25
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
YANKEE BONDS (CONTINUED)
FINANCE-OTHER (CONTINUED)
ConocoPhilips Canada Funding
Co.
5.625%, due 10/15/16 $ 375,000 $ 424,343
Credit Suisse New York
5.50%, due 5/1/14 500,000 547,835
------------
1,248,181
------------
FOREIGN GOVERNMENTS 0.1%
International Bank of
Reconstruction &
Development
(zero coupon), due 3/11/31 504,000 169,729
Svensk Exportkredit AB
3.25%, due 9/16/14 250,000 256,981
5.125%, due 3/1/17 200,000 219,588
------------
646,298
------------
INDEPENDENT 0.1%
Rio Tinto Finance USA, Ltd.
5.875%, due 7/15/13 600,000 662,963
------------
INSURANCE 0.0%++
AXA S.A.
8.60%, due 12/15/30 105,000 128,066
------------
MANUFACTURING 0.4%
Alcan, Inc.
5.00%, due 6/1/15 100,000 105,648
5.75%, due 6/1/35 50,000 50,462
6.45%, due 3/15/11 100,000 104,271
ArcelorMittal
6.125%, due 6/1/18 300,000 323,396
Barrick Gold Finance Co.
4.875%, due 11/15/14 50,000 53,399
BHP Billiton Finance USA,
Ltd.
4.80%, due 4/15/13 100,000 107,802
5.25%, due 12/15/15 300,000 330,996
Celulosa Arauco y
Constitucion S.A.
5.625%, due 4/20/15 50,000 52,767
Inco, Ltd.
5.70%, due 10/15/15 100,000 106,289
Ingersoll-Rand Co.
4.75%, due 5/15/15 150,000 157,610
Koninklijke Philips
Electronics N.V.
6.875%, due 3/11/38 275,000 319,854
Lafarge S.A.
6.50%, due 7/15/16 50,000 53,918
7.125%, due 7/15/36 50,000 51,725
Potash Corp. of Saskatchewan
7.75%, due 5/31/11 140,000 149,859
Vale Overseas, Ltd.
6.25%, due 1/23/17 400,000 438,675
Xstrata Canada Corp.
5.50%, due 6/15/17 50,000 52,091
8.375%, due 2/15/11 75,000 79,178
------------
2,537,940
------------
SERVICE 0.1%
AstraZeneca PLC
6.45%, due 9/15/37 200,000 229,223
Covidien International
Finance S.A.
6.00%, due 10/15/17 150,000 166,285
Thomson Corp. (The)
5.70%, due 10/1/14 50,000 55,529
------------
451,037
------------
TELECOMMUNICATION 0.6%
America Movil S.A. de C.V.
5.75%, due 1/15/15 275,000 303,548
British Telecommunications
PLC
9.125%, due 12/15/10 150,000 157,240
9.625%, due 12/15/30 100,000 128,684
Deutsche Telekom
International
Finance B.V.
5.25%, due 7/22/13 100,000 107,671
5.75%, due 3/23/16 200,000 218,276
6.00%, due 7/8/19 250,000 270,856
9.25%, due 6/1/32 100,000 136,719
France Telecom S.A.
4.375%, due 7/8/14 125,000 133,613
8.50%, due 3/1/31 250,000 339,238
Koninklijke (Royal) KPN N.V.
8.00%, due 10/1/10 100,000 102,927
Rogers Communications, Inc.
6.80%, due 8/15/18 225,000 259,390
Telecom Italia Capital S.A.
4.95%, due 9/30/14 150,000 154,528
6.00%, due 9/30/34 100,000 88,594
6.375%, due 11/15/33 100,000 93,066
Telefonica Emisones S.A.U.
7.045%, due 6/20/36 100,000 111,147
Telefonica Europe B.V.
8.25%, due 9/15/30 200,000 247,592
TELUS Corp.
8.00%, due 6/1/11 70,000 75,175
Vodafone Group PLC
5.00%, due 12/16/13 294,000 318,296
6.15%, due 2/27/37 250,000 260,097
7.875%, due 2/15/30 100,000 121,147
------------
3,627,804
------------
</Table>
26 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)
TRANSPORTATION 0.1%
Canadian National Railway
Co.
6.20%, due 6/1/36 $ 100,000 $ 111,132
6.375%, due 10/15/11 100,000 107,573
6.375%, due 11/15/37 60,000 68,248
Canadian Pacific Railway Co.
7.25%, due 5/15/19 125,000 144,336
------------
431,289
------------
WATER 0.0%++
United Utilities PLC
5.375%, due 2/1/19 100,000 100,088
------------
Total Yankee Bonds
(Cost $19,957,301) 21,227,921
------------
Total Long-Term Bonds
(Cost $568,139,175) 588,605,709
------------
SHORT-TERM INVESTMENTS 2.8%
- -------------------------------------------------------
COMMERCIAL PAPER 2.0%
Canadian Wheat Board
0.152%, due 5/13/10 (h) 2,000,000 1,999,893
Societe Generale North
America, Inc.
0.158%, due 5/3/10 (h) 7,000,000 6,999,911
Wal-Mart Stores, Inc.
0.172%, due 5/18/10 (c)(h) 3,000,000 2,999,745
------------
Total Commercial Paper
(Cost $11,999,549) 11,999,549
------------
REPURCHASE AGREEMENT 0.1%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$709,789
(Collateralized by a
United States Treasury
Bill with a rate of 0.144%
and a maturity date of
7/15/10, with a Principal
Amount of $725,000 and a
Market Value of $724,783) 709,788 709,788
------------
Total Repurchase Agreement
(Cost $709,788) 709,788
------------
U.S. GOVERNMENT 0.7%
UNITED STATES TREASURY BILLS 0.7%
0.135%, due 5/20/10 (h) 2,000,000 1,999,852
0.143%, due 5/13/10 (h) 2,000,000 1,999,899
------------
Total U.S. Government
(Cost $3,999,751) 3,999,751
------------
Total Short-Term Investments
(Cost $16,709,088) 16,709,088
------------
Total Investments
(Cost $584,848,263) (i) 102.1% 605,314,797
Other Assets, Less
Liabilities (2.1) (12,425,278)
----------- ------------
Net Assets 100.0% $592,889,519
=========== ============
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
++ Less than one-tenth of a percent.
(a) Subprime mortgage investment and other
asset-backed securities. The total market
value of the securities at April 30, 2010
is $1,460,431, which represents 0.3% of
the Fund's net assets.
(b) The debt is guaranteed under the Federal
Deposit Insurance Corporation (FDIC)
Temporary Liquidity Guarantee Program and
is backed by the full faith and credit of
the United States. The expiration date of
the FDIC's guarantee is the earlier of
the maturity date of the debt or June 30,
2012.
(c) May be sold to institutional investors
only under Rule 144A or securities
offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
(d) Illiquid security--The total market value
of this security at April 30, 2010 is
$81,458, which represents less than one-
tenth of a percent of the Fund's net
assets.
(e) Floating rate--Rate shown is the rate in
effect at April 30, 2010.
(f) TBA--Securities purchased on a forward
commitment basis with an approximate
principal amount and maturity date. The
actual principal amount and maturity date
will be determined upon settlement. The
market value of these securities at April
30, 2010 is $10,930,155, which represents
1.8% of the Fund's net assets. All or a
portion of these securities were acquired
under a mortgage dollar roll agreement.
(g) Yankee Bond--dollar-denominated bond
issued in the United States by a foreign
bank or corporation.
(h) Interest rate presented is yield to
maturity.
(i) At April 30, 2010, cost is $585,008,588
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $21,447,073
Gross unrealized depreciation (1,140,864)
-----------
Net unrealized appreciation $20,306,209
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
27
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Long-Term Bonds
Asset-Backed Securities $ -- $ 3,035,595 $ -- $ 3,035,595
Corporate Bonds -- 107,807,254 -- 107,807,254
Foreign Government Bonds -- 8,971,662 -- 8,971,662
Mortgage-Backed Securities -- 20,209,444 -- 20,209,444
U.S. Government & Federal Agencies -- 427,353,833 -- 427,353,833
Yankee Bonds -- 21,227,921 -- 21,227,921
-------- ------------ -------- ------------
Total Long-Term Bonds -- 588,605,709 -- 588,605,709
-------- ------------ -------- ------------
Short-Term Investments
Commercial Paper -- 11,999,549 -- 11,999,549
Repurchase Agreement -- 709,788 -- 709,788
U.S. Government -- 3,999,751 -- 3,999,751
-------- ------------ -------- ------------
Total Short-Term Investments -- 16,709,088 -- 16,709,088
-------- ------------ -------- ------------
Total Investments in Securities $-- $605,314,797 $-- $605,314,797
======== ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
28 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 APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $584,848,263) $605,314,797
Receivables:
Interest 4,401,887
Fund shares sold 736,227
Investment securities sold 71,346
Other assets 60,012
------------
Total assets 610,584,269
------------
LIABILITIES:
Payables:
Investment securities purchased 16,411,530
Fund shares redeemed 803,373
Transfer agent (See Note 3) 125,775
Manager (See Note 3) 118,433
Shareholder communication 98,946
Professional fees 37,978
NYLIFE Distributors (See Note 3) 18,062
Custodian 15,365
Trustees 1,699
Accrued expenses 3,852
Dividend payable 59,737
------------
Total liabilities 17,694,750
------------
Net assets $592,889,519
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 52,158
Additional paid-in capital 569,365,151
------------
569,417,309
Accumulated distributions in excess
of net investment income (62,436)
Accumulated undistributed net
realized gain on investments 3,068,112
Net unrealized appreciation on
investments 20,466,534
------------
Net assets $592,889,519
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 5,127,809
============
Shares of beneficial interest
outstanding 449,639
============
Net asset value per share
outstanding $ 11.40
Maximum sales charge (3.00% of
offering price) 0.35
------------
Maximum offering price per share
outstanding $ 11.75
============
CLASS A
Net assets applicable to
outstanding shares $ 83,510,666
============
Shares of beneficial interest
outstanding 7,352,233
============
Net asset value per share
outstanding $ 11.36
Maximum sales charge (3.00% of
offering price) 0.35
------------
Maximum offering price per share
outstanding $ 11.71
============
CLASS I
Net assets applicable to
outstanding shares $504,251,044
============
Shares of beneficial interest
outstanding 44,355,760
============
Net asset value and offering price
per share outstanding $ 11.37
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
29
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest (a) $11,210,316
-----------
EXPENSES:
Manager (See Note 3) 997,179
Transfer agent (See Note 3) 385,649
Distribution/Service--Investor
Class (See Note 3) 5,610
Distribution/Service--Class A (See
Note 3) 101,062
Professional fees 61,545
Custodian 57,227
Registration 54,400
Shareholder communication 40,525
Trustees 9,590
Miscellaneous 15,714
-----------
Total expenses before waiver 1,728,501
Expense waiver from Manager (See
Note 3) (336,078)
-----------
Net expenses 1,392,423
-----------
Net investment income 9,817,893
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments 3,188,348
Net change in unrealized
appreciation on investments (942,387)
-----------
Net realized and unrealized gain on
investments 2,245,961
-----------
Net increase in net assets resulting
from operations $12,063,854
===========
</Table>
(a) Interest recorded net of foreign withholding taxes in the amount of $2,186.
30 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.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 9,817,893 $ 19,401,290
Net realized gain on
investments 3,188,348 5,476,804
Net change in unrealized
appreciation
(depreciation) on
investments (942,387) 38,254,355
---------------------------
Net increase in net assets
resulting from operations 12,063,854 63,132,449
---------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (68,623) (129,225)
Class A (1,267,242) (2,800,956)
Class I (8,491,896) (16,673,937)
---------------------------
(9,827,761) (19,604,118)
---------------------------
From net realized gain on
investments:
Investor Class (6,059) --
Class A (111,528) --
Class I (667,928) --
---------------------------
(785,515) --
---------------------------
Total dividends and
distributions to
shareholders (10,613,276) (19,604,118)
---------------------------
Capital share transactions:
Net proceeds from sale of
shares 117,212,751 220,233,073
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 10,411,855 19,298,817
Cost of shares redeemed (86,699,014) (178,281,842)
---------------------------
Increase in net assets
derived from capital
share transactions 40,925,592 61,250,048
---------------------------
Net increase in net
assets 42,376,170 104,778,379
NET ASSETS:
Beginning of period 550,513,349 445,734,970
---------------------------
End of period $592,889,519 $ 550,513,349
===========================
Accumulated distributions in
excess of net investment
income at end of period $ (62,436) $ (52,568)
===========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
31
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
----------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $11.38 $10.37 $10.97
------ ------ ------
Net investment income 0.17 0.40 0.30
Net realized and unrealized gain
(loss) on investments 0.04 1.02 (0.60)
------ ------ ------
Total from investment operations 0.21 1.42 (0.30)
------ ------ ------
Less dividends and distributions:
From net investment income (0.17) (0.41) (0.30)
From net realized gain on
investments (0.02) -- --
------ ------ ------
Total dividends and distributions (0.19) (0.41) (0.30)
------ ------ ------
Net asset value at end of period $11.40 $11.38 $10.37
====== ====== ======
Total investment return (a) 1.82%(b) 13.87% (2.76%)(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.02%++ 3.66% 4.26% ++
Net expenses 0.92%++ 0.92% 0.92% ++
Expenses (before
waiver/reimbursement) 1.15%++ 1.28% 1.27% ++
Portfolio turnover rate 48%(c) 61%(c) 66% (c)
Net assets at end of period (in
000's) $5,128 $4,279 $2,874
</Table>
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 11.34 $ 10.33 $ 10.70 $ 10.69 $ 10.69 $ 11.07
-------- -------- -------- -------- -------- --------
Net investment income 0.20 0.46 0.51 0.51 0.48 0.40
Net realized and unrealized gain
(loss) on investments 0.05 1.01 (0.37) 0.02 0.00 ++ (0.31)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.25 1.47 0.14 0.53 0.48 0.09
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income (0.20) (0.46) (0.51) (0.52) (0.48) (0.47)
From net realized gain on
investments (0.02) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.22) (0.46) (0.51) (0.52) (0.48) (0.47)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 11.37 $ 11.34 $ 10.33 $ 10.70 $ 10.69 $ 10.69
======== ======== ======== ======== ======== ========
Total investment return (a) 2.16%(b) 14.47% 1.25% 5.07% 4.60% 0.82%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.50%++ 4.15% 4.74% 4.79% 4.49% 3.79%
Net expenses 0.43%++ 0.43% 0.43% 0.43% 0.43% 0.46%
Expenses (before
waiver/reimbursement) 0.57%++ 0.63% 0.56% 0.53% 0.47% 0.64%
Portfolio turnover rate 48%(c) 61%(c) 66%(c) 121%(c) 105%(c) 156%(c)
Net assets at end of period (in
000's) $504,251 $468,639 $381,086 $398,047 $328,259 $265,096
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(b) Total return is not annualized.
(c) The portfolio turnover rates not including mortgage dollar rolls are 44%, 56%,
62%, 116%, 85% and 62% for the six-month ended April 30, 2010 and the years
ended October 31, 2009, 2008, 2007, 2006 and 2005, respectively.
</Table>
32 MainStay Indexed Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER, 31
2010* 2009 2008 2007 2006 2005
$ 11.33 $ 10.33 $ 10.70 $ 10.69 $ 10.68 $ 11.07
------- ------- ------- ------- ------- -------
0.18 0.41 0.47 0.47 0.44 0.36
0.05 1.01 (0.36) 0.02 0.01 (0.32)
------- ------- ------- ------- ------- -------
0.23 1.42 0.11 0.49 0.45 0.04
------- ------- ------- ------- ------- -------
(0.18) (0.42) (0.48) (0.48) (0.44) (0.43)
(0.02) -- -- -- -- --
------- ------- ------- ------- ------- -------
(0.20) (0.42) (0.48) (0.48) (0.44) (0.43)
------- ------- ------- ------- ------- -------
$ 11.36 $ 11.33 $ 10.33 $ 10.70 $ 10.69 $ 10.68
======= ======= ======= ======= ======= =======
1.97%(b) 13.93% 0.88% 4.66% 4.29% 0.39%
3.12%++ 3.76% 4.35% 4.40% 4.10% 3.45%
0.82%++ 0.82% 0.82% 0.82% 0.82% 0.80%
0.82%++ 0.88% 0.88% 0.93% 0.86% 0.98%
48%(c) 61%(c) 66%(c) 121%(c) 105%(c) 156%(c)
$83,511 $77,595 $61,775 $57,604 $51,941 $64,351
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
33
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Indexed Bond Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Indexed Bond Fund, a
series of Eclipse Funds Inc. (the "Predecessor Fund"). The reorganization of the
Predecessor Fund with and into the Fund, which was not subject to shareholder
approval under applicable law, occurred on February 26, 2010. All information
regarding and references to periods prior to the commencement of operations of
the Fund relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced
operations on January 2, 1991. Class A shares commenced operations on January 2,
2004. Investor Class shares commenced operations on February 28, 2008. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class I shares are
offered at NAV and are not subject to a sales charge. Depending upon
eligibility, Investor Class shares may convert to Class A shares and Class A
shares may convert to Investor Class shares. The three classes of shares have
the same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions. Class I shares
are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek to provide investment results that
correspond to the total return performance of fixed-income securities in the
aggregate, as represented by the Fund's primary benchmark index.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the Fund's Manager (as defined in Note 3(A))
in consultation with the Fund's Subadvisor, if any (as defined in Note 3(A)),
whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the Fund's Manager, in
consultation with the Fund's Subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Futures contracts are valued at the last posted
settlement price on the market where such futures are primarily traded.
Investments in other mutual funds are valued at their NAVs as of the close of
the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the
34 MainStay Indexed Bond Fund
reporting entity's own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the information
available in the circumstances. The inputs or methodology used for valuing
securities may not be an indication of the risks associated with investing in
those securities. The three-tier hierarchy of inputs is summarized in the three
broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income monthly and distributions of net realized
capital and currency gains, if any, annually, Unless the shareholder elects
otherwise, all dividends and distributions are reinvested in the same class of
shares of the Fund, at NAV. Dividends and distributions to shareholders are
determined in accordance with federal income tax regulations and may differ from
GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage-backed securities. Interest
income is accrued as earned using the effective interest rate method. Discounts
and premiums on securities purchased, other than short-term investments, for the
Fund are accreted and amortized, respectively, on the effective interest rate
method over the life of the respective securities or, in the case of a callable
security, over the period to the first date of call. Discounts and premiums on
short-term investments are accreted and amortized, respectively, on the
straight-line method. Income from payment-in-kind securities is recorded daily
based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may
mainstayinvestments.com 35
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
enter into repurchase agreements only with financial institutions that are
deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines
established by the Fund's Board. Repurchase agreements are considered under the
1940 Act to be collateralized loans by a Fund to the seller secured by the
securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage dollar roll ("MDR")
transactions in which it sells mortgage-backed securities ("MBS") from its
portfolio to a counterparty from whom it simultaneously agrees to buy a similar
security on a delayed delivery basis. The MDR transactions of the Fund are
classified as purchase and sale transactions. The securities sold in connection
with the MDRs are removed from the portfolio and a realized gain or loss is
recognized. The securities the Fund has agreed to acquire are included at market
value in the Portfolio of Investments and liabilities for such purchase
commitments are included as payables for investments purchased. During the roll
period, the Fund foregoes principal and interest paid on the securities. The
Fund is compensated by the difference between the current sales price and the
forward price for the future as well as by the earnings on the cash proceeds of
the initial sale. MDRs may be renewed without physical delivery of the
securities subject to the contract. The Fund maintains liquid assets from its
portfolio having a value not less than the repurchase price, including accrued
interest. MDR transactions involve certain risks, including the risk that the
MBS returned to the Fund at the end of the roll, while substantially similar,
could be inferior to what was initially sold to the counterparty.
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(J) CONCENTRATION OF RISK. The Fund invests in foreign securities, which carry
certain risks that are in addition to the usual risks inherent in domestic
instruments. These risks include those resulting from currency fluctuations,
future adverse political and economic developments and possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions.
These risks are likely to be greater in emerging markets than in developed
markets. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic or political developments in a
specific country, industry or region.
(K) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER. New York Life Investment Management LLC ("New York Life
Investments" or "Manager"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life Insurance Company ("New
36 MainStay Indexed Bond Fund
York Life"), serves as the Fund's Manager, pursuant to a Management Agreement
("Management Agreement"). The Manager provides offices, conducts clerical,
recordkeeping and bookkeeping services, and keeps most of the financial and
accounting records required to be maintained by the Fund. Except for the portion
of salaries and expenses that are the responsibility of the Fund, the Manager
also pays the salaries and expenses of all personnel affiliated with the Fund
and the operational expenses of the Fund. The Fund is advised by New York Life
Investments directly, without a subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.35% on assets up to $1 billion and 0.30% on assets in excess of $1 billion.
The effective management fee rate (exclusive of any applicable
waivers/reimbursements) was 0.35% for the six-month period ended April 30, 2010.
Effective February 26, 2010, New York Life Investments entered into a written
expense limitation agreement, under which it agreed to waive a portion of the
management fee or reimburse expenses of the appropriate class of the Fund to the
extent necessary to ensure that the total ordinary operating expenses (total
ordinary operating expenses excludes taxes, interest, litigation, extraordinary
expenses, brokerage, other transaction expenses relating to the purchase or sale
of portfolio investments, and the fees and expenses of any other funds in which
the Fund invests) do not exceed the following percentages of average daily net
assets: Investor Class, 0.92%; Class A, 0.82%; and Class I, 0.43%. This
agreement expires on July 31, 2010, and is reviewed annually by the Board in
connection with its review of the Fund's investment advisory agreements. Based
on its review, the Board may agree to maintain, modify or terminate the
agreement.
For the period August 1, 2009 to February 25, 2010, New York Life Investments
had a written expense limitation agreement under which it agreed to waive a
portion of the management fee or reimburse expenses to the extent necessary to
ensure that the total ordinary operating expenses for the Fund's Class A shares
do not exceed 0.82% of its average net assets. While applying an equivalent
waiver or reimbursement, in an equal number of basis points, to the other share
classes of the Fund. Additionally, New York Life Investments had agreed to
voluntarily waive or reimburse the expenses of the appropriate class of the Fund
so that the total annual operating expenses of a class do not exceed the
following percentages: Investor Class, 0.92%, and Class I, 0.43%.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $997,179 and waived/reimbursed its fees in
the amount of $336,078.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $1,674
and $6,428, respectively, for the six-month period ended April 30, 2010. The
Fund was also advised that the Distributor retained contingent deferred sales
charges on redemptions of Class A of $279, for the six-month period ended April
30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 10,445
- -----------------------------------------------
Class A 53,653
- -----------------------------------------------
Class I 321,551
- -----------------------------------------------
</Table>
mainstayinvestments.com 37
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class A $ 1,302 0.0%++
- --------------------------------------------------
Class I 41,263,821 8.2
- --------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $14,188.
NOTE 4--FEDERAL INCOME TAX:
The Fund utilized $4,760,891 of capital loss carryforwards during the year ended
October 31, 2009.
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $19,604,118
- ------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of U.S.
Government securities were $136,301 and $172,892, respectively. Purchases and
sales of securities, other than U.S. Government securities and short-term
securities, were $205,360 and $97,808, respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 105,375 $ 1,197,125
Shares issued to
shareholders in
reinvestment of dividends
and distributions 6,412 72,989
Shares redeemed (31,009) (352,601)
--------------------------
Net increase in shares
outstanding before
conversion 80,778 917,513
Shares converted into
Investor Class (See Note
1) 9,943 112,851
Shares converted from
Investor Class (See Note
1) (17,060) (193,244)
--------------------------
Net increase 73,661 $ 837,120
==========================
Year ended October 31,
2009:
Shares sold 182,242 $ 2,021,067
Shares issued to
shareholders in
reinvestment of dividends 11,372 126,033
Shares redeemed (88,843) (980,714)
--------------------------
Net increase in shares
outstanding before
conversion 104,771 1,166,386
Shares converted into
Investor Class (See Note
1) 15,744 176,176
Shares converted from
Investor Class (See Note
1) (21,733) (242,238)
--------------------------
Net increase 98,782 $ 1,100,324
==========================
</Table>
38 MainStay Indexed Bond Fund
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 1,638,793 $ 18,554,692
Shares issued to
shareholders in
reinvestment of dividends
and distributions 107,575 1,219,799
Shares redeemed (1,222,229) (13,834,738)
--------------------------
Net increase in shares
outstanding before
conversion 524,139 5,939,753
Shares converted into Class
A
(See Note 1) 17,127 193,244
Shares converted from Class
A
(See Note 1) (9,987) (112,851)
Shares converted from Class
A (a) (25,085) (282,703)
--------------------------
Net increase 506,194 $ 5,737,443
==========================
Year ended October 31,
2009:
Shares sold 3,981,714 $ 43,827,538
Shares issued to
shareholders in
reinvestment of dividends 227,691 2,511,641
Shares redeemed (3,350,470) (36,984,892)
--------------------------
Net increase in shares
outstanding before
conversion 858,935 9,354,287
Shares converted into Class
A
(See Note 1) 21,812 242,238
Shares converted from Class
A
(See Note 1) (15,808) (176,176)
--------------------------
Net increase 864,939 $ 9,420,349
==========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 8,617,321 $ 97,460,934
Shares issued to
shareholders in
reinvestment of dividends
and distributions 803,601 9,119,067
Shares redeemed (6,404,138) (72,511,675)
--------------------------
Net increase in shares
outstanding before
conversion 3,016,784 34,068,326
Shares converted into Class
I (a) 25,062 282,703
--------------------------
Net increase 3,041,846 $ 34,351,029
==========================
Year ended October 31,
2009:
Shares sold 15,748,210 $ 174,384,468
Shares issued to
shareholders in
reinvestment of dividends 1,508,897 16,661,143
Shares redeemed (12,816,997) (140,316,236)
--------------------------
Net increase 4,440,110 $ 50,729,375
==========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
mainstayinvestments.com 39
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the SEC's website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request by calling 800-MAINSTAY (624-6782);
visiting the Funds' website at www.mainstayinvestments.com; or on the SEC's
website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Funds' Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
40 MainStay Indexed Bond Fund
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18298 MS121-10 MSIN10-06/10
B3
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY INTERMEDIATE TERM BOND FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY INTERMEDIATE TERM BOND FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ---------------------------------------------
FINANCIAL STATEMENTS 25
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 31
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 41
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 41
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -1.05% 4.95% 4.17% 5.23%
Excluding sales charges 3.61 9.89 5.14 5.71
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE BARCLAYS CAPITAL
TERM BOND U.S. AGGREGATE
FUND BOND INDEX
--------------------- ----------------
4/30/00 9550 10000
10653 11239
11189 12119
12235 13388
12374 13632
12955 14348
12971 14450
13892 15514
14611 16579
15145 17215
4/30/10 16643 18643
</Table>
CLASS A SHARES(3)--MAXIMUM 4.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
With sales charges -0.87% 5.16% 4.26% 5.27%
Excluding sales charges 3.80 10.12 5.23 5.76
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE BARCLAYS CAPITAL
TERM BOND U.S. AGGREGATE
FUND BOND INDEX
--------------------- ----------------
4/30/00 23875 25000
26632 28096
27973 30299
30588 33469
30935 34079
32387 35870
32428 36125
34730 38784
36517 41447
37943 43037
4/30/10 41782 46607
</Table>
CLASS B SHARES(3)--MAXIMUM 5% CDSC IF REDEEMED WITHIN THE FIRST SIX YEARS OF
PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -1.66% 4.11% 4.02% 4.94%
Excluding sales charges 3.34 9.11 4.36 4.94
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE BARCLAYS CAPITAL
TERM BOND U.S. AGGREGATE
FUND BOND INDEX
--------------------- ----------------
4/30/00 10000 10000
11076 11239
11539 12119
12524 13388
12587 13632
13080 14348
13012 14450
13816 15514
14418 16579
14838 17215
4/30/10 16190 18643
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 4.50% and an
annual 12b-1 fee of 0.25%. 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 1.00% 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 or individual 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. For information on current fee waivers and/or expense limitations,
please refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in certain contractual fees and expenses.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS C SHARES(3)--MAXIMUM 1% CDSC IF REDEEMED WITHIN ONE YEAR OF PURCHASE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges 2.34% 8.10% 4.38% 4.95%
Excluding sales charges 3.34 9.10 4.38 4.95
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE BARCLAYS CAPITAL
TERM BOND U.S. AGGREGATE
FUND BOND INDEX
--------------------- ----------------
4/30/00 10000 10000
11076 11239
11539 12119
12524 13388
12587 13632
13080 14348
13013 14450
13817 15514
14434 16579
14854 17215
4/30/10 16206 18643
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- -------------------------------------------------------------
3.96% 10.47% 5.58% 6.08%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
MAINSTAY INTERMEDIATE BARCLAYS CAPITAL
TERM BOND U.S. AGGREGATE
FUND BOND INDEX
--------------------- ----------------
4/30/00 10000 10000
11178 11239
11766 12119
12895 13388
13074 13632
13748 14348
13826 14450
14851 15514
15674 16579
16330 17215
4/30/10 18040 18643
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
- ----------------------------------------------------------------------------------------------------
Barclays Capital U.S. Aggregate Bond Index(4) 2.54% 8.30% 5.38% 6.43%
Average Lipper intermediate investment grade debt fund(5) 4.04 15.23 4.50 5.80
</Table>
Unadjusted, the performance shown for Investor Class shares might have been
lower.
3. Performance figures for Class A, B and C shares, first offered on January 2,
2004, include the historical performance of Class I shares through December
31, 2003, adjusted for differences in certain contractual expenses and fees.
Unadjusted, the performance shown for Class A, B and C shares might have been
lower.
4. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the Mortgage-Backed Securities Index and the Asset-
Backed Securities Index. To qualify for inclusion in the Barclays Capital
U.S. 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 $250 million.
Results assume reinvestment of all income and capital gains. The Barclays
Capital U.S. Aggregate Bond Index is the Fund's broad-based securities market
index for comparison purposes. An investment cannot be made directly in an
index.
5. The average Lipper intermediate investment grade debt fund is representative
of funds that invest primarily in investment-grade debt issues (rated in the
top four grades) with dollar-weighted average maturities of five to ten
years. This benchmark is a product of Lipper Inc. Lipper Inc. is an
independent monitor of fund performance. Results are based on average total
returns of similar funds with all dividend and capital gain distributions
reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Intermediate Term Bond Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY INTERMEDIATE TERM BOND FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,036.10 $5.30 $1,019.60 $5.26
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,038.00 $4.60 $1,020.30 $4.56
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES $1,000.00 $1,033.40 $9.08 $1,015.90 $9.00
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES $1,000.00 $1,033.40 $9.08 $1,015.90 $9.00
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,039.60 $2.98 $1,021.90 $2.96
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.05% for Investor Class, 0.91% for Class A, 1.80% for Class B and Class C
and 0.59% for Class I) multiplied by the average account value over the
period, divided by 365 and multiplied by 181 (to reflect the one-half year
period). The table above represents the actual expenses incurred during the
one-half year period.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PIE CHART)
<Table>
Corporate Bonds 42.30
U.S. Government & Federal Agencies 36.10
Short-Term Investment 13.80
Yankee Bonds 10.20
Mortgage-Backed Securities 8.00
Asset-Backed Securities 0.50
Municipal Bond 0.10
Common Stock 0.00
Foreign Government Bond 0.00
Warrants 0.00
Other Assets, Less Liabilities (11.00)
</Table>
See Portfolio of Investments on page 12 for specific holdings within these
categories.
++ Less than one-tenth of a percent.
TOP TEN ISSUERS HELD AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. Federal National Mortgage Association (Mortgage Pass-Through
Securities), 4.50%-6.50%, due 2/1/17-11/1/38
2. Government National Mortgage Association (Mortgage Pass-
Through Securities), 5.00%-12.50%, due 1/15/14-5/1/38
3. United States Treasury Bonds, 4.375%-6.875%, due
8/15/25-11/15/39
4. United States Treasury Notes, 0.875%-3.625%, due
1/31/12-2/15/20
5. N.V. Energy, Inc., 7.803%-8.625%, due 6/15/12-3/15/14
6. Federal Home Loan Mortgage Corporation (Mortgage Pass-
Through Securities), 3.00%-6.50%, due 8/1/10-1/1/38
7. Freddie Mac (Collateralized Mortgage Obligations),
3.50%-5.00%, due 6/15/13-6/15/34
8. AgriBank FCB, 9.125%, due 7/15/19
9. Greenwich Capital Commercial Funding Corp., 5.224%-5.317%,
due 6/10/36-4/10/37
10. Coventry Health Care, Inc., 5.95%-6.125%, due
1/15/15-3/15/17
</Table>
8 MainStay Intermediate Term Bond Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS GARY GOODENOUGH AND JAMES RAMSAY, CFA,
OF MACKAY SHIELDS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY INTERMEDIATE TERM BOND FUND PERFORM RELATIVE TO ITS PEERS AND
ITS BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Intermediate Term Bond Fund returned 3.61%
for Investor Class shares, 3.80% for Class A shares, 3.34% for Class B shares
and 3.34% for Class C shares for the six months ended April 30, 2010. Over the
same period, the Fund's Class I shares returned 3.96%. All share classes
underperformed the 4.04% return of the average Lipper(1) intermediate investment
grade debt fund for the six-month reporting period. All share classes
outperformed the 2.54% return of the Barclays Capital U.S. Aggregate Bond
Index(2) for the six months ended April 30, 2010. The Barclays Capital U.S.
Aggregate Bond Index is the Fund's broad-based securitiesmarket index. See pages
5 and 6 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
Relative to the Barclays Capital U.S. Aggregate Bond Index, the Fund benefited
from overweight positions in corporate bonds, commercial mortgage-backed
securities and asset-backed securities. A modest allocation to mortgage-backed
securities collateralized by jumbo residential loans larger than the conforming
standards of Fannie Mae and Freddie Mac added value as well. Individual issue
selection among investment-grade corporate bonds, especially a bias toward bonds
rated BBB,(3) also helped. Nimble use of the new-issue calendar and a variety of
well-timed sales further strengthened the Fund's relative performance.
A less aggressive position in corporate bonds and non-investment-grade
securities along with a bias toward a flatter Treasury yield curve(4) detracted
from the Fund's results relative to its Lipper peers during a period when the
yield curve steepened.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
Early in 2009, the Federal Reserve formally adopted and implemented quantitative
easing, a way to expand the money supply through direct security purchases.
Policymakers intended to purchase $300 billion of longer-term Treasurys, $1.25
trillion of agency mortgage-backed securities, and $200 billion of agency debt.
As these purchase programs wound to conclusion in 2010, we rotated Fund assets
away from these sectors toward purchases of corporate bonds and commercial
mortgage-backed securities. We expected these fixed-income sectors would have
better total returns than government-related debt for two reasons. First,
prospects for both credit-related sectors were aligned with an improving
economy, implying positive price returns as spreads(5) to U.S. Treasury
securities tightened. Second, there was healthy investor demand for higher-
yielding products during the reporting period. The strategy benefited the Fund's
performance.
At the same time, the Federal Reserve's resolve to maintain its targeted federal
funds rate near zero helped quiet interest-rate volatility. This gave us the
confidence we needed to put an emphasis on higher-coupon mortgage-backed
securities that offer better yields than the sector average. The higher yield
helped compensate for the risk of unpredictable cash flows from the securities.
That risk is diminished when interest-rate volatility is subdued and U.S.
Treasury security yields remain range-bound.
The housing sector strengthened during the reporting period, and we established
a Fund position in securities tied to jumbo residential mortgages. We believed
that these securities had better opportunities to appreciate in price from their
distressed levels in the spring of 2009.
Through coupon income and spread narrowing, both mortgage-backed strategies
added value to the Fund's results relative to its benchmark during the reporting
period.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Barclays Capital U.S.
Aggregate Bond Index.
3. 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.
4. The yield curve is a line that plots the yields of various securities of
similar quality--typically U.S. Treasury issues--across a range of
maturities. The U.S. Treasury yield curve serves as a benchmark for other
debt and is used in economic forecasting. The U.S. Treasury yield curve is
said to flatten when the differential in yield between shorter-maturity and
longer-maturity Treasury securities narrows.
5. The terms "spread" and "yield spread" may refer to the difference in yield
between a security or type of security and comparable U.S. Treasury issues.
The terms may also refer to the difference in yield between two specific
securities or types of securities at a given time.
mainstayinvestments.com 9
WHICH FIXED-INCOME SECTORS CONTRIBUTED MOST POSITIVELY TO THE FUND'S RELATIVE
PERFORMANCE DURING THE REPORTING PERIOD?
Overweight allocations to investment-grade corporate bonds, high-yield corporate
bonds and commercial mortgage-backed securities were positive contributors to
the Fund's relative performance during the reporting period, as the average
spread on each of these sectors narrowed significantly.
Effective issue selection within investment-grade corporate bonds also
contributed positively to the Fund's performance during the reporting period. In
an environment where liquidity premiums receded, the Fund benefited from
increased exposure to corporate issuers that were less mainstream, such as
Teachers Insurance, Agribank and Prologis. We also positioned the Fund for a
recovery in the financials sector by increasing exposure to regional banks such
as Regions Financial and KeyBank. Further, when we liked a company's prospects,
we bought bonds across the issuer's yield curve rather than restricting our
attention to a single maturity. This strategy allowed the Fund to more fully
participate in gains as a company's credit fundamentals improved. Examples where
this strategy was adopted with positive results included Altria, Coventry Health
Care, Williams Partners, NGPL Pipeco and Dow Chemical.
As mentioned earlier, securities tied to jumbo residential mortgages appreciated
in price and added value. The price action reflected investors' expectations
about the future performance of the underlying loans.
WHAT INVESTMENT DECISIONS DETRACTED MOST FROM THE FUND'S RELATIVE RESULTS DURING
THE REPORTING PERIOD?
We favored intermediate-duration over short-duration corporate bonds. This view
imposed a yield-curve flattening bias that detracted from performance.
Transaction costs in increasing allocations to high-yield corporate bonds and
commercial mortgage-backed securities tempered gains from the Fund's overweight
positions in these sectors. Also, the Fund held positions in Royal Bank of
Scotland, Telecom Italia and multinational electric utility Enel that carried
exposure to peripheral Eurozone countries whose economies were under stress.
Moreover, some of the Fund's non-investment-grade holdings in the gaming and
lodging sector and the wireless telecommunications sector had sluggish
performance relative to the broader high-yield corporate bond universe. Gaming
and lodging issues that disappointed were Starwood Hotels & Resorts Worldwide,
Penn National Gaming and Peninsula Gaming. Wireless telecommunications
detractors included Sprint Nextel, Inmarsat and SBA Communications.
WHAT WAS THE FUND'S DURATION DURING THE REPORTING PERIOD?
The Fund maintained an intermediate duration(6) near 4.0 years and made modest
technical adjustments depending on the direction we felt interest rates were
likely to move over the near- to medium-term. Given the rise in Treasury yields
during the reporting period, the Fund would have benefited more from a shorter
duration.
DID THE FUND MAKE ANY SIGNIFICANT PURCHASES OR SALES DURING THE REPORTING
PERIOD?
During the reporting period, we sold U.S. Treasury securities and residential
pass-through mortgages(7) issued by government-related entities Fannie Mae,
Freddie Mac and Ginnie Mae. We reinvested the proceeds in high-yield corporate
bonds and commercial mortgage-backed securities. In our view, high-yield debt
and commercial real estate had better prospects in an improving economy than
U.S. Treasury securities or agency residential mortgages. In addition, heavy
Treasury issuance and the end of the Federal Reserve's purchase program for
agency mortgage-backed securities weighed on security prices in these sectors.
The trades we made contributed positively to Fund performance.
The Fund also benefited during the reporting period from our relative-value
trading within investment-grade corporate bonds. Purchases were often funded
with sales of U.S. Treasury securities or sales of corporate bonds that had
achieved fair value. Examples of the former include purchases of Incitec Pivot
and CVS in a trade against Treasurys. An example of the latter was the purchase
of Williams Partners funded with sales of Sonat and Daimler Chrysler. As
mentioned earlier, we raised the Fund's allocation to the financials sector by
purchasing debt of regional banks, such as KeyBank and Regions Financial. These
trades were successful, as bank balance sheets strengthened.
Toward the end of the reporting period, we introduced Fund exposure to the
Korean won using currency forwards.
6. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
7. Pass-through mortgages consist of a pool of residential mortgage loans, where
homeowners' monthly payments of principal, interest and prepayments pass from
the original bank through a government agency or investment bank to
investors.
10 MainStay Intermediate Term Bond Fund
HOW DID THE FUND'S WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
We increased the Fund's allocations to investment-grade corporate bonds, high-
yield corporate bonds and commercial mortgage-backed securities during the
reporting period as we sought to boost yield and to align the Fund with more
robust demand for credit risk. The trades were funded with cash, sales of U.S.
Treasurys and sales of agency mortgage-backed securities. The trades also
modestly lengthened the Fund's duration.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
As of April 30, 2010, the Fund was overweight relative to the Barclays Capital
U.S. Aggregate Bond Index in high-yield corporate bonds, investment-grade
corporate bonds, commercial mortgage-backed securities and asset-backed
securities. On the same date, the Fund was underweight relative to the benchmark
index in U.S. Treasurys, agency debentures and agency mortgage-backed
securities. Owing to stronger demand for risk assets, the Fund benefited from
underweight positions in government-related sectors and overweight positions in
credit-sensitive and commercial sectors.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 11
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS 97.2%+
ASSET-BACKED SECURITIES 0.5%
- -------------------------------------------------------
CREDIT CARDS 0.1%
Chase Issuance Trust Series
2006-C4, Class C4
0.544%, due 1/15/14 (a) $ 750,000 $ 739,929
------------
DIVERSIFIED FINANCIAL SERVICES 0.2%
Dominos Pizza Master Issuer
LLC
Series 2007-1, Class A2
5.261%, due 4/25/37 (b) 550,000 509,176
Dunkin Securitization
Series 2006-1, Class A2
5.779%, due 6/20/31 (b) 395,000 387,132
USXL Funding LLC
Series 2006-1A, Class A
5.379%, due 4/15/14 (b)(c) 39,564 39,557
------------
935,865
------------
HOME EQUITY 0.1%
Citicorp Residential
Mortgage Securities, Inc.
Series 2006-3, Class A3
5.61%, due 11/25/36 (d) 202,119 198,994
Series 2006-1, Class A3
5.706%, due 7/25/36 (d) 353,666 350,436
------------
549,430
------------
UTILITIES 0.1%
Atlantic City Electric
Transition Funding LLC
Series 2002-1, Class A4
5.55%, due 10/20/23 675,000 760,501
------------
Total Asset-Backed
Securities
(Cost $2,964,982) 2,985,725
------------
CORPORATE BONDS 42.3%
- -------------------------------------------------------
ADVERTISING 0.1%
Lamar Media Corp.
9.75%, due 4/1/14 345,000 383,812
------------
AEROSPACE & DEFENSE 0.0%++
L-3 Communications Corp.
6.125%, due 7/15/13 133,000 134,995
------------
AGRICULTURE 1.8%
Altria Group, Inc.
9.25%, due 8/6/19 470,000 580,582
9.70%, due 11/10/18 4,310,000 5,420,217
Cargill, Inc.
4.375%, due 6/1/13 (b) 890,000 932,375
5.20%, due 1/22/13 (b) 1,000,000 1,065,783
6.00%, due 11/27/17 (b) 1,935,000 2,126,375
Lorillard Tobacco Co.
6.875%, due 5/1/20 685,000 704,081
------------
10,829,413
------------
AIRLINES 0.0%++
Northwest Airlines, Inc.
(Escrow Shares)
8.875%, due 6/1/49 (e)(f) 5,000 31
10.00%, due 2/1/49 (e)(f) 10,000 62
------------
93
------------
APPAREL 0.0%++
Unifi, Inc.
11.50%, due 5/15/14 10,000 10,300
------------
AUTO MANUFACTURERS 0.0%++
Harley-Davidson Funding
Corp.
6.80%, due 6/15/18 (b) 250,000 254,946
------------
AUTO PARTS & EQUIPMENT 0.0%++
FleetPride Corp.
11.50%, due 10/1/14 (b) 25,000 22,875
Goodyear Tire & Rubber Co.
(The)
10.50%, due 5/15/16 173,000 192,679
------------
215,554
------------
BANKS 3.5%
V AgriBank FCB
9.125%, due 7/15/19 5,795,000 6,660,669
Bank of America Corp.
5.75%, due 8/15/16 1,400,000 1,436,497
6.50%, due 8/1/16 1,375,000 1,483,156
Discover Bank/Greenwood DE
7.00%, due 4/15/20 3,800,000 3,904,329
KeyBank N.A.
5.80%, due 7/1/14 3,765,000 3,993,976
Morgan Stanley
5.625%, due 9/23/19 285,000 281,087
Regions Bank
3.25%, due 12/9/11 (g) 1,635,000 1,694,962
USB Capital IX
6.189%, due 10/29/49 (a) 470,000 408,312
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest issuers held, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
12 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)
BANKS (CONTINUED)
Wachovia Corp.
5.50%, due 5/1/13 $ 400,000 $ 434,943
------------
20,297,931
------------
BEVERAGES 1.2%
Anheuser-Busch InBev
Worldwide, Inc.
3.00%, due 10/15/12 1,192,000 1,225,941
5.375%, due 11/15/14 (b) 2,500,000 2,719,783
Coca-Cola Enterprises, Inc.
8.00%, due 9/15/22 750,000 963,593
Constellation Brands, Inc.
7.25%, due 5/15/17 5,000 5,100
8.375%, due 12/15/14 1,061,000 1,137,923
Dr. Pepper Snapple Group,
Inc.
6.82%, due 5/1/18 725,000 843,163
------------
6,895,503
------------
BUILDING MATERIALS 0.3%
Texas Industries, Inc.
7.25%, due 7/15/13 1,184,000 1,179,560
USG Corp.
6.30%, due 11/15/16 630,000 582,750
------------
1,762,310
------------
CHEMICALS 2.4%
Chevron Phillips Chemical
Co. LLC
8.25%, due 6/15/19 (b) 3,430,000 4,136,896
Dow Chemical Co. (The)
5.90%, due 2/15/15 2,005,000 2,199,182
8.55%, due 5/15/19 1,015,000 1,240,246
Incitec Pivot Finance LLC
6.00%, due 12/10/19 (b) 5,000,000 5,210,305
Mosaic Global Holdings, Inc.
7.625%, due 12/1/16 (b) 15,000 16,469
Nalco Co.
8.25%, due 5/15/17 (b) 1,077,000 1,155,083
Olin Corp.
8.875%, due 8/15/19 170,000 184,875
Westlake Chemical Corp.
6.625%, due 1/15/16 180,000 180,000
------------
14,323,056
------------
COAL 0.1%
Peabody Energy Corp.
7.375%, due 11/1/16 441,000 467,460
7.875%, due 11/1/26 15,000 15,825
------------
483,285
------------
COMMERCIAL SERVICES 0.2%
Great Lakes Dredge & Dock
Corp.
7.75%, due 12/15/13 180,000 182,025
Lender Processing Services,
Inc.
8.125%, due 7/1/16 885,000 943,631
Quebecor World, Inc.
(Litigation Recovery
Trust-Escrow Shares)
9.75%, due 8/1/49
(b)(c)(f)(h) 15,000 780
Service Corp. International
7.625%, due 10/1/18 10,000 10,225
------------
1,136,661
------------
COMPUTERS 0.2%
Hewlett-Packard Co.
6.125%, due 3/1/14 350,000 397,788
SunGard Data Systems, Inc.
4.875%, due 1/15/14 10,000 9,513
9.125%, due 8/15/13 458,000 470,022
------------
877,323
------------
DIVERSIFIED FINANCIAL SERVICES 4.4%
Bear Stearns Cos., Inc.
(The)
5.30%, due 10/30/15 225,000 242,261
5.70%, due 11/15/14 1,200,000 1,316,731
7.25%, due 2/1/18 275,000 317,245
Citigroup, Inc.
5.50%, due 4/11/13 2,335,000 2,465,804
6.375%, due 8/12/14 1,250,000 1,348,509
8.50%, due 5/22/19 1,052,500 1,242,506
HSBC Finance Corp.
6.375%, due 10/15/11 1,505,000 1,596,007
6.75%, due 5/15/11 535,000 563,094
International Lease Finance
Corp.
5.625%, due 9/20/13 1,010,000 937,835
5.75%, due 6/15/11 1,480,000 1,476,874
Janus Capital Group, Inc.
6.95%, due 6/15/17 1,166,000 1,187,865
Jefferies Group, Inc.
5.50%, due 3/15/16 800,000 808,157
John Deere Capital Corp.
4.90%, due 9/9/13 930,000 1,015,989
JPMorgan Chase & Co.
5.125%, due 9/15/14 2,140,000 2,287,129
MBNA Corp.
7.50%, due 3/15/12 240,000 260,144
Merrill Lynch & Co., Inc.
5.00%, due 2/3/14 800,000 831,190
6.15%, due 4/25/13 790,000 854,870
Morgan Stanley
4.75%, due 4/1/14 1,495,000 1,525,180
6.00%, due 4/28/15 300,000 320,578
Nationstar
Mortgage/Nationstar
Capital Corp.
10.875%, due 4/1/15 (b) 241,000 232,565
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Nissan Motor Acceptance
Corp.
4.50%, due 1/30/15 (b) $ 3,240,000 $ 3,271,321
SLM Corp.
8.00%, due 3/25/20 241,000 231,963
Textron Financial Corp.
5.40%, due 4/28/13 1,305,000 1,358,860
------------
25,692,677
------------
ELECTRIC 3.7%
AES Corp. (The)
8.00%, due 10/15/17 2,145,000 2,209,350
AES Eastern Energy, L.P.
Series 1999-A
9.00%, due 1/2/17 41,562 42,709
Allegheny Energy Supply Co.
LLC
5.75%, due 10/15/19 (b) 1,605,000 1,592,152
Ameren Energy Generating Co.
6.30%, due 4/1/20 1,585,000 1,606,901
Calpine Construction Finance
Co., L.P. and CCFC Finance
Corp.
8.00%, due 6/1/16 (b) 1,111,000 1,149,885
CMS Energy Corp.
6.25%, due 2/1/20 2,765,000 2,772,463
V N.V. Energy, Inc.
7.803%, due 6/15/12 1,585,000 1,611,658
8.625%, due 3/15/14 6,958,000 7,140,647
NRG Energy, Inc.
7.25%, due 2/1/14 5,000 5,069
7.375%, due 2/1/16 94,000 93,060
OGE Energy Corp.
5.00%, due 11/15/14 1,420,000 1,502,910
Public Service Co. of New
Mexico
7.95%, due 5/15/18 49,000 52,282
Reliant Energy Mid-Atlantic
Power Holdings LLC
Series C
9.681%, due 7/2/26 1,000 1,075
Toledo Edison Co. (The)
7.25%, due 5/1/20 780,000 912,582
Virginia Electric and Power
Co.
5.10%, due 11/30/12 660,000 719,190
------------
21,411,933
------------
ELECTRICAL COMPONENTS & EQUIPMENT 0.2%
Belden, Inc.
7.00%, due 3/15/17 1,155,000 1,137,675
9.25%, due 6/15/19 (b) 137,000 147,275
------------
1,284,950
------------
ELECTRONICS 0.3%
Agilent Technologies, Inc.
6.50%, due 11/1/17 1,700,000 1,858,913
------------
ENTERTAINMENT 0.4%
Peninsula Gaming LLC
8.375%, due 8/15/15 (b) 1,136,000 1,161,560
Penn National Gaming, Inc.
6.75%, due 3/1/15 1,164,000 1,158,180
Speedway Motorsports, Inc.
6.75%, due 6/1/13 30,000 30,150
Vail Resorts, Inc.
6.75%, due 2/15/14 30,000 30,375
------------
2,380,265
------------
ENVIRONMENTAL CONTROLS 0.2%
Clean Harbors, Inc.
7.625%, due 8/15/16 1,100,000 1,145,375
Geo Sub Corp.
11.00%, due 5/15/12 20,000 19,725
------------
1,165,100
------------
FOOD 1.0%
Kraft Foods, Inc.
6.125%, due 2/1/18 3,770,000 4,164,470
7.00%, due 8/11/37 1,260,000 1,435,375
Tyson Foods, Inc.
10.50%, due 3/1/14 225,000 266,906
------------
5,866,751
------------
FOREST PRODUCTS & PAPER 0.2%
Georgia-Pacific Corp.
7.00%, due 1/15/15 (b) 1,110,000 1,154,400
8.875%, due 5/15/31 50,000 55,500
Weyerhaeuser Co.
7.375%, due 10/1/19 131,000 143,022
------------
1,352,922
------------
GAS 0.2%
Centerpoint Energy, Inc.
6.85%, due 6/1/15 1,135,000 1,277,086
------------
HEALTH CARE--PRODUCTS 0.0%++
Hanger Orthopedic Group,
Inc.
10.25%, due 6/1/14 15,000 15,787
------------
HEALTH CARE--SERVICES 2.3%
CIGNA Corp.
8.50%, due 5/1/19 875,000 1,075,981
V Coventry Health Care,
Inc.
5.95%, due 3/15/17 1,635,000 1,594,289
6.125%, due 1/15/15 4,668,000 4,759,773
</Table>
14 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)
HEALTH CARE--SERVICES (CONTINUED)
HCA, Inc.
6.25%, due 2/15/13 $ 11,000 $ 11,069
6.375%, due 1/15/15 165,000 160,669
8.50%, due 4/15/19 (b) 888,000 975,690
8.75%, due 9/1/10 5,000 5,100
Roche Holdings, Inc.
6.00%, due 3/1/19 (b) 1,775,000 1,990,322
WellPoint, Inc.
5.00%, due 12/15/14 1,895,000 2,035,044
5.25%, due 1/15/16 925,000 989,547
------------
13,597,484
------------
HOLDING COMPANY--DIVERSIFIED 0.0%++
Kansas City Southern Railway
8.00%, due 6/1/15 175,000 185,062
------------
INSURANCE 1.6%
Crum & Forster Holdings
Corp.
7.75%, due 5/1/17 1,015,000 1,018,806
MetLife, Inc.
6.125%, due 12/1/11 460,000 491,485
St. Paul Travelers Cos.,
Inc. (The)
6.25%, due 6/20/16 1,200,000 1,356,209
Teachers Insurance & Annuity
Association of America
6.85%, due 12/16/39 (b) 4,500,000 5,074,047
Travelers Cos., Inc. (The)
6.25%, due 3/15/67 (a) 475,000 467,152
Unum Group
7.125%, due 9/30/16 750,000 823,959
Willis North America, Inc.
6.20%, due 3/28/17 88,000 90,106
------------
9,321,764
------------
LODGING 0.3%
Seminole Hard Rock
Entertainment,
Inc./Seminole Hard Rock
International LLC
2.757%, due 3/15/14 (a)(b) 10,000 8,938
Sheraton Holding Corp.
7.375%, due 11/15/15 177,000 188,947
Starwood Hotels & Resorts
Worldwide, Inc.
6.75%, due 5/15/18 856,000 881,680
Wyndham Worldwide Corp.
6.00%, due 12/1/16 345,000 343,559
Wynn Las Vegas LLC/Wynn Las
Vegas Capital Corp.
6.625%, due 12/1/14 116,000 117,450
------------
1,540,574
------------
MEDIA 2.1%
Charter Communications
Operating LLC
8.00%, due 4/30/12 (b) 1,141,000 1,209,460
Comcast Cable Holdings LLC
9.80%, due 2/1/12 1,205,000 1,362,744
CSC Holdings, Inc.
6.75%, due 4/15/12 180,000 189,000
8.50%, due 6/15/15 (b) 1,067,000 1,136,355
Morris Publishing Group LLC
10.00%, due 9/1/14 (c) 5,213 4,913
NBC Universal, Inc.
5.15%, due 4/30/20 (b) 2,900,000 2,933,846
Rainbow National Services
LLC
8.75%, due 9/1/12 (b) 15,000 15,206
Time Warner Cable, Inc.
8.25%, due 2/14/14 2,535,000 2,992,461
Time Warner, Inc.
7.70%, due 5/1/32 1,980,000 2,323,548
Ziff Davis Media, Inc.
8.801%, due 7/15/11
(c)(h)(i) 8,624 1,691
------------
12,169,224
------------
MINING 0.2%
Alcoa, Inc.
5.90%, due 2/1/27 560,000 516,312
Freeport-McMoRan Copper &
Gold, Inc.
8.25%, due 4/1/15 10,000 10,888
Vulcan Materials Co.
6.30%, due 6/15/13 500,000 551,390
------------
1,078,590
------------
MISCELLANEOUS--MANUFACTURING 0.4%
Colt Defense LLC/Colt
Finance Corp.
8.75%, due 11/15/17 (b) 1,118,000 1,062,100
SPX Corp.
7.625%, due 12/15/14 1,100,000 1,163,250
------------
2,225,350
------------
OFFICE & BUSINESS EQUIPMENT 0.7%
Xerox Corp.
4.25%, due 2/15/15 4,055,000 4,144,344
------------
OFFICE FURNISHINGS 0.0%++
Interface, Inc.
11.375%, due 11/1/13 135,000 154,575
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
OIL & GAS 3.9%
Anadarko Petroleum Corp.
7.95%, due 6/15/39 $ 500,000 $ 616,425
Chesapeake Energy Corp.
6.50%, due 8/15/17 192,000 187,200
6.625%, due 1/15/16 780,000 768,300
6.875%, due 1/15/16 289,000 288,278
Concho Resources,
Inc./Midland TX
8.625%, due 10/1/17 131,000 139,843
EQT Corp.
8.125%, due 6/1/19 2,945,000 3,570,863
Forest Oil Corp.
7.25%, due 6/15/19 20,000 20,300
8.00%, due 12/15/11 10,000 10,575
Frontier Oil Corp.
8.50%, due 9/15/16 601,000 620,532
KazMunaiGaz Finance Sub B.V.
11.75%, due 1/23/15 (b) 165,000 207,900
Marathon Oil Corp.
6.50%, due 2/15/14 860,000 970,818
Motiva Enterprises LLC
5.75%, due 1/15/20 (b) 3,175,000 3,403,470
Newfield Exploration Co.
6.625%, due 9/1/14 100,000 101,750
6.625%, due 4/15/16 865,000 875,812
Pemex Project Funding Master
Trust 6.625%, due 6/15/35 25,000 24,744
Plains Exploration &
Production Co.
7.75%, due 6/15/15 453,000 463,192
Pride International, Inc.
7.375%, due 7/15/14 3,855,000 3,961,012
8.50%, due 6/15/19 340,000 390,575
Questar Market Resources,
Inc.
6.05%, due 9/1/16 2,000,000 2,079,268
6.80%, due 3/1/20 1,306,000 1,357,010
Range Resources Corp.
7.50%, due 5/15/16 180,000 187,200
Tesoro Corp.
6.50%, due 6/1/17 1,545,000 1,452,300
Whiting Petroleum Corp.
7.00%, due 2/1/14 855,000 882,787
7.25%, due 5/1/12 270,000 270,338
7.25%, due 5/1/13 5,000 5,063
------------
22,855,555
------------
OIL & GAS SERVICES 0.3%
Halliburton Co.
6.15%, due 9/15/19 1,350,000 1,534,027
SEACOR Holdings, Inc.
7.375%, due 10/1/19 340,000 358,748
------------
1,892,775
------------
PACKAGING & CONTAINERS 0.1%
Crown Americas LLC/Crown
Americas Capital Corp.
7.75%, due 11/15/15 436,000 452,350
------------
PHARMACEUTICALS 0.0%++
Medco Health Solutions, Inc.
7.25%, due 8/15/13 155,000 177,189
NBTY, Inc.
7.125%, due 10/1/15 10,000 10,063
------------
187,252
------------
PIPELINES 4.1%
Boardwalk Pipelines, L.P.
5.875%, due 11/15/16 2,445,000 2,673,194
Copano Energy LLC
8.125%, due 3/1/16 1,119,000 1,135,785
El Paso Pipeline Partners
Operating Co. LLC
6.50%, due 4/1/20 4,185,000 4,320,029
Energy Transfer Partners,
L.P.
8.50%, due 4/15/14 295,000 346,349
Gulfstream Natural Gas
System LLC
6.95%, due 6/1/16 (b) 1,420,000 1,616,893
MarkWest Energy Partners,
L.P./MarkWest Energy
Finance Corp.
Series B
6.875%, due 11/1/14 624,000 611,520
6.875%, due 11/1/14 144,000 141,480
NGPL Pipeco LLC
7.119%, due 12/15/17 (b) 2,780,000 3,160,037
7.768%, due 12/15/37 (b) 820,000 972,983
ONEOK Partners, L.P.
8.625%, due 3/1/19 200,000 251,008
ONEOK, Inc.
6.00%, due 6/15/35 1,425,000 1,401,482
Panhandle Eastern Pipeline
Co., L.P.
6.20%, due 11/1/17 3,485,000 3,763,636
8.125%, due 6/1/19 600,000 710,761
Williams Cos., Inc. (The)
7.875%, due 9/1/21 741,000 887,011
Williams Partners, L.P.
5.25%, due 3/15/20 (b) 2,225,000 2,288,524
------------
24,280,692
------------
REAL ESTATE INVESTMENT TRUSTS 1.4%
Equity One, Inc.
6.25%, due 12/15/14 850,000 890,095
</Table>
16 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)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Health Care Property
Investors, Inc.
6.00%, due 1/30/17 $ 3,450,000 $ 3,523,012
Host Hotels & Resorts, L.P.
6.875%, due 11/1/14 10,000 10,163
Host Marriott, L.P.
6.375%, due 3/15/15 165,000 165,825
Series Q
6.75%, due 6/1/16 1,062,000 1,083,240
ProLogis
7.375%, due 10/30/19 2,620,000 2,723,087
------------
8,395,422
------------
RETAIL 0.9%
Best Buy Co., Inc.
6.75%, due 7/15/13 1,620,000 1,812,472
CVS Caremark Corp.
5.75%, due 6/1/17 575,000 629,576
5.789%, due 1/10/26 (b)(h) 94,951 94,285
6.302%, due 6/1/62 (a) 560,000 540,400
Home Depot, Inc.
5.40%, due 3/1/16 410,000 449,712
J.C. Penney Corp., Inc.
7.125%, due 11/15/23 439,000 473,023
Limited Brands, Inc.
8.50%, due 6/15/19 127,000 140,970
Penske Auto Group, Inc.
7.75%, due 12/15/16 686,000 672,280
TJX Cos., Inc.
6.95%, due 4/15/19 330,000 394,085
------------
5,206,803
------------
SAVINGS & LOANS 1.2%
Amsouth Bank/Birmingham AL
5.20%, due 4/1/15 1,435,000 1,395,708
New Communications Holdings,
Inc.
8.75%, due 4/15/22 (b) 3,720,000 3,831,600
Teco Finance, Inc.
6.75%, due 5/1/15 1,730,000 1,948,143
------------
7,175,451
------------
TELECOMMUNICATIONS 2.1%
Alltel Corp.
6.50%, due 11/1/13 2,635,000 2,971,969
AT&T, Inc.
6.70%, due 11/15/13 2,580,000 2,954,128
Corning, Inc.
8.875%, due 8/15/21 1,900,000 2,353,348
Crown Castle International
Corp.
7.125%, due 11/1/19 243,000 244,215
GCI, Inc.
8.625%, due 11/15/19 (b) 1,112,000 1,131,460
iPCS, Inc.
2.374%, due 5/1/13 (a) 5,000 4,725
SBA Telecommunications, Inc.
8.00%, due 8/15/16 (b) 86,000 90,730
8.25%, due 8/15/19 (b) 1,070,000 1,147,575
Sprint Nextel Corp.
8.375%, due 8/15/17 139,000 143,691
tw telecom holdings, Inc.
8.00%, due 3/1/18 (b) 960,000 993,600
------------
12,035,441
------------
TEXTILES 0.2%
INVISTA
9.25%, due 5/1/12 (b) 1,108,000 1,121,850
------------
TRANSPORTATION 0.1%
Burlington Northern Santa Fe
5.65%, due 5/1/17 455,000 495,410
------------
Total Corporate Bonds
(Cost $235,937,971) 248,427,534
------------
FOREIGN GOVERNMENT BOND 0.0%++
- -------------------------------------------------------
VENEZUELA 0.0%++
Republic of Venezuela
6.00%, due 12/9/20 169,000 105,625
------------
Total Foreign Government
Bond
(Cost $125,953) 105,625
------------
MORTGAGE-BACKED SECURITIES 8.0%
- -------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) 8.0%
Banc of America Commercial
Mortgage, Inc.
Series 2005-5, Class A2
5.001%, due 10/10/45 558,033 562,193
Series 2007-2, Class A4
5.867%, due 4/10/49 2,560,000 2,504,897
Bayview Commercial Asset
Trust Series 2006-4A,
Class A1
0.493%, due 12/25/36
(a)(b)(c) 197,250 144,628
Bear Stearns Commercial
Mortgage Securities
Series 2005-PW10, Class A4
5.405%, due 12/11/40 2,550,000 2,646,164
Series 2007-PW16, Class A4
5.908%, due 6/11/40 2,270,000 2,311,481
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) (CONTINUED)
Citigroup Commercial
Mortgage Trust Series
2008-C7, Class A4
6.298%, due 12/10/49 $ 1,300,000 $ 1,332,883
Citigroup/Deutsche Bank
Commercial Mortgage Trust
Series 2006-CD3, Class A5
5.617%, due 10/15/48 3,390,000 3,486,911
Commercial Mortgage Loan
Trust
6.22%, due 12/10/49 990,000 1,001,489
Country Wide Alternative
Loan Trust Series 2005-76,
Class 2A1
1.463%, due 2/25/36 (a) 2,945,975 1,802,178
Four Times Square Trust
Series 2006-4TS, Class A
5.401%, due 12/13/28 (b) 470,000 478,457
V Greenwich Capital
Commercial Funding Corp.
Series 2005-GG5, Class A5
5.224%, due 4/10/37 2,960,000 3,006,966
Series 2004-GG1, Class A7
5.317%, due 6/10/36 3,275,000 3,463,367
GS Mortgage Securities Corp.
Series 2004-GG2, Class A6
5.396%, due 8/10/38 3,060,000 3,221,928
GS Mortgage Securities Corp.
II
Series 2006-GG6, Class A4
5.553%, due 4/10/38 2,040,000 2,089,073
Series 2007-GG10, Class A4
5.999%, due 8/10/45 3,095,000 3,031,014
Harborview Mortgage Loan
Trust Series 2005-11,
Class 2A1A
0.566%, due 8/19/45 (a) 75,359 50,748
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-LDPX, Class A3
5.42%, due 1/15/49 2,565,000 2,472,722
Series 2007-CB18, Class A4
5.44%, due 6/12/47 2,260,000 2,234,212
JP Morgan Mortgage Trust
Series 2007-S3, Class 1A96
6.00%, due 8/25/37 853,719 723,660
Series 2007-S3, Class 1A97
6.00%, due 8/25/37 1,878,181 1,629,615
LB-UBS Commercial Mortgage
Trust
Series 2004-C2, Class A2
3.246%, due 3/15/29 80,035 80,130
Series 2007-C6, Class A4
5.858%, due 7/15/40 1,680,000 1,681,318
Morgan Stanley Capital I
Series 2007-IQ15, Class A4
6.076%, due 6/11/49 2,585,000 2,604,608
Mortgage Equity Conversion
Asset Trust Series 2007-
FF2, Class A
0.88%, due 2/25/42
(a)(b)(c)(h) 453,299 436,300
Timberstar Trust
Series 2006-1, Class A
5.668%, due 10/15/36 (b) 160,000 168,735
Wachovia Bank Commercial
Mortgage Trust Series
2007-C33, Class A4
6.10%, due 2/15/51 990,000 973,351
WaMu Mortgage Pass-Through
Certificate
Series 2006-AR7, Class 2A
1.443%, due 7/25/46 (a) 4,280,565 2,815,351
------------
Total Mortgage-Backed
Securities
(Cost $47,534,971) 46,954,379
------------
MUNICIPAL BOND 0.1%
- -------------------------------------------------------
WEST VIRGINIA 0.1%
Tobacco Settlement Finance
Authority of West Virginia
7.467%, due 6/1/47 430,000 356,745
------------
Total Municipal Bond
(Cost $430,000) 356,745
------------
U.S. GOVERNMENT & FEDERAL AGENCIES 36.1%
- -------------------------------------------------------
FANNIE MAE (COLLATERALIZED MORTGAGE OBLIGATIONS) 0.0%++
Series 2006-B1, Class AB
6.00%, due 6/25/16 212,341 221,675
Series 1991-66, Class J
8.125%, due 6/25/21 1,036 1,153
------------
222,828
------------
V FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) 1.4%
3.00%, due 8/1/10 117,939 118,178
5.00%, due 8/1/33 1,466,527 1,532,934
5.044%, due 6/1/35 (a) 709,898 746,872
5.50%, due 1/1/21 499,593 537,892
5.50%, due 2/1/33 690,449 733,609
5.50%, due 7/1/34 1,319,037 1,401,490
5.50%, due 4/1/37 113,298 119,920
5.50%, due 5/1/37 89,578 94,814
5.50%, due 7/1/37 451,165 477,157
5.50%, due 1/1/38 526,758 557,105
6.00%, due 2/1/11 1,111 1,133
</Table>
18 MainStay Intermediate Term Bond Fund The notes to the financial
statements are an integral part of, and should be read in conjunction with, the
financial statements.
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
FEDERAL HOME LOAN MORTGAGE CORPORATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.00%, due 2/1/27 $ 332,396 $ 357,265
6.00%, due 3/1/36 696,404 750,085
6.50%, due 4/1/37 588,904 639,543
------------
8,067,997
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION 0.5%
4.625%, due 5/1/13 2,605,000 2,793,440
------------
V FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) 18.0%
4.50%, due 4/1/18 319,632 337,458
4.50%, due 7/1/18 1,146,017 1,209,931
4.50%, due 11/1/18 1,491,333 1,574,505
4.50%, due 10/1/20 TBA (j) 16,270,000 16,908,093
4.50%, due 6/1/23 3,016,475 3,141,815
5.00%, due 9/1/17 507,616 541,779
5.00%, due 9/1/20 411,312 437,965
5.00%, due 10/1/20 498,201 530,484
5.00%, due 12/1/20 1,010,870 1,076,375
5.00%, due 10/1/33 1,098,913 1,147,471
5.00%, due 6/1/35 5,889,329 6,144,042
5.00%, due 7/1/35 1,240,858 1,291,423
5.00%, due 12/1/35 TBA (j) 580,000 600,300
5.00%, due 1/1/36 1,687,375 1,756,136
5.00%, due 2/1/36 12,898,843 13,424,471
5.00%, due 5/1/36 4,794,949 4,990,343
5.00%, due 9/1/36 1,198,409 1,247,244
5.50%, due 2/1/17 380,437 408,947
5.50%, due 6/1/21 1,468,417 1,574,332
5.50%, due 6/1/33 7,640,913 8,110,192
5.50%, due 11/1/33 1,018,348 1,080,891
5.50%, due 12/1/33 733,090 778,114
5.50%, due 4/1/34 3,148,560 3,341,221
5.50%, due 5/1/34 2,651,760 2,814,622
5.50%, due 6/1/34 835,730 885,491
5.50%, due 3/1/35 1,402,110 1,485,594
5.50%, due 4/1/36 3,535,333 3,736,994
5.50%, due 12/1/36 1,278,039 1,348,943
5.50%, due 1/1/37 1,481,199 1,563,375
5.50%, due 4/1/37 5,163,192 5,445,317
5.50%, due 7/1/37 1,606,223 1,693,989
5.50%, due 8/1/37 1,054,870 1,115,042
5.50%, due 9/1/37 42,872 45,214
6.00%, due 8/1/17 53,197 57,499
6.00%, due 1/1/33 373,175 404,455
6.00%, due 3/1/33 353,215 382,602
6.00%, due 8/1/34 15,987 17,242
6.00%, due 9/1/35 964,742 1,048,441
6.00%, due 1/1/36 TBA (j) 1,400,000 1,494,718
6.00%, due 6/1/36 925,934 988,502
6.00%, due 12/1/36 876,470 935,695
6.00%, due 4/1/37 698,367 738,356
6.00%, due 9/1/37 261,977 279,024
6.00%, due 10/1/37 3,004,541 3,177,259
6.00%, due 11/1/37 169,814 180,864
6.00%, due 1/1/38 29,318 31,207
6.00%, due 11/1/38 1,088,403 1,158,548
6.50%, due 6/1/31 74,778 82,389
6.50%, due 8/1/31 66,594 73,373
6.50%, due 10/1/31 49,725 54,786
6.50%, due 6/1/32 65,543 72,214
6.50%, due 6/1/36 37,520 40,659
6.50%, due 7/1/36 128,316 139,051
6.50%, due 8/1/36 32,248 34,945
6.50%, due 11/1/36 650,913 705,366
6.50%, due 2/1/37 184,116 199,231
6.50%, due 7/1/37 67,546 73,090
6.50%, due 8/1/37 228,024 246,743
6.50%, due 9/1/37 822,885 890,439
6.50%, due 3/1/38 209,033 226,194
------------
105,521,005
------------
V FREDDIE MAC (COLLATERALIZED MORTGAGE OBLIGATIONS)
1.3%
Series 2632, Class NH
3.50%, due 6/15/13 278,155 282,138
Series 3104, Class QC
5.00%, due 9/15/31 2,400,000 2,538,914
Series 2690, Class PG
5.00%, due 4/15/32 1,250,000 1,327,978
Series 2734, Class PG
5.00%, due 7/15/32 1,804,000 1,910,180
Series 3113, Class QD
5.00%, due 6/15/34 1,425,000 1,498,430
------------
7,557,640
------------
FREDDIE MAC REFERENCE REMIC
(COLLATERALIZED MORTGAGE OBLIGATION) 0.1%
Series R001, Class AE
4.375%, due 4/15/15 820,580 843,804
------------
V GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) 8.9%
5.00%, due 5/1/38 TBA (j) 17,040,000 17,692,308
5.50%, due 7/1/36 TBA (j) 19,660,000 20,870,309
6.00%, due 2/15/29 54,193 58,900
6.00%, due 4/15/29 222,348 242,155
6.00%, due 8/15/32 477,369 519,960
6.00%, due 5/1/36 TBA (j) 6,020,000 6,455,511
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED)
6.50%, due 7/15/28 $ 52,951 $ 58,587
6.50%, due 5/15/29 26,800 29,666
6.50%, due 9/1/33 TBA (j) 6,030,000 6,525,594
12.50%, due 1/15/14 941 1,079
------------
52,454,069
------------
V UNITED STATES TREASURY BONDS 3.5%
4.375%, due 11/15/39 1,065,000 1,038,375
4.50%, due 8/15/39 14,460,000 14,387,700
6.25%, due 5/15/30 2,690,000 3,372,588
6.875%, due 8/15/25 1,305,000 1,699,966
------------
20,498,629
------------
V UNITED STATES TREASURY NOTES 2.2%
0.875%, due 1/31/12 12,180,000 12,186,188
3.625%, due 2/15/20 810,000 807,595
------------
12,993,783
------------
UNITED STATES TREASURY STRIP PRINCIPAL 0.2%
(zero coupon), due 8/15/23 820,000 460,095
(zero coupon), due 8/15/28 2,210,000 954,340
------------
1,414,435
------------
Total U.S. Government &
Federal Agencies
(Cost $208,065,786) 212,367,630
------------
YANKEE BONDS 10.2% (K)
- -------------------------------------------------------
AUTO MANUFACTURERS 0.2%
Volvo Treasury AB
5.95%, due 4/1/15 (b) 1,130,000 1,170,121
------------
BANKS 1.9%
Lloyds TSB Bank PLC
4.375%, due 1/12/15 (b) 5,000,000 4,965,030
Royal Bank of Scotland PLC
(The)
4.875%, due 8/25/14 (b) 1,405,000 1,437,413
UBS A.G.
3.875%, due 1/15/15 4,790,000 4,834,447
------------
11,236,890
------------
BIOTECHNOLOGY 0.1%
FMC Finance III S.A.
6.875%, due 7/15/17 455,000 472,062
------------
BUILDING MATERIALS 0.1%
Asia Aluminum Holdings, Ltd.
8.00%, due 12/23/11
(b)(c)(e) 420,000 54,075
Holcim Capital Corp, Ltd.
6.875%, due 9/29/39 (b) 500,000 543,269
------------
597,344
------------
COAL 0.0%++
Raspadskaya Securities, Ltd.
7.50%, due 5/22/12 175,000 181,737
------------
DIVERSIFIED FINANCIAL SERVICES 1.0%
Irish Life & Permanent Group
Holdings PLC
3.60%, due 1/14/13 (b) 5,000,000 5,039,570
Virgin Media Secured Finance
PLC
6.50%, due 1/15/18 (b) 960,000 964,800
------------
6,004,370
------------
ELECTRIC 1.5%
Enel Finance International
S.A.
5.125%, due 10/7/19 (b) 3,295,000 3,237,914
6.00%, due 10/7/39 (b) 2,810,000 2,644,412
SP PowerAssets, Ltd.
5.00%, due 10/22/13 (b) 305,000 329,863
Taqa Abu Dhabi National
Energy Co.
6.25%, due 9/16/19 (b) 185,000 190,114
TransAlta Corp.
4.75%, due 1/15/15 2,255,000 2,357,943
------------
8,760,246
------------
FOREST PRODUCTS & PAPER 0.1%
Smurfit Capital Funding PLC
7.50%, due 11/20/25 300,000 273,750
------------
HOLDING COMPANY--DIVERSIFIED 0.2%
EnCana Holdings Finance
Corp.
5.80%, due 5/1/14 860,000 955,325
------------
INSURANCE 0.2%
Fairfax Financial Holdings,
Ltd.
7.75%, due 7/15/37 677,000 641,457
8.25%, due 10/1/15 438,000 468,660
8.30%, due 4/15/26 15,000 15,019
Nippon Life Insurance Co.
4.875%, due 8/9/10 (b) 250,000 251,760
------------
1,376,896
------------
MEDIA 0.2%
Videotron Ltee
6.375%, due 12/15/15 15,000 14,962
6.875%, due 1/15/14 796,000 805,950
9.125%, due 4/15/18 252,000 279,720
------------
1,100,632
------------
</Table>
20 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
YANKEE BONDS (CONTINUED)
MINING 0.8%
Anglo American Capital PLC
9.375%, due 4/8/19 (b) $ 2,380,000 $ 3,099,879
Rio Tinto Finance USA, Ltd.
9.00%, due 5/1/19 1,320,000 1,700,651
------------
4,800,530
------------
MISCELLANEOUS--MANUFACTURING 0.4%
Siemens
Financieringsmaatschappij
N.V.
6.125%, due 8/17/26 (b) 265,000 287,143
Tyco Electronics Group S.A.
6.00%, due 10/1/12 1,815,000 1,958,962
------------
2,246,105
------------
OIL & GAS 1.0%
CITIC Resources Finance,
Ltd.
6.75%, due 5/15/14 (b) 200,000 204,000
Gaz Capital S.A.
8.125%, due 7/31/14 (b) 3,085,000 3,405,069
Gazprom International S.A.
7.201%, due 2/1/20 (b) 268,136 282,548
Petroleum Co. of Trinidad &
Tobago, Ltd.
9.75%, due 8/14/19 (b) 1,600,000 1,872,000
TNK-BP Finance S.A.
7.50%, due 7/18/16 (b) 285,000 304,950
------------
6,068,567
------------
PIPELINES 0.3%
Aquila Canada Finance Corp.
7.75%, due 6/15/11 1,595,000 1,682,408
------------
TELECOMMUNICATIONS 2.2%
Inmarsat Finance PLC
7.375%, due 12/1/17 (b) 1,111,000 1,158,218
Intelsat Subsidiary Holding
Co., Ltd.
8.50%, due 1/15/13 1,105,000 1,124,338
Millicom International
Cellular S.A.
10.00%, due 12/1/13 10,000 10,375
Qtel International Finance,
Ltd.
6.50%, due 6/10/14 (b) 1,500,000 1,635,559
Rogers Communications, Inc.
9.625%, due 5/1/11 50,000 53,991
Telecom Italia Capital S.A.
6.175%, due 6/18/14 3,145,000 3,378,655
6.999%, due 6/4/18 775,000 838,843
7.175%, due 6/18/19 545,000 594,181
Virgin Media Finance PLC
8.375%, due 10/15/19 180,000 188,550
Vodafone Group PLC
5.625%, due 2/27/17 3,578,000 3,852,701
------------
12,835,411
------------
Total Yankee Bonds
(Cost $57,901,824) 59,762,394
------------
Total Long-Term Bonds
(Cost $552,961,487) 570,960,032
------------
<Caption>
SHARES
COMMON STOCK 0.0%++
- -------------------------------------------------------
COMMERCIAL SERVICES 0.0%++
World Color Press, Inc. (f) 106 1,283
------------
Total Common Stock
(Cost $13,164) 1,283
------------
<Caption>
NUMBER OF
WARRANTS
WARRANTS 0.0%++
- -------------------------------------------------------
COMMERCIAL SERVICES 0.0%++
World Color Press, Inc.
Strike Price $13.00
Expires 7/20/14 (f) 61 320
Strike Price $16.30
Expires 7/20/14 (f) 61 170
------------
490
------------
MEDIA 0.0%++
ION Media Networks, Inc.
Expires 12/12/39 (c)(f)(h) 1,194 12
------------
Total Warrants
(Cost $2,395) 502
------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT 13.8%
- -------------------------------------------------------
REPURCHASE AGREEMENT 13.8%
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$81,029,904
(Collateralized by a
United States Treasury
Bill with a rate of 0.107%
and a maturity date of
6/3/10,
with a Principal Amount of
$82,660,000 and a Market
Value of $82,651,734) $81,029,837 $ 81,029,837
------------
Total Short-Term Investment
(Cost $81,029,837) 81,029,837
------------
Total Investments
(Cost $634,006,883) (l) 111.0% 651,991,654
Other Assets, Less
Liabilities (11.0) (64,638,044)
----------- ------------
Net Assets 100.0% $587,353,610
=========== ============
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
++ Less than one-tenth of a percent.
(a) Floating rate--Rate shown is the rate in
effect at April 30, 2010.
(b) May be sold to institutional investors
only under Rule 144A or securities
offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
(c) Illiquid security. The total market value
of these securities at April 30, 2010 is
$681,956, which represents 0.1% of the
Fund's net assets.
(d) Subprime mortgage investment and other
asset-backed securities. The total market
value of the securities at April 30, 2010
is $549,430, which represents 0.1% of the
Fund's net assets.
(e) Issue in default.
(f) Non-income producing security.
(g) The debt is guaranteed under the Federal
Deposit Insurance Corporation (FDIC)
Temporary Liquidity Guarantee Program and
is backed by the full faith and credit of
the United States. The expiration date of
the FDIC's guarantee is the earlier of
the maturity date of the debt or June 30,
2012.
(h) Fair valued security. The total market
value of these securities at April 30,
2010 is $533,068, which represents 0.1%
of the Fund's net assets.
(i) PIK ("Payment in Kind")--interest or
dividend payment is made with additional
securities.
(j) TBA--Securities purchased on a forward
commitment basis with an approximate
principal amount and maturity date. The
actual principal amount and maturity date
will be determined upon settlement. The
market value of these securities at April
30, 2010 is $70,546,833, which represents
12.0% of the Fund's net assets. All or a
portion of these securities were acquired
under a mortgage dollar roll agreement.
(k) Yankee Bond--dollar-denominated bond
issued in the United States by a foreign
bank or corporation.
(l) At April 30, 2010, cost is $634,058,866
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $22,912,301
Gross unrealized depreciation (4,979,513)
-----------
Net unrealized appreciation $17,932,788
===========
</Table>
22 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.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Long-Term Bonds
Asset-Backed Securities $ -- $ 2,985,725 $ -- $ 2,985,725
Corporate Bonds (b) -- 248,330,778 96,756 248,427,534
Foreign Government Bond -- 105,625 -- 105,625
Mortgage-Backed Securities (c) -- 46,518,079 436,300 46,954,379
Municipal Bond -- 356,745 -- 356,745
U.S. Government & Federal Agencies -- 212,367,630 -- 212,367,630
Yankee Bonds -- 59,762,394 -- 59,762,394
------ ------------ -------- ------------
Total Long-Term Bonds -- 570,426,976 533,056 570,960,032
------ ------------ -------- ------------
Common Stock 1,283 -- -- 1,283
Warrants (d) 490 -- 12 502
Short-Term Investment
Repurchase Agreement -- 81,029,837 -- 81,029,837
------ ------------ -------- ------------
Total Investments in Securities 1,773 651,456,813 533,068 651,991,654
------ ------------ -------- ------------
Other Financial Instruments
Foreign Currency Forward Contracts (e) -- 1,833 -- 1,833
------ ------------ -------- ------------
Total Investments in Securities and Other
Financial Instruments $1,773 $651,458,646 $533,068 $651,993,487
====== ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) The level 3 securities valued at $780, $1,691 and $94,285 are Commercial
Services, Media and Retail, respectively, within the Corporate Bonds section
of the Portfolio of Investments.
(c) The level 3 security valued at $436,300 is held in Commercial Mortgage Loans
(Collateralized Mortgage Obligations) within the Mortgaged-Backed Securities
section of the Portfolio of Investments.
(d) The level 3 security valued at $12 is held in Media within the Warrants
section of the Portfolio of Investments.
(e) The value listed for these securities reflects unrealized appreciation as
shown on the table of foreign currency forward contracts. (See Note 5)
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
23
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2. The following is a reconciliation of investments in which significant
unobservable inputs (level 3) were used in determining value:
The following is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining value:
<Table>
<Caption>
BALANCE
AS OF ACCRUED REALIZED
OCTOBER 31, DISCOUNTS GAIN
INVESTMENTS IN SECURITIES 2009 (PREMIUMS) (LOSS)
Long-Term Bonds
Asset-Backed Securities
Credit Cards $230,921 $(30) $(121)
Corporate Bonds
Commercial Services 780 -- --
Media 2,001 16 --
Retail 93,628 (67) (50)
Mortgage-Backed Securities
Commercial Mortgage Loans
(Collateralized
Mortgage Obligations) 431,595 -- --
Warrants
Media -- -- --
-------- ---- -----
Total $758,925 $(81) $(171)
======== ==== =====
<Caption>
CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
CHANGE IN NET NET BALANCE INVESTMENTS
UNREALIZED TRANSFERS TRANSFERS AS OF STILL HELD AT
APPRECIATION NET NET IN TO OUT OF APRIL 30, APRIL 30,
INVESTMENTS IN SECURITIES (DEPRECIATION) PURCHASES SALES LEVEL 3 LEVEL 3 2010 2010 (A)
Long-Term Bonds
Asset-Backed Securities
Credit Cards $ 3,522 $ -- $(234,292) $-- $-- $ -- $ --
Corporate Bonds
Commercial Services -- -- -- -- -- 780 --
Media (510) 184 -- -- -- 1,691 (510)
Retail 2,659 -- (1,885) -- -- 94,285 2,547
Mortgage-Backed Securities
Commercial Mortgage Loans
(Collateralized
Mortgage Obligations) 13,005 (8,300) -- -- 436,300 12,465
Warrants
Media 8 4 -- -- -- 12 8
------- ---- --------- --- --- -------- -------
Total $18,684 $188 $(244,477) $-- $-- $533,068 $14,510
======= ==== ========= === === ======== =======
</Table>
(a) Included in "Net change in unrealized appreciation (depreciation) on
investments" in the Statement of Operations.
24 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 APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $552,977,046) $570,961,817
Repurchase agreement, at value
(identified cost $81,029,837) 81,029,837
Receivables:
Interest 6,429,363
Investment securities sold 1,199,729
Fund shares sold 156,758
Other assets 76,242
Unrealized appreciation on foreign
currency forward contracts 1,833
------------
Total assets 659,855,579
------------
LIABILITIES:
Payables:
Investment securities purchased 71,799,699
Fund shares redeemed 255,182
Manager (See Note 3) 181,960
Shareholder communication 39,725
Transfer agent (See Note 3) 32,413
NYLIFE Distributors (See Note 3) 28,224
Professional fees 19,953
Custodian 3,882
Trustees 89
Accrued expenses 2,217
Dividend payable 138,625
------------
Total liabilities 72,501,969
------------
Net assets $587,353,610
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 55,874
Additional paid-in capital 571,196,536
------------
571,252,410
Accumulated distributions in excess
of net investment income (76,482)
Accumulated net realized loss on
investments, futures transactions
and foreign currency transactions (1,808,922)
Net unrealized appreciation on
investments 17,984,771
Net unrealized appreciation on
translation of other assets and
liabilities in foreign currencies
and foreign currency forward
contracts 1,833
------------
Net assets $587,353,610
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 3,225,397
============
Shares of beneficial interest
outstanding 305,594
============
Net asset value per share
outstanding $ 10.55
Maximum sales charge (4.50% of
offering price) 0.50
------------
Maximum offering price per share
outstanding $ 11.05
============
CLASS A
Net assets applicable to
outstanding shares $ 33,396,967
============
Shares of beneficial interest
outstanding 3,178,880
============
Net asset value per share
outstanding $ 10.51
Maximum sales charge (4.50% of
offering price) 0.50
------------
Maximum offering price per share
outstanding $ 11.01
============
CLASS B
Net assets applicable to
outstanding shares $ 6,303,256
============
Shares of beneficial interest
outstanding 599,287
============
Net asset value and offering price
per share outstanding $ 10.52
============
CLASS C
Net assets applicable to
outstanding shares $ 19,065,217
============
Shares of beneficial interest
outstanding 1,811,043
============
Net asset value and offering price
per share outstanding $ 10.53
============
CLASS I
Net assets applicable to
outstanding shares $525,362,773
============
Shares of beneficial interest
outstanding 49,978,998
============
Net asset value and offering price
per share outstanding $ 10.51
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
25
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest $12,577,387
-----------
EXPENSES:
Manager (See Note 3) 1,723,579
Transfer agent (See Note 3) 311,716
Distribution/Service--Investor
Class (See Note 3) 3,462
Distribution/Service--Class A (See
Note 3) 44,232
Distribution/Service--Class B (See
Note 3) 31,011
Distribution/Service--Class C (See
Note 3) 90,448
Professional fees 62,018
Shareholder communication 46,526
Registration 43,068
Custodian 27,322
Trustees 9,995
Miscellaneous 12,672
-----------
Total expenses before waiver 2,406,049
Expense waiver from Manager (See
Note 3) (503,767)
-----------
Net expenses 1,902,282
-----------
Net investment income 10,675,105
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Security transactions 4,375,519
Futures transactions (229,789)
Foreign currency transactions (34,318)
-----------
Net realized gain on investments,
futures transactions and foreign
currency transactions 4,111,412
-----------
Net change in unrealized
appreciation (depreciation) on:
Investments 7,525,320
Futures contracts 139,153
Translation of other assets and
liabilities in foreign
currencies and foreign currency
forward contracts (8,099)
-----------
Net change in unrealized
appreciation on investments,
futures contracts and foreign
currency transactions 7,656,374
-----------
Net realized and unrealized gain on
investments, futures transactions
and foreign currency transactions 11,767,786
-----------
Net increase in net assets resulting
from operations $22,442,891
===========
</Table>
26 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.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 10,675,105 $ 7,469,316
Net realized gain on
investments, futures
transactions and foreign
currency transactions 4,111,412 3,759,398
Net change in unrealized
appreciation
(depreciation) on
investments, futures
contracts and foreign
currency transactions 7,656,374 17,268,835
--------------------------
Net increase in net assets
resulting from operations 22,442,891 28,497,549
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (46,704) (61,839)
Class A (602,885) (777,322)
Class B (79,440) (121,566)
Class C (234,198) (289,052)
Class I (9,713,408) (6,258,791)
--------------------------
(10,676,635) (7,508,570)
--------------------------
From net realized gain on
investments:
Investor Class (5,598) --
Class A (69,433) --
Class B (12,101) --
Class C (34,781) --
Class I (1,013,978) --
--------------------------
(1,135,891) --
--------------------------
Total dividends and
distributions to
shareholders (11,812,526) (7,508,570)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 61,602,278 176,762,267
Net asset value of shares
issued in connection with
the acquisition of
MainStay Institutional
Bond Fund (See Note 10) -- 255,388,290
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 10,961,804 6,350,100
Cost of shares redeemed (71,051,580) (46,993,449)
--------------------------
Increase in net assets
derived from capital
share transactions 1,512,502 391,507,208
--------------------------
Net increase in net
assets 12,142,867 412,496,187
NET ASSETS:
Beginning of period 575,210,743 162,714,556
--------------------------
End of period $587,353,610 $575,210,743
==========================
Accumulated distributions in
excess of net investment
income at end of period $ (76,482) $ (74,952)
==========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
27
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $10.37 $ 9.39 $ 9.92
------ ------ ------
Net investment income 0.17 0.30 0.25
Net realized and unrealized gain
(loss) on investments 0.20 0.96 (0.54)
Net realized and unrealized gain
(loss) on foreign currency
transactions (0.00)++ 0.01 --
------ ------ ------
Total from investment operations 1.37 1.27 (0.29)
------ ------ ------
Less dividends and distributions:
From net investment income (0.17) (0.29) (0.24)
From net realized gain on
investments (0.02) -- --
------ ------ ------
Total dividends and distributions (0.19) (0.29) (0.24)
------ ------ ------
Net asset value at end of period $10.55 $10.37 $ 9.39
====== ====== ======
Total investment return (a) 3.61%(b) 13.72% (2.98%)(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.30%++ 3.03% 3.73% ++
Net expenses 1.05%++ 1.17% 1.20% ++
Expenses (before
waiver/reimbursement) 1.16%++ 1.25% 1.34% ++
Portfolio turnover rate 118%(c) 246%(c) 114%(c)
Net assets at end of period (in
000's) $3,225 $2,743 $1,727
</Table>
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $10.33 $ 9.36 $ 9.74 $ 9.76 $ 9.73 $ 9.99
------ ------ ------ ------ ------ ------
Net investment income 0.13 0.23 0.30 0.35 0.32 0.26
Net realized and unrealized gain
(loss) on investments 0.21 0.95 (0.37) 0.01 0.01 (0.27)
Net realized and unrealized gain
(loss) on foreign currency
transactions (0.00)++ 0.01 -- 0.00 ++ (0.00)++ --
------ ------ ------ ------ ------ ------
Total from investment operations 0.34 1.19 (0.07) 0.36 0.33 (0.01)
------ ------ ------ ------ ------ ------
Less dividends and distributions:
From net investment income (0.13) (0.22) (0.31) (0.38) (0.30) (0.25)
From net realized gain on
investments (0.02) -- -- -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions (0.15) (0.22) (0.31) (0.38) (0.30) (0.25)
------ ------ ------ ------ ------ ------
Net asset value at end of period $10.52 $10.33 $ 9.36 $ 9.74 $ 9.76 $ 9.73
====== ====== ====== ====== ====== ======
Total investment return (a) 3.34%(b) 12.82% (0.79%) 3.75% 3.46% (0.11%)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.55%++ 2.29% 3.13% 3.60% 3.19% 2.70%
Net expenses 1.80%++ 1.92% 1.91% 1.85% 1.85% 1.83%
Expenses (before
waiver/reimbursement) 1.91%++ 2.00% 2.08% 2.13% 2.07% 2.16%
Portfolio turnover rate 118%(c) 246%(c) 114%(c) 70% 146%(c) 192% (c)
Net assets at end of period (in
000's) $6,303 $6,065 $4,580 $2,968 $2,912 $4,359
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
++ Less than one cent per share.
(a) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(b) Total return is not annualized.
(c) The portfolio turnover rates not including mortgage dollar rolls were 46%,
130%, 92%, 64% and 76% for the six months ended April 30, 2010 and years ended
October 31, 2009, 2008, 2006 and 2005, respectively.
</Table>
28 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 A
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 10.32 $ 9.35 $ 9.73 $ 9.74 $ 9.72 $ 9.98
------- ------- ------- ------- ------ ------
0.18 0.34 0.43 0.43 0.39 0.34
0.21 0.93 (0.41) 0.01 0.00 ++ (0.28)
(0.00)++ 0.01 -- 0.00++ (0.00)++ --
------- ------- ------- ------- ------ ------
0.39 1.28 0.02 0.44 0.39 0.06
------- ------- ------- ------- ------ ------
(0.18) (0.31) (0.40) (0.45) (0.37) (0.32)
(0.02) -- -- -- -- --
------- ------- ------- ------- ------ ------
(0.20) (0.31) (0.40) (0.45) (0.37) (0.32)
------- ------- ------- ------- ------ ------
$ 10.51 $ 10.32 $ 9.35 $ 9.73 $ 9.74 $ 9.72
======= ======= ======= ======= ====== ======
3.80%(b) 13.89% 0.07% 4.63% 4.14% 0.63%
3.44%++ 3.20% 4.02% 4.35% 3.94% 3.45%
0.91%++ 1.00% 1.03% 1.10% 1.10% 1.08%
1.02%++ 1.08% 1.16% 1.38% 1.32% 1.41%
118%(c) 246%(c) 114%(c) 70% 146%(c) 192%(c)
$33,397 $33,134 $16,211 $10,821 $9,468 $8,062
</Table>
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 10.34 $ 9.37 $ 9.75 $ 9.76 $ 9.73 $ 9.99
------- ------- ------ ------ ------ ------
0.13 0.23 0.30 0.35 0.32 0.26
0.21 0.95 (0.37) 0.02 0.01 (0.27)
(0.00)++ 0.01 -- 0.00++ (0.00)++ --
------- ------- ------ ------ ------ ------
0.34 1.19 (0.07) 0.37 0.33 (0.01)
------- ------- ------ ------ ------ ------
0.13 (0.22) (0.31) (0.38) (0.30) (0.25)
(0.02) -- -- -- -- --
------- ------- ------ ------ ------ ------
(0.15) (0.22) (0.31) (0.38) (0.30) (0.25)
------- ------- ------ ------ ------ ------
$ 10.53 $ 10.34 $ 9.37 $ 9.75 $ 9.76 $ 9.73
======= ======= ====== ====== ====== ======
3.34%(b) 12.92% (0.89%) 3.86% 3.46% (0.11%)
2.55%++ 2.27% 3.11% 3.60% 3.19% 2.70%
1.80%++ 1.92% 1.92% 1.85% 1.85% 1.83%
1.91%++ 2.00% 2.08% 2.13% 2.07% 2.16%
118%(c) 246%(c) 114%(c) 70% 146%(c) 192%(c)
$19,065 $16,747 $7,106 $2,689 $1,464 $1,708
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
29
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS I
------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 10.32 $ 9.35 $ 9.73 $ 9.75 $ 9.72 $ 10.00
-------- -------- -------- -------- -------- --------
Net investment income 0.19 0.34 0.43 0.46 0.41 0.38
Net realized and unrealized gain
(loss) on investments 0.21 0.96 (0.38) 0.01 0.03 (0.28)
Net realized and unrealized gain
(loss) on foreign currency
transactions (0.00)++ 0.01 -- 0.00 ++ (0.00)++ --
-------- -------- -------- -------- -------- --------
Total from investment operations 0.40 1.31 0.05 0.47 0.44 0.10
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income (0.19) (0.34) (0.43) (0.49) (0.41) (0.38)
From net realized gain on
investments (0.02) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.21) (0.34) (0.43) (0.49) (0.41) (0.38)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 10.51 $ 10.32 $ 9.35 $ 9.73 $ 9.75 $ 9.72
======== ======== ======== ======== ======== ========
Total investment return (a) 3.96%(b) 14.22% 0.39% 4.94% 4.70% 0.97%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 3.76%++ 3.50% 4.35% 4.75% 4.34% 3.81%
Net expenses 0.59%++ 0.66% 0.70% 0.70% 0.70% 0.72%
Expenses (before
waiver/reimbursement) 0.77%++ 0.83% 0.78% 0.74% 0.76% 0.86%
Portfolio turnover rate 118%(c) 246%(c) 114%(c) 70% 146%(c) 192%(c)
Net assets at end of period (in
000's) $525,363 $516,522 $133,090 $140,221 $125,525 $115,147
</Table>
<Table>
* Unaudited.
++ Annualized.
++ Less than one cent per share.
(a) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(b) Total return is not annualized.
(c) The portfolio turnover rates not including mortgage dollar rolls were 46%,
130%, 92%, 64% and 76% for the six months ended April 30, 2010 and years ended
October 31, 2009, 2008, 2006 and 2005, respectively.
</Table>
30 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.
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Intermediate Term Bond Fund (the "Fund"),
a diversified fund. The Fund is the successor of the MainStay Intermediate Term
Bond Fund, a series of Eclipse Funds Inc. (the "Predecessor Fund"). The
reorganization of the Predecessor Fund with and into the Fund, which was not
subject to shareholder approval under applicable law, occurred on February 26,
2010. All information regarding and references to periods prior to the
commencement of operations of the Fund relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class I shares commenced
operations on January 2, 1991. Class A shares, Class B shares and Class C shares
commenced operations on January 2, 2004. Investor Class shares commenced
operations on February 28, 2008. Investor Class and Class A shares are offered
at net asset value ("NAV") per share plus an initial sales charge. No sales
charge applies on investments of $1 million or more (and certain other qualified
purchases) in Investor Class and Class A shares, but a contingent deferred sales
charge is imposed on certain redemptions of such shares within one year of the
date of purchase. Class B shares and Class C shares are offered at NAV without
an initial sales charge, although a declining contingent deferred sales charge
may be imposed on redemptions made within six years of purchase of Class B
shares and a 1.00% contingent deferred sales charge may be imposed on
redemptions made within one year of purchase of Class C shares. Class I shares
are offered at NAV and are not subject to a sales charge. Depending upon
eligibility, Class B shares convert to either Investor Class or Class A shares
eight years after the date they were purchased. Additionally, depending upon
eligibility, Investor Class shares may convert to Class A shares and Class A
shares may convert to Investor Class shares. The five classes of shares have the
same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions, except that
Class B and Class C shares are subject to higher distribution and/or service fee
rates than Investor Class and Class A shares under a distribution plan pursuant
to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a
distribution and/or service fee.
The Fund's investment objective is to seek to maximize total return, consistent
with liquidity, moderate risk to principal and investment in debt securities.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the Fund's Manager (as defined in Note 3(A))
in consultation with the Fund's Subadvisor, if any (as defined in Note 3(A)),
whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the Fund's Manager, in
consultation with the Fund's Subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Investments in other mutual funds are valued at
their NAVs as of the close of the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund held securities
with a value of $533,068 that were valued in such a manner.
Certain events may occur between the time that foreign markets close, on which
securities held by the Fund principally trade, and the time at which the Fund's
NAV is calculated. These events may include, but are not limited to, situations
relating to a single issuer in a market sector, significant fluctuations in U.S.
or foreign markets, natural
mainstayinvestments.com 31
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
disasters, armed conflicts, governmental actions or other developments not tied
directly to the securities markets. Should the Manager or Subadvisor, as defined
in Note 3(A), conclude that such events may have affected the accuracy of the
last price reported on the local foreign market, the Manager or Subadvisor may,
pursuant to procedures adopted by the Fund's Board, adjust the value of the
local price to reflect the impact on the price of such securities as a result of
such events. Additionally, international equity securities are also fair valued
whenever the movement of a particular index exceeds certain thresholds. In such
cases, the securities are fair valued by applying factors provided by a third
party vendor in accordance with the Fund's policies and procedures. At April 30,
2010, certain foreign equity securities held by the Fund were fair valued.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
Generally, a security is considered illiquid if it cannot be sold or disposed of
in the ordinary course of business at approximately the price at which it is
valued. Its illiquidity might prevent the sale of such security at a time when
the Manager or Subadvisor, if any, as defined in Note 3(A) might wish to sell,
and these securities could have the effect of decreasing the overall level of a
Fund's liquidity. Further, the lack of an established secondary market may make
it more difficult to value illiquid securities, requiring the Fund to rely on
judgments that may be somewhat subjective in determining value, which could vary
from the amount that the Fund could realize upon disposition. Difficulty in
selling illiquid securities may result in a loss or may be costly to the Fund.
Under the supervision of the Board, the Manager or Subadvisor, if any,
determines the liquidity of a Fund's investments; in doing so, the Manager or
Subadvisor, if any, may consider various factors, including (1) the frequency of
trades and quotations, (2) the number of dealers and prospective purchasers, (3)
the dealer undertakings to make a market, and (4) the nature of the security and
the market in which it trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). Illiquid
securities generally will be valued in such manner, as the Board in good faith
deems appropriate to reflect their fair market value.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is
32 MainStay Intermediate Term Bond Fund
"more likely than not" to be sustained assuming examination by taxing
authorities. Management has analyzed the Fund's tax positions taken on federal
income tax returns for all open tax years (current and prior three tax years),
and has concluded that no provision for federal income tax is required in the
Fund's financial statements. The Fund's federal and state income and federal
excise tax returns for tax years for which the applicable statutes of
limitations have not expired are subject to examination by the Internal Revenue
Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income monthly and distributions of net realized
capital and currency gains, if any, annually, Unless the shareholder elects
otherwise, all dividends and distributions are reinvested in the same class of
shares of the Fund, at NAV. Dividends and distributions to shareholders are
determined in accordance with federal income tax regulations and may differ from
GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage-backed securities. Interest
income is accrued as earned using the effective interest rate method. Discounts
and premiums on securities purchased, other than short-term investments, for the
Fund are accreted and amortized, respectively, on the effective interest rate
method over the life of the respective securities or, in the case of a callable
security, over the period to the first date of call. Discounts and premiums on
short-term investments are accreted and amortized, respectively, on the
straight-line method. Income from payment-in-kind securities is recorded daily
based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a financial
instrument (e.g., foreign currency, interest rate, security, or securities
index.) The Fund is subject to interest rate risk in the normal course of
investing in these transactions. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. The Fund agrees
to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin". When the futures contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Fund's basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The contract or notional amounts and variation margin reflect the
extent of the Fund's involvement in open futures positions. Risks arise from the
possible imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Fund's
activities in futures contracts have minimal
mainstayinvestments.com 33
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
counterparty risk as they are conducted through regulated exchanges that
guarantee the futures against default by the counterparty. The Fund invests in
futures contracts to help manage the duration and yield curve of the portfolio
while minimizing the exposure to wider bid/ask spreads in traditional bonds. The
Fund's investment in futures contracts and other derivatives may increase the
volatility of the Fund's NAV and may result in a loss to the Fund.
(I) FOREIGN CURRENCY FORWARD CONTRACTS. The Fund may enter into foreign
currency forward contracts, which are agreements to buy or sell currencies of
different countries on a specified future date at a specified rate. The Fund is
subject to foreign currency exchange rate risk in the normal course of investing
in these transactions. During the period the forward contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" such contract on a daily basis to reflect the market value
of the contract at the end of each day's trading. Cash movement occurs on
settlement date. When the forward contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Fund's basis in the contract. The Fund
enters into foreign currency forward contracts to reduce currency risk versus
the benchmark or for trade settlement.
The use of foreign currency forward contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The contract amount reflects the extent of the Fund's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. While a
Fund may enter into forward contracts to reduce currency exchange risks, changes
in currency exchange rates may result in poorer overall performance for the Fund
than if it had not engaged in such transactions. Exchange rate movements can be
large, depending on the currency, and can last for extended periods of time,
affecting the value of the Fund's assets. Moreover, there may be an imperfect
correlation between the Fund's holdings of securities denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may prevent the Fund from achieving the intended hedge or
expose the Fund to the risk of currency exchange loss. The unrealized
appreciation (depreciation) on forward contracts reflects the Fund's exposure at
valuation date to credit loss in the event of a counterparty's failure to
perform its obligations. (See Note 5.)
(J) MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage dollar roll ("MDR")
transactions in which it sells mortgage-backed securities ("MBS") from its
portfolio to a counterparty from whom it simultaneously agrees to buy a similar
security on a delayed delivery basis. The MDR transactions of the Fund are
classified as purchase and sale transactions. The securities sold in connection
with the MDRs are removed from the portfolio and a realized gain or loss is
recognized. The securities the Fund has agreed to acquire are included at market
value in the Portfolio of Investments and liabilities for such purchase
commitments are included as payables for investments purchased. During the roll
period, the Fund foregoes principal and interest paid on the securities. The
Fund is compensated by the difference between the current sales price and the
forward price for the future as well as by the earnings on the cash proceeds of
the initial sale. MDRs may be renewed without physical delivery of the
securities subject to the contract. The Fund maintains liquid assets from its
portfolio having a value not less than the repurchase price, including accrued
interest. MDR transactions involve certain risks, including the risk that the
MBS returned to the Fund at the end of the roll, while substantially similar,
could be inferior to what was initially sold to the counterparty.
(K) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(L) CONCENTRATION OF RISK. The Fund invests in foreign securities, which carry
certain risks that are in addition to the usual risks inherent in domestic
instruments. These risks include those resulting from currency fluctuations,
future adverse political and economic developments and possible imposition of
currency exchange blockages or
34 MainStay Intermediate Term Bond Fund
other foreign governmental laws or restrictions. These risks are likely to be
greater in emerging markets than in developed markets. The ability of issuers of
debt securities held by the Fund to meet their obligations may be affected by
economic or political developments in a specific country, industry or region.
(M) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
(N) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the Fund's derivative and hedging activities,
including how such activities are accounted for and their effect on the Fund's
financial positions, performance and cash flows. These derivatives are not
accounted for as hedging instruments.
Fair value of Derivatives as of April 30, 2010:
ASSET DERIVATIVES
<Table>
<Caption>
STATEMENT OF FOREIGN
ASSETS AND EXCHANGE EQUITY INTEREST
LIABILITIES CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Warrants Investment in
securities, at value $ -- $502 $-- $ 502
Forward Contracts Unrealized
appreciation on
foreign currency
forward contracts 1,833 -- -- 1,833
--------------------------------------------
Total Fair Value $1,833 $502 $-- $2,335
============================================
</Table>
The effect of derivative instruments on the Statement of Operations for the six
months ended April 30, 2010.
REALIZED GAIN (LOSS)
<Table>
<Caption>
FOREIGN
STATEMENT OF EXCHANGE EQUITY INTEREST
OPERATIONS CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Futures Contracts Net realized loss on
futures transactions $ -- $-- $(229,789) $(229,789)
Forward Contracts Net realized loss on
foreign currency
transactions (48,272) -- -- (48,272)
----------------------------------------------
Total Realized Loss $(48,272) $-- $(229,789) $(278,061)
==============================================
</Table>
CHANGE IN APPRECIATION (DEPRECIATION)
<Table>
<Caption>
FOREIGN
STATEMENT OF EXCHANGE EQUITY INTEREST
OPERATIONS CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Warrants Net change in
unrealized
appreciation
(depreciation) on
security
transactions $ -- $106 $ -- $ 105
Futures Contracts Net change in
unrealized
appreciation
(depreciation) on
futures contracts -- -- 139,153 139,153
Forward Contracts Net change in
unrealized
appreciation
(depreciation) on
translation of other
assets and
liabilities in
foreign currencies
and foreign currency
forward contracts 874 -- -- 874
--------------------------------------------
Total Change in Appreciation
(Depreciation) $874 $106 $139,153 $140,132
============================================
</Table>
mainstayinvestments.com 35
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
FOREIGN
EXCHANGE EQUITY INTEREST
CONTRACTS CONTRACTS RATE
RISK RISK RISK TOTAL
Warrants (2) -- 59 -- 59
Futures Contracts Long (2) -- -- 46 46
Futures Contracts Short (2) -- -- (386) (386)
Forward Contracts Long (3) $ 2,162,162 -- -- $ 2,162,162
Forward Contracts Short (3) $(1,910,651) -- -- $(1,910,651)
===================================================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
(3) Amount(s) represent(s) notional amount.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. MacKay
Shields LLC (the "Subadvisor"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and
is responsible for the day-to-day portfolio management of the Fund. Pursuant to
the terms of a Subadvisory Agreement between New York Life Investments and the
Subadvisor, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.60% on assets up to $500 million, 0.575% on assets from $500 million to $1
billion, and 0.55% on assets in excess of $1 billion. Effective on September 11,
2009, New York Life Investments has contractually agreed to waive a portion of
its management fee so that it does not exceed 0.50% on assets up to $1 billion
and 0.475% on assets in excess of $1 billion. The effective management fee rate
(exclusive of any applicable waivers/reimbursements) was 0.60% for the six-month
period ended April 30, 2010.
Effective on September 11, 2009, New York Life Investments had agreed to limit
total ordinary operating expenses (total ordinary operating expenses excludes
taxes, interest, litigation, extraordinary expenses, brokerage, and other
transaction expenses relating to the purchase or sale of portfolio investments
and the fees and expenses of any other fund in which the fund invests) of Class
I shares to 0.50% through November 27, 2009 and to 0.60% thereafter. This
agreement also requires the Manager to waive a portion of the management fee in
addition to the management fee described above or other non-class specific
expenses or Investor Class, Class A, Class B and Class C shares to the extent
necessary in order to maintain the expense limitation applicable to Class I
shares. This agreement expires on February 28, 2011 and is reviewed annually by
the Board in connection with its review of the Fund's investment advisory
agreements. Based on its review, the Board may agree to maintain, modify of
terminate the agreement.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $1,723,579 and waived/reimbursed its fees in
the amount of $503,767.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Pursuant to the Class B and Class C
36 MainStay Intermediate Term Bond Fund
Plans, Class B and Class C shares of the Fund pay the Distributor a monthly
distribution fee at an annual rate of 0.75% of the average daily net assets of
the Fund's Class B and Class C shares, along with a service fee at an annual
rate of 0.25% of the average daily net assets of the Class B and Class C shares
of the Fund for a total 12b-1 fee of 1.00%. Class I shares are not subject to a
distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $2,570
and $13,769, respectively, for the six-month period ended April 30, 2010. 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 $62, $5,903 and
$1,943, respectively, for the six-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 3,302
- -----------------------------------------------
Class A 17,941
- -----------------------------------------------
Class B 7,389
- -----------------------------------------------
Class C 21,560
- -----------------------------------------------
Class I 261,524
- -----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class A $ 1,315 0.0%++
- --------------------------------------------------
Class B 1,258 0.0++
- --------------------------------------------------
Class C 1,259 0.0++
- --------------------------------------------------
Class I 79,983,629 15.2
- --------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $14,580.
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $6,007,340 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the Fund through the years
indicated. The fund acquired $6,153,939 of capital losses in its reorganization
with the MainStay Institutional Bond Fund (See Note 10); use of these losses may
be limited due to the provisions of IRC Section 382. 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. No capital
gain distributions shall be made until any capital loss carryforwards have been
fully utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2012 $ 444
2013 3,824
2015 648
2016 1,091
- ---------------------------------- -----
Total $6,007
- ---------------------------------- -----
</Table>
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $7,508,570
- ------------------------------------------------
</Table>
mainstayinvestments.com 37
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
NOTE 5--FOREIGN CURRENCY FORWARD CONTRACTS:
As of April 30, 2010, the Fund held the following foreign currency forward
contracts:
<Table>
<Caption>
CONTRACT CONTRACT
AMOUNT AMOUNT UNREALIZED
COUNTERPARTY PURCHASED SOLD APPRECIATION
Foreign Currency Buy Contracts:
- ------------------------------------------------------------------------------------------------------------
Korean Won vs. U.S. Dollar,
expiring 5/26/10 JPMorgan Chase Bank KRW 2,400,000,000 USD 2,162,162 USD 1,833
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on
foreign currency forward
contracts USD1,833
- ------------------------------------------------------------------------------------------------------------
</Table>
NOTE 6--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 7--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 8--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of U.S.
Government securities were $386,456 and $477,981, respectively. Purchases and
sales of securities, other than U.S. Government securities and short-term
securities, were $266,624 and $131,021, respectively.
NOTE 9--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 91,723 $ 956,794
Shares issued to
shareholders in
reinvestment of dividends
and distributions 4,845 50,585
Shares redeemed (54,088) (561,755)
------------------------
Net increase in shares
outstanding before
conversion 42,480 445,624
Shares converted into
Investor Class (See Note
1) 17,528 182,806
Shares converted from
Investor Class (See Note
1) (19,014) (197,438)
------------------------
Net increase 40,994 $ 430,992
========================
Year ended October 31, 2009:
Shares sold 160,649 $ 1,605,270
Shares issued to
shareholders in
reinvestment of dividends 5,946 59,452
Shares redeemed (92,608) (919,917)
------------------------
Net increase in shares
outstanding before
conversion 73,987 744,805
Shares converted into
Investor Class (See Note
1) 26,518 265,118
Shares converted from
Investor Class (See Note
1) (19,928) (198,805)
------------------------
Net increase 80,577 $ 811,118
========================
</Table>
38 MainStay Intermediate Term Bond Fund
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,006,899 $ 10,415,411
Shares issued to
shareholders in
reinvestment of dividends
and distributions 52,562 546,178
Shares redeemed (832,432) (8,631,600)
------------------------
Net increase in shares
outstanding before
conversion 227,029 2,329,989
Shares converted into Class
A (See Note 1) 44,884 465,270
Shares converted from Class
A (See Note 1) (6,090) (63,455)
Shares converted from Class
A (a) (298,088) (3,079,252)
------------------------
Net decrease (32,265) $ (347,448)
========================
Year ended October 31, 2009:
Shares sold 2,304,718 $ 22,920,086
Shares issued to
shareholders in
reinvestment of dividends 63,582 632,857
Shares redeemed (951,379) (9,464,145)
------------------------
Net increase in shares
outstanding before
conversion 1,416,921 14,088,798
Shares converted into Class
A (See Note 1) 70,766 701,600
Shares converted from Class
A (See Note 1) (10,393) (104,711)
------------------------
Net increase 1,477,294 $ 14,685,687
========================
<Caption>
CLASS B SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 150,265 $ 1,559,641
Shares issued to
shareholders in
reinvestment of dividends
and distributions 6,793 70,677
Shares redeemed (107,700) (1,120,289)
------------------------
Net increase in shares
outstanding before
conversion 49,358 510,029
Shares converted from Class
B (See Note 1) (37,267) (387,183)
------------------------
Net increase 12,091 $ 122,846
========================
Year ended October 31, 2009:
Shares sold 363,320 $ 3,596,090
Shares issued to
shareholders in
reinvestment of dividends 9,487 94,225
Shares redeemed (208,125) (2,062,284)
------------------------
Net increase in shares
outstanding before
conversion 164,682 1,628,031
Shares converted from Class
B (See Note 1) (66,941) (663,202)
------------------------
Net increase 97,741 $ 964,829
========================
<Caption>
CLASS C SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 495,377 $ 5,146,659
Shares issued to
shareholders in
reinvestment of dividends
and distributions 17,293 180,117
Shares redeemed (321,458) (3,344,255)
------------------------
Net increase 191,212 $ 1,982,521
========================
Year ended October 31, 2009:
Shares sold 1,401,666 $ 13,881,575
Shares issued to
shareholders in
reinvestment of dividends 19,081 189,869
Shares redeemed (559,604) (5,552,660)
------------------------
Net increase 861,143 $ 8,518,784
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 4,197,638 $ 43,523,773
Shares issued to
shareholders in
reinvestment of dividends
and distributions 972,696 10,114,247
Shares redeemed (5,525,277) (57,393,681)
------------------------
Net decrease in shares
outstanding before
conversion (354,943) (3,755,661)
Shares converted into Class
I (a) 298,088 3,079,252
------------------------
Net decrease (56,855) $ (676,409)
========================
Year ended October 31, 2009:
Shares sold 13,363,917 $134,759,246
Shares issued in connection
with the acquisition of
MainStay Institutional
Bond Fund 24,825,107 255,388,290
Shares issued to
shareholders in
reinvestment of dividends 537,521 5,373,697
Shares redeemed (2,921,987) (28,994,443)
------------------------
Net increase 35,804,558 $366,526,790
========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the
mainstayinvestments.com 39
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
new share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 10-- FUND ACQUISITION:
At a meeting held on April 18, 2009, the Board of Trustees approved a plan of
reorganization whereby the Fund would acquire the assets, including the
investments, and assume the liabilities of MainStay Institutional Bond Fund, a
series of The MainStay Funds. Shareholders of the MainStay Institutional Bond
Fund approved this reorganization on October 5, 2009, which was then completed
on October 16, 2009. The aggregate net assets of the Fund immediately before the
acquisition were $264,046,943 and the combined net assets after the acquisition
were $519,435,233.
The acquisition was accomplished by a tax-free exchange of the following:
<Table>
<Caption>
SHARES VALUE
MAINSTAY INSTITUTIONAL BOND
FUND
- ------------------------------------------------------
Class I 24,649,476 $255,388,290
- ------------------------------------------------------
</Table>
In exchange for the MainStay Institutional Bond Fund shares and net assets, the
Fund issued 24,825,107 Class I shares.
MainStay Institutional 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
accumulated net realized loss:
<Table>
<Caption>
ACCUMULATED UNDISTRIBUTED
TOTAL NET CAPITAL UNREALIZED NET REALIZED NET INVESTMENT
ASSETS STOCK APPRECIATION LOSS INCOME
MainStay Institutional Bond Fund $255,388,290 $260,250,315 $1,340,150 ($6,202,175) $--
- --------------------------------------------------------------------------------------------------------------
</Table>
NOTE 11--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 12--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
40 MainStay Intermediate Term Bond Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request by calling 800-MAINSTAY (624-6782);
visiting the Funds' website at mainstayinvestments.com; or on the SEC's website
at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Funds' Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 41
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18332 MS121-10 MSIT10-06/10
B4
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY RETIREMENT FUNDS
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY RETIREMENT FUNDS
SEMIANNUAL REPORT
Unaudited - April 30, 2010
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
MAINSTAY RETIREMENT 2010 FUND 5
- ---------------------------------------------
MAINSTAY RETIREMENT 2020 FUND 20
- ---------------------------------------------
MAINSTAY RETIREMENT 2030 FUND 34
- ---------------------------------------------
MAINSTAY RETIREMENT 2040 FUND 48
- ---------------------------------------------
MAINSTAY RETIREMENT 2050 FUND 62
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 76
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 90
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 90
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO EACH FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF EACH FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF EACH FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
MAINSTAY RETIREMENT 2010 FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 2.05% 17.75% -1.36%
Excluding sales charges 7.99 24.61 0.63
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2010 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 9450 10000 10000 10000
9569 9367 9641 10800
7720 6059 5518 11214
4/30/10 9619 8412 7418 12145
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 2.09% 17.71% -1.36%
Excluding sales charges 8.04 24.56 0.63
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2010 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 23625 25000 25000 25000
23698 23416 24103 27000
17693 15147 13796 28036
4/30/10 24047 21031 18546 30362
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
8.09% 24.97% 0.89%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2010 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
10149 9367 9641 10800
8206 6059 5518 11214
4/30/10 10255 8412 7418 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50%, no
contingent deferred sales charge ("CDSC") and an annual 12b-1 fee of 0.25%.
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 or individual investors with a minimum initial investment of $5
million or more. Class R2 shares are sold with no initial sales charge or
CDSC, and have an annual 12b-1 fee of 0.25%. Class R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements. Class R3 shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of 0.50%, and are available in
certain individual retirement accounts or in certain retirement plans.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns may have been lower. For information on
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
8.01% 24.53% 0.56%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2010 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
10118 9367 9641 10800
8159 6059 5518 11214
4/30/10 10160 8412 7418 12145
</Table>
CLASS R3 SHARES(4)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
7.75% 24.22% 0.27%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2010 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
10096 9367 9641 10800
8112 6059 5518 11214
4/30/10 10077 8412 7418 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
S&P 500(R) Index(5) 15.66% 38.84% -5.92%
MSCI EAFE(R) Index(6) 2.48 34.43 -10.00
Barclays Capital U.S. Aggregate Bond Index(7) 2.54 8.30 7.10
Average Lipper mixed-asset target 2010 fund(8) 8.30 25.96 -1.00
</Table>
current fee waivers and/or expense limitations, please refer to the notes to
the financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008 include the historical performance of Class A shares through February
27, 2008, adjusted for differences in expenses and fees. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. Class R2 shares commenced investment operations on January 8, 2009.
Performance figures for Class R2 shares include the historical performance of
Class A shares through January 7, 2009, adjusted for differences in expenses
and fees. Unadjusted, the performance shown for Class R2 shares might have
been lower.
4. Class R3 shares commenced investment operations on May 1, 2008. Performance
figures for Class R3 shares include the historical performance of Class A
shares through April 30, 2008, adjusted for differences in expenses and fees.
Unadjusted, the performance shown for Class R3 shares might have been lower.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard for measuring large-cap U.S. stock-
market performance. The S&P 500 Index is the Fund's broad-based securities
market index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
6. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--consists of international stocks representing
the developed world outside of North America. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
7. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the MBS Index, and the ABS Index. To qualify for
inclusion in the Barclays Capital U.S. 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 $250 million. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly in an index.
8. The average Lipper mixed-asset target 2010 fund is representative of funds
that seek to maximize assets for retirement or other purposes with an
expected time horizon not exceeding December 31, 2010. This benchmark is a
product of Lipper Inc. Lipper Inc. is an independent monitor of fund
performance. Results are based on average total returns of similar funds with
all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Retirement 2010 Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY RETIREMENT 2010 FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,079.90 $2.42 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,080.40 $1.91 $1,023.00 $1.86
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,080.90 $0.62 $1,024.20 $0.60
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,080.10 $2.42 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,077.50 $3.71 $1,021.20 $3.61
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for
Class R2 and 0.72% for Class R3) multiplied by the average account value over
the period, divided by 365 and multiplied by 181 (to reflect the one-half
year period). The table above represents the actual expenses incurred during
the one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
mainstayinvestments.com 7
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Total Return 54.0
Growth of Capital 25.1
Capital Appreciation 12.1
Current Income 8.7
Other Assets, Less Liabilities 0.1
</Table>
See Portfolio of Investments on page 12 for specific holdings within these
categories.
8 MainStay Retirement 2010 Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY RETIREMENT 2010 FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Retirement 2010 Fund returned 7.99% for
Investor Class shares and 8.04% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 8.09%,
Class R2 shares returned 8.01% and Class R3 shares returned 7.75%. All share
classes underperformed the 8.30% return of the average Lipper(1) mixed-asset
target 2010 fund and the 15.66% return of the S&P 500(R) Index(2) for the six
months ended April 30, 2010. As of April 30, 2010, Class R1 shares had not
commenced investment operations. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See page 5 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, the Fund's performance was modestly below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the Fund's average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings,
such as valuation metrics, earnings data and technical indicators. Finally, we
evaluated the historical success of the portfolio managers responsible for the
Underlying Funds. In general, we sought Underlying Equity Funds that had a track
record of capable portfolio management, that occupied attractively valued market
segments and that invested in companies with fairly priced securities and strong
price and earnings momentum. During the reporting period, these techniques were
generally unsuccessful, as they steered the Fund into Underlying Funds that
collectively underperformed the S&P 500(R) Index after adjusting for Underlying
Fund expenses and the Fund's strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most noteworthy change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This shift had a positive impact on the
Fund's performance, as value-oriented small-capitalization stocks
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
mainstayinvestments.com 9
outpaced growth-oriented larger-cap stocks as the reporting period progressed.
We have substantially reduced the Fund's exposure to growth-oriented stocks over
the past two and a half years. At the end of the current reporting period, the
Fund was evenly positioned between growth and value.
In addition, we reduced the Fund's allocations to MainStay Indexed Bond Fund and
MainStay Intermediate Term Bond Fund and directed the proceeds to Underlying
Fixed Income Funds that focus on inflation indexed Treasury bonds. This decision
had a very modest positive impact on the Fund's performance.
During the reporting period, the Fund initiated new positions in Columbia Small
Cap Index Fund, MainStay Epoch Global Choice Fund and MainStay Convertible Fund.
We selected Columbia Small Cap Index Fund to gain pure exposure to the small-cap
segment of the U.S. stock market. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's responsiveness to movements in the equity market
while incrementally lowering the Fund's average credit quality and duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Columbia Small Cap Index Fund, MainStay U.S. Small Cap Fund and MainStay Epoch
U.S. All Cap Fund generated the best total returns among the Underlying Equity
Funds in which the Fund invested, as these Underlying Funds invested most
heavily in smaller-capitalization stocks. The worst returns came from Underlying
Equity Funds that invest abroad, namely MainStay ICAP International Fund,
MainStay 130/30 International Fund and MainStay International Equity Fund. These
Underlying Funds were hampered not only by comparatively weak overseas returns
in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
On an absolute basis, the strongest contributions to the Fund's equity
performance came from the Fund's largest Underlying Equity Fund holdings, namely
MainStay MAP Fund and MainStay Growth Equity Fund.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND?
U.S. Treasury yields were largely unchanged over the course of the reporting
period. Signs of economic strength, improving corporate profitability and a
large supply of new issuance threatened to push rates higher. These factors,
however, were offset by concerns about corporate and sovereign default risk
(holding company Dubai World and Greece were notable examples) and by questions
about the sustainability of the economic recovery. Lower-quality fixed-income
securities generally outperformed higher-quality fixed-income securities as
credit spreads(4) narrowed, driving bond prices higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished a bias toward
lower-quality instruments. We implemented these strategies primarily by
increasing the Fund's holdings in MainStay Floating Rate Fund, MainStay High
Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund.
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
10 MainStay Retirement 2010 Fund
WHICH UNDERLYING FIXED INCOME FUNDS HAD THE STRONGEST ABSOLUTE PERFORMANCE
DURING THE REPORTING PERIOD AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. The worst-performing Underlying Fixed Income Fund--and the
only Fund holding that provided a negative return--was American Century
International Bond Fund. This Underlying Fund was hurt by the potential for
sovereign defaults and by a rising U.S. dollar.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 87.5%+
- -----------------------------------------------------
EQUITY FUNDS 45.6%
MainStay 130/30 Core
Fund Class I 357,010 $ 2,591,895
MainStay 130/30 Growth
Fund Class I (a) 27,584 220,397
MainStay 130/30 International
Fund Class I 162,591 1,027,577
MainStay Common Stock
Fund Class I 151,121 1,657,793
MainStay Epoch Global Choice
Fund Class I 21,449 303,068
MainStay Epoch U.S. All Cap
Fund Class I 101,066 2,226,494
MainStay Growth Equity
Fund Class I 14,403 147,772
MainStay ICAP Equity
Fund Class I 52,433 1,795,310
MainStay ICAP International
Fund Class I 37,686 1,033,349
MainStay ICAP Select Equity
Fund Class I 54,295 1,796,608
MainStay International Equity
Fund Class I 71,382 875,852
MainStay Large Cap Growth
Fund Class I (a) 314,172 2,038,979
MainStay MAP
Fund Class I 85,432 2,559,543
MainStay S&P 500 Index
Fund Class I 2,741 75,256
MainStay U.S. Small Cap
Fund Class I (a) 48,449 737,876
-----------
Total Equity Funds
(Cost $16,683,132) 19,087,769
-----------
FIXED INCOME FUNDS 41.9%
MainStay Convertible
Fund Class I 10,645 158,607
MainStay Floating Rate
Fund Class I 70,610 660,909
MainStay Global High Income
Fund Class I 56,408 656,023
MainStay High Yield Corporate
Bond Fund Class I 176,398 1,019,579
MainStay High Yield
Opportunities
Fund Class I 118,361 1,402,574
MainStay Indexed Bond
Fund Class I 840,058 9,551,456
MainStay Intermediate Term Bond
Fund Class I 389,317 4,091,720
-----------
Total Fixed Income Funds
(Cost $16,624,138) 17,540,868
-----------
Total Affiliated Investment
Companies
(Cost $33,307,270) 36,628,637
-----------
UNAFFILIATED INVESTMENT COMPANIES 12.4%
- -----------------------------------------------------
EQUITY FUNDS 3.9%
Columbia Funds Series
Trust--Columbia SmallCap
Index Fund 4,669 74,612
T. Rowe Price Emerging Markets
Stock Fund 28,068 867,578
T. Rowe Price International
Discovery Fund 18,178 699,498
-----------
Total Equity Funds
(Cost $1,534,775) 1,641,688
-----------
FIXED INCOME FUNDS 8.5%
American Century Inflation
Adjusted Bond Fund 258,114 3,050,906
American Century International
Bond Fund Institutional Class 35,507 494,971
-----------
Total Fixed Income Funds
(Cost $3,514,034) 3,545,877
-----------
Total Unaffiliated Investment
Companies
(Cost $5,048,809) 5,187,565
-----------
Total Investments
(Cost $38,356,079) (b) 99.9% 41,816,202
Other Assets, Less Liabilities 0.1 62,153
------- -----------
Net Assets 100.0% 41,878,355
======= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) At April 30, 2010, cost is $41,231,948
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 3,487,508
Gross unrealized depreciation (2,903,254)
-----------
Net unrealized appreciation $ 584,254
===========
</Table>
12 MainStay Retirement 2010 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $19,087,769 $ -- $ -- $19,087,769
Fixed Income Funds 17,540,868 -- -- 17,540,868
----------- -------- -------- -----------
Total Affiliated Investment Companies 36,628,637 -- -- 36,628,637
----------- -------- -------- -----------
Unaffiliated Investment Companies
Equity Funds 1,641,688 -- -- 1,641,688
Fixed Income Funds 3,545,877 -- -- 3,545,877
----------- -------- -------- -----------
Total Unaffiliated Investment Companies 5,187,565 -- -- 5,187,565
----------- -------- -------- -----------
Total Investments in Securities $41,816,202 $-- $-- $41,816,202
=========== ======== ======== ===========
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $33,307,270) $36,628,637
Investments in unaffiliated
investment companies, at value
(identified cost $5,048,809) 5,187,565
Receivables:
Investment securities sold 104,915
Fund shares sold 38,363
Manager (See Note 3) 19,591
Other assets 47,209
-----------
Total assets 42,026,280
-----------
LIABILITIES:
Due to custodian 104,915
Payables:
Transfer agent (See Note 3) 15,011
Professional fees 13,695
Fund shares redeemed 8,003
NYLIFE Distributors (See Note 3) 2,367
Custodian 2,145
Trustees 192
Accrued expenses 1,597
-----------
Total liabilities 147,925
-----------
Net assets $41,878,355
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 4,322
Additional paid-in capital 39,339,575
-----------
39,343,897
Accumulated undistributed net
investment income 208,036
Accumulated net realized loss on
investments (1,133,701)
Net unrealized appreciation on
investments 3,460,123
-----------
Net assets $41,878,355
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 369,569
===========
Shares of beneficial interest
outstanding 38,184
===========
Net asset value per share
outstanding $ 9.68
Maximum sales charge (5.50% of
offering price) 0.56
-----------
Maximum offering price per share
outstanding $ 10.24
===========
CLASS A
Net assets applicable to outstanding
shares $ 6,701,854
===========
Shares of beneficial interest
outstanding 694,571
===========
Net asset value per share
outstanding $ 9.65
Maximum sales charge (5.50% of
offering price) 0.56
-----------
Maximum offering price per share
outstanding $ 10.21
===========
CLASS I
Net assets applicable to outstanding
shares $32,098,474
===========
Shares of beneficial interest
outstanding 3,309,114
===========
Net asset value and offering price
per share outstanding $ 9.70
===========
CLASS R2
Net assets applicable to outstanding
shares $ 1,737,800
===========
Shares of beneficial interest
outstanding 179,929
===========
Net asset value and offering price
per share outstanding $ 9.66
===========
CLASS R3
Net assets applicable to outstanding
shares $ 970,658
===========
Shares of beneficial interest
outstanding 100,465
===========
Net asset value and offering price
per share outstanding $ 9.66
===========
</Table>
14 MainStay Retirement 2010 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 512,563
Dividend distributions from
unaffiliated investment
companies 44,154
----------
Total income 556,717
----------
EXPENSES:
Transfer agent (See Note 3) 47,342
Registration 46,457
Manager (See Note 3) 20,822
Shareholder communication 18,201
Professional fees 14,256
Distribution/Service--Investor
Class (See Note 3) 263
Distribution/Service--Class A (See
Note 3) 8,339
Distribution/Service--Class R2
(See Note 3) 2,138
Distribution/Service--Class R3
(See Note 3) 2,476
Custodian 5,655
Trustees 751
Shareholder service (See Note 3) 1,353
Miscellaneous 4,096
----------
Total expenses before
waiver/reimbursement 172,149
Expense waiver/reimbursement from
Manager (See Note 3) (131,358)
Expense reimbursement from
Transfer agent (See Note 3) (1,023)
----------
Net expenses 39,768
----------
Net investment income 516,949
----------
REALIZED AND UNREALIZED GAIN ON :
Net realized gain on:
Affiliated investment company
transactions 2,162,823
Unaffiliated investment company
transactions 459,662
Realized gain distributions from
affiliated investment companies 30,977
Realized gain distributions from
unaffiliated investment
companies 5,981
----------
Net realized gain on investments
from affiliated and unaffiliated
investment companies 2,659,443
----------
Net change in unrealized
appreciation on investments 66,476
----------
Net realized and unrealized gain on
investments 2,725,919
----------
Net increase in net assets resulting
from operations $3,242,868
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 516,949 $ 913,605
Net realized gain (loss) on
investments from
affiliated and
unaffiliated investment
company transactions 2,659,443 (3,169,896)
Net change in unrealized
appreciation
(depreciation) on
investments 66,476 8,007,774
--------------------------
Net increase in net assets
resulting from operations 3,242,868 5,751,483
--------------------------
Dividends to shareholders:
From net investment income:
Investor Class (4,024) (1,237)
Class A (142,596) (116,981)
Class I (737,674) (519,833)
Class R2 (32,713) --
Class R3 (18,719) (18,140)
--------------------------
Total dividends to
shareholders (935,726) (656,191)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 6,960,214 24,528,411
Net asset value of shares
issued to shareholders in
reinvestment of dividends 935,726 656,191
Cost of shares redeemed (10,898,830) (13,157,027)
--------------------------
Increase (decrease) in
net assets derived from
capital share
transactions (3,002,890) 12,027,575
--------------------------
Net increase (decrease)
in net assets (695,748) 17,122,867
NET ASSETS:
Beginning of period 42,574,103 25,451,236
--------------------------
End of period $ 41,878,355 $ 42,574,103
==========================
Accumulated undistributed net
investment income at end of
period $ 208,036 $ 626,813
==========================
</Table>
16 MainStay Retirement 2010 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
--------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 9.15 $ 7.95 $ 9.95
------ ------ -------
Net investment income (a) 0.10 0.22 0.15
Net realized and unrealized gain
(loss) on investments 0.62 1.17 (2.15)
------ ------ -------
Total from investment operations 0.72 1.39 (2.00)
------ ------ -------
Less dividends and distributions:
From net investment income (0.19) (0.19) --
From net realized gain on
investments -- -- --
------ ------ -------
Total dividends and distributions (0.19) (0.19) --
------ ------ -------
Net asset value at end of period $ 9.68 $ 9.15 $ 7.95
====== ====== =======
Total investment return (b) 7.99%(c) 17.90% (20.10%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.11%++ 2.61% 2.38%++
Net expenses (d) 0.47%++ 0.38% 0.46%++
Expenses (before
waiver/reimbursement) (d) 2.25%++ 0.89% 6.41%++
Portfolio turnover rate 53% 76% 127%
Net assets at end of period (in
000's) $ 370 $ 163 $ 41
</Table>
<Table>
<Caption>
CLASS I
----------------------------------------------------------- CLASS R2
JUNE 29, ----------
SIX MONTHS 2007** SIX MONTHS
ENDED THROUGH ENDED
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, APRIL 30,
2010* 2009 2008 2007 2010*
Net asset value at beginning of
period $ 9.18 $ 7.96 $ 10.58 $10.00 $ 9.12
------- ------- ------- ------ ------
Net investment income (a) 0.12 0.25 0.26 0.08 0.10
Net realized and unrealized gain
(loss) on investments 0.61 1.18 (2.81) 0.50 0.62
------- ------- ------- ------ ------
Total from investment operations 0.73 1.43 (2.55) 0.58 0.72
------- ------- ------- ------ ------
Less dividends and distributions:
From net investment income (0.21) (0.21) (0.06) -- (0.18)
From net realized gain on
investments -- -- (0.01) -- --
------- ------- ------- ------ ------
Total dividends and distributions (0.21) (0.21) (0.07) -- (0.18)
------- ------- ------- ------ ------
Net asset value at end of period $ 9.70 $ 9.18 $ 7.96 $10.58 $ 9.66
======= ======= ======= ====== ======
Total investment return (b) 8.09%(c) 18.38% (24.25%) 5.80%(c) 8.01%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.56%++ 2.98% 2.77% 2.42%++ 2.14%++
Net expenses (d) 0.12%++ 0.12% 0.13% 0.13%++ 0.47%++
Expenses (before
waiver/reimbursement) (d) 0.75%++ 0.84% 1.51% 30.84%++ 1.10%++
Portfolio turnover rate 53% 76% 127% 17% 53%
Net assets at end of period (in
000's) $32,098 $33,025 $20,105 $ 930 $1,738
<Caption>
CLASS R2
-----------
JANUARY 8,
2009**
THROUGH
OCTOBER 31,
2009
Net asset value at beginning of
period $ 7.84
------
Net investment income (a) 0.15
Net realized and unrealized gain
(loss) on investments 1.13
------
Total from investment operations 1.28
------
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 $ 9.12
======
Total investment return (b) 16.33%(c)(e)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.12%++
Net expenses (d) 0.47%++
Expenses (before
waiver/reimbursement) (d) 1.18%++
Portfolio turnover rate 76%
Net assets at end of period (in
000's) $1,821
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I, Class R2 and Class R3
shares are not subject to sales charges.
(c) Total return is not annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
</Table>
18 MainStay Retirement 2010 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
----------------------------------------------------------------
JUNE 29,
SIX MONTHS 2007**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007
$ 9.12 $ 7.95 $ 10.57 $10.00
------ ------ ------- ------
0.11 0.23 0.24 0.06
0.61 1.15 (2.80) 0.51
------ ------ ------- ------
0.72 1.38 (2.56) 0.57
------ ------ ------- ------
(0.19) (0.21) (0.05) --
-- -- (0.01) --
------ ------ ------- ------
(0.19) (0.21) (0.06) --
------ ------ ------- ------
$ 9.65 $ 9.12 $ 7.95 $10.57
====== ====== ======= ======
8.04%(c) 17.85% (24.37%) 5.70%(c)
2.26%++ 2.78% 2.46% 1.83%++
0.37%++ 0.37% 0.38% 0.38%++
1.00%++ 1.09% 1.81% 31.10%++
53% 76% 127% 17%
$6,702 $6,570 $ 4,418 $ 281
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------
MAY 1,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
$ 9.13 $ 7.93 $ 10.07
------ ------ -------
0.09 0.20 0.14
0.61 1.17 (2.28)
------ ------ -------
0.70 1.37 (2.14)
------ ------ -------
(0.17) (0.17) --
-- -- --
------ ------ -------
(0.17) (0.17) --
------ ------ -------
$ 9.66 $ 9.13 $ 7.93
====== ====== =======
7.75%(c) 17.62% (21.25%)(c)
1.92%++ 2.47% 3.25%++
0.72%++ 0.72% 0.73%++
1.35%++ 1.44% 1.86%++
53% 76% 127%
$ 971 $ 996 $ 887
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
MAINSTAY RETIREMENT 2020 FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 3.39% 21.90% -3.23%
Excluding sales charges 9.41 29.00 -1.28
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2020 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 9450 10000 10000 10000
4/30/08 9470 9367 9641 10800
4/30/09 7062 6059 5518 11214
4/30/10 9110 8412 7418 12145
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 3.47% 21.88% -3.16%
Excluding sales charges 9.49 28.98 -1.21
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2020 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 23625 25000 25000 25000
4/30/08 23698 23416 24103 27000
4/30/09 17693 15147 13796 28036
4/30/10 22820 21031 18546 30362
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
9.53% 29.27% -1.02%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2020 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 10043 9367 9641 10800
4/30/09 7515 6059 5518 11214
4/30/10 9715 8412 7418 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50%, no
contingent deferred sales charge ("CDSC") and an annual 12b-1 fee of 0.25%.
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 or individual investors with a minimum initial investment of $5
million or more. Class R2 shares are sold with no initial sales charge or
CDSC, and have an annual 12b-1 fee of 0.25%. Class R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements. Class R3 shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of 0.50%, and are available in
certain individual retirement accounts or in certain retirement plans.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
20 MainStay Retirement 2020 Fund
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
9.36% 29.00% -1.31%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2020 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 10023 9367 9641 10800
4/30/09 7467 6059 5518 11214
4/30/10 9633 8412 7418 12145
</Table>
CLASS R3 SHARES(4)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
9.21% 28.65% -1.58%
</Table>
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2020 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 10002 9367 9641 10800
4/30/09 7431 6059 5518 11214
4/30/10 9559 8412 7418 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
S&P 500(R) Index(5) 15.66% 38.84% -5.92%
MSCI EAFE(R) Index(6) 2.48 34.43 -10.00
Barclays Capital U.S. Aggregate Bond Index(7) 2.54 8.30 7.10
Average Lipper mixed-asset target 2020 fund(8) 9.79 29.79 -3.42
</Table>
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns may have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in expenses and fees. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. Class R2 shares commenced investment operations on January 8, 2009.
Performance figures for Class R2 shares include the historical performance of
Class A shares through January 7, 2009, adjusted for differences in expenses
and fees. Unadjusted, the performance shown for Class R2 shares might have
been lower.
4. Class R3 shares commenced investment operations on May 1, 2008. Performance
figures for Class R3 shares include the historical performance of Class A
shares through April 30, 2008, adjusted for differences in expenses and fees.
Unadjusted, the performance shown for the Class R3 shares might have been
lower.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard for measuring large-cap U.S. stock-
market performance. The S&P 500 Index is the broad-based securities market
index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
6. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--consists of international stocks representing
the developed world outside of North America. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
7. The Barclays Capital U.S. Aggregate Bond Index (formerly named the Lehman
Brothers(R) U.S. Aggregate Bond Index) consists of the following other
unmanaged Barclays Capital indices: the Government Bond Index, the Corporate
Bond Index, the MBS Index, and the ABS Index. To qualify for inclusion in the
Barclays Capital U.S. 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 $250
million. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
8. The average Lipper mixed-asset target 2020 fund is representative of funds
that seek to maximize assets for retirement or other purposes with an
expected time horizon from January 1, 2016, to December 31, 2020. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on average total returns of similar
funds with all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 21
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY RETIREMENT 2020 FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,094.10 $2.44 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,094.90 $1.92 $1,023.00 $1.86
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,095.30 $0.62 $1,024.20 $0.60
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,093.60 $2.44 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,092.10 $3.73 $1,021.20 $3.61
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for
Class R2 and 0.72% for Class R3) multiplied by the average account value over
the period, divided by 365 and multiplied by 181 (to reflect the one-half
year period). The table above represents the actual expenses incurred during
the one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Portfolio/Funds in which it invests. Such indirect
expenses are not included in the above-reported expense figures.
22 MainStay Retirement 2020 Fund
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Total Return 41.6
Growth of Capital 32.3
Capital Appreciation 15.6
Current Income 10.2
Other Assets, Less Liabilities 0.3
</Table>
See Portfolio of Investments on page 26 for specific holdings within these
categories.
mainstayinvestments.com 23
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY RETIREMENT 2020 FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Retirement 2020 Fund returned 9.41% for
Investor Class shares and 9.49% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 9.53%,
Class R2 shares returned 9.36% and Class R3 shares returned 9.21%. All share
classes underperformed the 9.79% return of the average Lipper(1) mixed-asset
target 2020 fund and the 15.66% return of the S&P 500(R) Index(2) for the six
months ended April 30, 2010. As of April 30, 2010, Class R1 shares had not
commenced investment operations. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See page 20 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was moderately below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the Fund's average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underlying Funds.
In general, we sought Underlying Equity Funds that had a track record of capable
portfolio management, that occupied attractively valued market segments and that
invested in companies with fairly priced securities and strong price and
earnings momentum. During the reporting period, these techniques were generally
unsuccessful, as they steered the Fund into Underlying Funds that collectively
underperformed the S&P 500(R) Index after adjusting for Underlying Fund expenses
and the Fund's strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most noteworthy change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This shift had a positive impact on the
Fund's performance, as value-oriented small-capitalization stocks
1. See footnote on page 21 for more information on Lipper Inc.
2. See footnote on page 21 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. is expressed as a number of years and is
considered a more accurate sensitivity gauge than average maturity.
24 MainStay Retirement 2020 Fund
outpaced growth-oriented larger-cap stocks as the reporting period progressed.
We have substantially reduced the Fund's exposure to growth-oriented stocks over
the past two and a half years. At the end of the current reporting period, the
Fund was evenly positioned between growth and value.
During the reporting period, the Fund initiated new positions in Columbia Small
Cap Index Fund, MainStay Epoch Global Choice Fund and MainStay Convertible Fund.
We selected Columbia Small Cap Index Fund to gain pure exposure to the small-cap
segment of the U.S. stock market. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's responsiveness to movements in the equity market
while incrementally lowering the Fund's average credit quality and duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Columbia Small Cap Index Fund, MainStay U.S. Small Cap Fund and MainStay Epoch
U.S. All Cap Fund generated the best total returns among the Underlying Equity
Funds in which the Fund invested, as these Underlying Funds invested most
heavily in smaller-capitalization stocks. The worst returns came from Underlying
Equity Funds that invest abroad, namely MainStay ICAP International Fund,
MainStay 130/30 International Fund and MainStay International Equity Fund. These
Underlying Funds were hampered not only by comparatively weak overseas returns
in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
On an absolute basis, the strongest contributions to the Fund's equity
performance came from the Fund's largest Underlying Equity Fund holdings, namely
MainStay MAP Fund and MainStay Growth Equity Fund.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative
returns. The weakest contributions to the Fund's performance came from two of
its smallest positions, MainStay S&P 500 Index Fund and MainStay Epoch Global
Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND?
U.S. Treasury yields were largely unchanged over the course of the reporting
period. Signs of economic strength, improving corporate profitability and a
large supply of new issuance threatened to push rates higher. These factors,
however, were offset by concerns about corporate and sovereign default risk
(holding company Dubai World and Greece were notable examples) and by questions
about the sustainability of the economic recovery. Lower-quality fixed-income
securities generally outperformed higher-quality fixed-income securities as
credit spreads(4) narrowed, driving bond prices higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished a bias toward
lower-quality instruments. We implemented these strategies primarily by
increasing the Fund's holdings in MainStay Floating Rate Fund, MainStay High
Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. The worst-performing Underlying Fixed Income Fund--and the
only Fund holding that provided a negative return--was American Century
International Bond Fund. This Underlying Fund was hurt by the potential for
sovereign defaults and by a rising U.S. dollar.
4 The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 25
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 90.6%+
- ----------------------------------------------------
EQUITY FUNDS 58.5%
MainStay 130/30 Core
Fund Class I 694,201 $ 5,039,899
MainStay 130/30 Growth
Fund Class I (a) 53,096 424,239
MainStay 130/30 International
Fund Class I 320,994 2,028,679
MainStay Common Stock
Fund Class I 307,282 3,370,879
MainStay Epoch Global Choice
Fund Class I 45,083 637,024
MainStay Epoch U.S. All Cap
Fund Class I 174,764 3,850,053
MainStay Growth Equity
Fund Class I 20,754 212,932
MainStay ICAP Equity
Fund Class I 103,005 3,526,882
MainStay ICAP International
Fund Class I 74,430 2,040,878
MainStay ICAP Select Equity
Fund Class I 106,624 3,528,183
MainStay International Equity
Fund Class I 140,920 1,729,085
MainStay Large Cap Growth
Fund Class I (a) 585,055 3,797,009
MainStay MAP
Fund Class I 155,996 4,673,648
MainStay S&P 500 Index
Fund Class I 5,351 146,941
MainStay U.S. Small Cap
Fund Class I (a) 119,475 1,819,602
-----------
Total Equity Funds
(Cost $31,815,276) 36,825,933
-----------
FIXED INCOME FUNDS 32.1%
MainStay Convertible
Fund Class I 31,706 472,412
MainStay Floating Rate
Fund Class I 118,213 1,106,475
MainStay Global High Income
Fund Class I 94,430 1,098,221
MainStay High Yield Corporate
Bond
Fund Class I 240,926 1,392,553
MainStay High Yield
Opportunities
Fund Class I 162,055 1,920,350
MainStay Indexed Bond
Fund Class I 873,352 9,930,009
MainStay Intermediate Term
Bond
Fund Class I 404,747 4,253,890
-----------
Total Fixed Income Funds
(Cost $19,056,297) 20,173,910
-----------
Total Affiliated Investment
Companies
(Cost $50,871,573) 56,999,843
-----------
UNAFFILIATED INVESTMENT COMPANIES 9.1%
- ----------------------------------------------------
EQUITY FUNDS 5.4%
Columbia Funds Series
Trust--Columbia SmallCap
Index Fund 20,060 320,553
T. Rowe Price Emerging Markets
Stock Fund 55,362 1,711,249
T. Rowe Price International
Discovery Fund 35,837 1,379,015
-----------
Total Equity Funds
(Cost $3,043,316) 3,410,817
-----------
FIXED INCOME FUNDS 3.7%
American Century Inflation
Adjusted Bond Fund 122,907 1,452,755
American Century International
Bond Fund Institutional
Class 61,635 859,191
-----------
Total Fixed Income Funds
(Cost $2,313,538) 2,311,946
-----------
Total Unaffiliated Investment
Companies
(Cost $5,356,854) 5,722,763
-----------
Total Investments
(Cost $56,228,427) (b) 99.7% 62,722,606
Other Assets, Less Liabilities 0.3 183,382
------- -----------
Net Assets 100.0% $62,905,988
======= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) At April 30, 2010, cost is $59,110,760
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 6,524,426
Gross unrealized depreciation (2,912,580)
-----------
Net unrealized appreciation $ 3,611,846
===========
</Table>
26 MainStay Retirement 2020 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $36,825,933 $ -- $ -- $36,825,933
Fixed Income Funds 20,173,910 -- -- 20,173,910
----------- -------- -------- -----------
Total Affiliated Investment Companies 56,999,843 -- -- 56,999,843
----------- -------- -------- -----------
Unaffiliated Investment Companies
Equity Funds 3,410,817 -- -- 3,410,817
Fixed Income Funds 2,311,946 -- -- 2,311,946
----------- -------- -------- -----------
Total Unaffiliated Investment Companies 5,722,763 -- -- 5,722,763
----------- -------- -------- -----------
Total Investments in Securities $62,722,606 $-- $-- $62,722,606
=========== ======== ======== ===========
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
27
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $50,871,573) $56,999,843
Investments in unaffiliated
investment companies, at value
(identified cost $5,356,854) 5,722,763
Cash 25,538
Receivables:
Fund shares sold 153,013
Manager (See Note 3) 19,978
Other assets 52,698
-----------
Total assets 62,973,833
-----------
LIABILITIES:
Payables:
Investment securities purchased 25,538
Transfer agent (See Note 3) 16,134
Professional fees 13,625
Fund shares redeemed 4,543
NYLIFE Distributors (See Note 3) 4,055
Custodian 2,085
Trustees 191
Accrued expenses 1,674
-----------
Total liabilities 67,845
-----------
Net assets $62,905,988
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 6,828
Additional paid-in capital 57,788,381
-----------
57,795,209
Accumulated undistributed net
investment income 227,381
Accumulated net realized loss on
investments (1,610,781)
Net unrealized appreciation on
investments 6,494,179
-----------
Net assets $62,905,988
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 1,569,570
===========
Shares of beneficial interest
outstanding 170,503
===========
Net asset value per share
outstanding $ 9.21
Maximum sales charge (5.50% of
offering price) 0.54
-----------
Maximum offering price per share
outstanding $ 9.75
===========
CLASS A
Net assets applicable to outstanding
shares $12,540,336
===========
Shares of beneficial interest
outstanding 1,364,787
===========
Net asset value per share
outstanding $ 9.19
Maximum sales charge (5.50% of
offering price) 0.53
-----------
Maximum offering price per share
outstanding $ 9.72
===========
CLASS I
Net assets applicable to outstanding
shares $45,258,421
===========
Shares of beneficial interest
outstanding 4,907,833
===========
Net asset value and offering price
per share outstanding $ 9.22
===========
CLASS R2
Net assets applicable to outstanding
shares $ 1,690,092
===========
Shares of beneficial interest
outstanding 183,862
===========
Net asset value and offering price
per share outstanding $ 9.19
===========
CLASS R3
Net assets applicable to outstanding
shares $ 1,847,569
===========
Shares of beneficial interest
outstanding 201,077
===========
Net asset value and offering price
per share outstanding $ 9.19
===========
</Table>
28 MainStay Retirement 2020 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated
investment companies $ 687,928
Dividend distributions from
unaffiliated
investment companies 39,363
----------
Total income 727,291
----------
EXPENSES:
Transfer agent (See Note 3) 52,597
Registration 51,479
Manager (See Note 3) 29,589
Distribution/Service--Investor
Class (See Note 3) 1,500
Distribution/Service--Class A (See
Note 3) 14,690
Distribution/Service--Class R2
(See Note 3) 1,430
Distribution/Service--Class R3
(See Note 3) 4,498
Shareholder communication 19,651
Professional fees 15,403
Custodian 5,391
Trustees 997
Shareholder service (See Note 3) 1,473
Miscellaneous 4,188
----------
Total expenses before
waiver/reimbursement 202,886
Expense waiver/reimbursement from
Manager (See Note 3) (141,691)
Expense reimbursement from
Transfer agent (See Note 3) (1,797)
----------
Net expenses 59,398
----------
Net investment income 667,893
----------
REALIZED AND UNREALIZED GAIN ON :
Net realized gain on:
Affiliated investment company
transactions 2,213,479
Unaffiliated investment company
transactions 368,028
Realized gain distributions from
affiliated investment companies 31,639
Realized gain distributions from
unaffiliated investment
companies 10,769
----------
Net realized gain on investments
from affiliated and unaffiliated
investment companies 2,623,915
----------
Net change in unrealized
appreciation on investments 2,089,545
----------
Net realized and unrealized gain on
investments 4,713,460
----------
Net increase in net assets resulting
from operations $5,381,353
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
29
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 667,893 $ 986,746
Net realized gain (loss) on
investments from
affiliated and
unaffiliated investment
company transactions 2,623,915 (3,703,111)
Net change in unrealized
appreciation
(depreciation) on
investments 2,089,545 10,536,753
-------------------------
Net increase in net assets
resulting from operations 5,381,353 7,820,388
-------------------------
Dividends and distributions
to shareholders:
From net investment income:
Investor Class (17,600) (6,172)
Class A (199,170) (127,594)
Class I (820,771) (471,082)
Class R2 (18,380) --
Class R3 (26,508) (27,097)
-------------------------
(1,082,429) (631,945)
-------------------------
From net realized gain on
investments:
Investor Class -- (630)
Class A -- (11,253)
Class I -- (42,294)
Class R3 -- (2,967)
-------------------------
-- (57,144)
-------------------------
Total dividends and
distributions to
shareholders (1,082,429) (689,089)
-------------------------
Capital share transactions:
Net proceeds from sale of
shares 10,422,302 32,450,241
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 1,082,429 689,089
Cost of shares redeemed (10,418,523) (9,078,659)
-------------------------
Increase in net assets
derived from capital
share transactions 1,086,208 24,060,671
-------------------------
Net increase in net
assets 5,385,132 31,191,970
NET ASSETS:
Beginning of period 57,520,856 26,328,886
-------------------------
End of period $ 62,905,988 $57,520,856
=========================
Accumulated undistributed net
investment income at end of
period $ 227,381 $ 641,917
=========================
</Table>
30 MainStay Retirement 2020 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
31
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 8.56 $ 7.43 $ 9.83
------ ------ -------
Net investment income (a) 0.08 0.18 0.12
Net realized and unrealized gain
(loss) on investments 0.72 1.13 (2.52)
------ ------ -------
Total from investment operations 0.80 1.31 (2.40)
------ ------ -------
Less dividends and distributions:
From net investment income (0.15) (0.16) --
From net realized gain on
investments -- (0.02) --
------ ------ -------
Total dividends and distributions (0.15) (0.18) --
------ ------ -------
Net asset value at end of period $ 9.21 $ 8.56 $ 7.43
====== ====== =======
Total investment return (b) 9.41%(c) 17.99% (24.42%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.86%++ 2.31% 2.02% ++
Net expenses (d) 0.47%++ 0.47% 0.47% ++
Expenses (before
waiver/reimbursement) (d) 1.18%++ 1.31% 1.48% ++
Portfolio turnover rate 45% 68% 134%
Net assets at end of period (in
000's) $1,570 $ 915 $ 342
</Table>
<Table>
<Caption>
CLASS I CLASS R2
-------------------------------------------------- --------------------------
JUNE 29, JANUARY 8,
SIX MONTHS 2007** SIX MONTHS 2009**
ENDED YEAR ENDED OCTOBER THROUGH ENDED THROUGH
APRIL 30, 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2007 2010* 2009
Net asset value at beginning of
period $ 8.58 $ 7.45 $ 10.57 $10.00 $ 8.54 $ 7.21
------- ------- ------- ------ ------ ------
Net investment income (a) 0.10 0.21 0.19 0.05 0.09 0.12
Net realized and unrealized gain
(loss) on investments 0.71 1.12 (3.24) 0.52 0.70 1.21
------- ------- ------- ------ ------ ------
Total from investment operations 0.81 1.33 (3.05) 0.57 0.79 1.33
------- ------- ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.17) (0.18) (0.06) -- (0.14) --
From net realized gain on
investments -- (0.02) (0.01) -- -- --
------- ------- ------- ------ ------ ------
Total dividends and distributions (0.17) (0.20) (0.07) -- (0.14) --
------- ------- ------- ------ ------ ------
Net asset value at end of period $ 9.22 $ 8.58 $ 7.45 $10.57 $ 9.19 $ 8.54
======= ======= ======= ====== ====== ======
Total investment return (b) 9.53%(c) 18.30% (29.14%) 5.80%(c) 9.36%(c) 18.45%(c)(e)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 2.35%++ 2.73% 2.06% 1.56%++ 2.02%++ 1.82%++
Net expenses (d) 0.12%++ 0.12% 0.13% 0.13%++ 0.47%++ 0.47%++
Expenses (before
waiver/reimbursement) (d) 0.60%++ 0.76% 1.45% 35.16%++ 0.95%++ 1.09%++
Portfolio turnover rate 45% 68% 134% 25% 45% 68%
Net assets at end of period (in
000's) $45,258 $42,809 $19,743 $ 440 $1,690 $1,057
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I, Class R2 and Class R3
shares are not subject to sales charges.
(c) Total return is not annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
(e) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
32 MainStay Retirement 2020 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
-----------------------------------------------------------------
JUNE 29,
SIX MONTHS 2007**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007
$ 8.54 $ 7.44 $ 10.57 $10.00
------- ------- ------- ------
0.09 0.19 0.17 0.04
0.71 1.11 (3.25) 0.53
------- ------- ------- ------
0.80 1.30 (3.08) 0.57
------- ------- ------- ------
(0.15) (0.18) (0.04) --
-- (0.02) (0.01) --
------- ------- ------- ------
(0.15) (0.20) (0.05) --
------- ------- ------- ------
$ 9.19 $ 8.54 $ 7.44 $10.57
======= ======= ======= ======
9.49%(c) 17.97% (29.25%) 5.70%(c)
2.05%++ 2.48% 1.79% 1.32%++
0.37%++ 0.37% 0.38% 0.38%++
0.85%++ 1.01% 1.74% 35.65%++
45% 68% 134% 25%
$12,540 $11,026 $ 4,940 $ 297
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------
MAY 1,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
$ 8.54 $ 7.42 $ 9.98
------ ------ -------
0.07 0.17 0.10
0.71 1.12 (2.66)
------ ------ -------
0.78 1.29 (2.56)
------ ------ -------
(0.13) (0.15) --
-- (0.02) --
------ ------ -------
(0.13) (0.17) --
------ ------ -------
$ 9.19 $ 8.54 $ 7.42
====== ====== =======
9.21%(c) 17.71% (25.65%)(c)
1.69%++ 2.31% 2.61%++
0.72%++ 0.72% 0.73%++
1.20%++ 1.37% 1.81%++
45% 68% 134%
$1,848 $1,713 $ 1,305
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
33
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
MAINSTAY RETIREMENT 2030 FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 4.53% 25.28% -5.22%
Excluding sales charges 10.61 32.57 -3.31
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2030 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 9450 10000 10000 10000
4/30/08 9306 9367 9641 10800
4/30/09 6478 6059 5518 11214
4/30/10 8588 8412 7418 12145
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 4.61% 25.44% -5.16%
Excluding sales charges 10.70 32.74 -3.25
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2030 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 23625 25000 25000 25000
4/30/08 23266 23416 24103 27000
4/30/09 16206 15147 13796 28036
4/30/10 21512 21031 18546 30362
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
10.96% 33.08% -2.98%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2030 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9869 9367 9641 10800
4/30/09 6895 6059 5518 11214
4/30/10 9176 8412 7418 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50%, no
contingent deferred sales charge ("CDSC") and an annual 12b-1 fee of 0.25%.
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 or individual investors with a minimum initial investment of $5
million or more. Class R2 shares are sold with no initial sales charge or
CDSC, and have an annual 12b-1 fee of 0.25%. Class R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements. Class R3 shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of 0.50%, and are available in
certain individual retirement accounts or in certain retirement plans.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns may have been lower. For information on
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
34 MainStay Retirement 2030 Fund
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
10.70% 32.57% -3.34%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2030 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9840 9367 9641 10800
4/30/09 6849 6059 5518 11214
4/30/10 9080 8412 7418 12145
</Table>
CLASS R3 SHARES(4)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
10.54% 32.31% -3.55%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2030 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9819 9367 9641 10800
4/30/09 6821 6059 5518 11214
4/30/10 9026 8412 7418 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
S&P 500(R) Index(5) 15.66% 38.84% -5.92%
MSCI EAFE(R) Index(6) 2.48 34.43 -10.00
Barclays Capital U.S. Aggregate Bond Index(7) 2.54 8.30 7.10
Average Lipper mixed-asset target 2030 fund(8) 11.78 35.09 -5.13
</Table>
current fee waivers and/or expense limitations, please refer to the notes to
the financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in expenses and fees. Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. Class R2 shares commenced investment operations on January 8, 2009.
Performance figures for Class R2 shares include the historical performance of
Class A shares through January 7, 2009, adjusted for differences in expenses
and fees. Unadjusted, the performance shown for Class R2 shares might have
been lower.
4. Class R3 shares commenced investment operations on May 1, 2008. Performance
figures for Class R3 shares include the historical performance of Class A
shares through April 30, 2008, adjusted for differences in expenses and fees.
Unadjusted, the performance shown for Class R3 shares might have been lower.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard for measuring large-cap U.S. stock-
market performance. The S&P 500 Index is the Fund's broad-based securities
market index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
6. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--consists of international stocks representing
the developed world outside of North America. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
7. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the MBS Index, and the ABS Index. To qualify for
inclusion in the Barclays Capital U.S. 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 $250 million. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly in an index.
8. The average Lipper mixed-asset target 2030 fund is representative of funds
that seek to maximize assets for retirement or other purposes with an
expected time horizon from January 1, 2026, to December 31, 2030. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on average total returns of similar
funds with all dividend and capital gain distributions reinvested.
THE FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THE TABLES AND
GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 35
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY RETIREMENT 2030 FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,106.10 $2.45 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,107.00 $1.93 $1,023.00 $1.86
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,109.60 $0.63 $1,024.20 $0.60
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,107.00 $2.46 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,105.40 $3.76 $1,021.20 $3.61
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for
Class R2 and 0.72% for Class R3) multiplied by the average account value over
the period, divided by 365 and multiplied by 181 (to reflect the one-half
year period). The table above represents the actual expenses incurred during
the one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
36 MainStay Retirement 2030 Fund
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Growth of Capital 39.2
Total Return 30.6
Capital Appreciation 20.8
Current Income 9.2
Cash and Other Assets, Less Liabilities 0.2
</Table>
See Portfolio of Investments on page 41 for specific holdings within these
categories.
mainstayinvestments.com 37
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY RETIREMENT 2030 FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Retirement 2030 Fund returned 10.61% for
Investor Class shares and 10.70% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 10.96%,
Class R2 shares returned 10.70% and Class R3 shares returned 10.54%. All share
classes underperformed the 11.78% return of the average Lipper(1) mixed-asset
target 2030 fund and the 15.66% return of the S&P 500(R) Index() for the six
months ended April 30, 2010. As of April 30, 2010, Class R1 shares had not
commenced investment operations. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See page 34 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was moderately below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the Fund's average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underlying Funds.
In general, we sought Underlying Equity Funds that had a track record of capable
portfolio management, that occupied attractively valued market segments and that
invested in companies with fairly priced securities and strong price and
earnings momentum. During the reporting period, these techniques were generally
unsuccessful, as they steered the Fund into Underlying Funds that collectively
underperformed the S&P 500(R) Index after adjusting for Underlying Fund expenses
and the Fund's strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most noteworthy change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This
1. See footnote on page 35 for more information on Lipper Inc.
2. See footnote on page 35 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
38 MainStay Retirement 2030 Fund
shift had a positive impact on the Fund's performance, as value-oriented
smaller-capitalization stocks outpaced growth-oriented larger-cap stocks as the
reporting period progressed. We have substantially reduced the Fund's exposure
to growth-oriented stocks over the past two and a half years. At the end of the
current reporting period, the Fund was evenly positioned between growth and
value.
During the reporting period, the Fund initiated new positions in Columbia Small
Cap Index Fund, MainStay Epoch Global Choice Fund and MainStay Convertible Fund.
We selected Columbia Small Cap Index Fund to gain pure exposure to the small-cap
segment of the U.S. stock market. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's responsiveness to movements in the equity market
while incrementally lowering the Fund's average credit quality and duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Columbia Small Cap Index Fund, MainStay U.S. Small Cap Fund and MainStay Epoch
U.S. All Cap Fund generated the best total returns among the Underlying Equity
Funds in which the Fund invested, as these Underlying Funds invested most
heavily in smaller-capitalization stocks. The worst returns came from Underlying
Equity Funds that invest abroad, namely MainStay ICAP International Fund,
MainStay 130/30 International Fund and MainStay International Equity Fund. These
Underlying Funds were hampered not only by comparatively weak overseas returns
in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
On an absolute basis, the strongest contributions to the Fund's equity
performance came from the Fund's largest Underlying Equity Fund holdings, namely
MainStay MAP Fund and MainStay Growth Equity Fund.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND?
U.S. Treasury yields were largely unchanged over the course of the reporting
period. Signs of economic strength, improving corporate profitability and a
large supply of new issuance threatened to push rates higher. These factors,
however, were offset by concerns about corporate and sovereign default risk
(holding company Dubai World and Greece were notable examples) and by questions
about the sustainability of the economic recovery. Lower-quality fixed-income
securities generally outperformed higher-quality fixed-income securities as
credit spreads(4) narrowed, driving bond prices higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished a bias toward
lower-quality instruments. We implemented these strategies primarily by
increasing the Fund's holdings in MainStay Floating Rate Fund, MainStay High
Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
mainstayinvestments.com 39
in credit spreads that accompanied the economic recovery. The worst-performing
Underlying Fixed Income Fund--and the only Fund holding that provided a negative
return--was American Century International Bond Fund. This Underlying Fund was
hurt by the potential for sovereign defaults and by a rising U.S. dollar.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
40 MainStay Retirement 2030 Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 89.8%+
- ------------------------------------------------------
EQUITY FUNDS 71.7%
MainStay 130/30 Core
Fund Class I 1,118,914 $ 8,123,313
MainStay 130/30 Growth
Fund Class I (a) 60,495 483,352
MainStay 130/30 International
Fund Class I 529,105 3,343,943
MainStay Common Stock
Fund Class I 445,006 4,881,711
MainStay Epoch Global Choice
Fund Class I 70,238 992,464
MainStay Epoch U.S. All Cap
Fund Class I 259,241 5,711,084
MainStay Growth Equity
Fund Class I 31,490 323,084
MainStay ICAP Equity
Fund Class I 143,659 4,918,894
MainStay ICAP International
Fund Class I 122,631 3,362,549
MainStay ICAP Select Equity
Fund Class I 148,707 4,920,717
MainStay International Equity
Fund Class I 232,526 2,853,091
MainStay Large Cap Growth
Fund Class I (a) 933,611 6,059,133
MainStay MAP
Fund Class I 229,352 6,871,390
MainStay S&P 500 Index
Fund Class I 6,717 184,439
MainStay U.S. Small Cap
Fund Class I (a) 258,787 3,941,327
-----------
Total Equity Funds
(Cost $49,295,127) 56,970,491
-----------
FIXED INCOME FUNDS 18.1%
MainStay Convertible
Fund Class I 73,850 1,100,362
MainStay Floating Rate
Fund Class I 219,221 2,051,909
MainStay Global High Income
Fund Class I (b) 176,966 2,058,113
MainStay High Yield Corporate
Bond Fund Class I 275,974 1,595,127
MainStay High Yield
Opportunities Fund Class I 186,386 2,208,669
MainStay Indexed Bond
Fund Class I 330,341 3,755,978
MainStay Intermediate Term
Bond Fund Class I 153,105 1,609,135
-----------
Total Fixed Income Funds
(Cost $13,297,092) 14,379,293
-----------
Total Affiliated Investment
Companies
(Cost $62,592,219) 71,349,784
-----------
UNAFFILIATED INVESTMENT COMPANIES 10.0%
- ------------------------------------------------------
EQUITY FUNDS 7.0%
Columbia Funds Series
Trust-Columbia SmallCap
Index Fund 29,004 463,486
T. Rowe Price Emerging Markets
Stock Fund 91,615 2,831,823
T. Rowe Price International
Discovery Fund 59,332 2,283,091
-----------
Total Equity Funds
(Cost $4,991,298) 5,578,400
-----------
FIXED INCOME FUNDS 3.0%
American Century Inflation
Adjusted Bond Fund 66,725 788,684
American Century International
Bond Fund Institutional
Class 116,379 1,622,320
-----------
Total Fixed Income Funds
(Cost $2,473,515) 2,411,004
-----------
Total Unaffiliated Investment
Companies
(Cost $7,464,813) 7,989,404
-----------
Total Investments
(Cost $70,057,032) (c) 99.8% 79,339,188
Other Assets, Less Liabilities 0.2 148,061
--------- -----------
Net Assets 100.0% $79,487,249
========= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) The Fund's ownership exceeds 5% of the
outstanding shares of the Underlying
Funds share class (See Note 3).
(c) At April 30, 2010, cost is $73,930,691
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 9,360,234
Gross unrealized depreciation (3,951,737)
-----------
Net unrealized appreciation $ 5,408,497
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
41
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $56,970,491 $ -- $ -- $56,970,491
Fixed Income Funds 14,379,293 -- -- 14,379,293
----------- -------- -------- -----------
Total Affiliated Investment Companies 71,349,784 -- -- 71,349,784
----------- -------- -------- -----------
Unaffiliated Investment Companies
Equity Funds 5,578,400 -- -- 5,578,400
Fixed Income Funds 2,411,004 -- -- 2,411,004
----------- -------- -------- -----------
Total Unaffiliated Investment Companies 7,989,404 -- -- 7,989,404
----------- -------- -------- -----------
Total Investments in Securities $79,339,188 $-- $-- $79,339,188
=========== ======== ======== ===========
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
42 MainStay Retirement 2030 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $62,592,219) $71,349,784
Investments in unaffiliated
investment companies, at value
(identified cost $7,464,813) 7,989,404
Cash 31,401
Receivables:
Fund shares sold 149,593
Manager (See Note 3) 25,957
Other assets 53,570
-----------
Total assets 79,599,709
-----------
LIABILITIES:
Payables:
Fund shares redeemed 32,802
Investment securities purchased 31,400
Transfer agent (See Note 3) 24,857
Professional fees 13,735
NYLIFE Distributors (See Note 3) 6,070
Custodian 2,126
Trustees 187
Accrued expenses 1,283
-----------
Total liabilities 112,460
-----------
Net assets $79,487,249
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 9,113
Additional paid-in capital 72,992,876
-----------
73,001,989
Accumulated undistributed net
investment income 164,370
Accumulated net realized loss on
investments (2,961,266)
Net unrealized appreciation on
investments 9,282,156
-----------
Net assets $79,487,249
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 1,300,376
===========
Shares of beneficial interest
outstanding 149,443
===========
Net asset value per share
outstanding $ 8.70
Maximum sales charge (5.50% of
offering price) 0.51
-----------
Maximum offering price per share
outstanding $ 9.21
===========
CLASS A
Net assets applicable to outstanding
shares $12,167,730
===========
Shares of beneficial interest
outstanding 1,401,686
===========
Net asset value per share
outstanding $ 8.68
Maximum sales charge (5.50% of
offering price) 0.51
-----------
Maximum offering price per share
outstanding $ 9.19
===========
CLASS I
Net assets applicable to outstanding
shares $57,131,560
===========
Shares of beneficial interest
outstanding 6,539,215
===========
Net asset value and offering price
per share outstanding $ 8.74
===========
CLASS R2
Net assets applicable to outstanding
shares $ 3,183,253
===========
Shares of beneficial interest
outstanding 366,801
===========
Net asset value and offering price
per share outstanding $ 8.68
===========
CLASS R3
Net assets applicable to outstanding
shares $ 5,704,330
===========
Shares of beneficial interest
outstanding 655,817
===========
Net asset value and offering price
per share outstanding $ 8.70
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
43
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated
investment companies $ 695,639
Dividend distributions from
unaffiliated investment
companies 44,860
----------
Total income 740,499
----------
EXPENSES:
Transfer agent (See Note 3) 87,737
Registration 54,923
Manager (See Note 3) 36,238
Distribution/Service--Investor
Class (See Note 3) 1,107
Distribution/Service--Class A (See
Note 3) 13,927
Distribution/Service--Class R2
(See Note 3) 2,274
Distribution/Service--Class R3
(See Note 3) 13,341
Shareholder communication 23,146
Professional fees 16,249
Custodian 5,634
Trustees 1,187
Shareholder service (See Note 3) 3,583
Miscellaneous 4,489
----------
Total expenses before
waiver/reimbursement 263,835
Expense waiver/reimbursement from
Manager (See Note 3) (183,838)
Expense reimbursement from
Transfer agent (See Note 3) (2,601)
----------
Net expenses 77,396
----------
Net investment income 663,103
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Affiliated investment company
transactions 2,130,470
Unaffiliated investment company
transactions 555,978
Realized gain distributions from
affiliated investment companies 20,770
Realized gain distributions from
unaffiliated investment
companies 16,374
----------
Net realized gain on investments
from affiliated and unaffiliated
investment companies 2,723,592
----------
Net change in unrealized
appreciation on investments 3,985,243
----------
Net realized and unrealized gain on
investments 6,708,835
----------
Net increase in net assets resulting
from operations $7,371,938
==========
</Table>
44 MainStay Retirement 2030 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 663,103 $ 1,008,791
Net realized gain (loss) on
investments from
affiliated and
unaffiliated
investment company
transactions 2,723,592 (5,164,517)
Net change in unrealized
appreciation
on investments 3,985,243 13,680,745
-------------------------
Net increase in net assets
resulting
from operations 7,371,938 9,525,019
-------------------------
Dividends and distributions
to shareholders:
From net investment income:
Investor Class (10,126) (3,124)
Class A (150,443) (110,257)
Class I (808,959) (489,844)
Class R2 (22,641) --
Class R3 (59,828) (63,982)
-------------------------
(1,051,997) (667,207)
-------------------------
From net realized gain on
investments:
Investor Class -- (213)
Class A -- (6,363)
Class I -- (30,777)
Class R3 -- (4,842)
-------------------------
-- (42,195)
-------------------------
Total dividends and
distributions to
shareholders (1,051,997) (709,402)
-------------------------
Capital share transactions:
Net proceeds from sale of
shares 12,977,827 37,041,778
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 1,051,997 709,402
Cost of shares redeemed (8,735,767) (10,525,579)
-------------------------
Increase in net assets
derived from capital
share transactions 5,294,057 27,225,601
-------------------------
Net increase in net
assets 11,613,998 36,041,218
NET ASSETS:
Beginning of period 67,873,251 31,832,033
-------------------------
End of period $79,487,249 $ 67,873,251
=========================
Accumulated undistributed net
investment income at end of
period $ 164,370 $ 553,264
=========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
45
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 7.97 $ 6.92 $ 9.60
------ ------ -------
Net investment income 0.06 (a) 0.12 (a) 0.07 (a)
Net realized and unrealized gain
(loss) on investments 0.78 1.07 (2.75)
------ ------ -------
Total from investment operations 0.84 1.19 (2.68)
------ ------ -------
Less dividends and distributions:
From net investment income (0.11) (0.13) --
From net realized gain on
investments -- (0.01) --
------ ------ -------
Total dividends and distributions (0.11) (0.14) --
------ ------ -------
Net asset value at end of period $ 8.70 $ 7.97 $ 6.92
====== ====== =======
Total investment return (b) 10.61%(c) 17.67% (27.92%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.48%++ 1.75% 1.26% ++
Net expenses (d) 0.47%++ 0.47% 0.46% ++
Expenses (before
waiver/reimbursement) (d) 1.40%++ 1.70% 1.42% ++
Portfolio turnover rate 39% 71% 148%
Net assets at end of period (in
000's) $1,300 $ 606 $ 104
</Table>
<Table>
<Caption>
CLASS I CLASS R2
-------------------------------------------------- --------------------------
JUNE 29, JANUARY 8,
SIX MONTHS 2007** SIX MONTHS 2009**
ENDED YEAR ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2007 2010* 2009
Net asset value at beginning of
period $ 8.00 $ 6.94 $ 10.60 $10.00 $ 7.94 $ 6.64
------- ------- ------- ------ ------ ------
Net investment income 0.08 (a) 0.17 (a) 0.13 (a) 0.03 0.07 (a) 0.08 (a)
Net realized and unrealized gain
(loss) on investments 0.79 1.04 (3.69) 0.57 0.77 1.22
------- ------- ------- ------ ------ ------
Total from investment operations 0.87 1.21 (3.56) 0.60 0.84 1.30
------- ------- ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.13) (0.14) (0.09) -- (0.10) --
From net realized gain on
investments -- (0.01) (0.01) -- -- --
------- ------- ------- ------ ------ ------
Total dividends and distributions (0.13) (0.15) (0.10) -- (0.10) --
------- ------- ------- ------ ------ ------
Net asset value at end of period $ 8.74 $ 8.00 $ 6.94 $10.60 $ 8.68 $ 7.94
======= ======= ======= ====== ====== ======
Total investment return (b) 10.96%(c) 17.96% (33.86%) 6.00%(c) 10.70%(c) 19.58%(c)(e)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.93%++ 2.37% 1.49% 0.96%++ 1.63%++ 1.34%++
Net expenses (d) 0.12%++ 0.12% 0.13% 0.13%++ 0.47%++ 0.47%++
Expenses (before
waiver/reimbursement) (d) 0.63%++ 0.76% 1.36% 35.62%++ 0.98%++ 1.10%++
Portfolio turnover rate 39% 71% 148% 42% 39% 71%
Net assets at end of period (in
000's) $57,132 $50,513 $23,249 $ 287 $3,183 $1,540
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I, Class R2 and Class R3
shares are not subject to sales charges.
(c) Total return is not annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
(e) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
46 MainStay Retirement 2030 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
-----------------------------------------------------------------
JUNE 29,
SIX MONTHS 2007**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007
$ 7.95 $ 6.92 $ 10.59 $10.00
------- ------- ------- ------
0.07 (a) 0.15 (a) 0.11 (a) 0.02
0.78 1.05 (3.69) 0.57
------- ------- ------- ------
0.85 1.20 (3.58) 0.59
------- ------- ------- ------
(0.12) (0.16) (0.08) --
-- (0.01) (0.01) --
------- ------- ------- ------
(0.12) (0.17) (0.09) --
------- ------- ------- ------
$ 8.68 $ 7.95 $ 6.92 $10.59
======= ======= ======= ======
10.70%(c) 17.63% (33.97%) 5.90%(c)
1.64%++ 2.14% 1.22% 0.71%++
0.37%++ 0.37% 0.38% 0.38%++
0.88%++ 1.01% 1.76% 35.87%++
39% 71% 148% 42%
$12,168 $10,314 $ 4,784 $ 306
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------
MAY 1,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
$ 7.96 $ 6.92 $ 9.76
------ ------ -------
0.05 (a) 0.14 (a) 0.03 (a)
0.78 1.03 (2.87)
------ ------ -------
0.83 1.17 (2.84)
------ ------ -------
(0.09) (0.12) --
-- (0.01) --
------ ------ -------
(0.09) (0.13) --
------ ------ -------
$ 8.70 $ 7.96 $ 6.92
====== ====== =======
10.54%(c) 17.28% (29.10%)(c)
1.29%++ 1.98% 0.79% ++
0.72%++ 0.72% 0.73% ++
1.23%++ 1.36% 1.69% ++
39% 71% 148%
$5,704 $4,901 $ 3,695
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
47
MAINSTAY RETIREMENT 2040 FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 5.24% 26.85% -6.14%
Excluding sales charges 11.37 34.23 -4.25
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2040 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 9450 10000 10000 10000
4/30/08 9221 9367 9641 10800
4/30/09 6224 6059 5518 11214
4/30/10 8354 8412 7418 12145
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 5.35% 26.88% -6.09%
Excluding sales charges 11.48 34.26 -4.20
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2040 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 23625 25000 25000 25000
4/30/08 23052 23416 24103 27000
4/30/09 15580 15147 13796 28036
4/30/10 20918 21031 18546 30362
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
11.59% 34.64% -4.00%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2040 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9780 9367 9641 10800
4/30/09 6615 6059 5518 11214
4/30/10 8906 8412 7418 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50%, no
contingent deferred sales charge ("CDSC") and an annual 12b-1 fee of 0.25%.
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 or individual investors with a minimum initial investment of $5
million or more. Class R2 shares are sold with no initial sales charge or
CDSC, and have an annual 12b-1 fee of 0.25%. Class R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements. Class R3 shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
48 MainStay Retirement 2040 Fund
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
11.45% 34.23% -4.26%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2040 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9749 9367 9641 10800
4/30/09 6585 6059 5518 11214
4/30/10 8839 8412 7418 12145
</Table>
CLASS R3 SHARES(4)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
11.21% 33.73% -4.57%
</Table>
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2040 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9729 9367 9641 10800
4/30/09 6548 6059 5518 11214
4/30/10 8756 8412 7418 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE SINCE
MONTHS YEAR INCEPTION
S&P 500(R) Index(5) 15.66% 38.84% -5.92%
MSCI EAFE(R) Index(6) 2.48 34.43 -10.00
Barclays Capital U.S. Aggregate Bond Index(7) 2.54 8.30 7.10
Average Lipper mixed-asset target 2040 fund(8) 12.72 37.51 -5.79
</Table>
0.50%, and are available in certain individual retirement accounts or in
certain retirement plans. Performance figures reflect certain fee waivers
and/or expense limitations, without which total returns may have been lower.
For information on current fee waivers and/or expense limitations, please
refer to the notes to the financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in expenses and fees Unadjusted, the
performance shown for Investor Class shares might have been lower.
3. Class R2 shares commenced investment operations on January 8, 2009.
Performance figures for Class R2 shares include the historical performance of
Class A shares through January 7, 2009, adjusted for differences in expenses
and fees. Unadjusted, the performance shown for Class R2 shares might have
been lower.
4. Class R3 shares commenced investment operations on May 1, 2008. Performance
figures for Class R3 shares include the historical performance of Class A
shares through April 30, 2008, adjusted for differences in expenses and fees.
Unadjusted, the performance shown for Class R3 shares might have been lower.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard for measuring large-cap U.S. stock-
market performance. The S&P 500 Index is the Fund's broad-based securities
market index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
6. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--consists of international stocks representing
the developed world outside of North America. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
7. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the MBS Index, and the ABS Index. To qualify for
inclusion in the Barclays Capital U.S. 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 $250 million. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly in an index.
8. The average Lipper mixed-asset target 2040 fund is representative of funds
that seek to maximize assets for retirement or other purposes with an
expected time horizon from January 1, 2036, to December 31, 2040. This
benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor
of fund performance. Results are based on average total returns of similar
funds with all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 49
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY RETIREMENT 2040 FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,113.70 $2.46 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,114.80 $1.94 $1,023.00 $1.86
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,115.90 $0.63 $1,024.20 $0.60
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,114.50 $2.46 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,112.10 $3.77 $1,021.20 $3.61
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for
Class R2 and 0.72% for Class R3) multiplied by the average account value over
the period, divided by 365 and multiplied by 181 (to reflect the one-half
year period). The table above represents the actual expenses incurred during
the one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
50 MainStay Retirement 2040 Fund
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Growth of Capital 42.8
Total Return 28.8
Capital Appreciation 22.3
Current Income 5.9
Cash and Other Assets, Less Liabilities 0.2
</Table>
See Portfolio of Investments on page 55 for specific holdings within these
categories.
mainstayinvestments.com 51
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY RETIREMENT 2040 FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Retirement 2040 Fund returned 11.37% for
Investor Class shares and 11.48% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 11.59%,
Class R2 shares returned 11.45% and Class R3 shares returned 11.21%. All share
classes underperformed the 12.72% return of the average Lipper(1) mixed-asset
target 2040 fund and the 15.66% return of the S&P 500(R) Index(2) for the six
months ended April 30, 2010. As of April 30, 2010, Class R1 shares had not
commenced investment operations. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See page 48 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was significantly below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the Fund's average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a period when value stocks were in
favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underlying Funds.
In general, we sought Underlying Equity Funds that had a track record of capable
portfolio management, that occupied attractively valued market segments and that
invested in companies with fairly priced securities and strong price and
earnings momentum. During the reporting period, these techniques were generally
unsuccessful, as they steered the Fund into Underlying Funds that collectively
underperformed the S&P 500(R) Index after adjusting for Underlying Fund expenses
and the Fund's strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most noteworthy change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This
1. See footnote on page 49 for more information on Lipper Inc.
2. See footnote on page 49 for more information on the S&P 500(R) Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment
to changes in interest rates. Duration is expressed as a number of years and
is considered a more accurate sensitivity gauge than average maturity.
52 MainStay Retirement 2040 Fund
shift had a positive impact on the Fund's performance, as value-oriented
smaller-capitalization stocks outpaced growth-oriented larger-cap stocks as the
reporting period progressed. We have substantially reduced the Fund's exposure
to growth-oriented stocks over the past two and a half years. At the end of the
current reporting period, the Fund was evenly positioned between growth and
value.
During the reporting period, the Fund initiated new positions in Columbia Small
Cap Index Fund, MainStay Epoch Global Choice Fund and MainStay Convertible Fund.
We selected Columbia Small Cap Index Fund to gain pure exposure to the small-cap
segment of the U.S. stock market. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's responsiveness to movements in the equity market
while incrementally lowering the Fund's average credit quality and duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Columbia Small Cap Index Fund, MainStay U.S. Small Cap Fund and MainStay Epoch
U.S. All Cap Fund generated the best total returns among the Underlying Equity
Funds in which the Fund invested, as these Underlying Funds invested most
heavily in smaller-capitalization stocks. The worst returns came from Underlying
Equity Funds that invest abroad, namely MainStay ICAP International Fund,
MainStay 130/30 International Fund and MainStay International Equity Fund. These
Underlying Funds were hampered not only by comparatively weak overseas returns
in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
On an absolute basis, the strongest contributions to the Fund's equity
performance came from the Fund's largest Underlying Equity Fund holdings, namely
MainStay MAP Fund and MainStay Growth Equity Fund.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND?
U.S. Treasury yields were largely unchanged over the course of the reporting
period. Signs of economic strength, improving corporate profitability and a
large supply of new issuance threatened to push rates higher. These factors,
however, were offset by concerns about corporate and sovereign default risk
(holding company Dubai World and Greece were notable examples) and by questions
about the sustainability of the economic recovery. Lower-quality fixed-income
securities generally outperformed higher-quality fixed-income securities as
credit spreads(4) narrowed, driving bond prices higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished a bias toward
lower-quality instruments. We implemented these strategies primarily by
increasing the Fund's holdings in MainStay Floating Rate Fund, MainStay High
Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
mainstayinvestments.com 53
recovery. The worst-performing Underlying Fixed Income Fund--and the only Fund
holding that provided a negative return--was American Century International Bond
Fund. This Underlying Fund was hurt by the potential for sovereign defaults and
by a rising U.S. dollar.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
54 MainStay Retirement 2040 Fund
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 89.9%+
- ----------------------------------------------------
EQUITY FUNDS 78.7%
MainStay 130/30 Core
Fund Class I 689,903 $ 5,008,695
MainStay 130/30 Growth
Fund Class I (a) 32,496 259,646
MainStay 130/30 International
Fund Class I 337,227 2,131,273
MainStay Common Stock
Fund Class I 281,107 3,083,740
MainStay Epoch Global Choice
Fund Class I 45,106 637,344
MainStay Epoch U.S. All Cap
Fund Class I 183,320 4,038,549
MainStay Growth Equity
Fund Class I 17,050 174,928
MainStay ICAP Equity
Fund Class I 91,886 3,146,189
MainStay ICAP International
Fund Class I 78,162 2,143,195
MainStay ICAP Select Equity
Fund Class I 95,115 3,147,355
MainStay International Equity
Fund Class I 148,202 1,818,440
MainStay Large Cap Growth
Fund Class I (a) 563,475 3,656,955
MainStay MAP
Fund Class I 106,112 3,179,111
MainStay S&P 500 Index
Fund Class I 5,062 138,996
MainStay U.S. Small Cap
Fund Class I (a) 230,924 3,516,973
-----------
Total Equity Funds
(Cost $31,665,581) 36,081,389
-----------
FIXED INCOME FUNDS 11.2%
MainStay Convertible Fund
Class I 75,617 1,126,687
MainStay Floating Rate Fund
Class I 77,134 721,975
MainStay Global High Income
Fund Class I 62,266 724,157
MainStay High Yield Corporate
Bond Fund Class I 97,103 561,254
MainStay High Yield
Opportunities Fund Class I 65,581 777,131
MainStay Indexed Bond Fund
Class I 74,775 850,191
MainStay Intermediate Term
Bond Fund Class I 34,656 364,240
-----------
Total Fixed Income Funds
(Cost $4,775,858) 5,125,635
-----------
Total Affiliated Investment
Companies
(Cost $36,441,439) 41,207,024
-----------
UNAFFILIATED INVESTMENT COMPANIES 9.8%
- ----------------------------------------------------
EQUITY FUNDS 7.9%
Columbia Funds Series
Trust--Columbia SmallCap
Index Fund 23,114 369,367
T. Rowe Price Emerging Markets
Stock Fund 58,412 1,805,512
T. Rowe Price International
Discovery Fund 37,830 1,455,706
-----------
Total Equity Funds
(Cost $3,286,830) 3,630,585
-----------
FIXED INCOME FUNDS 1.9%
American Century Inflation
Adjusted Bond Fund 24,204 286,091
American Century International
Bond Fund Institutional
Class 41,061 572,387
-----------
Total Fixed Income Funds
(Cost $881,870) 858,478
-----------
Total Unaffiliated Investment
Companies
(Cost $4,168,700) 4,489,063
-----------
Total Investments
(Cost $40,610,139)(b) 99.7% 45,696,087
Other Assets, Less Liabilities 0.3 144,478
------- -----------
Net Assets 100.0% $45,840,565
======= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) At April 30, 2010, cost is $42,957,966
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 5,115,014
Gross unrealized depreciation (2,376,893)
-----------
Net unrealized appreciation $ 2,738,121
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
55
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $36,081,389 $ -- $ -- $36,081,389
Fixed Income Funds 5,125,635 -- -- 5,125,635
----------- -------- -------- -----------
Total Affiliated Investment Companies 41,207,024 -- -- 41,207,024
----------- -------- -------- -----------
Unaffiliated Investment Companies
Equity Funds 3,630,585 -- -- 3,630,585
Fixed Income Funds 858,478 -- -- 858,478
----------- -------- -------- -----------
Total Unaffiliated Investment Companies 4,489,063 -- -- 4,489,063
----------- -------- -------- -----------
Total Investments in Securities $45,696,087 $-- $-- $45,696,087
=========== ======== ======== ===========
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
56 MainStay Retirement 2040 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $36,441,439) $41,207,024
Investments in unaffiliated
investment companies, at value
(identified cost $4,168,700) 4,489,063
Cash 16,277
Receivables:
Fund shares sold 111,166
Manager (See Note 3) 20,059
Other assets 52,779
-----------
Total assets 45,896,368
-----------
LIABILITIES:
Payables:
Investment securities purchased 16,276
Transfer agent (See Note 3) 14,314
Professional fees 13,236
NYLIFE Distributors (See Note 3) 4,132
Fund shares redeemed 3,901
Custodian 2,392
Trustees 93
Accrued expenses 1,459
-----------
Total liabilities 55,803
-----------
Net assets $45,840,565
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) 750 million shares
authorized $ 5,363
Additional paid-in capital 42,180,012
-----------
42,185,375
Accumulated undistributed net
investment income 49,288
Accumulated net realized loss on
investments (1,480,046)
Net unrealized appreciation on
investments 5,085,948
-----------
Net assets $45,840,565
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 990,439
===========
Shares of beneficial interest
outstanding 116,014
===========
Net asset value per share
outstanding $ 8.54
Maximum sales charge (5.50% of
offering price) 0.50
-----------
Maximum offering price per share
outstanding $ 9.04
===========
CLASS A
Net assets applicable to outstanding
shares $ 6,244,535
===========
Shares of beneficial interest
outstanding 734,140
===========
Net asset value per share
outstanding $ 8.51
Maximum sales charge (5.50% of
offering price) 0.50
-----------
Maximum offering price per share
outstanding $ 9.01
===========
CLASS I
Net assets applicable to outstanding
shares $31,062,847
===========
Shares of beneficial interest
outstanding 3,627,124
===========
Net asset value and offering price
per share outstanding $ 8.56
===========
CLASS R2
Net assets applicable to outstanding
shares $ 3,243,931
===========
Shares of beneficial interest
outstanding 380,712
===========
Net asset value and offering price
per share outstanding $ 8.52
===========
CLASS R3
Net assets applicable to outstanding
shares $ 4,298,813
===========
Shares of beneficial interest
outstanding 504,998
===========
Net asset value and offering price
per share outstanding $ 8.51
===========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
57
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 348,119
Dividend distributions from
unaffiliated
investment companies 21,908
----------
Total income 370,027
----------
EXPENSES:
Transfer agent (See Note 3) 51,095
Registration 47,365
Distribution/Service--Investor
Class (See Note 3) 1,007
Distribution/Service--Class A (See
Note 3) 7,294
Distribution/Service--Class R2
(See Note 3) 2,342
Distribution/Service--Class R3
(See Note 3) 9,999
Manager (See Note 3) 20,561
Professional fees 13,897
Shareholder communication 12,934
Custodian 5,961
Trustees 663
Shareholder service (See Note 3) 2,930
Miscellaneous 3,952
----------
Total expenses before
waiver/reimbursement 180,000
Expense waiver/reimbursement from
Manager (See Note 3) (130,282)
Expense reimbursement from
Transfer agent (See Note 3) (1,420)
----------
Net expenses 48,298
----------
Net investment income 321,729
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Affiliated investment company
transactions 1,565,483
Unaffiliated investment company
transactions 332,552
Realized gain distributions from
affiliated investment companies 7,448
Realized gain distributions from
unaffiliated investment
companies 10,164
----------
Net realized gain on investments
from affiliated and unaffiliated
investment companies 1,915,647
----------
Net change in unrealized
appreciation on investments 2,198,791
----------
Net realized and unrealized gain on
investments 4,114,438
----------
Net increase in net assets resulting
from operations $4,436,167
==========
</Table>
58 MainStay Retirement 2040 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 321,729 $ 454,289
Net realized gain (loss) on
investments from
affiliated and
unaffiliated investment
company transactions 1,915,647 (3,035,376)
Net change in unrealized
appreciation on
investments 2,198,791 7,645,510
------------------------
Net increase in net assets
resulting
from operations 4,436,167 5,064,423
------------------------
Dividends to shareholders:
From net investment income:
Investor Class (8,084) (2,062)
Class A (65,681) (54,906)
Class I (361,660) (231,599)
Class R2 (18,538) --
Class R3 (34,687) (49,111)
------------------------
Total dividends to
shareholders (488,650) (337,678)
------------------------
Capital share transactions:
Net proceeds from sale of
shares 8,333,433 22,038,972
Net asset value of shares
issued to shareholders in
reinvestment of dividends 488,396 337,678
Cost of shares redeemed (5,139,193) (5,368,229)
------------------------
Increase in net assets
derived from capital
share transactions 3,682,636 17,008,421
------------------------
Net increase in net
assets 7,630,153 21,735,166
NET ASSETS:
Beginning of period 38,210,412 16,475,246
------------------------
End of period $45,840,565 $38,210,412
========================
Accumulated undistributed net
investment income at end of
period $ 49,288 $ 216,209
========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
59
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 7.75 $ 6.74 $ 9.56
------ ------ -------
Net investment income (a) 0.05 0.09 0.06
Net realized and unrealized gain
(loss) on investments 0.83 1.04 (2.88)
------ ------ -------
Total from investment operations 0.88 1.13 (2.82)
------ ------ -------
Less dividends and distributions:
From net investment income (0.09) (0.12) --
From net realized gain on
investments -- -- --
------ ------ -------
Total dividends and distributions (0.09) (0.12) --
------ ------ -------
Net asset value at end of period $ 8.54 $ 7.75 $ 6.74
====== ====== =======
Total investment return (b) 11.37%(c) 17.20% (29.50%)(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.22%++ 1.25% 1.10% ++
Net expenses (d) 0.47%++ 0.47% 0.46% ++
Expenses (before
waiver/reimbursement) (d) 1.63%++ 1.94% 1.93% ++
Portfolio turnover rate 41% 75% 145%
Net assets at end of period (in
000's) $ 990 $ 614 $ 81
</Table>
<Table>
<Caption>
CLASS I CLASS R2
-------------------------------------------------- --------------------------
JUNE 29, JANUARY 8,
SIX MONTHS 2007** SIX MONTHS 2009**
ENDED YEAR ENDED THROUGH ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2007 2010* 2009
Net asset value at beginning of
period $ 7.77 $ 6.76 $ 10.61 $10.00 $ 7.72 $ 6.43
------- ------- ------- ------ ------ ------
Net investment income (a) 0.07 0.14 0.11 0.03 0.06 0.05
Net realized and unrealized gain
(loss) on investments 0.83 1.00 (3.90) 0.58 0.82 1.24
------- ------- ------- ------ ------ ------
Total from investment operations 0.90 1.14 (3.79) 0.61 0.88 1.29
------- ------- ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.11) (0.13) (0.05) -- (0.08) --
From net realized gain on
investments -- -- (0.01) -- -- --
------- ------- ------- ------ ------ ------
Total dividends and distributions (0.11) (0.13) (0.06) -- (0.08) --
------- ------- ------- ------ ------ ------
Net asset value at end of period $ 8.56 $ 7.77 $ 6.76 $10.61 $ 8.52 $ 7.72
======= ======= ======= ====== ====== ======
Total investment return (b) 11.59%(c) 17.34% (35.96%) 6.20%(c) 11.45%(c) 20.06%(c)(e)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.68%++ 2.04% 1.25% 0.75%++ 1.35%++ 0.91%++
Net expenses (d) 0.12%++ 0.12% 0.13% 0.13%++ 0.47%++ 0.47%++
Expenses (before
waiver/reimbursement) (d) 0.75%++ 0.94% 2.02% 39.47%++ 1.10%++ 1.26%++
Portfolio turnover rate 41% 75% 145% 25% 41% 75%
Net assets at end of period (in
000's) $31,063 $27,031 $11,263 $ 273 $3,244 $1,425
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I, Class R2 and Class R3
shares are not subject to sales charges.
(c) Total return is not annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
(e) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
60 MainStay Retirement 2040 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
----------------------------------------------------------------
JUNE 29,
SIX MONTHS 2007**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007
$ 7.72 $ 6.75 $ 10.61 $10.00
------ ------ ------- ------
0.06 0.12 0.10 0.02
0.82 1.00 (3.91) 0.59
------ ------ ------- ------
0.88 1.12 (3.81) 0.61
------ ------ ------- ------
(0.09) (0.15) (0.04) --
-- -- (0.01) --
------ ------ ------- ------
(0.09) (0.15) (0.05) --
------ ------ ------- ------
$ 8.51 $ 7.72 $ 6.75 $10.61
====== ====== ======= ======
11.48%(c) 17.09% (36.07%) 6.10%(c)
1.42%++ 1.77% 1.07% 0.49%++
0.37%++ 0.37% 0.38% 0.38%++
1.00%++ 1.19% 2.57% 39.66%++
41% 75% 145% 25%
$6,245 $5,459 $ 2,364 $ 265
</Table>
<Table>
<Caption>
CLASS R3
------------------------------------------------------
MAY 1,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
$ 7.72 $ 6.73 $ 9.71
------ ------ -------
0.04 0.11 0.04
0.82 0.99 (3.02)
------ ------ -------
0.86 1.10 (2.98)
------ ------ -------
(0.07) (0.11) --
-- -- --
------ ------ -------
(0.07) (0.11) --
------ ------ -------
$ 8.51 $ 7.72 $ 6.73
====== ====== =======
11.21%(c) 16.77% (30.69%)(c)
1.05%++ 1.68% 1.07% ++
0.72%++ 0.72% 0.73% ++
1.35%++ 1.55% 2.08% ++
41% 75% 145%
$4,299 $3,682 $ 2,767
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
61
MAINSTAY RETIREMENT 2050 FUND
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 5.57% 27.71% -6.85%
Excluding sales charges 11.72 35.14 -4.98
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2050 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 9450 10000 10000 10000
4/30/08 9155 9367 9641 10800
4/30/09 6050 6059 5518 11214
4/30/10 8176 8412 7418 12145
</Table>
CLASS A SHARES--MAXIMUM 5.5% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- --------------------------------------------------------
With sales charges 5.77% 27.98% -6.76%
Excluding sales charges 11.93 35.43 -4.89
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2050 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 23625 25000 25000 25000
4/30/08 22887 23416 24103 27000
4/30/09 15132 15147 13796 28036
4/30/10 20494 21031 18546 30362
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
12.06% 35.88% -4.62%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2050 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9720 9367 9641 10800
4/30/09 6435 6059 5518 11214
4/30/10 8744 8412 7418 12145
</Table>
1. Performance tables and graphs do not reflect any deduction of taxes that a
shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 5.50%, no
contingent deferred sales charge ("CDSC") and an annual 12b-1 fee of 0.25%.
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 or individual investors with a minimum initial investment of $5
million or more. Class R2 shares are sold with no initial sales charge or
CDSC, and have an annual 12b-1 fee of 0.25%. Class R2 shares are available
only through corporate-sponsored retirement programs, which include certain
minimum program requirements. Class R3 shares are sold with no initial sales
charge or CDSC, have an annual 12b-1 fee of 0.50%, and are available in
certain individual retirement accounts or in certain retirement plans.
Performance figures reflect certain fee waivers and/or expense limitations,
without which total returns may have been lower. For information on current
fee waivers and/or expense limitations, please refer to the notes to the
financial statements.
2. Performance figures for Investor Class shares, first offered February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in expenses
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
62 MainStay Retirement 2050 Fund
CLASS R2 SHARES(3)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
11.87% 35.36% -4.95%
</Table>
(With sales charges)
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2050 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9680 9367 9641 10800
4/30/09 6395 6059 5518 11214
4/30/10 8657 8412 7418 12145
</Table>
CLASS R3 SHARES(4)--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
SINCE
AVERAGE ANNUAL SIX ONE INCEPTION
TOTAL RETURNS MONTHS YEAR (6/29/07)
- -----------------------------------------------
11.68% 34.95% -5.21%
</Table>
(LINE GRAPH)
<Table>
<Caption>
BARCLAYS CAPITAL
MAINSTAY RETIREMENT S&P 500(R) MSCI EAFE(R) U.S. AGGREGATE
2050 FUND INDEX INDEX BOND INDEX
------------------- ---------- ------------ ----------------
6/29/07 10000 10000 10000 10000
4/30/08 9659 9367 9641 10800
4/30/09 6366 6059 5518 11214
4/30/10 8590 8412 7418 12145
</Table>
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX SINCE
MONTHS ONE YEAR INCEPTION
S&P 500(R) Index(5) 15.66% 38.84% -5.92%
MSCI EAFE(R) Index(6) 2.48 34.43 -10.00
Barclays Capital U.S. Aggregate Bond Index(7) 2.54 8.30 7.10
Average Lipper mixed-asset target 2050+ fund(8) 13.05 38.64 -5.94
</Table>
and fees. Unadjusted, the performance shown for Investor Class shares might
have been lower.
3. Class R2 shares commenced investment operations on January 8, 2009.
Performance figures for Class R2 shares include the historical performance of
Class A shares through January 7, 2009, adjusted for differences in expenses
and fees. Unadjusted, the performance shown for Class R2 shares might have
been lower.
4. Class R3 shares commenced investment operations on May 1, 2008. Performance
figures for Class R3 shares include the historical performance of Class A
shares through April 30, 2008, adjusted for differences in expenses and fees.
Unadjusted, the performance shown for Class R3 shares might have been lower.
5. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R)
Index is widely regarded as the standard for measuring large-cap U.S. stock-
market performance. The S&P 500 Index is the Fund's broad-based securities
market index. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly in an index.
6. The Morgan Stanley Capital International Europe, Australasia and Far East
Index--the MSCI EAFE(R) Index--consists of international stocks representing
the developed world outside of North America. Results assume reinvestment of
all income and capital gains. An investment cannot be made directly in an
index.
7. The Barclays Capital U.S. Aggregate Bond Index consists of the following
other unmanaged Barclays Capital indices: the Government Bond Index, the
Corporate Bond Index, the MBS Index, and the ABS Index. To qualify for
inclusion in the Barclays Capital 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 $250 million. Results assume reinvestment of all income and capital
gains. An investment cannot be made directly in an index.
8. The average Lipper mixed-asset target 2050+ fund is representative of funds
that seek to maximize assets for retirement or other purposes with an
expected time horizon exceeding December 31, 2045. This benchmark is a
product of Lipper Inc. Lipper Inc. is an independent monitor of fund
performance. Results are based on average total returns of similar funds with
all dividend and capital gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLE AND GRAPHS
AND SHOULD BE READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 63
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY RETIREMENT 2050 FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,117.20 $2.47 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,119.30 $1.94 $1,023.00 $1.86
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,120.60 $0.63 $1,024.20 $0.60
- -------------------------------------------------------------------------------------------------------
CLASS R2 SHARES $1,000.00 $1,118.70 $2.47 $1,022.50 $2.36
- -------------------------------------------------------------------------------------------------------
CLASS R3 SHARES $1,000.00 $1,116.80 $3.78 $1,021.20 $3.61
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for
Class R2 and 0.72% for Class R3) multiplied by the average account value over
the period, divided by 365 and multiplied by 181 (to reflect the one-half
year period). The table above represents the actual expenses incurred during
the one-half year period. In addition to the fees and expenses which the Fund
bears directly, the Fund indirectly bears a pro rata share of the fees and
expenses of the Underlying Funds in which it invests. Such indirect expenses
are not included in the above-reported expense figures.
64 MainStay Retirement 2050 Fund
INVESTMENT OBJECTIVES OF UNDERLYING FUNDS AS OF APRIL 30, 2010 (UNAUDITED)
(COMPOSITION PIE CHART)
<Table>
Growth of Capital 45.7
Capital Appreciation 25.8
Total Return 24.7
Current Income 3.5
Cash and Other Assets, Less Liabilities 0.3
</Table>
See Portfolio of Investments on page 68 for specific holdings within these
categories.
mainstayinvestments.com 65
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS TONY ELAVIA AND JONATHAN SWANEY OF
MADISON SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY RETIREMENT 2050 FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Retirement 2050 Fund returned 11.72% for
Investor Class shares and 11.93% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 12.06%,
Class R2 shares returned 11.87% and Class R3 shares returned 11.68%. All share
classes underperformed the 13.05% return of the average Lipper(1) mixed-asset
target 2050+ fund and the 15.66% return of the S&P 500(R) Index(2) for the six
months ended April 30, 2010. As of April 30, 2010, Class R1 shares had not
commenced investment operations. The S&P 500(R) Index is the Fund's broad-based
securities-market index. See page 62 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
The Fund invests in other mutual funds referred to as Underlying Funds. The
Underlying Funds may invest in fixed-income securities or in domestic or
international stocks at various capitalization levels. The Fund's primary
benchmark, on the other hand, consists entirely of U.S. large-cap stocks. These
asset-class differences accounted for much of the Fund's underperformance of the
S&P 500(R) Index. Even with the Fund's asset-allocation targets taken into
account, however, performance was significantly below our expectations.
Disappointing results from several Underlying Funds, particularly those that use
quantitative stock selection, detracted from the Fund's performance relative to
the S&P 500(R) Index and the Fund's average Lipper peer fund. The Fund also had
negative beta exposure (or lower volatility than the market as a whole) in a
period when the stock market was rising. In addition, the Fund suffered from a
slight bias toward growth-oriented stocks in a when value stocks were in favor.
DURING THE REPORTING PERIOD, HOW DID YOU DETERMINE THE FUND'S ALLOCATIONS AMONG
THE UNDERLYING FUNDS?
In managing the Fund, we considered a variety of information, including
portfolio-level characteristics of the Underlying Funds, such as capitalization,
style biases and sector exposures. We also examined the attributes of the
Underlying Funds' holdings, such as valuation metrics, earnings data and
technical indicators. Finally, we evaluated the historical success of the
portfolio managers responsible for the Underlying Funds.
In general, we sought Underlying Equity Funds that had a track record of capable
portfolio management, that occupied attractively valued market segments and that
invested in companies with fairly priced securities and strong price and
earnings momentum. During the reporting period, these techniques were generally
unsuccessful, as they steered the Fund into Underlying Funds that collectively
underperformed the S&P 500(R) Index after adjusting for Underlying Fund expenses
and the Fund's strategic allocation policy.
Underlying Fixed Income Funds were selected based upon the type and country of
issuance of the securities in which they invested, the average credit quality of
those securities and their duration.(3)
It is usually difficult to identify any single factor that had a
disproportionate effect on the Fund's relative performance, but during the
reporting period, one theme had a distinctive impact. We tilted the Fund toward
Underlying Funds that prized earnings stability, because higher-quality stocks
with stable earnings have historically been rewarded with higher returns than
lower-quality stocks with earnings that are less stable. Unfortunately, when the
global equity markets turned positive in the spring of 2009, investors
aggressively bought the riskiest and lowest-quality securities in anticipation
that these securities would benefit most from a recovery. This trend persisted
throughout the reporting period, and stocks with negative earnings and cash
flows were among the best performers. This so-called junk rally served as a
significant drag on the Fund's relative performance during the reporting period.
DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S ALLOCATIONS DURING THE
REPORTING PERIOD?
The most noteworthy change we made during the reporting period was a gradual,
protracted shift away from large-cap growth-oriented Underlying Funds toward
Underlying Funds with a more neutral style and capitalization focus.
Specifically, we reduced the Fund's allocations to MainStay Large Cap Growth
Fund, MainStay Growth Equity Fund and MainStay 130/30 Growth Fund and increased
the Fund's allocations to MainStay Epoch U.S. All Cap Fund and, to a lesser
degree, to MainStay 130/30 Core Fund. This shift had a positive impact on the
Fund's performance, as value-oriented smaller-capitalization stocks outpaced
growth-oriented larger-cap stocks as the reporting
1. See footnote on page 63 for more information on Lipper Inc.
2. See footnote on page 63 for more information on the S&P 500(R) Index.
3 Duration is a measure of the price sensitivity of a fixed-income investment to
changes in interest rates. Duration is expressed as a number of years and is
considered a more accurate sensitivity gauge than average maturity.
66 MainStay Retirement 2050 Fund
period progressed. We have substantially reduced the Fund's exposure to growth-
oriented stocks over the past two and a half years. At the end of the current
reporting period, the Fund was evenly positioned between growth and value.
During the reporting period, the Fund initiated new positions in Columbia Small
Cap Index Fund, MainStay Epoch Global Choice Fund and MainStay Convertible Fund.
We selected Columbia Small Cap Index Fund to gain pure exposure to the small-cap
segment of the U.S. stock market. We chose MainStay Epoch Global Choice Fund to
further diversify the Fund across management strategies and to enhance the
Fund's exposure to desirable cash flow metrics. MainStay Convertible Fund was
chosen to increase the Fund's responsiveness to movements in the equity market
while incrementally lowering the Fund's average credit quality and duration.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUND POSITIONS HAD THE
HIGHEST TOTAL RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Columbia Small Cap Index Fund, MainStay U.S. Small Cap Fund and MainStay Epoch
U.S. All Cap Fund generated the best total returns among the Underlying Equity
Funds in which the Fund invested, as these Underlying Funds invested most
heavily in smaller-capitalization stocks. The worst returns came from Underlying
Equity Funds that invest abroad, namely MainStay ICAP International Fund,
MainStay 130/30 International Fund and MainStay International Equity Fund. These
Underlying Funds were hampered not only by comparatively weak overseas returns
in local currencies but also by a strengthening U.S. dollar.
DURING THE REPORTING PERIOD, WHICH UNDERLYING EQUITY FUNDS MADE THE STRONGEST
CONTRIBUTIONS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH UNDERLYING EQUITY
FUNDS DETRACTED THE MOST?
On an absolute basis, the strongest contributions to the Fund's equity
performance came from the Fund's largest Underlying Equity Fund holdings, namely
MainStay MAP Fund and MainStay Growth Equity Fund.
During the reporting period, no Underlying Equity Funds in which the Fund
invested provided negative returns. The weakest contributions to the Fund's
performance came from two of its smallest positions, MainStay S&P 500 Index Fund
and MainStay Epoch Global Choice Fund.
WHAT FACTORS INFLUENCED PERFORMANCE IN THE FIXED-INCOME PORTION OF THE FUND?
U.S. Treasury yields were largely unchanged over the course of the reporting
period. Signs of economic strength, improving corporate profitability and a
large supply of new issuance threatened to push rates higher. These factors,
however, were offset by concerns about corporate and sovereign default risk
(holding company Dubai World and Greece were notable examples) and by questions
about the sustainability of the economic recovery. Lower-quality fixed-income
securities generally outperformed higher-quality fixed-income securities as
credit spreads(4) narrowed, driving bond prices higher.
HOW DID THE FUND ALLOCATE ASSETS AMONG THE UNDERLYING FIXED INCOME FUNDS DURING
THE REPORTING PERIOD?
In anticipation that Treasury rates would ultimately rise and that credit
spreads would continue to narrow from the wider-than-normal levels we had
observed, we shortened the Fund's duration and reestablished a bias toward
lower-quality instruments. We implemented these strategies primarily by
increasing the Fund's holdings in MainStay Floating Rate Fund, MainStay High
Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund.
DURING THE REPORTING PERIOD, WHICH UNDERLYING FIXED INCOME FUNDS HAD THE
STRONGEST ABSOLUTE PERFORMANCE AND WHICH ONES DETRACTED FROM THE FUND'S ABSOLUTE
PERFORMANCE?
The Fund's best-performing Underlying Fixed Income Fund holdings were MainStay
High Yield Opportunities Fund and MainStay High Yield Corporate Bond Fund, both
of which benefited from the contraction in credit spreads that accompanied the
economic recovery. The worst-performing Underlying Fixed Income Fund--and the
only Fund holding that provided a negative return--was American Century
International Bond Fund. This Underlying Fund was hurt by the potential for
sovereign defaults and by a rising U.S. dollar.
4. The terms "credit spread" and "yield spread" may refer to the difference in
yield between a security or type of security and comparable U.S. Treasury
issues. The terms may also refer to the difference in yield between two
specific securities or types of securities at a given time.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 67
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
AFFILIATED INVESTMENT COMPANIES 90.1%+
- -----------------------------------------------------
EQUITY FUNDS 83.2%
MainStay 130/30 Core
Fund Class I 362,271 $ 2,630,088
MainStay 130/30 Growth
Fund Class I (a) 14,569 116,403
MainStay 130/30 International
Fund Class I 187,171 1,182,923
MainStay Common Stock
Fund Class I 148,383 1,627,763
MainStay Epoch Global Choice
Fund Class I 25,660 362,575
MainStay Epoch U.S. All Cap
Fund Class I 94,802 2,088,496
MainStay Growth Equity
Fund Class I 10,467 107,388
MainStay ICAP Equity
Fund Class I 40,482 1,386,100
MainStay ICAP International
Fund Class I 43,384 1,189,583
MainStay ICAP Select Equity
Fund Class I 41,904 1,386,619
MainStay International Equity
Fund Class I 82,260 1,009,334
MainStay Large Cap Growth
Fund Class I(a) 301,887 1,959,249
MainStay MAP
Fund Class I 66,777 2,000,648
MainStay S&P 500 Index
Fund Class I 4,144 113,806
MainStay U.S. Small Cap
Fund Class I(a) 140,157 2,134,597
-----------
Total Equity Funds
(Cost $17,082,877) 19,295,572
-----------
FIXED INCOME FUNDS 6.9%
MainStay Convertible
Fund Class I 44,438 662,124
MainStay Floating Rate
Fund Class I 23,661 221,469
MainStay Global High Income
Fund Class I 19,100 222,138
MainStay High Yield Corporate
Bond
Fund Class I 29,787 172,166
MainStay High Yield
Opportunities
Fund Class I 20,117 238,388
MainStay Indexed Bond Fund
Class I 5,509 62,638
MainStay Intermediate Term Bond
Fund Class I 2,553 26,836
-----------
Total Fixed Income Funds
(Cost $1,500,894) 1,605,759
-----------
Total Affiliated Investment
Companies
(Cost $18,583,771) 20,901,331
-----------
UNAFFILIATED INVESTMENT COMPANIES 9.7%
- -----------------------------------------------------
EQUITY FUNDS 8.6%
Columbia Funds Series
Trust--Columbia SmallCap
Index Fund 11,679 186,637
T. Rowe Price Emerging Markets
Stock Fund 32,405 1,001,635
T. Rowe Price International
Discovery Fund 20,987 807,570
-----------
Total Equity Funds
(Cost $1,831,334) 1,995,842
-----------
FIXED INCOME FUNDS 1.1%
American Century Inflation
Adjusted Bond Fund 7,020 82,975
American Century International
Bond Fund Institutional Class 12,461 173,703
-----------
Total Fixed Income Funds
(Cost $264,182) 256,678
-----------
Total Unaffiliated Investment
Companies
(Cost $2,095,516) 2,252,520
-----------
Total Investments
(Cost $20,679,287) (b) 99.8% 23,153,851
Other Assets, Less Liabilities 0.2 51,119
------- -----------
Net Assets 100.0% $23,204,970
======= ===========
</Table>
<Table>
+ Percentages indicated are based on Fund
net assets.
(a) Non-income producing Underlying Fund.
(b) At April 30, 2010, cost is $22,052,175
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 2,483,712
Gross unrealized depreciation (1,382,036)
-----------
Net unrealized appreciation $ 1,101,676
===========
</Table>
68 MainStay Retirement 2050 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities
Affiliated Investment Companies
Equity Funds $19,295,572 $ -- $ -- $19,295,572
Fixed Income Funds 1,605,759 -- -- 1,605,759
----------- -------- -------- -----------
Total Affiliated Investment Companies 20,901,331 -- -- 20,901,331
----------- -------- -------- -----------
Unaffiliated Investment Companies
Equity Funds 1,995,842 -- -- 1,995,842
Fixed Income Funds 256,678 -- -- 256,678
----------- -------- -------- -----------
Total Unaffiliated Investment Companies 2,252,520 -- -- 2,252,520
----------- -------- -------- -----------
Total Investments in Securities $23,153,851 $-- $-- $23,153,851
=========== ======== ======== ===========
</Table>
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
69
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in affiliated investment
companies, at value (identified
cost $18,583,771) $20,901,331
Investments in unaffiliated
investment companies, at value
(identified cost $2,095,516) 2,252,520
Cash 5,401
Receivables:
Fund shares sold 26,017
Manager (See Note 3) 14,785
Other assets 48,815
-----------
Total assets 23,248,869
-----------
LIABILITIES:
Payables:
Professional fees 13,915
Fund shares redeemed 11,865
Transfer agent (See Note 3) 6,897
Investment securities purchased 5,400
Custodian 2,198
NYLIFE Distributors (See Note 3) 1,898
Trustees 34
Accrued expenses 1,692
-----------
Total liabilities 43,899
-----------
Net assets $23,204,970
===========
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 2,787
Additional paid-in capital 21,811,562
-----------
21,814,349
Accumulated undistributed net
investment income 10,127
Accumulated net realized loss on
investments (1,094,070)
Net unrealized appreciation on
investments 2,474,564
-----------
Net assets $23,204,970
===========
INVESTOR CLASS
Net assets applicable to outstanding
shares $ 456,078
===========
Shares of beneficial interest
outstanding 54,921
===========
Net asset value per share
outstanding $ 8.30
Maximum sales charge (5.50% of
offering price) 0.48
-----------
Maximum offering price per share
outstanding $ 8.78
===========
CLASS A
Net assets applicable to outstanding
shares $ 1,987,892
===========
Shares of beneficial interest
outstanding 239,485
===========
Net asset value per share
outstanding $ 8.30
Maximum sales charge (5.50% of
offering price) 0.48
-----------
Maximum offering price per share
outstanding $ 8.78
===========
CLASS I
Net assets applicable to outstanding
shares $16,666,526
===========
Shares of beneficial interest
outstanding 1,998,890
===========
Net asset value and offering price
per share outstanding $ 8.34
===========
CLASS R2
Net assets applicable to outstanding
shares $ 1,575,516
===========
Shares of beneficial interest
outstanding 189,648
===========
Net asset value and offering price
per share outstanding $ 8.31
===========
CLASS R3
Net assets applicable to outstanding
shares $ 2,518,958
===========
Shares of beneficial interest
outstanding 303,938
===========
Net asset value and offering price
per share outstanding $ 8.29
===========
</Table>
70 MainStay Retirement 2050 Fund The notes to the financial statements are
an integral part of, and should be read in conjunction with, the financial
statements.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividend distributions from
affiliated investment companies $ 153,133
Dividend distributions from
unaffiliated investment
companies 9,613
----------
Total income 162,746
----------
EXPENSES:
Registration 37,016
Transfer agent (See Note 3) 25,442
Professional fees 12,068
Manager (See Note 3) 10,123
Distribution/Service--Investor
Class (See Note 3) 435
Distribution/Service--Class A (See
Note 3) 2,217
Distribution/Service--Class R2
(See Note 3) 805
Distribution/Service--Class R3
(See Note 3) 5,848
Shareholder communication 7,871
Custodian 5,983
Trustees 315
Shareholder service (See Note 3) 1,493
Miscellaneous 3,622
----------
Total expenses before
waiver/reimbursement 113,238
Expense waiver/reimbursement from
Manager (See Note 3) (89,563)
Expense reimbursement from
Transfer agent (See Note 3) (701)
----------
Net expenses 22,974
----------
Net investment income 139,772
----------
REALIZED AND UNREALIZED GAIN ON :
Net realized gain on:
Affiliated investment company
transactions 823,405
Unaffiliated investment company
transactions 205,550
Realized gain distributions from
affiliated investment companies 2,133
Realized gain distributions from
unaffiliated investment
companies 5,596
----------
Net realized gain on investments
from affiliated and unaffiliated
investment companies 1,036,684
----------
Net change in unrealized
appreciation on investments 1,095,218
----------
Net realized and unrealized gain on
investments 2,131,902
----------
Net increase in net assets resulting
from operations $2,271,674
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
71
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 139,772 $ 225,958
Net realized gain (loss) on
investments from
affiliated and
unaffiliated investment
company transactions 1,036,684 (1,863,154)
Net change in unrealized
appreciation
(depreciation) on
investments 1,095,218 4,063,188
------------------------
Net increase in net assets
resulting
from operations 2,271,674 2,425,992
------------------------
Dividends and distributions
to shareholders:
From net investment income:
Investor Class (3,360) (1,596)
Class A (17,225) (16,052)
Class I (169,995) (146,223)
Class R2 (5,289) --
Class R3 (17,594) (24,674)
------------------------
(213,463) (188,545)
------------------------
From net realized gain on
investments:
Investor Class -- (524)
Class A -- (4,715)
Class I -- (42,300)
Class R3 -- (8,669)
------------------------
-- (56,208)
------------------------
Total dividends and
distributions to
shareholders (213,463) (244,753)
------------------------
Capital share transactions:
Net proceeds from sale of
shares 5,081,101 9,208,669
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 213,435 244,717
Cost of shares redeemed (2,867,941) (2,379,651)
------------------------
Increase in net assets
derived from capital
share transactions 2,426,595 7,073,735
------------------------
Net increase in net
assets 4,484,806 9,254,974
NET ASSETS:
Beginning of period 18,720,164 9,465,190
------------------------
End of period $23,204,970 $18,720,164
========================
Accumulated undistributed net
investment income at end of
period $ 10,127 $ 83,818
========================
</Table>
72 MainStay Retirement 2050 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
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
73
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 7.50 $ 6.57 $ 9.46
------ ------ -------
Net investment income (a) 0.04 0.09 0.05
Net realized and unrealized gain
(loss) on investments 0.83 0.99 (2.94)
------ ------ -------
Total from investment operations 0.87 1.08 (2.89)
------ ------ -------
Less dividends and distributions:
From net investment income (0.07) (0.11) --
From net realized gain on
investments -- (0.04) --
------ ------ -------
Total dividends and distributions (0.07) (0.15) --
------ ------ -------
Net asset value at end of period $ 8.30 $ 7.50 $ 6.57
====== ====== =======
Total investment return (c) 11.72%(b) 16.92% (30.55%)(b)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.07%++ 1.30% 0.81% ++
Net expenses (d) 0.47%++ 0.47% 0.46% ++
Expenses (before
waiver/reimbursement) (d) 2.26%++ 2.31% 2.86% ++
Portfolio turnover rate 44% 67% 138%
Net assets at end of period (in
000's) $ 456 $ 299 $ 80
</Table>
<Table>
<Caption>
CLASS I CLASS R2
-------------------------------------------------- --------------------------
JUNE 29, JANUARY 8,
SIX MONTHS 2007** SIX MONTHS 2009**
ENDED YEAR ENDED OCTOBER THROUGH ENDED THROUGH
APRIL 30, 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2010* 2009 2008 2007 2010* 2009
Net asset value at beginning of
period $ 7.53 $ 6.59 $ 10.63 $10.00 $ 7.49 $ 6.22
------- ------- ------- ------ ------ ------
Net investment income (a) 0.06 0.13 0.09 0.02 0.04 0.04
Net realized and unrealized gain
(loss) on investments 0.84 0.98 (4.03) 0.61 0.85 1.23
------- ------- ------- ------ ------ ------
Total from investment operations 0.90 1.11 (3.94) 0.63 0.89 1.27
------- ------- ------- ------ ------ ------
Less dividends and distributions:
From net investment income (0.09) (0.13) (0.09) -- (0.07) --
From net realized gain on
investments -- (0.04) (0.01) -- -- --
------- ------- ------- ------ ------ ------
Total dividends and distributions (0.09) (0.17) (0.10) -- (0.07) --
------- ------- ------- ------ ------ ------
Net asset value at end of period $ 8.34 $ 7.53 $ 6.59 $10.63 $ 8.31 $ 7.49
======= ======= ======= ====== ====== ======
Total investment return (c) 12.06%(b) 17.31% (37.49%) 6.40%(b) 11.87%(b) 20.42%(b)(e)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.50%++ 1.99% 1.08% 0.55%++ 1.12%++ 0.66%
Net expenses (d) 0.12%++ 0.12% 0.13% 0.13%++ 0.47%++ 0.47%
Expenses (before
waiver/reimbursement) (d) 0.99%++ 1.34% 3.18% 39.11%++ 1.35%++ 1.64%
Portfolio turnover rate 44% 67% 138% 24% 44% 67%
Net assets at end of period (in
000's) $16,667 $14,283 $ 7,191 $ 273 $1,576 $ 419
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Total return is not annualized.
(c) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I, Class R2 and Class R3
shares are not subject to sales charges.
(d) In addition to the fees and expenses which the Fund bears directly, the Fund
indirectly bears a pro-rata share of the fees and expenses of the Underlying
Funds in which it invests. Such indirect expenses are not included in the
above expense ratios.
(e) Total investment returns may reflect adjustments to conform to generally
accepted accounting principles.
</Table>
74 MainStay Retirement 2050 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
----------------------------------------------------------------
JUNE 29,
SIX MONTHS 2007**
ENDED THROUGH
APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31,
2010* 2009 2008 2007
$ 7.49 $ 6.58 $ 10.62 $10.00
------ ------ ------- ------
0.05 0.11 0.09 0.01
0.84 0.97 (4.05) 0.61
------ ------ ------- ------
0.89 1.08 (3.96) 0.62
------ ------ ------- ------
(0.08) (0.13) (0.07) --
-- (0.04) (0.01) --
------ ------ ------- ------
(0.08) (0.17) (0.08) --
------ ------ ------- ------
$ 8.30 $ 7.49 $ 6.58 $10.62
====== ====== ======= ======
11.93%(b) 16.84% (37.60%) 6.30%(b)
1.19%++ 1.62% 0.97% 0.29%++
0.37%++ 0.37% 0.38% 0.38%++
1.24%++ 1.58% 3.52% 39.60%++
44% 67% 138% 24%
$1,988 $1,571 $ 721 $ 270
</Table>
<Table>
<Caption>
CLASS R3
----------------------------------------------------
MAY 1,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
$ 7.48 $ 6.56 $ 9.61
------ ------ -------
0.03 0.10 0.01
0.84 0.96 (3.06)
------ ------ -------
0.87 1.06 (3.05)
------ ------ -------
(0.06) (0.10) --
-- (0.04) --
------ ------ -------
(0.06) (0.14) --
------ ------ -------
$ 8.29 $ 7.48 $ 6.56
====== ====== =======
11.68% (b) 16.66% (31.74%)(b)
0.86%++ 1.49% 0.28% ++
0.72%++ 0.72% 0.73% ++
1.59%++ 1.94% 2.99% ++
44% 67% 138%
$2,519 $2,149 $ 1,473
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
75
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
as an open-end management investment company, and is comprised of twenty-nine
funds (collectively referred to as the "Funds" and each individually, referred
to as a "Fund"). These financial statements and notes relate to the MainStay
Retirement 2010 Fund, MainStay Retirement 2020 Fund, MainStay Retirement 2030
Fund, MainStay Retirement 2040 Fund and MainStay Retirement 2050 Fund
(collectively referred to as the "Retirement Funds" and each individually
referred to as a "Retirement Fund"). Each is a diversified fund. Each Retirement
Fund is the successor of a series of Eclipse Funds Inc. with the same name (each
a "Predecessor Fund"). The reorganizations of the Predecessor Funds with and
into the respective Retirement Funds, which were not subject to shareholder
approval under applicable law, occurred on February 26, 2010. All information
regarding and references to periods prior to the commencement of operations of
each Retirement Fund relate to the respective Predecessor Fund.
The Retirement Funds each currently offer six classes of shares. Class A shares,
Class I shares, Class R1 shares, Class R2 shares, and Class R3 shares commenced
operations on June 29, 2007. Investor Class shares commenced operations on
February 28, 2008. Investor Class and Class A shares are offered at net asset
value ("NAV") per share plus an initial sales charge. No sales charge applies on
investments of $1 million or more (and certain other qualified purchases) in
Investor Class and Class A shares, but a contingent deferred sales charge is
imposed on certain redemptions of such shares within one year of the date of
purchase. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV and
are not subject to a sales charge. Depending on eligibility, Investor Class
shares may convert to Class A shares and Class A shares may convert to Investor
Class shares. The six classes of shares have the same voting (except for issues
that relate solely to one class), dividend, liquidation and other rights, and
the same terms and conditions, except that Class R3 shares are subject to higher
distribution and/or service fee rates than the Investor Class, Class A and Class
R2 shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.
Class I and Class R1 shares are not subject to a distribution or service fee.
Class R1, Class R2 and Class R3 shares are authorized to pay to New York Life
Investment Management LLC, its affiliates, or third-party service providers, as
compensation for services rendered to shareholders of Class R1, Class R2 or
Class R3 shares, a shareholder service fee. There were no shares outstanding as
of April 30, 2010 for Class R1 shares. Class R3 received additional investments
on April 30, 2008, and began investment activity on May 1, 2008. Class R2
received additional investments on January 7, 2009, and began investment
activity on January 8, 2009.
The investment objective for each of the Retirement Funds is as follows:
Each Retirement Fund seeks to maximize total return over time consistent with
its current investment allocation. Total return is defined as a combination of
long-term growth of capital and current income.
The RETIREMENT 2010 FUND is managed for the typical investor who has retired or
is seeking to retire before the year 2015 and who plans to withdraw the value of
the investor's account in the Fund gradually after retirement.
The RETIREMENT 2020 FUND is managed for the typical investor seeking to retire
between the years 2016 and 2025 and who plans to withdraw the value of the
investor's account in the Fund gradually after retirement.
The RETIREMENT 2030 FUND is managed for the typical investor seeking to retire
between the years 2026 and 2035 and who plans to withdraw the value of the
investor's account in the Fund gradually after retirement.
The RETIREMENT 2040 FUND is managed for the typical investor seeking to retire
between the years 2036 and 2045 and who plans to withdraw the value of the
investor's account in the Fund gradually after retirement.
The RETIREMENT 2050 FUND is managed for the typical investor seeking to retire
between the years 2046 and 2055 and who plans to withdraw the value of the
investor's account in the Fund gradually after retirement.
The Retirement Funds are funds-of-funds and may invest in other Funds of the
Trust as well as funds of the Eclipse Funds and The MainStay Funds, each a
Massachusetts business trust, and Eclipse Funds Inc., a Maryland Corporation,
for which New York Life Investment Management LLC also serves as manager
("Affiliated Underlying Funds"). The Retirement Funds may also invest in other
unaffiliated funds. ("Unaffiliated Underlying Funds" and, collectively with the
Affiliated Underlying Funds, the "Underlying Funds").
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Retirement Funds prepare their financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") and follow the significant accounting policies described below.
(A) SECURITIES VALUATION. Investments in Underlying Funds are valued at their
NAV at the close of business each day. The Retirement Funds' other investments
and securities held by the Affiliated Underlying Funds are valued as described
below.
Debt securities are valued at prices supplied by a pricing agent or broker
selected by the funds' manager in consultation with the funds' subadvisor, if
any, whose prices reflect
76 MainStay Retirement Funds
broker/dealer supplied valuations and electronic data processing techniques, if
such prices are deemed by the funds' manager in consultation with the funds'
subadvisor, if any, to be representative of market values, at the regular close
of trading of the New York Stock Exchange ("Exchange") (generally 4:00 p.m.
Eastern time) on each day the Exchange is open for business ("valuation date").
Equity securities are valued at the latest quoted sales prices as of the close
of regular trading on the Exchange on each valuation date. Securities that are
not traded on the valuation date are valued at the mean of the latest quoted bid
and asked prices. Prices normally are taken from the principal market in which
each security trades.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Funds' Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the fund's manager, reflect the security's market value; and (vi)
a security where the trading on that security's principal market is temporarily
closed at a time when, under normal conditions, it would be open. At April 30,
2010, the Retirement Funds did not hold securities that were valued in such a
manner.
"Fair value" is defined as the price that the Retirement Fund would receive upon
selling an investment in an orderly transaction to an independent buyer in the
principal or most advantageous market of the investment. Fair value measurements
are determined within a framework that has established a three-tier hierarchy
which maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in the circumstances. The inputs or methodology used for
valuing securities may not be an indication of the risks associated with
investing in those securities. The three-tier hierarchy of inputs is summarized
in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Retirement Fund's own
assumptions about the assumptions that market participants would use in
determining the fair value of investments)
The aggregate value by input level, as of April 30, 2010, for each Retirement
Fund's investments is included at the end of each Retirement Fund's Portfolio of
Investments.
The valuation techniques used by the Retirement Funds to measure fair value
during the six-month period ended April 30, 2010 maximized the use of observable
inputs and minimized the use of unobservable inputs. The Underlying Funds may
have utilized some of the following fair value techniques: multi-dimensional
relational pricing models, option adjusted spread pricing and estimating the
price that would have prevailed in a liquid market for an international equity
security given information available at the time of evaluation, when there are
significant events after the close of local foreign markets. For the six-month
period ended April 30, 2010, there have been no changes to the fair value
methodologies.
(B) FEDERAL INCOME TAXES. Each of the Retirement Funds is treated as a
separate entity for federal income tax purposes. The Retirement Funds' policy is
to comply with the requirements of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") applicable to regulated investment companies and
to distribute all of the taxable income to the shareholders of each Retirement
Fund within the allowable time limits. Therefore, no federal income tax
provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
mainstayinvestments.com 77
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Retirement Funds'
tax positions taken on federal income tax returns for all open tax years
(current and prior three tax years), and has concluded that no provision for
federal income tax is required in the Retirement Funds' financial statements.
The Retirement Funds' federal and state income and federal excise tax returns
for tax years for which the applicable statutes of limitations have not expired
are subject to examination by the Internal Revenue Service and state departments
of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Retirement Funds intend to declare and
pay dividends of net investment income and distributions of net realized capital
gains, if any, annually. Unless the shareholder elects otherwise, all dividends
and distributions are reinvested in the same class of shares of the respective
Retirement Fund, at NAV. Dividends and distributions to shareholders are
determined in accordance with federal income tax regulations and may differ from
GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Retirement Funds record
security transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividends and
distributions received by the Retirement Funds from the Underlying Funds are
recorded on the ex-dividend date.
Investment income and realized and unrealized gains and losses on investments of
the Retirement Funds are allocated to separate classes of shares pro rata based
upon their relative net assets on the date the income is earned or realized and
unrealized gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Retirement
Funds in proportion to the net assets of the respective Retirement Funds when
the expenses are incurred, except where direct allocations of expenses can be
made. Expenses (other than transfer agent expenses and fees incurred under the
shareholder services plans and the distribution plans further discussed in Note
3(B)) are allocated to separate classes of shares pro rata based upon their
relative NAV on the date the expenses are incurred. The expenses borne by each
Retirement Fund, including those of related parties to the Retirement Funds, are
shown in the Statement of Operations.
In addition, the Retirement Funds bear a pro rata share of the fees and expenses
of the Underlying Funds in which they invest. Because the Underlying Funds have
varied expense and fee levels and the Retirement Funds may own different
proportions of the Underlying Funds at different times, the amount of fees and
expenses incurred indirectly by the Retirement Funds may vary.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Retirement Funds enter into contracts with third-party service
providers that contain a variety of representations and warranties and which
provide general indemnifications. The Retirement Funds' maximum exposure under
these arrangements is unknown, as this would involve future claims that may be
made against the Retirement Funds that have not yet occurred. Based on
experience, management is of the view that the risk of loss in connection with
these potential indemnification obligations is remote. However, there can be no
assurance that material liabilities related to such obligations will not arise
in the future, which could adversely impact the Retirement Funds.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Retirement Funds' Manager, pursuant to an Amended and
Restated Management Agreement ("Management Agreement"). The Manager provides
offices, conducts clerical, recordkeeping and bookkeeping services, and keeps
most of the financial and accounting records required to be maintained by the
Retirement Funds. Except for the portion of salaries and expenses that are the
responsibility of the Fund, the Manager also pays the salaries and expenses of
all personnel affiliated with the Retirement Funds and the operational expenses
of the Retirement Funds. Madison Square Investors LLC ("Madison Square
Investors" or "Subadvisor"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life, serves as Subadvisor to the Retirement
Funds and is responsible for the day-to-day portfolio management of the
Retirement Funds. Pursuant to the terms of an Amended and Restated Subadvisory
Agreement between New York Life Investments and the Subadvisor, New York Life
Investments pays for the services of the Subadvisor.
Each Retirement Fund is contractually obligated to pay the Manager a monthly fee
for services performed and facilities furnished at an annual rate of 0.10% of
the average daily net assets of the respective Retirement Fund. New York Life
78 MainStay Retirement Funds
Investments has also contractually agreed to waive this fee so that the
effective management fee is 0.00%. This waiver may be modified or terminated
only with Board approval. Each Retirement Fund also indirectly pays a
proportionate share of the management fees paid to the investment advisers of
the Underlying Funds in which each Retirement Fund invests.
Effective August 1, 2009, New York Life Investments entered into written expense
limitation agreements under which it agreed to reimburse the expenses of the
appropriate Class of the Retirement Funds so that the total ordinary operating
expenses (total ordinary operating expenses excludes expense reimbursement from
transfer agent, taxes, interest, litigation, extraordinary expenses, brokerage
and other transaction expenses relating to the purchase or sale of portfolio
investments, and the fees and expenses of any other funds in which a Fund
invests) do not exceed the following percentages of average daily net assets:
Investor Class, 0.475%; Class A, 0.375%; Class I, 0.125%; Class R1, 0.225%;
Class R2, 0.475% and Class R3, 0.725%. The expense limitation agreement expires
on February 28, 2011 and is reviewed annually by the Board in connection with
its review of the Fund's investment advisory agreements. Based on its review,
the Board may agree to maintain, modify or terminate the agreement.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Retirement Funds as follows:
<Table>
<Caption>
TOTAL
MainStay Retirement 2010 Fund $20,822
- ----------------------------------------------
MainStay Retirement 2020 Fund 29,589
- ----------------------------------------------
MainStay Retirement 2030 Fund 36,238
- ----------------------------------------------
MainStay Retirement 2040 Fund 20,561
- ----------------------------------------------
MainStay Retirement 2050 Fund 10,123
- ----------------------------------------------
</Table>
For the six-month period ended April 30, 2010, New York Life Investments
waived/reimbursed expenses of the Retirement Funds as follows:
<Table>
<Caption>
TOTAL
MainStay Retirement 2010 Fund $131,358
- -----------------------------------------------
MainStay Retirement 2020 Fund 141,691
- -----------------------------------------------
MainStay Retirement 2030 Fund 183,838
- -----------------------------------------------
MainStay Retirement 2040 Fund 130,282
- -----------------------------------------------
MainStay Retirement 2050 Fund 89,563
- -----------------------------------------------
</Table>
State Street Bank and Trust Company ("State Street"), 1 Lincoln Street, Boston,
Massachusetts 02111, provides sub-administration and sub-accounting services to
the Retirement Funds pursuant to an agreement with New York Life Investments.
These services include calculating the daily NAVs of the Retirement Funds,
maintaining the general ledger and sub-ledger accounts for the calculation of
the Retirement Funds' respective NAVs, and assisting New York Life Investments
in conducting various aspects of the Retirement Funds' administrative
operations. For providing these services to the Retirement Funds, State Street
is compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Retirement
Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC
(the "Distributor"), an indirect, wholly-owned subsidiary of New York Life. The
Retirement Funds have adopted distribution plans, (the "Plans") in accordance
with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class, Class A and Class R2 Plans, the Distributor
receives a monthly distribution fee from the Investor Class, Class A and Class
R2 shares at an annual rate of 0.25% of the average daily net assets of the
Investor Class, Class A and Class R2 shares for distribution or service
activities as designated by the Distributor. Pursuant to the Class R3 Plan, the
Distributor receives a monthly distribution fee from the Class R3 shares at an
annual rate of 0.25% for distribution and 0.25% for service of the average daily
net assets of the Class R3 shares for distribution and service activities as
designated by the Distributor. Class I and Class R1 shares are not subject to a
distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Retirement Funds' shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and
Class R3 shares, the Manager has agreed to provide, through its affiliates or
independent third parties, various shareholder and administrative support
services to shareholders of the Class R1, Class R2 and Class R3 shares. For its
services, the Manager is entitled to a Shareholder Service Fee accrued daily and
paid monthly at an annual rate of 0.10% of the average daily net assets
attributable to the Class R1, Class R2 and Class R3 shares.
<Table>
<Caption>
MAINSTAY RETIREMENT 2010 FUND
Class R1 $ --
- ---------------------------------------------
Class R2 858
- ---------------------------------------------
Class R3 495
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2020 FUND
Class R1 $ --
- ---------------------------------------------
Class R2 574
- ---------------------------------------------
Class R3 899
- ---------------------------------------------
</Table>
mainstayinvestments.com 79
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
MAINSTAY RETIREMENT 2030 FUND
Class R1 $ --
- ----------------------------------------------
Class R2 911
- ----------------------------------------------
Class R3 2,672
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2040 FUND
Class R1 $ --
- ----------------------------------------------
Class R2 940
- ----------------------------------------------
Class R3 1,990
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND
Class R1 $ --
- ----------------------------------------------
Class R2 323
- ----------------------------------------------
Class R3 1,170
- ----------------------------------------------
</Table>
(C) SALES CHARGES. The Retirement Funds were advised by the Distributor that
the amount of sales charges retained on sales of Investor Class and Class A
shares, for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY RETIREMENT 2010 FUND
Investor Class $1,462
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2020 FUND
Investor Class $3,310
- ----------------------------------------------
Class A 286
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2030 FUND
Investor Class $3,725
- ----------------------------------------------
Class A 637
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2040 FUND
Investor Class $2,711
- ----------------------------------------------
Class A 116
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND
Investor Class $1,029
- ----------------------------------------------
Class A 141
- ----------------------------------------------
</Table>
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the
Retirement Funds' transfer, dividend disbursing and shareholder servicing agent
pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM
Service Company LLC has entered into an agreement with Boston Financial Data
Services, Inc. ("BFDS") pursuant to which BFDS performs certain transfer agent
services on behalf of NYLIM Service Company LLC. Transfer agent offset
arrangements represent reimbursements of a portion of the transfer agency fees
from unaffiliated underlying funds. Transfer agent expenses incurred by the
Retirement Funds for the six-month period ended April 30, 2010, were as follows:
<Table>
<Caption>
MAINSTAY RETIREMENT 2010 FUND TOTAL
Investor Class $ 1,678
- ----------------------------------------------
Class A 7,336
- ----------------------------------------------
Class I 35,352
- ----------------------------------------------
Class R1 --
- ----------------------------------------------
Class R2 1,887
- ----------------------------------------------
Class R3 1,089
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2020 FUND TOTAL
Investor Class $ 2,983
- ----------------------------------------------
Class A 10,055
- ----------------------------------------------
Class I 37,039
- ----------------------------------------------
Class R1 --
- ----------------------------------------------
Class R2 981
- ----------------------------------------------
Class R3 1,539
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2030 FUND TOTAL
Investor Class $ 3,349
- ----------------------------------------------
Class A 13,112
- ----------------------------------------------
Class I 62,850
- ----------------------------------------------
Class R1 --
- ----------------------------------------------
Class R2 2,145
- ----------------------------------------------
Class R3 6,281
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2040 FUND TOTAL
Investor Class $ 3,489
- ----------------------------------------------
Class A 6,869
- ----------------------------------------------
Class I 33,816
- ----------------------------------------------
Class R1 --
- ----------------------------------------------
Class R2 2,216
- ----------------------------------------------
Class R3 4,705
- ----------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND TOTAL
Investor Class $ 2,359
- ----------------------------------------------
Class A 2,056
- ----------------------------------------------
Class I 17,566
- ----------------------------------------------
Class R1 --
- ----------------------------------------------
Class R2 750
- ----------------------------------------------
Class R3 2,711
- ----------------------------------------------
</Table>
80 MainStay Retirement Funds
For the six-month period ended April 30, 2010, the Retirement Funds were
reimbursed transfer agent fees as follows:
<Table>
<Caption>
TOTAL
MainStay Retirement 2010 Fund $1,023
- ----------------------------------------------
MainStay Retirement 2020 Fund 1,797
- ----------------------------------------------
MainStay Retirement 2030 Fund 2,601
- ----------------------------------------------
MainStay Retirement 2040 Fund 1,420
- ----------------------------------------------
MainStay Retirement 2050 Fund 701
- ----------------------------------------------
</Table>
(E) SMALL AMOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Retirement Funds have implemented a small account
fee on certain types of accounts. Certain shareholders with an account balance
of less than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Retirement Funds with the following values and percentages of
net assets as follows:
<Table>
<Caption>
MAINSTAY RETIREMENT 2010 FUND
Investor Class $ 25,433 6.9%
- --------------------------------------------------
Class A 254,461 3.8
- --------------------------------------------------
Class I 1,063,359 3.3
- --------------------------------------------------
Class R2 31,411 1.8
- --------------------------------------------------
Class R3 24,952 2.6
- --------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2020 FUND
Investor Class $ 24,393 1.6%
- -------------------------------------------------
Class A 241,483 1.9
- -------------------------------------------------
Class I 263,221 0.6
- -------------------------------------------------
Class R2 32,384 1.9
- -------------------------------------------------
Class R3 23,894 1.3
- -------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2030 FUND
Investor Class $ 23,455 1.8%
- -------------------------------------------------
Class A 227,638 1.9
- -------------------------------------------------
Class I 156,770 0.3
- -------------------------------------------------
Class R2 33,092 1.0
- -------------------------------------------------
Class R3 22,979 0.4
- -------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2040 FUND
Investor Class $ 23,006 2.3%
- -------------------------------------------------
Class A 221,358 3.5
- -------------------------------------------------
Class I 761,431 2.5
- -------------------------------------------------
Class R2 33,453 1.0
- -------------------------------------------------
Class R3 22,501 0.5
- -------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND
Investor Class $ 22,680 5.0%
- --------------------------------------------------
Class A 216,868 10.9
- --------------------------------------------------
Class I 1,778,021 10.7
- --------------------------------------------------
Class R2 33,678 2.1
- --------------------------------------------------
Class R3 22,233 0.9
- --------------------------------------------------
</Table>
At April 30, 2010, the Retirement Funds held the following percentages of
outstanding shares of affiliated investment companies:
<Table>
<Caption>
MAINSTAY RETIREMENT 2010 FUND
MainStay 130/30 Core Fund Class I 0.86%
- ---------------------------------------------
MainStay 130/30 Growth Fund Class I 1.06
- ---------------------------------------------
MainStay 130/30 International Fund
Class I 0.85
- ---------------------------------------------
MainStay Common Stock Fund Class I 0.67
- ---------------------------------------------
MainStay Convertible Fund Class I 0.08
- ---------------------------------------------
MainStay Epoch Global Choice Fund Class
I 0.51
- ---------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 0.54
- ---------------------------------------------
MainStay Floating Rate Fund Class I 0.22
- ---------------------------------------------
MainStay Global High Income Fund Class
I 2.16
- ---------------------------------------------
MainStay Growth Equity Fund Class I 2.17
- ---------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.06
- ---------------------------------------------
MainStay High Yield Opportunities Fund
Class I 0.71
- ---------------------------------------------
MainStay ICAP Equity Fund Class I 0.21
- ---------------------------------------------
MainStay ICAP International Fund Class
I 0.19
- ---------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.09
- ---------------------------------------------
MainStay Indexed Bond Fund Class I 1.89
- ---------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 0.78
- ---------------------------------------------
MainStay International Equity Fund
Class I 0.22
- ---------------------------------------------
MainStay Large Cap Growth Fund Class I 0.07
- ---------------------------------------------
MainStay MAP Fund Class I 0.39
- ---------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ---------------------------------------------
MainStay U.S. Small Cap Fund Class I 0.42
- ---------------------------------------------
</Table>
mainstayinvestments.com 81
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
MAINSTAY RETIREMENT 2020 FUND
MainStay 130/30 Core Fund Class I 1.67%
- ---------------------------------------------
MainStay 130/30 Growth Fund Class I 2.03
- ---------------------------------------------
MainStay 130/30 International Fund
Class I 1.67
- ---------------------------------------------
MainStay Common Stock Fund Class I 1.35
- ---------------------------------------------
MainStay Convertible Fund Class I 0.25
- ---------------------------------------------
MainStay Epoch Global Choice Fund Class
I 1.06
- ---------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 0.93
- ---------------------------------------------
MainStay Floating Rate Fund Class I 0.37
- ---------------------------------------------
MainStay Global High Income Fund Class
I 3.62
- ---------------------------------------------
MainStay Growth Equity Fund Class I 3.13
- ---------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.09
- ---------------------------------------------
MainStay High Yield Opportunities Fund
Class I 0.97
- ---------------------------------------------
MainStay ICAP Equity Fund Class I 0.42
- ---------------------------------------------
MainStay ICAP International Fund Class
I 0.37
- ---------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.09
- ---------------------------------------------
MainStay Indexed Bond Fund Class I 0.18
- ---------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 0.81
- ---------------------------------------------
MainStay International Equity Fund
Class I 0.43
- ---------------------------------------------
MainStay Large Cap Growth Fund Class I 0.14
- ---------------------------------------------
MainStay MAP Fund Class I 0.72
- ---------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ---------------------------------------------
MainStay U.S. Small Cap Fund Class I 1.02
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2030 FUND
MainStay 130/30 Core Fund Class I 2.69%
- ---------------------------------------------
MainStay 130/30 Growth Fund Class I 2.31
- ---------------------------------------------
MainStay 130/30 International Fund
Class I 2.75
- ---------------------------------------------
MainStay Common Stock Fund Class I 1.96
- ---------------------------------------------
MainStay Convertible Fund Class I 0.58
- ---------------------------------------------
MainStay Epoch Global Choice Fund Class
I 1.66
- ---------------------------------------------
MainStay Epoch U.S. All Cap Growth Fund
Class I 1.38
- ---------------------------------------------
MainStay Floating Rate Fund Class I 0.69
- ---------------------------------------------
MainStay Global High Income Fund Class
I 6.78
- ---------------------------------------------
MainStay Growth Equity Fund Class I 4.75
- ---------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.10
- ---------------------------------------------
MainStay High Yield Opportunities Fund
Class I 1.12
- ---------------------------------------------
MainStay ICAP Equity Fund Class I 0.59
- ---------------------------------------------
MainStay ICAP International Fund Class
I 0.61
- ---------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.25
- ---------------------------------------------
MainStay Indexed Bond Fund Class I 0.74
- ---------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 0.31
- ---------------------------------------------
MainStay International Equity Fund
Class I 0.70
- ---------------------------------------------
MainStay Large Cap Growth Fund Class I 0.22
- ---------------------------------------------
MainStay MAP Fund Class I 1.06
- ---------------------------------------------
MainStay S&P 500 Index Fund Class I 0.02
- ---------------------------------------------
MainStay U.S. Small Cap Fund Class I 2.22
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2040 FUND
MainStay 130/30 Core Fund Class I 1.66%
- ---------------------------------------------
MainStay 130/30 Growth Fund Class I 1.24
- ---------------------------------------------
MainStay 130/30 International Fund
Class I 1.75
- ---------------------------------------------
MainStay Common Stock Fund Class I 1.24
- ---------------------------------------------
MainStay Convertible Fund Class I 0.59
- ---------------------------------------------
MainStay Epoch Global Choice Fund Class
I 1.06
- ---------------------------------------------
MainStay Epoch U.S. All Cap Growth Fund
Class I 0.98
- ---------------------------------------------
MainStay Floating Rate Fund Class I 0.24
- ---------------------------------------------
MainStay Global High Income Fund Class
I 2.39
- ---------------------------------------------
MainStay Growth Equity Fund Class I 2.57
- ---------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.04
- ---------------------------------------------
MainStay High Yield Opportunities Fund
Class I 0.39
- ---------------------------------------------
MainStay ICAP Equity Fund Class I 0.38
- ---------------------------------------------
MainStay ICAP International Fund Class
I 0.39
- ---------------------------------------------
MainStay ICAP Select Equity Fund Class
I 0.16
- ---------------------------------------------
MainStay Indexed Bond Fund Class I 0.17
- ---------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 0.07
- ---------------------------------------------
MainStay International Equity Fund
Class I 0.45
- ---------------------------------------------
MainStay Large Cap Growth Fund Class I 0.13
- ---------------------------------------------
MainStay MAP Fund Class I 0.49
- ---------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ---------------------------------------------
MainStay U.S. Small Cap Fund Class I 1.98
- ---------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND
MainStay 130/30 Core Fund Class I 0.87%
- ---------------------------------------------
MainStay 130/30 Growth Fund Class I 0.56
- ---------------------------------------------
MainStay 130/30 International Fund
Class I 0.97
- ---------------------------------------------
MainStay Common Stock Fund Class I 0.65
- ---------------------------------------------
MainStay Convertible Fund Class I 0.35
- ---------------------------------------------
MainStay Epoch Global Choice Fund Class
I 0.61
- ---------------------------------------------
MainStay Epoch U.S. All Cap Fund Class
I 0.51
- ---------------------------------------------
MainStay Floating Rate Fund Class I 0.07
- ---------------------------------------------
MainStay Global High Income Fund Class
I 0.73
- ---------------------------------------------
MainStay Growth Equity Fund Class I 1.58
- ---------------------------------------------
MainStay High Yield Corporate Bond Fund
Class I 0.01
- ---------------------------------------------
MainStay High Yield Opportunities Fund
Class I 0.12
- ---------------------------------------------
MainStay ICAP Equity Fund Class I 0.17
- ---------------------------------------------
MainStay ICAP International Fund Class
I 0.22
- ---------------------------------------------
</Table>
82 MainStay Retirement Funds
<Table>
<Caption>
MAINSTAY RETIREMENT 2050 FUND (CONTINUED)
MainStay ICAP Select Equity Fund Class I
0.07
- ---------------------------------------------
MainStay Indexed Bond Fund Class I 0.01
- ---------------------------------------------
MainStay Intermediate Term Bond Fund
Class I 0.01
- ---------------------------------------------
MainStay International Equity Fund
Class I 0.25
- ---------------------------------------------
MainStay Large Cap Growth Fund Class I 0.07
- ---------------------------------------------
MainStay MAP Fund Class I 0.31
- ---------------------------------------------
MainStay S&P 500 Index Fund Class I 0.01
- ---------------------------------------------
MainStay U.S. Small Cap Fund Class I 0.42
- ---------------------------------------------
</Table>
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Retirement Funds by the Office of the General Counsel
of New York Life Investments is payable directly by the Retirement Funds. For
the six-month period ended April 30, 2010, these fees, which are included in
professional fees shown on the Statement of Operations, were as follows:
<Table>
<Caption>
TOTAL
MainStay Retirement 2010 Fund $1,073
- ----------------------------------------------
MainStay Retirement 2020 Fund 1,480
- ----------------------------------------------
MainStay Retirement 2030 Fund 1,786
- ----------------------------------------------
MainStay Retirement 2040 Fund 1,019
- ----------------------------------------------
MainStay Retirement 2050 Fund 494
- ----------------------------------------------
</Table>
NOTE 4--FEDERAL INCOME TAX:
MAINSTAY RETIREMENT 2010 FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $917,275 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Retirement
2010 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 57
2017 860
- ---------------------------------- -----
Total $917
- ---------------------------------- -----
</Table>
MAINSTAY RETIREMENT 2020 FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $1,352,363 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Retirement
2020 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $1,352
- ---------------------------------- -----
</Table>
MAINSTAY RETIREMENT 2030 FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $1,811,199 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Retirement
2030 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $1,811
- ---------------------------------- -----
</Table>
MAINSTAY RETIREMENT 2040 FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $1,047,866 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Retirement
2040 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2016 $ 51
2017 997
- ---------------------------------- -----
Total $1,048
- ---------------------------------- -----
</Table>
MAINSTAY RETIREMENT 2050 FUND
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $757,866 were available as shown in the table below, to the extent provided
by the regulations to offset future realized gains of the MainStay Retirement
2050 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. No capital gain
distributions shall be made until any capital loss carryforwards have been fully
utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2017 $758
- ---------------------------------- -----
</Table>
mainstayinvestments.com 83
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
-------------------------------------------
TAX-BASED TAX-BASED
DISTRIBUTIONS DISTRIBUTIONS
FROM ORDINARY FROM LONG-TERM
INCOME GAINS TOTAL
MainStay Retirement 2010 Fund $656,191 $ -- $656,191
- ------------------------------------------------------------------------------------------------
MainStay Retirement 2020 Fund 634,246 54,843 689,089
- ------------------------------------------------------------------------------------------------
MainStay Retirement 2030 Fund 667,237 42,165 709,402
- ------------------------------------------------------------------------------------------------
MainStay Retirement 2040 Fund 337,678 -- 337,678
- ------------------------------------------------------------------------------------------------
MainStay Retirement 2050 Fund 188,549 56,204 244,753
- ------------------------------------------------------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Retirement
Funds. Custodial fees are charged to the Retirement Funds based on the market
value of securities in the Retirement Funds and the number of certain cash
transactions incurred by the Retirement Funds.
NOTE 6--LINE OF CREDIT:
The Retirement Funds and certain affiliated funds maintain a line of credit with
a syndicate of banks in order to secure a source of funds for temporary purposes
to meet unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Retirement Funds based upon net assets and
other factors. Interest on any revolving credit loan is charged based upon the
Federal Funds Advances rate or the one month LIBOR rate, whichever is higher.
There were no borrowings made or outstanding with respect to the Retirement
Funds on the line of credit during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
For the six-month period ended April 30, 2010, purchases and sales of securities
were as follows:
<Table>
<Caption>
MAINSTAY RETIREMENT MAINSTAY RETIREMENT MAINSTAY RETIREMENT
2010 FUND 2020 FUND 2030 FUND
-------------------- -------------------- --------------------
PURCHASES SALES PURCHASES SALES PURCHASES SALES
U.S. Government Securities $ -- $ -- $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------
All Others 22,083 25,486 27,560 26,878 32,955 28,056
- --------------------------------------------------------------------------------------------------------
Total $22,083 $25,486 $27,560 $26,878 $32,955 $28,056
- --------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MAINSTAY RETIREMENT MAINSTAY RETIREMENT
2040 FUND 2050 FUND
-------------------- -------------------
PURCHASES SALES PURCHASES SALES
U.S. Government Securities $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------
All Others 20,567 17,085 11,347 8,982
- ------------------------------------------------------------------------------------------------
Total $20,567 $17,085 $11,347 $8,982
- ------------------------------------------------------------------------------------------------
</Table>
84 MainStay Retirement Funds
NOTE 8--CAPITAL SHARE TRANSACTIONS:
MAINSTAY RETIREMENT 2010 FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 20,783 $ 197,423
Shares issued to shareholders
in reinvestment of
dividends 434 4,024
Shares redeemed (807) (7,668)
------------------------
Net increase 20,410 $ 193,779
========================
Year ended October 31, 2009:
Shares sold 16,227 $ 130,137
Shares issued to shareholders
in reinvestment of
dividends 159 1,237
Shares redeemed (3,798) (29,808)
------------------------
Net increase 12,588 $ 101,566
========================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 69,069 $ 656,206
Shares issued to shareholders
in reinvestment of
dividends 15,416 142,596
Shares redeemed (110,108) (1,040,803)
------------------------
Net decrease (25,623) $ (242,001)
========================
Year ended October 31, 2009:
Shares sold 385,040 $ 3,145,755
Shares issued to shareholders
in reinvestment of
dividends 15,094 116,981
Shares redeemed (235,937) (1,928,123)
------------------------
Net increase 164,197 $ 1,334,613
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 614,761 $ 5,824,657
Shares issued to shareholders
in reinvestment of
dividends 79,405 737,674
Shares redeemed (984,059) (9,250,037)
------------------------
Net decrease (289,893) $ (2,687,706)
========================
Year ended October 31, 2009:
Shares sold 2,369,429 $ 19,282,165
Shares issued to shareholders
in reinvestment of
dividends 66,902 519,833
Shares redeemed (1,362,101) (10,831,838)
------------------------
Net increase 1,074,230 $ 8,970,160
========================
<Caption>
CLASS R2 SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 26,776 $ 253,452
Shares issued to shareholders
in reinvestment of
dividends 3,533 32,713
Shares redeemed (49,964) (473,749)
------------------------
Net decrease (19,655) $ (187,584)
========================
Period ended October 31, 2009
(a):
Shares sold 225,016 $ 1,868,095
Shares redeemed (25,432) (221,803)
------------------------
Net increase 199,584 $ 1,646,292
========================
(a)Class R2 shares were first offered on January 8,
2009.
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 3,042 $ 28,476
Shares issued to shareholders
in reinvestment of
dividends 2,019 18,719
Shares redeemed (13,709) (126,573)
------------------------
Net decrease (8,648) $ (79,378)
========================
Year ended October 31, 2009:
Shares sold 12,518 $ 102,259
Shares issued to shareholders
in reinvestment of
dividends 2,335 18,140
Shares redeemed (17,552) (145,455)
------------------------
Net decrease (2,699) $ (25,056)
========================
</Table>
MAINSTAY RETIREMENT 2020 FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 80,708 $ 720,700
Shares issued to shareholders
in reinvestment of
dividends 2,000 17,600
Shares redeemed (9,869) (90,066)
-----------------------
Net increase in shares
outstanding before
conversion 72,839 648,234
Shares converted into
Investor Class (See Note 1) 1,161 10,587
Shares converted from
Investor Class (See Note 1) (10,462) (95,208)
-----------------------
Net increase 63,538 $ 563,613
=======================
Year ended October 31, 2009:
Shares sold 76,970 $ 566,281
Shares issued to shareholders
in reinvestment of
dividends and distributions 956 6,802
Shares redeemed (9,722) (76,601)
-----------------------
Net increase in shares
outstanding before
conversion 68,204 496,482
Shares converted into
Investor Class (See Note 1) 2,812 19,178
Shares converted from
Investor Class (See Note 1) (10,021) (71,352)
-----------------------
Net increase 60,995 $ 444,308
=======================
</Table>
mainstayinvestments.com 85
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 141,249 $ 1,259,655
Shares issued to shareholders
in reinvestment of
dividends 22,684 199,170
Shares redeemed (99,109) (883,486)
-----------------------
Net increase in shares
outstanding before
conversion 64,824 575,339
Shares converted into Class A
(See Note 1) 10,474 95,208
Shares converted from Class A
(See Note 1) (1,163) (10,587)
-----------------------
Net increase 74,135 $ 659,960
=======================
Year ended October 31, 2009:
Shares sold 811,161 $ 6,203,506
Shares issued to shareholders
in reinvestment of
dividends and distributions 19,556 138,847
Shares redeemed (211,181) (1,603,375)
-----------------------
Net increase in shares
outstanding before
conversion 619,536 4,738,978
Shares converted into Class A
(See Note 1) 10,007 71,352
Shares converted from Class A
(See Note 1) (2,820) (19,178)
-----------------------
Net increase 626,723 $ 4,791,152
=======================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 869,520 $ 7,804,824
Shares issued to shareholders
in reinvestment of
dividends 93,163 820,771
Shares redeemed (1,045,062) (9,314,622)
-----------------------
Net decrease (82,379) $ (689,027)
=======================
Year ended October 31, 2009:
Shares sold 3,269,384 $24,448,430
Shares issued to shareholders
in reinvestment of
dividends and distributions 72,103 513,376
Shares redeemed (1,001,095) (7,269,270)
-----------------------
Net increase 2,340,392 $17,692,536
=======================
<Caption>
CLASS R2 SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 62,151 $ 567,882
Shares issued to shareholders
in reinvestment of
dividends 2,091 18,380
Shares redeemed (4,166) (36,702)
-----------------------
Net increase 60,076 $ 549,560
=======================
Period ended October 31, 2009
(a):
Shares sold 130,313 $ 1,002,492
Shares redeemed (6,527) (55,039)
-----------------------
Net increase 123,786 $ 947,453
=======================
(a) Class R2 shares first commenced investment
operations on January 8, 2009.
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 7,767 $ 69,241
Shares issued to shareholders
in reinvestment of
dividends 3,016 26,508
Shares redeemed (10,404) (93,647)
-----------------------
Net increase 379 $ 2,102
=======================
Year ended October 31, 2009:
Shares sold 30,809 $ 229,532
Shares issued to shareholders
in reinvestment of
dividends and distributions 4,223 30,064
Shares redeemed (10,050) (74,374)
-----------------------
Net increase 24,982 $ 185,222
=======================
</Table>
MAINSTAY RETIREMENT 2030 FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 91,848 $ 775,226
Shares issued to shareholders
in reinvestment of
dividends 1,220 10,126
Shares redeemed (9,832) (82,934)
-----------------------
Net increase in shares
outstanding before
conversion 83,236 702,418
Shares converted from
Investor Class (See Note 1) (9,791) (83,084)
-----------------------
Net increase 73,445 $ 619,334
=======================
Year ended October 31, 2009:
Shares sold 69,077 $ 472,304
Shares issued to shareholders
in reinvestment of
dividends and distributions 510 3,337
Shares redeemed (8,327) (60,435)
-----------------------
Net increase in shares
outstanding before
conversion 61,260 415,206
Shares converted into
Investor Class (See Note 1) 3,119 24,733
Shares converted from
Investor Class (See Note 1) (3,422) (27,920)
-----------------------
Net increase 60,957 $ 412,019
=======================
</Table>
86 MainStay Retirement Funds
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 141,201 $ 1,188,003
Shares issued to shareholders
in reinvestment of
dividends 18,191 150,443
Shares redeemed (65,060) (548,673)
-----------------------
Net increase in shares
outstanding before
conversion 94,332 789,773
Shares converted into Class A
(See Note 1) 9,819 83,084
-----------------------
Net increase 104,151 $ 872,857
=======================
Year ended October 31, 2009:
Shares sold 773,081 $ 5,484,802
Shares issued to shareholders
in reinvestment of
dividends and distributions 17,887 116,620
Shares redeemed (184,742) (1,332,711)
-----------------------
Net increase in shares
outstanding before
conversion 606,226 4,268,711
Shares converted into Class A
(See Note 1) 3,434 27,920
Shares converted from Class A
(See Note 1) (3,127) (24,733)
-----------------------
Net increase 606,533 $ 4,271,898
=======================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 1,076,738 $ 9,136,702
Shares issued to shareholders
in reinvestment of
dividends 97,230 808,958
Shares redeemed (945,615) (7,969,565)
-----------------------
Net increase 228,353 $ 1,976,095
=======================
Year ended October 31, 2009:
Shares sold 4,179,658 $28,810,694
Shares issued to shareholders
in reinvestment of
dividends and distributions 79,484 520,621
Shares redeemed (1,298,386) (8,739,161)
-----------------------
Net increase 2,960,756 $20,592,154
=======================
<Caption>
CLASS R2 SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 180,448 $ 1,554,011
Shares issued to shareholders
in reinvestment of
dividends 2,734 22,641
Shares redeemed (10,305) (86,731)
-----------------------
Net increase 172,877 $ 1,489,921
=======================
Period ended October 31, 2009
(a):
Shares sold 226,218 $ 1,613,043
Shares redeemed (32,294) (238,649)
-----------------------
Net increase 193,924 $ 1,374,394
=======================
(a) Class R2 shares first commenced investment
operations on January 8, 2009.
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 38,498 $ 323,885
Shares issued to shareholders
in reinvestment of
dividends 7,208 59,829
Shares redeemed (5,672) (47,864)
-----------------------
Net increase 40,034 $ 335,850
=======================
Year ended October 31, 2009:
Shares sold 93,726 $ 660,935
Shares issued to shareholders
in reinvestment of
dividends and distributions 10,508 68,824
Shares redeemed (22,582) (154,623)
-----------------------
Net increase 81,652 $ 575,136
=======================
</Table>
MAINSTAY RETIREMENT 2040 FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 45,625 $ 376,967
Shares issued to shareholders
in reinvestment of
dividends 994 8,084
Shares redeemed (9,189) (77,031)
----------------------
Net increase in shares
outstanding before
conversion 37,430 308,020
Shares converted from
Investor Class (See Note 1) (637) (5,376)
----------------------
Net increase 36,793 $ 302,644
======================
Year ended October 31, 2009:
Shares sold 73,171 $ 472,041
Shares issued to shareholders
in reinvestment of
dividends 325 2,062
Shares redeemed (6,321) (43,316)
----------------------
Net increase in shares
outstanding before
conversion 67,175 430,787
Shares converted into
Investor Class (See Note 1) 108 641
----------------------
Net increase 67,283 $ 431,428
======================
</Table>
mainstayinvestments.com 87
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 79,590 $ 653,361
Shares issued to shareholders
in reinvestment of
dividends 8,087 65,427
Shares redeemed (61,551) (508,883)
----------------------
Net increase in shares
outstanding before
conversion 26,126 209,905
Shares converted into Class A
(See Note 1) 639 5,376
----------------------
Net increase 26,765 $ 215,281
======================
Year ended October 31, 2009:
Shares sold 441,203 $ 3,028,918
Shares issued to shareholders
in reinvestment of
dividends 8,702 54,906
Shares redeemed (92,820) (664,612)
----------------------
Net increase in shares
outstanding before
conversion 357,085 2,419,212
Shares converted from Class A
(See Note 1) (108) (641)
----------------------
Net increase 356,977 $ 2,418,571
======================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 642,447 $ 5,333,763
Shares issued to shareholders
in reinvestment of
dividends 44,430 361,660
Shares redeemed (537,415) (4,412,663)
----------------------
Net increase 149,462 $ 1,282,760
======================
Year ended October 31, 2009:
Shares sold 2,423,866 $16,618,190
Shares issued to shareholders
in reinvestment of
dividends 36,530 231,599
Shares redeemed (648,968) (4,385,445)
----------------------
Net increase 1,811,428 $12,464,344
======================
<Caption>
CLASS R2 SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 209,261 $ 1,760,692
Shares issued to shareholders
in reinvestment of
dividends 2,286 18,538
Shares redeemed (15,349) (125,387)
----------------------
Net increase 196,198 $ 1,653,843
======================
Period ended October 31, 2009
(a):
Shares sold 195,423 $ 1,350,125
Shares redeemed (10,909) (75,089)
----------------------
Net increase 184,514 $ 1,275,036
======================
(a) Class R2 shares had additional investments on
January 8, 2009.
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 25,407 $ 208,650
Shares issued to shareholders
in reinvestment of
dividends 4,277 34,687
Shares redeemed (1,856) (15,229)
----------------------
Net increase 27,828 $ 228,108
======================
Year ended October 31, 2009:
Shares sold 86,762 $ 569,698
Shares issued to shareholders
in reinvestment of
dividends 7,758 49,111
Shares redeemed (28,437) (199,767)
----------------------
Net increase 66,083 $ 419,042
======================
</Table>
MAINSTAY RETIREMENT 2050 FUND
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 16,312 $ 130,251
Shares issued to shareholders
in reinvestment of
dividends 425 3,360
Shares redeemed (1,653) (13,266)
----------------------
Net increase 15,084 $ 120,345
======================
Year ended October 31, 2009:
Shares sold 27,175 $ 176,228
Shares issued to shareholders
in reinvestment of
dividends and distributions 346 2,120
Shares redeemed (2,833) (18,841)
----------------------
Net increase in shares
outstanding before
conversion 24,688 159,507
Shares converted into
Investor Class (See Note 1) 2,954 16,926
----------------------
Net increase 27,642 $ 176,433
======================
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 34,464 $ 274,491
Shares issued to shareholders
in reinvestment of
dividends 2,180 17,197
Shares redeemed (6,737) (52,682)
----------------------
Net increase 29,907 $ 239,006
======================
Year ended October 31, 2009:
Shares sold 125,754 $ 820,076
Shares issued to shareholders
in reinvestment of
dividends and distributions 3,393 20,730
Shares redeemed (26,175) (169,050)
----------------------
Net increase in shares
outstanding before
conversion 102,972 671,756
Shares converted from Class A
(See Note 1) (2,959) (16,926)
----------------------
Net increase 100,013 $ 654,830
======================
</Table>
88 MainStay Retirement Funds
<Table>
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 422,917 $ 3,405,030
Shares issued to shareholders
in reinvestment of
dividends 21,464 169,995
Shares redeemed (342,004) (2,739,786)
----------------------
Net increase 102,377 $ 835,239
======================
Year ended October 31, 2009:
Shares sold 1,096,923 $ 7,402,117
Shares issued to shareholders
in reinvestment of
dividends and distributions 30,754 188,524
Shares redeemed (321,610) (2,138,066)
----------------------
Net increase 806,067 $ 5,452,575
======================
<Caption>
CLASS R2 SHARES AMOUNT
Period ended April 30, 2010:
Shares sold 136,830 $ 1,125,557
Shares issued to shareholders
in reinvestment of
dividends 669 5,289
Shares redeemed (3,859) (31,421)
----------------------
Net increase 133,640 $ 1,099,425
======================
Period ended October 31, 2009
(a):
Shares sold 56,090 $ 390,598
Shares redeemed (82) (631)
----------------------
Net increase 56,008 $ 389,967
======================
(a) Class R2 shares first commenced investment
operations on January 8, 2009.
<Caption>
CLASS R3 SHARES AMOUNT
Six-month period ended April
30, 2010:
Shares sold 18,223 $ 145,772
Shares issued to shareholders
in reinvestment of
dividends 2,230 17,594
Shares redeemed (3,848) (30,786)
----------------------
Net increase 16,605 $ 132,580
======================
Year ended October 31, 2009:
Shares sold 65,692 $ 419,650
Shares issued to shareholders
in reinvestment of
dividends and distributions 5,457 33,343
Shares redeemed (8,241) (53,063)
----------------------
Net increase 62,908 $ 399,930
======================
</Table>
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU
2010-06 requires reporting entities to make new disclosures about amount and
reasons for significant transfers in and out of Level 1 and Level 2 fair value
measurements and input and valuation techniques used to measure fair value for
both recurring and nonrecurring fair value measurements that fall in either
Level 2 or Level 3, and information on purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures. The
new and revised disclosure requirements are effective for interim and annual
reporting periods beginning after December 15, 2009 except for the disclosures
about purchased, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measures, which are effective for fiscal years
beginning after December 15, 2010. As of April 30, 2010, the Retirement Funds
have adopted ASU 2010-06. The adoption of ASU 2010-06 has not impacted the
amounts reported in the Retirement Funds' financial statements; however, there
are additional disclosures in each of the Retirement Funds' Portfolio of
Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Retirement
Funds as of and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Retirement Funds' management
for possible adjustment and/or disclosure. No subsequent events requiring
financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 89
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Funds' securities is available without charge,
upon request, (i) by visiting the Retirement Funds' website at
mainstayinvestments.com; and (ii) on the Securities and Exchange Commission's
("SEC") website at www.sec.gov.
The Retirement Funds are required to file with the SEC their proxy voting
records for each Portfolio for the 12-month period ending June 30 on Form N-PX.
The most recent Form N-PX is available free of charge upon request by calling
800-MAINSTAY (624-6782); visiting the Funds' website at mainstayinvestments.com;
or on the SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
Each Retirement Fund is required to file its complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q. The
Funds' Form N-Q is available without charge, on the SEC's website at www.sec.gov
or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can
obtain and review copies of Form N-Q by visiting the SEC's Public Reference Room
in Washington, DC (information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330).
90 MainStay Retirement Funds
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18301 MS121-10 MSRF10-06/10
C1
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY S&P 500 INDEX FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY S&P 500 INDEX FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------
FINANCIAL STATEMENTS 18
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 24
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 31
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 31
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE
FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY OBTAIN COPIES OF THE
FUND'S SUMMARY
PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FREE OF CHARGE,
UPON REQUEST, BY
CALLING TOLL-FREE 800-MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS
LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING
AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE ALSO
AVAILABLE AT
MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTORS CLASS SHARES(2)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 11.91% 33.90% 1.44% -0.97%
Excluding sales charges 15.37 38.04 2.06 -0.67
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY S&P
500 INDEX S&P 500
FUND INDEX
------------ -------
4/30/00 9700 10000
8438 8703
7341 7604
6342 6592
7755 8100
8193 8614
9393 9941
10753 11456
10201 10920
6573 7064
4/30/10 9073 9808
</Table>
CLASS A SHARES(3)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
With sales charges 11.99% 34.01% 1.45% -0.96%
Excluding sales charges 15.46 38.16 2.07 -0.66
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY S&P
500 INDEX S&P 500
FUND INDEX
------------ -------
4/30/00 24250 25000
21096 21757
18352 19010
15856 16480
19389 20250
20483 21534
23482 24853
26883 28640
25495 27301
16427 17660
4/30/10 22695 24520
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------------
15.54% 38.48% 2.40% -0.38%
</Table>
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
MAINSTAY S&P
500 INDEX S&P 500
FUND INDEX
------------ -------
4/30/00 10000 10000
8714 8703
7597 7604
6578 6592
8067 8100
8554 8614
9845 9941
11310 11456
10758 10920
6955 7064
4/30/10 9631 9808
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain
distributions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 3.00% and an
annual 12b-1 fee of 0.25%. Class I shares are sold with no initial sales
charge or contingent deferred sales charge, have no annual 12b-1 fee, and are
generally available to corporate and institutional investors or individual
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. For information on current fee waivers
and/or expense limitations, please refer to the notes to the financial
statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares, through February
27, 2008, adjusted for differences in certain contractual expenses and fees.
Unadjusted, the performance shown for Investor Class shares might have been
lower.
3. Performance figures for Class A shares, first offered on January 2, 2004,
include the historical performance of Class I shares through December 31,
2003, adjusted for differences in certain contractual expenses and fees.
Unadjusted, the performance shown for Class A shares might have been lower.
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
S&P 500(R) Index(4) 15.66% 38.84% 2.63% -0.19%
Average Lipper S&P 500 Index objective fund(5) 15.37 38.18 2.13 -0.67
</Table>
4. "S&P 500(R)" and "S&P(R)" are trademarks of The McGraw-Hill Companies, Inc.,
and have been licensed for use by New York Life Investments. 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) Index is widely
regarded as the standard index for measuring large-cap U.S. stock market
performance. Results assume reinvestment of all dividends and capital gains.
The S&P 500(R) Index is the Fund's broad-based securities market index for
comparison purposes. An investment cannot be made directly in an index.
5. The average Lipper S&P 500 Index objective fund is representative of funds
that are passively managed and commit by prospectus language to replicate the
performance of the S&P 500(R) Index (including reinvested basis dividends).
In addition, S&P 500(R) Index objective funds have limited expenses (advisor
fee no higher than 0.50%). This benchmark is a product of Lipper Inc. Lipper
Inc. is an independent monitor of fund performance. Results are based on
average total returns of similar funds with all dividend and capital gain
distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay S&P 500 Index Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY S&P 500 INDEX FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,153.70 $3.74 $1,021.30 $3.51
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,154.60 $3.21 $1,021.80 $3.01
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,155.40 $1.87 $1,023.10 $1.76
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(0.70% for Investor Class, 0.60% for Class A and 0.35% for Class I)
multiplied by the average account value over the period, divided by 365 and
multiplied by 181 (to reflect the one-half year period). The table above
represents the actual expenses incurred during the one-half year period.
mainstayinvestments.com 7
INDUSTRY COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
<Table>
<Caption>
Oil, Gas & Consumable Fuels 9.1%
Pharmaceuticals 5.6
Diversified Financial Services 4.4
Computers & Peripherals 4.2
Software 4.0
Insurance 3.6
Commercial Banks 3.3
Media 3.1
Aerospace & Defense 2.9
IT Services 2.9
Capital Markets 2.5
Food & Staples Retailing 2.5
Industrial Conglomerates 2.5
Semiconductors & Semiconductor
Equipment 2.5
Beverages 2.4
Communications Equipment 2.4
Diversified Telecommunication
Services 2.4
Household Products 2.3
Specialty Retail 2.1
Health Care Providers & Services 2.0
Chemicals 1.8
Energy Equipment & Services 1.8
Health Care Equipment & Supplies 1.8
Electric Utilities 1.7
Food Products 1.7
Internet Software & Services 1.7
Machinery 1.7
Hotels, Restaurants & Leisure 1.6
Biotechnology 1.4
Tobacco 1.4
Multi-Utilities 1.3
Real Estate Investment Trusts 1.3
Air Freight & Logistics 1.1
Metals & Mining 1.0
Multiline Retail 0.9
Consumer Finance 0.8
Road & Rail 0.8
Electrical Equipment 0.6
Electronic Equipment & Instruments 0.6
Internet & Catalog Retail 0.6
Automobiles 0.5
Commercial Services & Supplies 0.5
Textiles, Apparel & Luxury Goods 0.5
Household Durables 0.4
Life Sciences Tools & Services 0.4
Wireless Telecommunication Services 0.3
Auto Components 0.2
Construction & Engineering 0.2
Containers & Packaging 0.2
Diversified Consumer Services 0.2
Gas Utilities 0.2
Independent Power Producers & Energy
Traders 0.2
Paper & Forest Products 0.2
Personal Products 0.2
Airlines 0.1
Building Products 0.1
Construction Materials 0.1
Distributors 0.1
Health Care Technology 0.1
Leisure Equipment & Products 0.1
Office Electronics 0.1
Professional Services 0.1
Thrifts & Mortgage Finance 0.1
Trading Companies & Distributors 0.1
Real Estate Management & Development 0.0++
Short-Term Investments 2.5
Other Assets, Less Liabilities 0.0++
-----
100.0%
=====
</Table>
See Portfolio of Investments beginning on page 10 for specific holdings within
these categories.
++ Less than one-tenth of a percent.
TOP TEN HOLDINGS AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENTS)
<Table>
1. ExxonMobil Corp.
2. Apple, Inc.
3. Microsoft Corp.
4. General Electric Co.
5. Procter & Gamble Co. (The)
6. Bank of America Corp.
7. Johnson & Johnson
8. Wells Fargo & Co.
9. JPMorgan Chase & Co.
10. International Business Machines Corp.
</Table>
8 MainStay S&P 500 Index Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS FRANCIS J. OK AND LEE BAKER OF MADISON
SQUARE INVESTORS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY S&P 500 INDEX FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay S&P 500 Index Fund returned 15.37% for
Investor Class shares and 15.46% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 15.54%.
Class A and I shares outperformed--and Investor Class shares performed in line
with--the 15.37% return of the average Lipper(1) S&P 500(R) Index objective fund
during the six-month reporting period. All share classes underperformed the
15.66% return of the S&P 500(R) Index(2) for the six months ended April 30,
2010. Because the Fund incurs operating expenses that the Index does not, the
Fund's net performance will typically lag that of the Index. The S&P 500(R)
Index is the Fund's broad-based securities-market index. See page 5 for Fund
returns with sales charges.
DURING THE REPORTING PERIOD, WHICH INDUSTRIES HAD THE HIGHEST TOTAL RETURNS AND
WHICH HAD THE LOWEST?
During the reporting period, the S&P 500(R) Index industry with the highest
total return was automobiles. Real estate management & development had the
second-highest industry total return, followed
by airlines. During the reporting period, health care technology had the lowest
total return of any indus-try in the Index. Independent power producers & energy
traders had the second-lowest total return, followed by thrifts & mortgage
finance.
DURING THE REPORTING PERIOD, WHICH INDUSTRIES WERE THE STRONGEST CONTRIBUTORS TO
THE FUND'S PERFORMANCE AND WHICH WERE THE WEAKEST CONTRIBUTORS?
On the basis of impact, which takes weightings and total returns into account,
the industry that made the strongest contribution to the Fund's performance was
computers & peripherals. Commercial banks was the second-strongest contributor,
followed by media. The industry that made the weakest contribution to the Fund's
performance was independent power producers & energy traders. The second-weakest
contributor was health care technology, followed by thrifts & mortgage finance.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL COMPANIES HAD THE HIGHEST TOTAL
RETURNS AND WHICH HAD THE LOWEST TOTAL RETURNS?
Within the S&P 500(R) Index, the company with the highest total return during
the six-month reporting period was communications equipment company JDS
Uniphase. Commercial bank Zions Bancorporation had the second-highest total
return, followed by semiconductor firm Advanced Micro Devices.
During the reporting period, the S&P 500(R) Index stock with the lowest total
return was Motorola, a leading communications equipment company. Software
company McAfee had the second-lowest total return, followed by energy equipment
& services company Diamond Offshore Drilling.
DURING THE REPORTING PERIOD, WHICH INDIVIDUAL STOCKS WERE THE STRONGEST
CONTRIBUTORS TO THE FUND'S ABSOLUTE PERFORMANCE AND WHICH WERE THE WEAKEST
CONTRIBUTORS?
On the basis of impact, which takes weightings and total returns into account,
the stocks that made the greatest positive contributions to the Fund's
performance during the reporting period were computers
& peripherals company Apple, followed by industrial conglomerate General
Electric and diversified financial services company Bank of America. The weakest
contributor was energy giant ExxonMobil, followed by capital markets firm
Goldman Sachs Group and communications company Qualcomm.
WERE THERE ANY CHANGES IN THE MAKEUP OF THE S&P 500(R) INDEX DURING THE
REPORTING PERIOD?
During the six-month reporting period, there were
14 additions to the S&P 500(R) Index and 14 deletions from it. Two significant
additions to the Index based on index weightings were business services firm
Visa and insurance company Berkshire Hathaway. Beverage company Pepsi Bottling
Group was a major deletion during the reporting period. The stock was deleted
from the S&P 500(R) Index when Pepsi Bottling Group was acquired by Pepsico,
which itself is part of the Index.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500(R) Index.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecasts
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
PORTFOLIO OF INVESTMENTS+++ APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS 97.5%+
- --------------------------------------------------------
AEROSPACE & DEFENSE 2.9%
Boeing Co. (The) 96,610 $ 6,997,462
General Dynamics Corp. 49,161 3,753,934
Goodrich Corp. 15,983 1,185,619
Honeywell International,
Inc. 97,569 4,631,600
ITT Corp. 23,276 1,293,447
L-3 Communications
Holdings, Inc. 14,810 1,385,772
Lockheed Martin Corp. 40,249 3,416,738
Northrop Grumman Corp. 38,643 2,621,155
Precision Castparts Corp. 18,085 2,321,029
Raytheon Co. 48,389 2,821,079
Rockwell Collins, Inc. 20,025 1,301,625
United Technologies Corp. 119,508 8,957,124
--------------
40,686,584
--------------
AIR FREIGHT & LOGISTICS 1.1%
C.H. Robinson Worldwide,
Inc. 21,252 1,281,496
Expeditors International of
Washington, Inc. 27,237 1,109,635
FedEx Corp. 39,941 3,595,089
United Parcel Service, Inc.
Class B 126,712 8,760,868
--------------
14,747,088
--------------
AIRLINES 0.1%
Southwest Airlines Co. 94,505 1,245,576
--------------
AUTO COMPONENTS 0.2%
Goodyear Tire & Rubber Co.
(The) (a) 31,058 417,109
Johnson Controls, Inc. 85,533 2,873,053
--------------
3,290,162
--------------
AUTOMOBILES 0.5%
Ford Motor Co. (a) 429,916 5,597,507
Harley-Davidson, Inc. 29,869 1,010,468
--------------
6,607,975
--------------
BEVERAGES 2.4%
Brown-Forman Corp. Class B 13,883 807,713
Coca-Cola Co. (The) 294,203 15,725,150
Coca-Cola Enterprises, Inc. 40,723 1,129,249
Constellation Brands, Inc.
Class A (a) 25,513 466,123
Dr. Pepper Snapple Group,
Inc. 32,366 1,059,339
Molson Coors Brewing Co.
Class B 20,133 893,100
PepsiCo, Inc. 208,569 13,602,870
--------------
33,683,544
--------------
BIOTECHNOLOGY 1.4%
Amgen, Inc. (a) 124,981 7,168,910
Biogen Idec, Inc. (a) 34,420 1,832,865
Celgene Corp. (a) 58,680 3,635,226
Cephalon, Inc. (a) 9,584 615,293
Genzyme Corp. (a) 33,958 1,807,924
Gilead Sciences, Inc. (a) 115,308 4,574,268
--------------
19,634,486
--------------
BUILDING PRODUCTS 0.1%
Masco Corp. 46,103 748,252
--------------
CAPITAL MARKETS 2.5%
Ameriprise Financial, Inc. 32,484 1,505,958
Bank of New York Mellon
Corp. (The) 154,196 4,800,121
Charles Schwab Corp. (The) 124,803 2,407,450
E*TRADE Financial Corp. (a) 203,014 341,064
Federated Investors, Inc.
Class B 11,254 271,446
Franklin Resources, Inc. 18,927 2,188,718
Goldman Sachs Group, Inc.
(The) 67,164 9,752,213
Invesco, Ltd. 54,617 1,255,645
Janus Capital Group, Inc. 23,383 329,233
Legg Mason, Inc. 20,850 660,737
Morgan Stanley 178,442 5,392,517
Northern Trust Corp. 30,758 1,691,075
State Street Corp. 63,233 2,750,635
T. Rowe Price Group, Inc. 33,065 1,901,568
--------------
35,248,380
--------------
CHEMICALS 1.8%
Air Products & Chemicals,
Inc. 27,075 2,078,818
Airgas, Inc. 10,485 665,273
CF Industries Holdings,
Inc. 6,159 515,324
Dow Chemical Co. (The) 146,808 4,526,091
E.I. du Pont de Nemours &
Co. 115,340 4,595,146
Eastman Chemical Co. 9,330 624,364
Ecolab, Inc. 30,266 1,478,191
FMC Corp. 9,224 587,015
International Flavors &
Fragrances, Inc. 10,166 509,215
Monsanto Co. 69,639 4,391,435
PPG Industries, Inc. 21,160 1,489,029
Praxair, Inc. 39,101 3,275,491
Sigma-Aldrich Corp. 15,490 918,557
--------------
25,653,949
--------------
COMMERCIAL BANKS 3.3%
BB&T Corp. 88,163 2,930,538
Comerica, Inc. 22,217 933,114
Fifth Third Bancorp 101,481 1,513,082
First Horizon National
Corp. (a) 28,905 409,006
Huntington Bancshares, Inc. 91,715 620,910
KeyCorp 112,801 1,017,465
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest holdings, as of April 30, 2010, excluding
short-term investments. May be subject to change daily.
10 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)
COMMERCIAL BANKS (CONTINUED)
M&T Bank Corp. 10,601 $ 925,997
Marshall & Ilsley Corp. 66,840 608,244
PNC Financial Services
Group, Inc. 66,017 4,437,002
Regions Financial Corp. 152,557 1,348,604
SunTrust Banks, Inc. 63,631 1,883,478
U.S. Bancorp 244,192 6,537,020
V Wells Fargo & Co. 661,216 21,892,862
Zions Bancorp 19,223 552,277
--------------
45,609,599
--------------
COMMERCIAL SERVICES & SUPPLIES 0.5%
Avery Dennison Corp. 14,314 558,675
Cintas Corp. 16,970 462,432
Iron Mountain, Inc. 23,140 581,971
Pitney Bowes, Inc. 26,585 675,259
R.R. Donnelley & Sons Co. 26,359 566,455
Republic Services, Inc. 41,384 1,284,146
Stericycle, Inc. (a) 10,754 633,411
Waste Management, Inc. 61,896 2,146,553
--------------
6,908,902
--------------
COMMUNICATIONS EQUIPMENT 2.4%
Cisco Systems, Inc. (a) 730,714 19,670,821
Harris Corp. 16,783 863,989
JDS Uniphase Corp. (a) 28,509 370,332
Juniper Networks, Inc. (a) 67,071 1,905,487
Motorola, Inc. (a) 294,713 2,083,621
QUALCOMM, Inc. 214,476 8,308,800
Tellabs, Inc. 48,988 444,811
--------------
33,647,861
--------------
COMPUTERS & PERIPHERALS 4.2%
V Apple, Inc. (a) 115,729 30,219,156
Dell, Inc. (a) 219,788 3,556,170
EMC Corp. (a) 261,987 4,980,373
Hewlett-Packard Co. 300,454 15,614,594
Lexmark International, Inc.
Class A (a) 9,919 367,499
NetApp, Inc. (a) 43,974 1,524,579
QLogic Corp. (a) 14,726 285,243
SanDisk Corp. (a) 29,153 1,162,913
Teradata Corp. (a) 21,290 618,900
Western Digital Corp. (a) 29,190 1,199,417
--------------
59,528,844
--------------
CONSTRUCTION & ENGINEERING 0.2%
Fluor Corp. 22,831 1,206,390
Jacobs Engineering Group,
Inc. (a) 15,910 767,180
Quanta Services, Inc. (a) 26,864 540,773
--------------
2,514,343
--------------
CONSTRUCTION MATERIALS 0.1%
Vulcan Materials Co. 16,048 919,229
--------------
CONSUMER FINANCE 0.8%
American Express Co. 152,739 7,044,323
Capital One Financial Corp. 58,105 2,522,338
Discover Financial Services 69,207 1,069,940
SLM Corp. (a) 61,871 757,301
--------------
11,393,902
--------------
CONTAINERS & PACKAGING 0.2%
Ball Corp. 12,084 642,990
Bemis Co., Inc. 13,866 421,665
Owens-Illinois, Inc. (a) 21,619 766,177
Pactiv Corp. (a) 16,943 430,522
Sealed Air Corp. 20,097 432,085
--------------
2,693,439
--------------
DISTRIBUTORS 0.1%
Genuine Parts Co. 20,240 866,272
--------------
DIVERSIFIED CONSUMER SERVICES 0.2%
Apollo Group, Inc. Class A
(a) 16,378 940,261
DeVry, Inc. 7,949 495,938
H&R Block, Inc. 42,602 780,043
--------------
2,216,242
--------------
DIVERSIFIED FINANCIAL SERVICES 4.4%
V Bank of America Corp. 1,280,332 22,828,319
Citigroup, Inc. (a) 2,507,840 10,959,261
CME Group, Inc. 8,504 2,792,798
IntercontinentalExchange,
Inc. (a) 9,395 1,095,739
V JPMorgan Chase & Co. 507,043 21,589,891
Leucadia National Corp. (a) 24,406 617,716
Moody's Corp. 25,182 622,499
NASDAQ OMX Group, Inc.
(The) (a) 18,812 395,052
NYSE Euronext 33,128 1,080,967
--------------
61,982,242
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES 2.4%
AT&T, Inc. 753,264 19,630,060
CenturyTel, Inc. 38,224 1,303,821
Frontier Communications
Corp. 39,563 314,922
Qwest Communications
International, Inc. 190,341 995,483
Verizon Communications,
Inc. 361,926 10,456,042
Windstream Corp. 58,305 644,270
--------------
33,344,598
--------------
ELECTRIC UTILITIES 1.7%
Allegheny Energy, Inc. 21,761 473,955
American Electric Power
Co., Inc. 60,883 2,088,287
Duke Energy Corp. 167,104 2,804,005
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
Edison International 41,532 $ 1,427,455
Entergy Corp. 24,074 1,956,975
Exelon Corp. 84,228 3,671,498
FirstEnergy Corp. 38,852 1,471,325
FPL Group, Inc. 52,672 2,741,578
Northeast Utilities 22,505 625,414
Pepco Holdings, Inc. 28,352 474,612
Pinnacle West Capital Corp. 12,994 485,196
PPL Corp. 48,052 1,189,768
Progress Energy, Inc. 36,331 1,450,333
Southern Co. (The) 104,689 3,618,052
--------------
24,478,453
--------------
ELECTRICAL EQUIPMENT 0.6%
Emerson Electric Co. 96,019 5,015,072
First Solar, Inc. (a) 6,179 886,996
Rockwell Automation, Inc. 18,227 1,106,743
Roper Industries, Inc. 11,951 729,250
--------------
7,738,061
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS 0.6%
Agilent Technologies, Inc.
(a) 44,510 1,613,933
Amphenol Corp. Class A 22,009 1,017,036
Corning, Inc. 198,926 3,829,326
FLIR Systems, Inc. (a) 19,449 594,945
Jabil Circuit, Inc. 24,320 372,582
Molex, Inc. 17,484 391,816
--------------
7,819,638
--------------
ENERGY EQUIPMENT & SERVICES 1.8%
Baker Hughes, Inc. 54,833 2,728,486
Cameron International Corp.
(a) 31,231 1,232,375
Diamond Offshore Drilling,
Inc. 8,858 700,668
FMC Technologies, Inc. (a) 15,578 1,054,475
Halliburton Co. 115,509 3,540,351
Helmerich & Payne, Inc. 13,540 549,995
Nabors Industries, Ltd. (a) 36,110 778,893
National-Oilwell Varco,
Inc. 53,317 2,347,548
Rowan Cos., Inc. (a) 14,604 435,199
Schlumberger, Ltd. 152,705 10,906,191
Smith International, Inc. 31,540 1,506,350
--------------
25,780,531
--------------
FOOD & STAPLES RETAILING 2.5%
Costco Wholesale Corp. 56,075 3,312,911
CVS Caremark Corp. 177,479 6,554,300
Kroger Co. (The) 82,923 1,843,378
Safeway, Inc. 49,647 1,171,669
SUPERVALU, Inc. 27,218 405,548
Sysco Corp. 75,412 2,378,495
Wal-Mart Stores, Inc. 272,325 14,610,236
Walgreen Co. 125,716 4,418,917
Whole Foods Market, Inc.
(a) 21,749 848,646
--------------
35,544,100
--------------
FOOD PRODUCTS 1.7%
Archer-Daniels-Midland Co. 81,856 2,287,057
Campbell Soup Co. 24,194 867,597
ConAgra Foods, Inc. 56,424 1,380,695
Dean Foods Co. (a) 23,148 363,424
General Mills, Inc. 42,060 2,993,831
H.J. Heinz Co. 40,223 1,885,252
Hershey Co. (The) 21,292 1,000,937
Hormel Foods Corp. 8,994 366,595
J.M. Smucker Co. (The) 15,167 926,249
Kellogg Co. 32,543 1,787,912
Kraft Foods, Inc. Class A 221,654 6,560,958
McCormick & Co., Inc. 16,779 663,945
Mead Johnson Nutrition Co. 26,111 1,347,589
Sara Lee Corp. 88,860 1,263,589
Tyson Foods, Inc. Class A 39,201 767,948
--------------
24,463,578
--------------
GAS UTILITIES 0.2%
EQT Corp. 16,807 730,936
Nicor, Inc. 5,806 252,619
ONEOK, Inc. 13,461 661,474
Questar Corp. 22,370 1,072,642
--------------
2,717,671
--------------
HEALTH CARE EQUIPMENT & SUPPLIES 1.8%
Baxter International, Inc. 76,815 3,627,204
Becton, Dickinson & Co. 30,076 2,296,904
Boston Scientific Corp. (a) 192,486 1,324,304
C.R. Bard, Inc. 12,214 1,056,878
CareFusion Corp. (a) 22,850 630,203
DENTSPLY International,
Inc. 18,791 688,502
Hospira, Inc. (a) 20,923 1,125,448
Intuitive Surgical, Inc.
(a) 4,968 1,791,262
Medtronic, Inc. 140,991 6,159,897
St. Jude Medical, Inc. (a) 41,543 1,695,785
Stryker Corp. 35,985 2,066,978
Varian Medical Systems,
Inc. (a) 15,865 894,469
Zimmer Holdings, Inc. (a) 27,133 1,652,671
--------------
25,010,505
--------------
HEALTH CARE PROVIDERS & SERVICES 2.0%
Aetna, Inc. 54,996 1,625,132
AmerisourceBergen Corp. 36,022 1,111,279
Cardinal Health, Inc. 46,182 1,602,053
CIGNA Corp. 35,014 1,122,549
Coventry Health Care, Inc.
(a) 18,842 447,309
DaVita, Inc. (a) 13,161 821,641
</Table>
12 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)
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
Express Scripts, Inc. (a) 35,118 $ 3,516,365
Humana, Inc. (a) 21,637 989,244
Laboratory Corp. of America
Holdings (a) 13,363 1,049,931
McKesson Corp. 34,378 2,228,038
Medco Health Solutions,
Inc. (a) 59,227 3,489,655
Patterson Cos., Inc. 11,936 381,833
Quest Diagnostics, Inc. 19,173 1,095,929
Tenet Healthcare Corp. (a) 55,592 347,450
UnitedHealth Group, Inc. 147,719 4,477,363
WellPoint, Inc. (a) 56,648 3,047,662
--------------
27,353,433
--------------
HEALTH CARE TECHNOLOGY 0.1%
Cerner Corp. (a) 8,483 720,292
--------------
HOTELS, RESTAURANTS & LEISURE 1.6%
Carnival Corp. 55,386 2,309,596
Darden Restaurants, Inc. 17,707 792,388
International Game
Technology 38,043 801,946
Marriott International,
Inc. Class A 32,385 1,190,473
McDonald's Corp. 137,327 9,693,913
Starbucks Corp. 94,640 2,458,747
Starwood Hotels & Resorts
Worldwide, Inc. 23,813 1,298,047
Wyndham Worldwide Corp. 22,847 612,528
Wynn Resorts, Ltd. 8,852 781,101
Yum! Brands, Inc. 59,886 2,540,364
--------------
22,479,103
--------------
HOUSEHOLD DURABLES 0.4%
D.R. Horton, Inc. 35,421 520,335
Fortune Brands, Inc. 19,291 1,011,234
Harman International
Industries, Inc. (a) 8,757 345,726
Leggett & Platt, Inc. 18,924 464,206
Lennar Corp. Class A 20,549 408,925
Newell Rubbermaid, Inc. 35,655 608,631
Pulte Homes, Inc. (a) 40,710 532,894
Stanley Black & Decker,
Inc. 20,032 1,244,989
Whirlpool Corp. 9,505 1,034,809
--------------
6,171,749
--------------
HOUSEHOLD PRODUCTS 2.3%
Clorox Co. (The) 17,891 1,157,548
Colgate-Palmolive Co. 63,013 5,299,393
Kimberly-Clark Corp. 53,130 3,254,744
V Procter & Gamble Co.
(The) 370,701 23,042,774
--------------
32,754,459
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.2%
AES Corp. (The) (a) 85,127 982,366
Constellation Energy Group,
Inc. 25,760 910,616
NRG Energy, Inc. (a) 33,141 801,018
--------------
2,694,000
--------------
INDUSTRIAL CONGLOMERATES 2.5%
3M Co. 90,829 8,053,807
V General Electric Co. 1,361,731 25,682,247
Textron, Inc. 34,697 792,480
--------------
34,528,534
--------------
INSURANCE 3.6%
Aflac, Inc. 59,884 3,051,689
Allstate Corp. (The) 68,363 2,233,419
American International
Group, Inc. (a) 17,279 672,153
Aon Corp. 34,063 1,446,315
Assurant, Inc. 14,855 541,168
Berkshire Hathaway, Inc.
Class B (a) 211,205 16,262,785
Chubb Corp. (The) 41,923 2,216,469
Cincinnati Financial Corp. 20,881 593,020
Genworth Financial, Inc.
Class A (a) 62,817 1,037,737
Hartford Financial Services
Group, Inc. (The) 48,798 1,394,159
Lincoln National Corp. 38,571 1,179,887
Loews Corp. 45,269 1,685,818
Marsh & McLennan Cos., Inc. 67,940 1,645,507
MetLife, Inc. 104,544 4,765,116
Principal Financial Group,
Inc. 40,658 1,188,027
Progressive Corp. (The) 85,943 1,726,595
Prudential Financial, Inc. 59,354 3,772,540
Torchmark Corp. 10,623 568,755
Travelers Cos., Inc. (The) 65,550 3,326,007
Unum Group 42,552 1,041,247
XL Capital, Ltd. Class A 43,933 782,007
--------------
51,130,420
--------------
INTERNET & CATALOG RETAIL 0.6%
Amazon.com, Inc. (a) 43,690 5,988,151
Expedia, Inc. 27,037 638,344
Priceline.com, Inc. (a) 5,816 1,524,083
--------------
8,150,578
--------------
INTERNET SOFTWARE & SERVICES 1.7%
Akamai Technologies, Inc.
(a) 21,970 853,095
eBay, Inc. (a) 144,142 3,432,021
Google, Inc. Class A (a) 30,843 16,206,146
Monster Worldwide, Inc. (a) 16,165 281,756
VeriSign, Inc. (a) 23,389 637,818
Yahoo!, Inc. (a) 151,753 2,508,477
--------------
23,919,313
--------------
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
IT SERVICES 2.9%
Automatic Data Processing,
Inc. 64,428 $ 2,793,598
Cognizant Technology
Solutions Corp. Class A
(a) 37,970 1,943,305
Computer Sciences Corp. (a) 19,477 1,020,400
Fidelity National
Information Services,
Inc. 42,081 1,106,309
Fiserv, Inc. (a) 19,436 992,985
V International Business
Machines Corp. 165,790 21,386,910
MasterCard, Inc. Class A 12,317 3,055,109
Paychex, Inc. 41,249 1,262,219
SAIC, Inc. (a) 39,064 680,104
Total System Services, Inc. 25,313 405,261
Visa, Inc. Class A 56,972 5,140,584
Western Union Co. (The) 87,122 1,589,977
--------------
41,376,761
--------------
LEISURE EQUIPMENT & PRODUCTS 0.1%
Eastman Kodak Co. (a) 34,211 209,371
Hasbro, Inc. 15,661 600,756
Mattel, Inc. 46,589 1,073,877
--------------
1,884,004
--------------
LIFE SCIENCES TOOLS & SERVICES 0.4%
Life Technologies Corp. (a) 23,081 1,262,761
Millipore Corp. (a) 7,132 757,062
PerkinElmer, Inc. 14,984 375,349
Thermo Fisher Scientific,
Inc. (a) 52,249 2,888,325
Waters Corp. (a) 11,935 859,201
--------------
6,142,698
--------------
MACHINERY 1.7%
Caterpillar, Inc. 79,736 5,429,224
Cummins, Inc. 25,716 1,857,467
Danaher Corp. 33,439 2,818,239
Deere & Co. 54,104 3,236,501
Dover Corp. 23,729 1,239,128
Eaton Corp. 21,130 1,630,391
Flowserve Corp. 7,115 815,237
Illinois Tool Works, Inc. 49,380 2,523,318
PACCAR, Inc. 46,386 2,157,877
Pall Corp. 14,881 580,210
Parker Hannifin Corp. 20,488 1,417,360
Snap-On, Inc. 7,410 357,014
--------------
24,061,966
--------------
MEDIA 3.1%
CBS Corp. Class B 86,260 1,398,274
Comcast Corp. Class A 362,146 7,148,762
DIRECTV Class A (a) 119,364 4,324,558
Discovery Communications,
Inc. Class A (a) 36,170 1,399,779
Gannett Co., Inc. 30,141 513,000
Interpublic Group of Cos.,
Inc. (The) (a) 62,414 556,109
McGraw-Hill Cos., Inc.
(The) 40,144 1,353,656
Meredith Corp. 4,695 168,691
New York Times Co. (The)
Class A (a) 14,779 146,608
News Corp. Class A 287,301 4,430,181
Omnicom Group, Inc. 39,648 1,691,384
Scripps Networks
Interactive Class A 11,307 512,659
Time Warner Cable, Inc. 44,909 2,526,131
Time Warner, Inc. 146,785 4,855,648
Viacom, Inc. Class B (a) 77,337 2,732,316
Walt Disney Co. (The) 247,516 9,118,489
Washington Post Co. Class B 779 395,078
--------------
43,271,323
--------------
METALS & MINING 1.0%
AK Steel Holding Corp. 14,300 239,525
Alcoa, Inc. 130,183 1,749,659
Allegheny Technologies,
Inc. 12,495 668,108
Cliffs Natural Resources,
Inc. 17,268 1,079,768
Freeport-McMoRan Copper &
Gold, Inc. 54,952 4,150,525
Newmont Mining Corp. 62,758 3,519,469
Nucor Corp. 40,116 1,818,057
Titanium Metals Corp. (a) 10,896 168,016
United States Steel Corp. 18,265 998,365
--------------
14,391,492
--------------
MULTI-UTILITIES 1.3%
Ameren Corp. 30,188 783,680
CenterPoint Energy, Inc. 50,108 719,551
CMS Energy Corp. 29,392 477,914
Consolidated Edison, Inc. 35,769 1,616,759
Dominion Resources, Inc. 76,578 3,200,960
DTE Energy Corp. 21,117 1,017,206
Integrys Energy Group, Inc. 9,712 481,812
NiSource, Inc. 35,352 576,238
PG&E Corp. 47,380 2,075,244
Public Service Enterprise
Group, Inc. 64,489 2,072,032
SCANA Corp. 14,158 558,816
Sempra Energy 31,500 1,549,170
TECO Energy, Inc. 27,444 464,627
Wisconsin Energy Corp. 15,011 788,228
Xcel Energy, Inc. 58,204 1,265,937
--------------
17,648,174
--------------
MULTILINE RETAIL 0.9%
Big Lots, Inc. (a) 10,609 405,264
Family Dollar Stores, Inc. 17,733 701,518
J.C. Penney Co., Inc. 30,284 883,384
Kohl's Corp. (a) 39,064 2,148,129
Macy's, Inc. 53,537 1,242,058
Nordstrom, Inc. 21,151 874,171
</Table>
14 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)
MULTILINE RETAIL (CONTINUED)
Sears Holdings Corp. (a) 6,250 $ 755,938
Target Corp. 96,013 5,460,259
--------------
12,470,721
--------------
OFFICE ELECTRONICS 0.1%
Xerox Corp. 172,780 1,883,302
--------------
OIL, GAS & CONSUMABLE FUELS 9.1%
Anadarko Petroleum Corp. 62,863 3,907,564
Apache Corp. 42,955 4,371,101
Cabot Oil & Gas Corp. 13,307 480,782
Chesapeake Energy Corp. 83,194 1,980,017
Chevron Corp. 256,322 20,874,864
ConocoPhillips 189,771 11,232,545
CONSOL Energy, Inc. 23,089 1,031,616
Denbury Resources, Inc. (a) 50,433 965,792
Devon Energy Corp. 57,027 3,839,628
El Paso Corp. 90,030 1,089,363
EOG Resources, Inc. 32,239 3,614,637
V ExxonMobil Corp. 602,546 40,882,746
Hess Corp. 37,175 2,362,471
Marathon Oil Corp. 90,194 2,899,737
Massey Energy Co. 10,974 401,978
Murphy Oil Corp. 24,331 1,463,510
Noble Energy, Inc. 22,260 1,700,664
Occidental Petroleum Corp. 103,629 9,187,747
Peabody Energy Corp. 34,291 1,602,075
Pioneer Natural Resources
Co. 14,774 947,457
Range Resources Corp. 20,191 964,322
Southwestern Energy Co. (a) 44,179 1,753,023
Spectra Energy Corp. 82,389 1,922,959
Sunoco, Inc. 15,009 491,995
Tesoro Corp. 17,917 235,609
Valero Energy Corp. 72,256 1,502,202
Williams Cos., Inc. 74,289 1,753,963
XTO Energy, Inc. 74,455 3,538,102
--------------
126,998,469
--------------
PAPER & FOREST PRODUCTS 0.2%
International Paper Co. 55,179 1,475,486
MeadWestvaco Corp. 21,970 596,925
Weyerhaeuser Co. 26,928 1,333,475
--------------
3,405,886
--------------
PERSONAL PRODUCTS 0.2%
Avon Products, Inc. 54,415 1,759,237
Estee Lauder Cos., Inc.
(The) Class A 15,153 998,886
--------------
2,758,123
--------------
PHARMACEUTICALS 5.6%
Abbott Laboratories 198,151 10,137,405
Allergan, Inc. 39,191 2,496,075
Bristol-Myers Squibb Co. 218,744 5,532,036
Eli Lilly & Co. 129,512 4,529,035
Forest Laboratories, Inc.
(a) 38,548 1,050,818
V Johnson & Johnson 351,216 22,583,189
King Pharmaceuticals, Inc.
(a) 31,859 312,218
Merck & Co., Inc. 397,582 13,931,273
Mylan, Inc. (a) 39,152 862,519
Pfizer, Inc. 1,030,006 17,221,700
Watson Pharmaceuticals,
Inc. (a) 13,575 581,281
--------------
79,237,549
--------------
PROFESSIONAL SERVICES 0.1%
Dun & Bradstreet Corp. 6,516 501,536
Equifax, Inc. 16,226 545,194
Robert Half International,
Inc. 18,958 519,070
--------------
1,565,800
--------------
REAL ESTATE INVESTMENT TRUSTS 1.3%
Apartment Investment &
Management Co. Class A 15,028 336,778
AvalonBay Communities, Inc. 10,370 1,078,895
Boston Properties, Inc. 17,682 1,394,403
Equity Residential 35,971 1,628,407
HCP, Inc. 37,342 1,199,425
Health Care REIT, Inc. 15,694 705,131
Host Hotels & Resorts, Inc. 83,347 1,355,222
Kimco Realty Corp. 51,761 806,954
Plum Creek Timber Co., Inc. 20,904 831,979
ProLogis 60,717 799,643
Public Storage 17,288 1,675,380
Simon Property Group, Inc. 37,004 3,294,096
Ventas, Inc. 20,099 949,276
Vornado Realty Trust 20,117 1,677,154
--------------
17,732,743
--------------
REAL ESTATE MANAGEMENT & DEVELOPMENT 0.0%++
CB Richard Ellis Group,
Inc. Class A (a) 34,606 599,376
--------------
ROAD & RAIL 0.8%
CSX Corp. 49,766 2,789,384
Norfolk Southern Corp. 47,175 2,798,893
Ryder System, Inc. 6,805 316,569
Union Pacific Corp. 64,490 4,879,313
--------------
10,784,159
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2.5%
Advanced Micro Devices,
Inc. (a) 72,004 652,356
Altera Corp. 37,911 961,423
Analog Devices, Inc. 38,006 1,137,520
Applied Materials, Inc. 171,394 2,361,809
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
<Table>
<Caption>
SHARES VALUE
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED)
Broadcom Corp. Class A 55,124 $ 1,901,227
Intel Corp. 704,992 16,094,967
KLA-Tencor Corp. 21,913 746,357
Linear Technology Corp. 28,541 857,942
LSI Corp. (a) 83,702 503,886
MEMC Electronic Materials,
Inc. (a) 28,866 374,392
Microchip Technology, Inc. 23,490 686,143
Micron Technology, Inc. (a) 108,533 1,014,784
National Semiconductor
Corp. 30,052 444,169
Novellus Systems, Inc. (a) 12,530 328,286
NVIDIA Corp. (a) 70,816 1,113,227
Teradyne, Inc. (a) 22,557 275,872
Texas Instruments, Inc. 158,505 4,122,715
Xilinx, Inc. 35,386 912,251
--------------
34,489,326
--------------
SOFTWARE 4.0%
Adobe Systems, Inc. (a) 66,956 2,249,052
Autodesk, Inc. (a) 29,497 1,003,193
BMC Software, Inc. (a) 23,300 917,088
CA, Inc. 50,440 1,150,536
Citrix Systems, Inc. (a) 23,502 1,104,594
Compuware Corp. (a) 29,385 252,711
Electronic Arts, Inc. (a) 41,929 812,165
Intuit, Inc. (a) 40,080 1,449,293
McAfee, Inc. (a) 20,184 701,394
V Microsoft Corp. 973,833 29,740,860
Novell, Inc. (a) 44,527 249,796
Oracle Corp. 498,843 12,890,103
Red Hat, Inc. (a) 24,016 717,358
Salesforce.com, Inc. (a) 14,010 1,199,256
Symantec Corp. (a) 102,862 1,724,996
--------------
56,162,395
--------------
SPECIALTY RETAIL 2.1%
Abercrombie & Fitch Co.
Class A 11,293 493,843
AutoNation, Inc. (a) 11,522 232,744
AutoZone, Inc. (a) 3,811 705,073
Bed Bath & Beyond, Inc. (a) 33,436 1,536,719
Best Buy Co., Inc. 43,757 1,995,319
GameStop Corp. Class A (a) 21,144 514,011
Gap, Inc. (The) 60,695 1,500,987
Home Depot, Inc. (The) 216,997 7,649,144
Limited Brands, Inc. 34,387 921,572
Lowe's Cos., Inc. 187,587 5,087,359
O'Reilly Automotive, Inc.
(a) 17,557 858,362
Office Depot, Inc. (a) 35,275 241,986
RadioShack Corp. 16,072 346,352
Ross Stores, Inc. 15,820 885,920
Sherwin-Williams Co. (The) 11,748 917,166
Staples, Inc. 93,026 2,188,902
Tiffany & Co. 15,962 773,838
TJX Cos., Inc. 53,465 2,477,568
Urban Outfitters, Inc. (a) 16,563 621,278
--------------
29,948,143
--------------
TEXTILES, APPAREL & LUXURY GOODS 0.5%
Coach, Inc. 40,113 1,674,718
NIKE, Inc. Class B 49,774 3,778,344
Polo Ralph Lauren Corp. 7,316 657,708
VF Corp. 11,321 978,361
--------------
7,089,131
--------------
THRIFTS & MORTGAGE FINANCE 0.1%
Hudson City Bancorp, Inc. 60,560 805,448
People's United Financial,
Inc. 47,400 736,122
--------------
1,541,570
--------------
TOBACCO 1.4%
Altria Group, Inc. 265,528 5,626,538
Lorillard, Inc. 19,749 1,547,729
Philip Morris
International, Inc. 240,054 11,781,850
Reynolds American, Inc. 21,566 1,152,056
--------------
20,108,173
--------------
TRADING COMPANIES & DISTRIBUTORS 0.1%
Fastenal Co. 16,756 916,386
W.W. Grainger, Inc. 7,853 868,070
--------------
1,784,456
--------------
WIRELESS TELECOMMUNICATION SERVICES 0.3%
American Tower Corp. Class
A (a) 51,390 2,097,226
MetroPCS Communications,
Inc. (a) 33,458 255,284
Sprint Nextel Corp. (a) 380,792 1,618,366
--------------
3,970,876
--------------
Total Common Stocks
(Cost $1,099,006,343) 1,367,932,503 (b)
--------------
</Table>
16 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>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS 2.5%
- --------------------------------------------------------
REPURCHASE AGREEMENT 0.0%++
State Street Bank and Trust
Co.
0.01%, dated 4/30/10
due 5/3/10
Proceeds at Maturity
$142,699 (Collateralized
by a United States
Treasury Bill with a rate
of 0.107% and a maturity
date of 6/3/10,
with a Principal Amount
of $150,000 and a Market
Value of $149,985) $ 142,699 $ 142,699
--------------
Total Repurchase Agreement
(Cost $142,699) 142,699
--------------
U.S. GOVERNMENT 2.5%
United States Treasury
Bills
0.189%, due 7/8/10 (c) 24,800,000 24,793,081
0.212%, due 7/22/10
(c)(d) 10,000,000 9,996,510
--------------
Total U.S. Government
(Cost $34,786,352) 34,789,591
--------------
Total Short-Term
Investments
(Cost $34,929,051) 34,932,290
--------------
Total Investments
(Cost $1,133,935,394) (f) 100.0% 1,402,864,793
Other Assets, Less
Liabilities 0.0++ 654,796
----------- --------------
Net Assets 100.0% $1,403,519,589
=========== ==============
</Table>
<Table>
<Caption>
CONTRACTS UNREALIZED
LONG APPRECIATION (E)
FUTURES CONTRACTS 0.0%++
- -------------------------------------------------------
Standard & Poor's 500
Index
Mini June 2010 573 $569,437
--------
Total Futures Contracts
(Settlement Value
$33,904,410) (b) $569,437
========
</Table>
<Table>
+++ On a daily basis New York Life
Investments confirms that the value of
the Fund's liquid assets (liquid
portfolio securities and cash) is
sufficient to cover its potential senior
securities (e.g., futures, swaps,
options).
++ Less than one-tenth of a percent.
(a) Non-income producing security.
(b) The combined market value of common
stocks and settlement value of Standard &
Poor's 500 Index futures contracts
represents 99.9% of net assets.
(c) Interest rate presented is yield to
maturity.
(d) Represents a security, or a portion
thereof, which is segregated, or
partially segregated as collateral for
futures contracts.
(e) Represents the difference between the
value of the contracts at the time they
were opened and the value at April 30,
2010.
(f) At April 30, 2010, cost is $1,167,751,639
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $ 410,327,143
Gross unrealized depreciation (175,213,989)
-------------
Net unrealized appreciation $ 235,113,154
=============
</Table>
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Common Stocks $1,367,932,503 $ -- $ -- $1,367,932,503
Short-Term Investments
Repurchase Agreement -- 142,699 -- 142,699
U.S. Government -- 34,789,591 -- 34,789,591
-------------- ----------- -------- --------------
Total Short-Term Investments -- 34,932,290 -- 34,932,290
-------------- ----------- -------- --------------
Total Investments in Securities 1,367,932,503 34,932,290 -- 1,402,864,793
Other Financial Instruments
Futures Contracts Long (b) 569,437 -- -- 569,437
-------------- ----------- -------- --------------
Total Investments in Securities and Other
Financial Instruments $1,368,501,940 $34,932,290 $-- $1,403,434,230
============== =========== ======== ==============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
(b) The value listed for these securities reflects unrealized appreciation as
shown on the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $1,133,935,394) $1,402,864,793
Receivables:
Fund shares sold 1,893,732
Dividends and interest 1,377,039
Other assets 126,245
--------------
Total assets 1,406,261,809
--------------
LIABILITIES:
Payables:
Fund shares redeemed 731,472
Variation margin on futures
contracts 642,655
Transfer agent (See Note 3) 482,396
Investment securities purchased 364,345
Shareholder communication 263,802
Manager (See Note 3) 115,370
Professional fees 53,326
NYLIFE Distributors (See Note 3) 48,154
Custodian 5,398
Trustees 5,128
Accrued expenses 30,174
--------------
Total liabilities 2,742,220
--------------
Net assets $1,403,519,589
==============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 51,181
Additional paid-in capital 1,263,035,274
--------------
1,263,086,455
Accumulated undistributed net
investment income 6,003,883
Accumulated net realized loss on
investments and futures
transactions (135,069,585)
Net unrealized appreciation on
investments and futures
contracts 269,498,836
--------------
Net assets $1,403,519,589
==============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 19,758,574
==============
Shares of beneficial interest
outstanding 725,423
==============
Net asset value per share
outstanding $ 27.24
Maximum sales charge (3.00% of
offering price) 0.84
--------------
Maximum offering price per share
outstanding $ 28.08
==============
CLASS A
Net assets applicable to
outstanding shares $ 213,207,301
==============
Shares of beneficial interest
outstanding 7,828,229
==============
Net asset value per share
outstanding $ 27.24
Maximum sales charge (3.00% of
offering price) 0.84
--------------
Maximum offering price per share
outstanding $ 28.08
==============
CLASS I
Net assets applicable to
outstanding shares $1,170,553,714
==============
Shares of beneficial interest
outstanding 42,627,379
==============
Net asset value and offering price
per share outstanding $ 27.46
==============
</Table>
18 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 SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Dividends $ 12,799,459
Interest 17,418
------------
Total income 12,816,877
------------
EXPENSES:
Manager (See Note 3) 1,633,332
Transfer agent (See Note 3) 1,436,665
Distribution/Service--Investor
Class
(See Note 3) 23,609
Distribution/Service--Class A
(See Note 3) 261,504
Registration 145,640
Professional fees 121,052
Shareholder communication 67,278
Trustees 23,770
Custodian 21,380
Miscellaneous 36,388
------------
Total expenses before waiver 3,770,618
Expense waiver from Manager (See
Note 3) (1,128,037)
------------
Net expenses 2,642,581
------------
Net investment income 10,174,296
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on:
Security transactions (4,473,339)
Futures transactions 11,710,348
------------
Net realized gain on investments
and futures transactions 7,237,009
------------
Net change in unrealized
appreciation on:
Investments 177,621,121
Futures contracts (1,741,763)
------------
Net change in unrealized
appreciation on investments and
futures contracts 175,879,358
------------
Net realized and unrealized gain on
investments and futures
transactions 183,116,367
------------
Net increase in net assets
resulting from operations $193,290,663
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
19
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 10,174,296 $ 22,179,919
Net realized gain (loss)
on investments and
futures transactions 7,237,009 (15,851,205)
Net change in unrealized
appreciation
(depreciation) on
investments and futures
contracts 175,879,358 108,606,241
------------------------------
Net increase in net
assets resulting from
operations 193,290,663 114,934,955
------------------------------
Dividends to shareholders:
From net investment
income:
Investor Class (254,640) (350,624)
Class A (2,895,095) (4,143,743)
Class I (17,697,570) (23,595,246)
------------------------------
Total dividends to
shareholders (20,847,305) (28,089,613)
------------------------------
Capital share
transactions:
Net proceeds from sale
of shares 128,535,842 329,494,436
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends 20,783,761 27,961,308
Cost of shares redeemed (177,437,357) (302,655,057)
------------------------------
Increase (decrease) in
net assets derived
from capital share
transactions (28,117,754) 54,800,687
------------------------------
Net increase in net
assets 144,325,604 141,646,029
NET ASSETS:
Beginning of period 1,259,193,985 1,117,547,956
------------------------------
End of period $1,403,519,589 $1,259,193,985
==============================
Accumulated undistributed
net investment income at
end of period $ 6,003,883 $ 16,676,892
==============================
</Table>
20 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.
This page intentionally left blank
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
21
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-----------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
-----------------------------------------
2010* 2009 2008
Net asset value at beginning of period $ 23.93 $ 22.47 $ 31.35
------- ------- -------
Net investment income 0.15 0.38 0.26
Net realized and unrealized gain (loss) on investments 3.50 1.59 (9.14)
------- ------- -------
Total from investment operations 3.65 1.97 (8.88)
------- ------- -------
Less dividends:
From net investment income (0.34) (0.51) --
------- ------- -------
Net asset value at end of period $ 27.24 $ 23.93 $ 22.47
======= ======= =======
Total investment return (b) 15.37%(c) 9.21% (28.33%)(c)
Ratios (to average net assets)/Supplemental Data:
Net investment income 1.21%++ 1.75% 1.63% ++
Net expenses 0.70%++ 0.63% 0.60% ++
Expenses (before waiver/reimbursement) 1.02%++ 1.15% 1.06% ++
Portfolio turnover rate 5% 8% 5%
Net assets at end of period (in 000's) $19,759 $17,822 $15,372
</Table>
<Table>
<Caption>
CLASS I
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
2010* 2009 2008 2007 2006 2005
Net asset value at
beginning of period $ 24.15 $ 22.69 $ 36.14 $ 32.16 $ 28.15 $ 26.35
---------- ---------- -------- ---------- ---------- ----------
Net investment income 0.20 0.44 0.60 0.58 0.53 0.48 (a)
Net realized and
unrealized gain (loss)
on investments 3.52 1.60 (13.46) 3.93 3.93 1.73
---------- ---------- -------- ---------- ---------- ----------
Total from investment
operations 3.72 2.04 (12.86) 4.51 4.46 2.21
---------- ---------- -------- ---------- ---------- ----------
Less dividends:
From net investment
income (0.41) (0.58) (0.59) (0.53) (0.45) (0.41)
---------- ---------- -------- ---------- ---------- ----------
Net asset value at end
of period $ 27.46 $ 24.15 $ 22.69 $ 36.14 $ 32.16 $ 28.15
========== ========== ======== ========== ========== ==========
Total investment return
(b) 15.54%(c) 9.55% (36.13%) 14.17% 16.06% 8.42%
Ratios (to average net
assets)/Supplemental
Data:
Net investment income 1.56%++ 2.07% 1.95% 1.73% 1.69% 1.86%(a)
Net expenses 0.35%++ 0.32% 0.30% 0.30% 0.30% 0.30%
Expenses (before
waiver/reimburse-
ment) 0.52%++ 0.61% 0.49% 0.42% 0.31% 0.44%
Portfolio turnover rate 5% 8% 5% 5% 5% 6%
Net assets at end of
period (in 000's) $1,170,554 $1,044,598 $919,826 $1,479,162 $1,299,916 $1,245,481
</Table>
<Table>
* Unaudited.
** Commencement of operations.
++ Annualized.
(a) 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.
(b) Total return is calculated exclusive of sales charges and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
</Table>
22 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
----------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2010* 2009 2008 2007 2006 2005
$ 23.92 $ 22.47 $ 35.79 $ 31.85 $ 27.86 $ 26.11
-------- -------- -------- -------- -------- --------
0.17 0.38 0.51 0.49 0.40 0.40 (a)
3.50 1.58 (13.35) 3.87 3.91 1.68
-------- -------- -------- -------- -------- --------
3.67 1.96 (12.84) 4.36 4.31 2.08
-------- -------- -------- -------- -------- --------
(0.35) (0.51) (0.48) (0.42) (0.32) (0.33)
-------- -------- -------- -------- -------- --------
$ 27.24 $ 23.92 $ 22.47 $ 35.79 $ 31.85 $ 27.86
======== ======== ======== ======== ======== ========
15.46%(c) 9.18% (36.32%) 13.83% 15.61% 7.97%
1.32%++ 1.79% 1.65% 1.44% 1.31% 1.43%(a)
0.60%++ 0.60% 0.60% 0.60% 0.68% 0.73%
0.77%++ 0.86% 0.79% 0.78% 0.74% 0.87%
5% 8% 5% 5% 5% 6%
$213,207 $196,774 $182,351 $334,325 $319,851 $309,387
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
23
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay S&P 500 Index Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay S&P 500 Index Fund,
a series of Eclipse Funds Inc. (the "Predecessor Fund"). The reorganization of
the Predecessor Fund with and into the Fund, which was not subject to
shareholder approval under applicable law, occurred on February 26, 2010. All
information regarding and references to periods prior to the commencement of
operations of the Fund relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced
operations on January 2, 1991. Class A shares commenced operations on January 2,
2004. Investor Class shares commenced operations on February 28, 2008. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class I shares are
offered at NAV and are not subject to a sales charge. Depending upon
eligibility, Investor Class shares may convert to Class A shares and Class A
shares may convert to Investor Class shares. The three classes of shares have
the same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions. Class I shares
are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek to provide investment results that
correspond to the total return performance (reflecting reinvestment of
dividends) of common stocks in the aggregate, as represented by the S&P 500((R)
Index.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Equity securities are valued at the latest quoted
sales prices as of the close of regular trading on the New York Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Securities that are not traded on the valuation
date are valued at the mean of the latest quoted bid and asked prices. Prices
normally are taken from the principal market in which each security trades.
Futures contracts are valued at the last posted settlement price on the market
where such futures are primarily traded. Investments in other mutual funds are
valued at their NAVs as of the close of the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or
24 MainStay S&P 500 Index Fund
liability developed based on the information available in the circumstances. The
inputs or methodology used for valuing securities may not be an indication of
the risks associated with investing in those securities. The three-tier
hierarchy of inputs is summarized in the three broad Levels listed below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income and distributions of net realized capital and
currency gains, if any, annually. Unless the shareholder elects otherwise, all
dividends and distributions are reinvested in the same class of shares of the
Fund, at NAV. Dividends and distributions to shareholders are determined in
accordance with federal income tax regulations and may differ from GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is accrued as earned
using the effective interest rate method. Discounts and premiums on short-term
investments are accreted and amortized, respectively, on the straight-line
method.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to be creditworthy,
pursuant to guidelines established by the Fund's Board. Repurchase agreements
are considered under the 1940 Act to be collateralized loans by a Fund to the
seller secured by the securities transferred to the Fund.
mainstayinvestments.com 25
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a financial
instrument (e.g., foreign currency, interest rate, security, or securities
index.) The Fund is subject to equity rate risk in the normal course of
investing in these transactions. The Fund enters into futures contracts for
market exposure. During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by "marking
to market" such contract on a daily basis to reflect the market value of the
contract at the end of each day's trading. The Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in the value
of the contract. Such receipts or payments are known as "variation margin". When
the futures contract is closed, the Fund records a realized gain or loss equal
to the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The contract or notional amounts and variation margin reflect the
extent of the Fund's involvement in open futures positions. Risks arise from the
possible imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Fund's
activities in futures contracts have minimal counterparty risk as they are
conducted through regulated exchanges that guarantee the futures against default
by the counterparty. The Fund invests in futures contracts to provide an
efficient means of maintaining liquidity while being fully invested in the
market. The Fund's investment in futures contracts and other derivatives may
increase the volatility of the Fund's NAV and may result in a loss to the Fund
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(J) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
(K) QUANTITATIVE DISCLOSURE OF DERIVATIVE HOLDINGS. The following tables show
additional disclosures about the Fund's derivative and hedging activities,
including how such activities are accounted for and their effect on the Fund's
financial positions, performance and cash flows. These derivatives are not
accounted for as hedging instruments.
26 MainStay S&P 500 Index Fund
Fair value of Derivatives as of April 30, 2010:
ASSET DERIVATIVES
<Table>
<Caption>
STATEMENT OF FOREIGN
ASSETS AND EXCHANGE EQUITY INTEREST
LIABILITIES CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Futures Contracts (a) Net
Assets--Unrealized
appreciation on
investments and
futures contracts $-- $569,437 $-- $569,437
----------------------------------------------
Total Fair Value $-- $569,437 $-- $569,437
==============================================
</Table>
(a) Includes cumulative appreciation (depreciation) of futures contracts as
reported in Portfolio of Investments. Only current day's variation margin is
reported within the Statement of Assets & Liabilities.
The effect of derivative instruments on the Statement of Operations for the six
months ended April 30, 2010.
REALIZED GAIN (LOSS)
<Table>
<Caption>
FOREIGN
STATEMENT OF EXCHANGE EQUITY INTEREST
OPERATIONS CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Futures Contracts Net realized gain on
futures transactions $-- $11,710,348 $-- $11,710,348
---------------------------------------------------
Total Realized Gain $-- $11,710,348 $-- $11,710,348
===================================================
</Table>
CHANGE IN APPRECIATION (DEPRECIATION)
<Table>
<Caption>
FOREIGN
STATEMENT OF EXCHANGE EQUITY INTEREST
OPERATIONS CONTRACTS CONTRACTS RATE
LOCATION RISK RISK RISK TOTAL
Futures Contracts Net change in
unrealized
appreciation
(depreciation) on
futures contracts $-- $(1,741,763) $-- $(1,741,763)
---------------------------------------------------
Total Change in
Appreciation
(Depreciation) $-- $(1,741,763) $-- $(1,741,763)
===================================================
</Table>
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OR SHARES/UNITS (1)
<Table>
<Caption>
FOREIGN
EXCHANGE EQUITY INTEREST
CONTRACTS CONTRACTS RATE
RISK RISK RISK TOTAL
Futures Contracts (2) -- 1,097 -- 1,097
===========================================
</Table>
(1) Amount disclosed represents the weighted average held during the six-month
period.
(2) Amount(s) represent(s) number of contracts or number of shares/units.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. Madison
Square Investors LLC ("Madison Square Investors" or "Subadvisor"), a registered
investment adviser and an indirect, wholly-owned subsidiary of New York Life,
serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio
management of the Fund. Pursuant to the terms of a Subadvisory Agreement between
New York
mainstayinvestments.com 27
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
Life Investments and the Subadvisor, New York Life Investments pays for the
services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.25% on assets up to $1 billion, 0.225% on assets from $1 billion to $2
billion, 0.215% on assets from $2 billion to $3 billion, and 0.20% on assets in
excess of $3 billion. The effective management fee rate (exclusive of any
applicable waivers/ reimbursements) was 0.24% for the six-month period ended
April 30, 2010.
Effective August 1, 2009, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
management fee or reimburse expenses to the extent necessary to ensure that the
total ordinary operating expenses (total ordinary operating expenses excludes
taxes, interest, litigation, extraordinary expenses, brokerage, other
transaction expenses relating to the purchase or sale of portfolio investments,
and the fees and expenses of any other funds in which the Fund invests) for the
Fund's Class A shares do not exceed 0.60% of its average daily net assets. New
York Life Investments will apply an equivalent waiver or reimbursement, in an
equal number of basis points, to the other share classes of the Fund. This
expense limitation agreement expires on February 28, 2011 and is reviewed
annually by the Board in connection with its review of the Fund's investment
advisory agreements. Based on its review, the Board may agree to maintain,
modify or terminate the agreement.
Additionally, effective August 1, 2009, New York Life Investments has agreed to
voluntarily reimburse the expenses of the Investor Class shares of the Fund so
that the total annual operating expenses of Investor Class shares do not exceed
0.70%. This voluntary waiver may be discontinued at any time.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $1,633,332 and waived/reimbursed its fees in
the amount of $1,128,037.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $4,139
and $3,873, respectively, for the six-month period ended April 30, 2010. The
Fund was also advised that the Distributor retained contingent deferred sales
charges on redemptions of Investor Class and Class A shares of $27 and $362,
respectively for the six-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 43,934
- ------------------------------------------------
Class A 220,386
- ------------------------------------------------
Class I 1,172,345
- ------------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class I $198,262,161 16.9%
- ---------------------------------------------------
</Table>
28 MainStay S&P 500 Index Fund
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $33,824.
NOTE 4--FEDERAL INCOME TAX:
At October 31, 2009, for federal income tax purposes, capital loss carryforwards
of $106,179,149 were available as shown in the table below, to the extent
provided by the regulations to offset future realized gains of the Fund through
the years indicated. To the extent that these loss carryforwards are used to
offset future capital gains, it is probable that the capital gains so offset
will not be distributed to shareholders. No capital gain distributions shall be
made until any capital loss carryforwards have been fully utilized or expired.
<Table>
<Caption>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNTS (000'S)
2010 $ 9,978
2013 5,221
2014 51,930
2016 39,050
- ---------------------------------- -----
Total $106,179
- ---------------------------------- -----
</Table>
The Fund utilized $4,698,769 of capital loss carryforwards during the year ended
October 31, 2009.
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $28,089,613
- ------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of
securities, other than short-term securities, were $86,939 and $60,229,
respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 78,901 $ 2,050,633
Shares issued to
shareholders in
reinvestment of dividends 9,977 253,817
Shares redeemed (92,892) (2,394,160)
--------------------------
Net decrease in shares
outstanding before
conversion (4,014) (89,710)
Shares converted into
Investor Class (See Note
1) 6,798 182,927
Shares converted from
Investor Class (See Note
1) (22,171) (581,689)
--------------------------
Net decrease (19,387) $ (488,472)
==========================
Year ended October 31,
2009:
Shares sold 185,821 $ 3,782,823
Shares issued to
shareholders in
reinvestment of dividends 17,590 349,167
Shares redeemed (149,786) (3,095,645)
--------------------------
Net increase in shares
outstanding before
conversion 53,625 1,036,345
Shares converted into
Investor Class (See Note
1) 50,946 958,278
Shares converted from
Investor Class (See Note
1) (43,795) (991,085)
--------------------------
Net increase 60,776 $ 1,003,538
==========================
</Table>
mainstayinvestments.com 29
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 954,489 $ 24,637,051
Shares issued to
shareholders in
reinvestment of dividends 111,379 2,832,374
Shares redeemed (1,476,617) (38,278,130)
--------------------------
Net decrease in shares
outstanding before
conversion (410,749) (10,808,705)
Shares converted into Class
A (See Note 1) 22,180 581,689
Shares converted from Class
A (See Note 1) (6,798) (182,927)
Shares converted from Class
A (a) (1,641) (41,706)
--------------------------
Net decrease (397,008) $ (10,451,649)
==========================
Year ended October 31,
2009:
Shares sold 2,729,982 $ 56,046,902
Shares issued to
shareholders in
reinvestment of dividends 202,474 4,017,090
Shares redeemed (2,817,086) (58,120,291)
--------------------------
Net increase in shares
outstanding before
conversion 115,370 1,943,701
Shares converted into Class
A (See Note 1) 43,805 991,085
Shares converted from Class
A (See Note 1) (50,972) (958,278)
--------------------------
Net increase 108,203 $ 1,976,508
==========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 3,902,987 $ 101,848,158
Shares issued to
shareholders in
reinvestment of dividends 690,772 17,697,570
Shares redeemed (5,230,475) (136,765,067)
--------------------------
Net decrease in shares
outstanding before
conversion (636,716) (17,219,339)
Shares converted into Class
I (a) 1,628 41,706
--------------------------
Net decrease (635,088) $ (17,177,633)
==========================
Year ended October 31,
2009:
Shares sold 12,933,406 $ 269,664,711
Shares issued to
shareholders in
reinvestment of dividends 1,181,525 23,595,051
Shares redeemed (11,397,494) (241,439,121)
--------------------------
Net increase 2,717,437 $ 51,820,641
==========================
</Table>
(a) In addition to any automatic conversion features described above in Note 1
with respect to Investor Class, Class A and B shares, you generally may also
elect to convert your shares on a voluntary basis into another share class
of the same fund for which you are eligible. However, the following
limitations apply:
- - Investor Class and Class A shares that remain subject to a CDSC are ineligible
for a voluntary conversion; and
- - All Class B and C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class, Class A and B shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
30 MainStay S&P 500 Index Fund
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; or
(ii) on the Securities and Exchange Commissions ("SEC") website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request (i) by calling 800-MAINSTAY (624-6782);
(ii) by visiting the Fund's website at mainstayinvestments.com; or (iii) on the
SEC's website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Fund's Form N-Q
is available without charge on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
mainstayinvestments.com 31
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York Life Insurance
Company, New York, NY 10010, provides investment
advisory products and services. Securities are distributed by NYLIFE
Distributors LLC, 169 Lackawanna Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or accompanied by a
current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-A018305 MS121-10 MSSP10-06/10
A6
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY SHORT TERM BOND FUND
MESSAGE FROM THE PRESIDENT AND SEMIANNUAL REPORT
Unaudited - April 30, 2010
MESSAGE FROM THE PRESIDENT
During the six months ended April 30, 2010, stock and bond markets generally
advanced, despite some volatility in January and February. Domestic small-cap
stocks were particularly strong, and U.S. stocks at all capitalization levels
provided double digit returns. Value stocks outpaced growth stocks for companies
of all sizes during the reporting period.
International stocks provided positive returns overall, but results varied
widely by country. Concerns about Greece's ability to meet its debt obligations
led many investors to abandon their holdings in Greece and question their
investments in several peripheral European nations where perceived risk had
increased. For the six-month reporting period, equities in the Far East
(including Japan) tended to be stronger than those in Europe.
The economic recovery in the United States continued. Real gross domestic
product advanced in the first quarter of 2010, though at a slower pace than in
the fourth quarter of 2009. The Federal Open Market Committee kept the targeted
federal funds rate at a historically low level throughout the reporting period,
which prompted many investors to leave the safety of U.S. Treasury securities in
search of higher yield.
In the high-yield bond market, lower-rated credits tended to be the strongest
performers. With investment-grade investors crossing into high-yield territory,
however, the highest-rated high-yield credits also saw strong demand. In the
municipal market, new-issue supply was reduced by government incentives that
encouraged municipal issuers to raise funds in the taxable market. In the
leveraged-loan market, new issuance strengthened, but extensive repayments
caused the market as a whole to contract.
Throughout the six-month reporting period, MainStay's portfolio managers sought
to make the most of market conditions within the investment strategies and risk
parameters of their respective Funds. While individual markets and Fund results
may vary, our pursuit of competitive returns over full market cycles has never
changed.
The information that follows provides a closer look
at the securities, strategies and market conditions that affected your MainStay
Fund(s) during the six months ended April 30, 2010. Of course, past performance
is no guarantee of future results. Even in a rising market, we believe that
maintaining a long-term perspective can be valuable. At MainStay, we believe
that in all markets, broad diversification, gradual allocation adjustments and
regular portfolio reviews can help guide you toward your long-range financial
goals.
We thank you for choosing MainStay Funds, and we look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ STEPHEN P. FISHER
Stephen P. Fisher
President
Not part of the Semiannual Report
(MAINSTAY INVESTMENTS LOGO)
MAINSTAY SHORT TERM BOND FUND
SEMIANNUAL REPORT
Unaudited - April 30, 2010
TABLE OF CONTENTS
<Table>
SEMIANNUAL REPORT
- ---------------------------------------------
INVESTMENT AND PERFORMANCE COMPARISON 5
- ---------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION AND
ANALYSIS 9
- ---------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS 18
- ---------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES AND
PROXY VOTING RECORD 24
- ---------------------------------------------
SHAREHOLDER REPORTS AND QUARTERLY
PORTFOLIO DISCLOSURE 24
- --------------------------------------------------------------------------------
INVESTORS SHOULD REFER TO THE FUND'S SUMMARY PROSPECTUS AND/OR PROSPECTUS FOR A
DISCUSSION OF THE FUND'S INVESTMENT OBJECTIVES, STRATEGIES AND RISKS. YOU MAY
OBTAIN COPIES OF THE FUND'S SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION FREE OF CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 800-
MAINSTAY (624-6782), BY WRITING TO NYLIFE DISTRIBUTORS LLC, ATTN: MAINSTAY
MARKETING DEPARTMENT, 169 LACKAWANNA AVENUE, PARSIPPANY, NEW JERSEY 07054 OR BY
SENDING AN E-MAIL TO MAINSTAYSHAREHOLDERSERVICES@NYLIM.COM. THESE DOCUMENTS ARE
ALSO AVAILABLE AT MAINSTAYINVESTMENTS.COM/DOCUMENTS.
INVESTMENT AND PERFORMANCE COMPARISON(1) (UNAUDITED)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. BECAUSE OF MARKET VOLATILITY, CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE, AND AS A RESULT, WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE INFORMATION CURRENT
TO THE MOST RECENT MONTH-END, PLEASE CALL 800-MAINSTAY (624-6782) OR VISIT
MAINSTAYINVESTMENTS.COM.
INVESTOR CLASS SHARES(2)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -2.72% -1.30% 3.29% 3.63%
Excluding sales charges 0.29 1.75 3.92 3.94
</Table>
(PERFORMANCE GRAPH) (With sales charges)
(LINE GRAPH)
(LINE GRAPH)
<Table>
<Caption>
CITIGROUP 1-3 BARCLAYS CAPITAL
MAINSTAY SHORT YEAR U.S. U.S. 1-3
TERM BOND TREASURY AGENCY YEAR GOVERNMENT/CREDIT
FUND INDEX INDEX
-------------- --------------- ----------------------
4/30/00 9700 10000 10000
10623 10978 11004
11111 11702 11725
11662 12366 12473
11729 12515 12681
11783 12678 12865
11966 12952 13155
12528 13622 13856
13328 14664 14850
14033 15344 15436
4/30/10 14279 15643 16035
</Table>
CLASS A SHARES(3)--MAXIMUM 3% INITIAL SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- ------------------------------------------------------------
With sales charges -2.48% -0.81% 3.41% 3.69%
Excluding sales charges 0.54 2.25 4.04 4.00
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP 1-3 BARCLAYS CAPITAL
MAINSTAY SHORT YEAR U.S. U.S. 1-3
TERM BOND TREASURY AGENCY YEAR GOVERNMENT/CREDIT
FUND INDEX INDEX
-------------- --------------- ----------------------
4/30/00 24250 25000 25000
26557 27446 27509
27778 29256 29312
29156 30914 31182
29323 31288 31704
29458 31696 32163
29914 32381 32887
31320 34055 34639
33307 36660 37125
35113 38361 38590
4/30/10 35904 39107 40087
</Table>
CLASS I SHARES--NO SALES CHARGE
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUAL SIX ONE FIVE TEN
TOTAL RETURNS MONTHS YEAR YEARS YEARS
- --------------------------------------------------------------
0.77% 2.52% 4.35% 4.31%
</Table>
(With sales charges)
(PERFORMANCE GRAPH)
(PERFORMANCE GRAPH)
<Table>
<Caption>
CITIGROUP 1-3 BARCLAYS CAPITAL
MAINSTAY SHORT YEAR U.S. U.S. 1-3
TERM BOND TREASURY AGENCY YEAR GOVERNMENT/CREDIT
FUND INDEX INDEX
-------------- --------------- ----------------------
4/30/00 10000 10000 10000
10976 10978 11004
11506 11702 11725
12106 12366 12473
12206 12515 12681
12329 12678 12865
12565 12952 13155
13195 13622 13856
14072 14664 14850
14877 15344 15436
4/30/10 15252 15643 16035
</Table>
1. 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 maximum applicable sales charges explained in this paragraph,
change in share price, and reinvestment of dividend and capital gain distri-
butions. The graphs assume an initial investment of $25,000 for Class A
shares and $10,000 for all other classes and reflect the deduction of all
sales charges that would have applied for the period of investment. Class A
shares generally have a $25,000 minimum initial investment with no minimum
subsequent purchase amount. For investors that, in the aggregate, have assets
of $100,000 or more invested in any share classes of any of the MainStay
Funds, the minimum initial investment is $15,000. Investor Class shares and
Class A shares are sold with a maximum initial sales charge of 3.00% and an
annual 12b-1 fee of 0.25%. Class I shares are sold with no initial sales
charge or contingent deferred sales charge, have no annual 12b-1 fee, and are
generally available to corporate and institutional investors or individual
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. For information on current fee waivers
and/or expense limitations, please refer to the notes to the financial
statements.
2. Performance figures for Investor Class shares, first offered on February 28,
2008, include the historical performance of Class A shares through February
27, 2008, adjusted for differences in certain contractual fees and expenses.
Unadjusted, the performance shown for Investor Class shares might have been
lower.
3. Performance figures for Class A shares, first offered on January 2, 2004,
include the historical performance of Class I
THE FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THE TABLES AND GRAPHS AND
SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
mainstayinvestments.com 5
<Table>
<Caption>
BENCHMARK PERFORMANCE SIX ONE FIVE TEN
MONTHS YEAR YEARS YEARS
Barclays Capital U.S. 1-3 Year Government/Credit Index(4) 1.26% 3.88% 4.50% 4.84%
Citigroup 1-3 Year U.S. Treasury Agency Index(5) 0.78 1.93 4.29 4.58
Average Lipper short U.S. government fund(6) 1.33 4.23 3.61 3.95
</Table>
shares through January 1, 2004, adjusted for differences in certain
contractual expenses and fees. Unadjusted, the performance shown for Class A
shares might have been lower.
4. The Barclays Capital U.S. 1-3 Year Government/Credit Index includes
investment grade corporate debt issues as well as debt issues of U.S.
government agencies and the U.S. Treasury, with maturities of one to three
years. An investment cannot be made directly in an index. Total returns
assume reinvestment of all dividends and capital gains. The Barclays Capital
U.S. 1-3 year Government/Credit Index is the fund's broad-based securities-
market index for comparison purposes.
5. The Citigroup 1-3 Year U.S. Treasury Agency Index consists 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. Total returns
assume reinvestment of all income and capital gains. An investment cannot be
made directly in an index.
6. The average Lipper short U.S. government fund is representative of funds that
invest primarily in securities issued or guaranteed by the U.S. government,
its agencies, or its instrumentalities, with dollar-weighted average
maturities of less than three years. This benchmark is a product of Lipper
Inc. Lipper Inc. is an independent monitor of fund performance. Results are
based on average total returns of similar funds with all dividend and capital
gain distributions reinvested.
THE FOOTNOTE ON THE PRECEDING PAGE IS AN INTEGRAL PART OF THE TABLES AND GRAPHS
AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM.
6 MainStay Short Term Bond Fund
COST IN DOLLARS OF A $1,000 INVESTMENT IN MAINSTAY SHORT TERM BOND FUND
(UNAUDITED)
- --------------------------------------------------------------------------------
The example below is intended to describe the fees and expenses borne by
shareholders during the six-month period from November 1, 2009, to April 30,
2010, 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, exchange fees, and sales charges (loads) on
purchases (as applicable), and (2) ongoing costs, including management fees,
distribution and/or service (12b-1) fees, and other Fund expenses (as
applicable). This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 made at the beginning of the six-month period and held for
the entire period from November 1, 2009, to April 30, 2010.
This example illustrates your Fund's ongoing costs in two ways:
- - ACTUAL EXPENSES
The second and third data columns in the table below provide information about
actual account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid during the six-months ended April 30, 2010. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
- - HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The fourth and fifth data columns in the table below provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balances or
expenses you paid for the six-month period shown. You may use this information
to compare the ongoing costs of investing in the Fund with the ongoing costs of
investing in other Funds. To do so, compare this 5% hypothetical example with
the 5% hypothetical examples that appear in the shareholder reports of the other
Funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
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.
ENDING ACCOUNT
ENDING ACCOUNT VALUE (BASED
VALUE (BASED ON HYPOTHETICAL
BEGINNING ON ACTUAL EXPENSES 5% ANNUALIZED EXPENSES
ACCOUNT RETURNS AND PAID RETURN AND PAID
VALUE EXPENSES) DURING ACTUAL EXPENSES) DURING
SHARE CLASS 11/1/09 4/30/10 PERIOD(1) 4/30/10 PERIOD(1)
INVESTOR CLASS SHARES $1,000.00 $1,002.90 $7.00 $1,017.80 $7.05
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES $1,000.00 $1,005.40 $4.62 $1,020.20 $4.66
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES $1,000.00 $1,007.70 $3.39 $1,021.40 $3.41
- -------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio of each class
(1.41% for Investor Class, 0.93% for Class A and 0.68% for Class I)
multiplied by the average account value over the period, divided by 365 and
multiplied by 181 (to reflect the one-half year period). The table above
represents the actual expenses incurred during the one-half year period.
mainstayinvestments.com 7
PORTFOLIO COMPOSITION AS OF APRIL 30, 2010 (UNAUDITED)
(PIE CHART)
<Table>
U.S. Government & Federal Agencies 72.3
Corporate Bonds 11.8
Yankee Bonds 7.6
Short-Term Investment 3.2
Mortgage-Backed Securities 2.7
Convertible Bonds 1.7
Asset-Backed Securities 0.9
Other Assets, Less Liabilities (0.2)
</Table>
See Portfolio of Investments beginning on page 10 for specific holdings within
these categories.
TOP TEN ISSUERS HELD AS OF APRIL 30, 2010 (EXCLUDING SHORT-TERM INVESTMENT)
<Table>
1. United States Treasury Notes, 0.875%-2.25%, due
2/28/11-5/31/14
2. Federal National Mortgage Association, 2.875%-6.25%, due
10/12/10-2/1/11
3. Federal Home Loan Bank, 1.625%-3.375%, due 10/20/10-4/13/12
4. Shell International Finance B.V., 1.875%, due 3/25/13
5. Rio Tinto Finance USA, Ltd., 8.95%, due 5/1/14
6. St. Jude Medical, Inc., 2.20%, due 9/15/13
7. JPMorgan Chase & Co., 3.70%, due 1/20/15
8. U.S. Bancorp, 3.15%, due 3/4/15
9. PNC Funding Corp., 3.625%, due 2/8/15
10. Telefonica Emisiones S.A.U, 4.949%, due 1/15/15
</Table>
8 MainStay Short Term Bond Fund
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
QUESTIONS ANSWERED BY PORTFOLIO MANAGERS CLAUDE ATHAIDE, PHD, CFA, GARY
GOODENOUGH AND JAMES RAMSAY, CFA, OF MACKAY SHIELDS LLC, THE FUND'S SUBADVISOR.
HOW DID MAINSTAY SHORT TERM BOND FUND PERFORM RELATIVE TO ITS PEERS AND ITS
BENCHMARK DURING THE SIX MONTHS ENDED APRIL 30, 2010?
Excluding all sales charges, MainStay Short Term Bond Fund returned 0.29% for
Investor Class shares and 0.54% for Class A shares for the six months ended
April 30, 2010. Over the same period, the Fund's Class I shares returned 0.77%.
All share classes underperformed the 1.33% return of the average Lipper(1) short
U.S. government fund, the 1.26% return of the Barclays Capital U.S. 1-3 Year
Government/Credit Index(2) and the 0.78% return of the Citigroup 1-3 Year U.S.
Treasury Agency Index(3) for the six months ended April 30, 2010. The Barclays
Capital U.S. 1-3 Year Government/Credit Index is the Fund's broad-based
securities-market index. See page 5 for Fund returns with sales charges.
WHAT FACTORS CONTRIBUTED TO THE FUND'S RELATIVE PERFORMANCE DURING THE REPORTING
PERIOD?
Real gross domestic product (GDP) grew at an annual rate of 5.6% in the fourth
quarter of 2009, with inventory adjustment and personal consumption contributing
3.8% and 1.16%, respectively. In the first quarter of 2010, real GDP grew an
annualized 3.0%, with personal consumption growing at 3.5%. The labor market
improved during the reporting period, as nonfarm payrolls increased 573,000
during the first four months of 2010.
Credit spreads(4) tightened during the reporting period, as investors' appetite
for risk remained firm. An 8% decline in the S&P 500(R) Index(5) beginning in
the second half
of January 2010 was shrugged off, and stocks rallied, reaching new highs for the
period by the end of April.
With conditions improving in the financial markets, the Federal Reserve ended
most of its emergency liquidity programs that had been initiated since December
2007. These included the Term Auction Facility, the Term Securities Lending
Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding
Facility and the Asset Backed Commercial Paper Money Market Fund Liquidity
Facility. The Federal Reserve also announced that the Term Asset-Backed
Securities Loan Facility (TALF) will expire at the end of June 2010. In
addition, in March 2010, the Federal Reserve completed its purchase of $1.25
trillion of agency mortgage-backed securities and $175 billion of agency debt.
HOW DID THE FUND INVEST DURING THE REPORTING PERIOD?
During the fourth quarter of 2009, we positioned the Fund for lower interest
rates and a flatter yield curve.(6) However, interest rates rose in December
2009, and the yield curve steepened. These developments detracted from the
Fund's performance relative to the Barclays Capital U.S. 1-3 Year
Government/Credit Index.
In the first quarter of 2010, we increased the Fund's allocation to corporate
bonds from 2.2% of net assets to 22.2%, while we reduced the percentage of
Treasury securities in the Fund from 68.6% to 50.5%.
WHICH MARKET SEGMENTS WERE PARTICULARLY STRONG DURING THE REPORTING PERIOD AND
WHICH ONES WERE WEAK?
The strongest market segments from a total return perspective were commercial
mortgage-backed securities with maturities of up to three years and 1-3 year
corporate bonds. Although all segments of the short-term market provided
positive returns, the weakest market segments were 1-3 year Treasury and agency
securities.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
Despite the recovery in risk appetite during the latter half of the reporting
period, we remained defensive and refrained from further increases in the Fund's
exposure to corporate bonds. Although we believe that the worst of the economic
contraction may be out of the way, talk of an economic recovery is, in our
opinion, still premature.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Barclays Capital U.S. 1-3
Year Government/Credit Index.
3. See footnote on page 6 for more information on the Citigroup 1-3 Year U.S.
Treasury Agency Index.
4. The terms "spread" and "yield spread" may refer to the difference in yield
between a security or type of security and comparable U.S. Treasury issues.
The terms may also refer to the difference in yield between two specific
securities or types of securities at a given time.
5. The S&P 500(R) Index is a trademark of the McGraw-Hill Companies, Inc., and
is widely recognized as the standard for measuring large-cap U.S. stock
market performance. Results assume reinvestment of all dividends and capital
gains. An investment cannot be made directly in an index.
6. The yield curve is a line that plots the yields of various securities of
similar quality--typically U.S. Treasury issues--across a range of
maturities. The U.S. Treasury yield curve serves as a benchmark for other
debt and is used in economic forecasting.
The opinions expressed are those of the portfolio managers as of the date of
this report and are subject to change. There is no guarantee that any forecast
made will come to pass. This material does not constitute investment advice and
is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
LONG-TERM BONDS 97.0%+
ASSET-BACKED SECURITIES 0.9%
- -------------------------------------------------------
AUTOMOBILE 0.9%
USAA Auto Owner Trust
Series 2009-1, Class A2
2.64%, due 8/15/11 $ 355,937 $ 356,681
World Omni Auto Receivables
Trust
Series 2009-A, Class A2
2.88%, due 10/17/11 635,440 638,616
------------
Total Asset-Backed
Securities
(Cost $991,354) 995,297
------------
CONVERTIBLE BONDS 1.7%
- -------------------------------------------------------
BIOTECHNOLOGY 0.8%
Amgen, Inc.
0.125%, due 2/1/11 1,000,000 993,750
------------
HEALTH CARE--PRODUCTS 0.9%
Medtronic, Inc.
1.50%, due 4/15/11 1,000,000 1,015,000
------------
Total Convertible Bonds
(Cost $1,946,778) 2,008,750
------------
CORPORATE BONDS 11.8%
- -------------------------------------------------------
AEROSPACE & DEFENSE 0.4%
Boeing Co. (The)
1.875%, due 11/20/12 490,000 496,086
------------
AGRICULTURE 1.1%
Philip Morris International,
Inc.
6.875%, due 3/17/14 1,070,000 1,235,651
------------
AUTO MANUFACTURERS 1.1%
DaimlerChrysler N.A. Holding
Corp.
6.50%, due 11/15/13 1,117,000 1,245,671
------------
BANKS 5.0%
V JPMorgan Chase & Co.
3.70%, due 1/20/15 1,235,000 1,260,270
Morgan Stanley
5.625%, due 1/9/12 655,000 690,741
V PNC Funding Corp.
3.625%, due 2/8/15 1,240,000 1,251,692
V U.S. Bancorp
3.15%, due 3/4/15 1,250,000 1,256,101
Wells Fargo & Co.
3.75%, due 10/1/14 1,225,000 1,249,305
------------
5,708,109
------------
DIVERSIFIED FINANCIAL SERVICES 2.1%
Citicorp
7.25%, due 10/15/11 1,155,000 1,233,064
General Electric Capital
Corp.
3.75%, due 11/14/14 1,220,000 1,250,633
------------
2,483,697
------------
HEALTH CARE--PRODUCTS 1.1%
V St. Jude Medical, Inc.
2.20%, due 9/15/13 1,310,000 1,310,131
------------
PHARMACEUTICALS 1.0%
Novartis Capital Corp.
1.90%, due 4/24/13 1,100,000 1,103,513
------------
Total Corporate Bonds
(Cost $13,535,744) 13,582,858
------------
MORTGAGE-BACKED SECURITIES 2.7%
- -------------------------------------------------------
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE OBLIGATIONS) 2.7%
Banc of America Commercial
Mortgage, Inc.
Series 2007-1, Class AAB
5.422%, due 1/15/49 870,000 903,830
LB-UBS Commercial Mortgage
Trust
Series 2004-C2, Class A2
3.246%, due 3/15/29 62,694 62,768
Series 2004-C1, Class A4
4.568%, due 1/15/31 890,000 915,989
RBSCF Trust
Series 2010-MB1, Class A1
2.367%, due 2/15/15 (a) 1,200,000 1,203,978
------------
Total Mortgage-Backed
Securities
(Cost $3,073,097) 3,086,565
------------
U.S. GOVERNMENT & FEDERAL AGENCIES 72.3%
- -------------------------------------------------------
V FEDERAL HOME LOAN
BANK 9.4%
1.625%, due 7/27/11 1,540,000 1,556,983
2.25%, due 4/13/12 5,075,000 5,186,584
3.375%, due 10/20/10 4,000,000 4,056,804
------------
10,800,371
------------
</Table>
+ Percentages indicated are based on Fund net assets.
V Among the Fund's 10 largest issuers, as of April 30, 2010, excluding
short-term investment. May be subject to change daily.
10 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)
V FEDERAL NATIONAL MORTGAGE ASSOCIATION 11.3%
2.875%, due 10/12/10 $ 3,985,000 $ 4,030,704
6.25%, due 2/1/11 8,565,000 8,934,374
------------
12,965,078
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITY) 0.3%
4.50%, due 11/1/18 335,641 354,360
------------
FREDDIE MAC (COLLATERALIZED MORTGAGE OBLIGATIONS) 0.7%
Series 2632, Class NH
3.50%, due 6/15/13 773,446 784,519
------------
V UNITED STATES TREASURY
NOTES 50.6%
0.875%, due 2/28/11 1,925,000 1,932,594
0.875%, due 5/31/11 21,080,000 21,168,936
0.875%, due 1/31/12 1,305,000 1,305,663
1.00%, due 7/31/11 1,490,000 1,498,033
1.00%, due 9/30/11 5,600,000 5,625,810
1.375%, due 9/15/12 755,000 758,893
1.50%, due 7/15/12 12,580,000 12,708,744
1.875%, due 6/15/12 10,395,000 10,582,598
2.25%, due 5/31/14 2,710,000 2,732,019
------------
58,313,290
------------
Total U.S. Government & Federal Agencies
(Cost $82,142,762) 83,217,618
------------
YANKEE BONDS 7.6% (B)
- -------------------------------------------------------
ELECTRIC 1.0%
Enel Finance International
S.A.
3.875%, due 10/7/14 (a) 1,120,000 1,144,376
------------
HOLDING COMPANY--DIVERSIFIED 1.1%
Hutchison Whampoa
International, Ltd.
4.625%, due 9/11/15 (a) 1,195,000 1,239,866
------------
MINING 1.2%
V Rio Tinto Finance USA,
Ltd.
8.95%, due 5/1/14 1,115,000 1,350,923
------------
MISCELLANEOUS--MANUFACTURING 0.4%
Tyco Electronics Group S.A.
6.00%, due 10/1/12 495,000 534,262
------------
OIL & GAS 2.8%
V Shell International
Finance B.V.
1.875%, due 3/25/13 2,000,000 2,008,742
------------
Total Capital S.A.
3.125%, due 10/2/15 1,235,000 1,245,032
------------
3,253,774
------------
TELECOMMUNICATIONS 1.1%
V Telefonica Emisiones
S.A.U
4.949%, due 1/15/15 1,180,000 1,251,218
------------
Total Yankee Bonds
(Cost $8,697,417) 8,774,419
------------
Total Long-Term Bonds
(Cost $110,387,152) 111,665,507
------------
SHORT-TERM INVESTMENT 3.2%
- -------------------------------------------------------
REPURCHASE AGREEMENT 3.2%
State Street Bank and
Trust Co.
0.01%, dated /30/10
due 5/3/10
Proceeds at Maturity
$3,695,612
(Collateralized by a
United States
Treasury Bill with a rate
of 0.107%
and a maturity date of
6/3/10,
with a Principal Amount of
$3,770,000 and a Market
Value of $3,769,623) 3,695,609 3,695,609
------------
Total Short-Term Investment
(Cost $3,695,609) 3,695,609
------------
Total Investments
(Cost $114,082,761) (c) 100.2% 115,361,116
Other Assets, Less
Liabilities (0.2) (209,997)
----------- ------------
Net Assets 100.0% $115,151,119
=========== ============
</Table>
<Table>
(a) May be sold to institutional investors
only under Rule 144A or securities
offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
(b) Yankee Bond--dollar-denominated bond
issued in the United States by a foreign
bank or corporation.
(c) At April 30, 2010, cost is $114,100,199
for federal income tax purposes and net
unrealized appreciation is as follows:
</Table>
<Table>
Gross unrealized appreciation $1,293,031
Gross unrealized depreciation (32,114)
----------
Net unrealized appreciation $1,260,917
==========
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
11
PORTFOLIO OF INVESTMENTS APRIL 30, 2010 UNAUDITED (CONTINUED)
The following is a summary of the fair valuations according to the inputs used
as of April 30, 2010, for valuing the Fund's assets.
ASSET VALUATION INPUTS
<Table>
<Caption>
QUOTED
PRICES IN
ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
Investments in Securities (a)
Long-Term Bonds
Asset-Backed Securities $ -- $ 995,297 $ -- $ 995,297
Convertible Bonds -- 2,008,750 -- 2,008,750
Corporate Bonds -- 13,582,858 -- 13,582,858
Mortgage-Backed Securities -- 3,086,565 -- 3,086,565
U.S. Government & Federal Agencies -- 83,217,618 -- 83,217,618
Yankee Bonds -- 8,774,419 -- 8,774,419
-------- ------------ -------- ------------
Total Long-Term Bonds -- 111,665,507 -- 111,665,507
-------- ------------ -------- ------------
Short-Term Investment
Repurchase Agreement -- 3,695,609 -- 3,695,609
-------- ------------ -------- ------------
Total Investments in Securities $-- $115,361,116 $-- $115,361,116
======== ============ ======== ============
</Table>
(a) For detailed industry descriptions, see the Portfolio of Investments.
At April 30, 2010, the Fund did not have any transfers between Level 1 and Level
2 or hold any investments with significant unobservable inputs (Level 3).
12 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 APRIL 30, 2010 UNAUDITED
<Table>
ASSETS:
Investment in securities, at value
(identified cost $114,082,761) $115,361,116
Receivables:
Fund shares sold 1,170,448
Interest 636,351
Other assets 44,279
------------
Total assets 117,212,194
------------
LIABILITIES:
Payables:
Fund shares redeemed 1,931,901
Manager (See Note 3) 35,693
Transfer agent (See Note 3) 23,716
Professional fees 23,480
Shareholder communication 12,804
NYLIFE Distributors (See Note 3) 8,872
Custodian 2,325
Trustees 674
Accrued expenses 50
Dividend payable 21,560
------------
Total liabilities 2,061,075
------------
Net assets $115,151,119
============
COMPOSITION OF NET ASSETS:
Share of beneficial interest
outstanding (par value of $.001
per share) unlimited number of
shares authorized $ 11,899
Additional paid-in capital 113,610,896
------------
113,622,795
Accumulated distributions in excess
of net investment income (15,102)
Accumulated net realized gain on
investments 265,071
Net unrealized appreciation on
investments 1,278,355
------------
Net assets $115,151,119
============
INVESTOR CLASS
Net assets applicable to
outstanding shares $ 3,234,915
============
Shares of beneficial interest
outstanding 333,329
============
Net asset value per share
outstanding $ 9.70
Maximum sales charge (3.00% of
offering price) 0.30
------------
Maximum offering price per share
outstanding $ 10.00
============
CLASS A
Net assets applicable to
outstanding shares $ 37,776,033
============
Shares of beneficial interest
outstanding 3,903,652
============
Net asset value per share
outstanding $ 9.68
Maximum sales charge (3.00% of
offering price) 0.30
------------
Maximum offering price per share
outstanding $ 9.98
============
CLASS I
Net assets applicable to
outstanding shares $ 74,140,171
============
Shares of beneficial interest
outstanding 7,662,262
============
Net asset value and offering price
per share outstanding $ 9.68
============
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
13
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED
<Table>
INVESTMENT INCOME:
INCOME:
Interest (a) $1,186,778
----------
EXPENSES:
Manager (See Note 3) 383,738
Transfer agent (See Note 3) 74,434
Distribution/Service--Investor
Class (See Note 3) 4,007
Distribution/Service--Class A (See
Note 3) 60,900
Registration 32,213
Shareholder communication 31,847
Professional fees 28,613
Custodian 6,335
Trustees 2,408
Miscellaneous 5,561
----------
Total expenses before waiver 630,056
Expense waiver from Manager (See
Note 3) (122,139)
----------
Net expenses 507,917
----------
Net investment income 678,861
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 282,750
Net change in unrealized
appreciation on investments (185,904)
----------
Net realized and unrealized gain on
investments 96,846
----------
Net increase in net assets resulting
from operations $ 775,707
==========
</Table>
(a) Interest recorded net of foreign withholding taxes in the amount of $1,720.
14 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.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2010 UNAUDITED AND THE YEAR ENDED OCTOBER 31,
2009
<Table>
<Caption>
2010 2009
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 678,861 $ 1,290,198
Net realized gain on
investments 282,750 2,038,549
Net change in unrealized
appreciation
(depreciation) on
investments (185,904) 2,005,222
--------------------------
Net increase in net assets
resulting from operations 775,707 5,333,969
--------------------------
Dividends and distributions
to shareholders:
From net investment
income:
Investor Class (7,590) (27,844)
Class A (218,677) (508,074)
Class I (461,028) (751,985)
--------------------------
(687,295) (1,287,903)
--------------------------
From net realized gain on
investments:
Investor Class (38,188) --
Class A (628,813) --
Class I (946,795) --
--------------------------
(1,613,796) --
--------------------------
Total dividends and
distributions to
shareholders (2,301,091) (1,287,903)
--------------------------
Capital share transactions:
Net proceeds from sale of
shares 45,448,907 139,760,022
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions 1,923,302 1,036,268
Cost of shares redeemed (68,014,781) (66,803,229)
--------------------------
Increase (decrease) in
net assets derived from
capital share
transactions (20,642,572) 73,993,061
--------------------------
Net increase (decrease)
in net assets (22,167,956) 78,039,127
NET ASSETS:
Beginning of period 137,319,075 59,279,948
--------------------------
End of period $115,151,119 $137,319,075
==========================
Accumulated distributions in
excess of net investment
income at end of period $ (15,102) $ (6,668)
==========================
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
15
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
INVESTOR CLASS
-------------------------------------------------
FEBRUARY 28,
SIX MONTHS 2008**
ENDED YEAR ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2010* 2009 2008
Net asset value at beginning of
period $ 9.81 $ 9.32 $ 9.44
------ ------ ------
Net investment income 0.02 0.10 0.13 (a)
Net realized and unrealized gain
(loss) on investments 0.01 0.49 (0.11)
------ ------ ------
Total from investment operations 0.03 0.59 0.02
------ ------ ------
Less dividends and distributions:
From net investment income (0.02) (0.10) (0.14)
From net realized gain on
investments (0.12) -- --
------ ------ ------
Total dividends and distributions (0.14) (0.10) (0.14)
------ ------ ------
Net asset value at end of period $ 9.70 $ 9.81 $ 9.32
====== ====== ======
Total investment return (b) 0.29%(c) 6.31% 0.20%(c)
Ratios (to average net
assets)/Supplemental Data:
Net investment income 0.45%++ 1.00% 2.10%++
Net expenses 1.41%++ 1.11% 1.00%++
Expenses (before
waiver/reimbursement) 1.60%++ 1.62% 2.09%++
Portfolio turnover rate 49%(d) 193%(d) 252%(d)
Net assets at end of period (in
000's) $3,235 $3,180 $2,266
</Table>
<Table>
<Caption>
CLASS I
----------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
Net asset value at beginning of
period $ 9.78 $ 9.29 $ 9.19 $ 9.08 $ 9.07 $ 9.26
------- ------- ------- ------- ------- -------
Net investment income 0.06 0.15 0.29 (a) 0.38 (a) 0.33 0.24
Net realized and unrealized gain
(loss) on investments 0.02 0.48 0.09 0.12 0.01 (0.19)
------- ------- ------- ------- ------- -------
Total from investment operations 0.08 0.63 0.38 0.50 0.34 0.05
------- ------- ------- ------- ------- -------
Less dividends and distributions:
From net investment income (0.06) (0.14) (0.28) (0.39) (0.33) (0.24)
From net realized gain on
investments (0.12) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.18) (0.14) (0.28) (0.39) (0.33) (0.24)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 9.68 $ 9.78 $ 9.29 $ 9.19 $ 9.08 $ 9.07
======= ======= ======= ======= ======= =======
Total investment return (b) 0.77%(c) 6.83% 4.17% 5.59% 3.83% 0.59%
Ratios (to average net
assets)/Supplemental Data:
Net investment income 1.19%++ 1.43% 3.15% 4.15% 3.63% 2.63%
Net expenses 0.68%++ 0.63% 0.60% 0.60% 0.60% 0.60%
Expenses (before
waiver/reimbursement) 0.87%++ 0.91% 0.91% 0.75% 0.76% 0.77%
Portfolio turnover rate 49%(d) 193%(d) 252%(d) 118% 95%(d) 151%
Net assets at end of period (in
000's) $74,140 $79,237 $36,701 $87,535 $74,221 $86,167
</Table>
<Table>
* Unaudited.
** 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 and assumes the
reinvestment of dividends and distributions. Class I shares are not subject to
sales charges.
(c) Total return is not annualized.
(d) The portfolio turnover rates not including mortgage dollar rolls were 33%,
131%, 237% and 93% for the six month period ended April 30, 2010 and for the
years ended October 31, 2009, 2008 and 2006, respectively.
</Table>
16 MainStay Short Term Bond Fund The notes to the financial statements are an
integral part of, and should be read in conjunction with, the financial
statements.
FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
<Table>
<Caption>
CLASS A
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
2010* 2009 2008 2007 2006 2005
$ 9.79 $ 9.29 $ 9.19 $ 9.08 $ 9.06 $ 9.24
------- ------- ------- ------- ------ ------
0.05 0.10 0.24 (a) 0.35 (a) 0.30 0.20
0.01 0.51 0.11 0.12 0.02 (0.19)
------- ------- ------- ------- ------ ------
0.06 0.61 0.35 0.47 0.32 0.01
------- ------- ------- ------- ------ ------
(0.05) (0.11) (0.25) (0.36) (0.30) (0.19)
(0.12) -- -- -- -- --
------- ------- ------- ------- ------ ------
(0.17) (0.11) (0.25) (0.36) (0.30) (0.19)
------- ------- ------- ------- ------ ------
$ 9.68 $ 9.79 $ 9.29 $ 9.19 $ 9.08 $ 9.06
======= ======= ======= ======= ====== ======
0.54%(c) 6.65% 3.87% 5.29% 3.55% 0.09%
0.91%++ 1.14% 2.55% 3.85% 3.33% 2.16%
0.93%++ 0.91% 0.90% 0.90% 0.90% 1.07%
1.12%++ 1.16% 1.32% 1.36% 1.61% 1.36%
49%(d) 193%(d) 252%(d) 118% 95%(d) 151%
$37,776 $54,902 $20,313 $13,740 $4,850 $6,085
</Table>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements. mainstayinvestments.com
17
NOTES TO FINANCIAL STATEMENTS UNAUDITED
NOTE 1--ORGANIZATION AND BUSINESS:
MainStay Funds Trust (the "Trust") is organized as a Delaware Statutory Trust
and is governed by a Declaration of Trust dated April 8, 2009. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company, and is comprised of twenty-
nine funds (collectively referred to as the "Funds"). These financial statements
and notes relate only to the MainStay Short Term Bond Fund (the "Fund"), a
diversified fund. The Fund is the successor of the MainStay Short Term Bond
Fund, a series of Eclipse Funds Inc. (the "Predecessor Fund"). The
reorganization of the Predecessor Fund with and into the Fund, which was not
subject to shareholder approval under applicable law, occurred on February 26,
2010. All information regarding and references to periods prior to the
commencement of operations of the Fund relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced
operations on January 2, 1991. Class A shares commenced operations on January 2,
2004. Investor Class shares commenced operations on February 28, 2008. Investor
Class and Class A shares are offered at net asset value ("NAV") per share plus
an initial sales charge. No sales charge applies on investments of $1 million or
more (and certain other qualified purchases) in Investor Class and Class A
shares, but a contingent deferred sales charge is imposed on certain redemptions
of such shares within one year of the date of purchase. Class I shares are
offered at NAV and are not subject to a sales charge. Depending upon
eligibility, Investor Class shares may convert to Class A shares and Class A
shares may convert to Investor Class shares. The three classes of shares have
the same voting (except for issues that relate solely to one class), dividend,
liquidation and other rights, and the same terms and conditions. Class I shares
are not subject to a distribution and/or service fee.
The Fund's investment objective is to seek to maximize total return, consistent
with liquidity, preservation of capital and investment in short-term debt
securities.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
The Fund prepares its financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") and
follows the significant accounting policies described below.
(A) SECURITIES VALUATION. Debt securities are valued at prices supplied by a
pricing agent or broker selected by the Fund's Manager (as defined in Note 3(A))
in consultation with the Fund's Subadvisor, if any (as defined in Note 3(A)),
whose prices reflect broker/dealer supplied valuations and electronic data
processing techniques, if such prices are deemed by the Fund's Manager, in
consultation with the Fund's Subadvisor, if any, to be representative of market
values, at the regular close of trading of the New York Stock Exchange
("Exchange") (generally 4:00 p.m. Eastern time) on each day the Fund is open for
business ("valuation date"). Investments in other mutual funds are valued at
their NAVs as of the close of the Exchange on the valuation date.
Temporary cash investments acquired over 60 days prior to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments which mature in 60 days or less ("short-term investments") are
valued at amortized cost. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and cost.
Securities for which market quotations are not readily available are valued by
methods deemed in good faith by the Fund's Board to represent fair value. Equity
and non-equity securities which may be valued in this manner include, but are
not limited to: (i) a security the trading for which has been halted or
suspended; (ii) a debt security that has recently gone into default and for
which there is not a current market quotation; (iii) a security of an issuer
that has entered into a restructuring; (iv) a security that has been de-listed
from a national exchange; (v) a security the market price of which is not
available from an independent pricing source or, if so provided, does not, in
the opinion of the Fund's Manager or Subadvisor, as defined in Note 3(A),
reflect the security's market value; and (vi) a security where the trading on
that security's principal market is temporarily closed at a time when, under
normal conditions, it would be open. At April 30, 2010, the Fund did not hold
securities that were valued in such a manner.
"Fair value" is defined as the price that the Fund would receive upon selling an
investment in an orderly transaction to an independent buyer in the principal or
most advantageous market of the investment. Fair value measurements are
determined within a framework that has established a three-tier hierarchy which
maximizes the use of observable market data and minimizes the use of
unobservable inputs to establish classification of fair value measurements for
disclosure purposes. "Inputs" refer broadly to the assumptions that market
participants would use in pricing the asset or liability, including assumptions
about risk, such as the risk inherent in a particular valuation technique used
to measure fair value using a pricing model and/or the risk inherent in the
inputs for the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants
would use in pricing the asset or liability based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs that
reflect the reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the
information available in
18 MainStay Short Term Bond Fund
the circumstances. The inputs or methodology used for valuing securities may not
be an indication of the risks associated with investing in those securities. The
three-tier hierarchy of inputs is summarized in the three broad Levels listed
below.
- - Level 1--quoted prices in active markets for identical investments
- - Level 2--other significant observable inputs (including quoted prices for
similar investments in active markets, interest rates and yield curves,
prepayment speeds, credit risks, etc.)
- - Level 3--significant unobservable inputs (including the Fund's own assumptions
about the assumptions that market participants would use in determining the
fair value of investments)
The aggregate value by input level, as of April 30, 2010, for the Fund's
investments is included at the end of the Fund's Portfolio of Investments.
The valuation techniques used by the Fund to measure fair value during the six-
month period ended April 30, 2010 maximized the use of observable inputs and
minimized the use of unobservable inputs. The Fund may have utilized some of the
following fair value techniques: multi-dimensional relational pricing models,
option adjusted spread pricing and estimating the price that would have
prevailed in a liquid market for an international equity security given
information available at the time of evaluation, when there are significant
events after the close of local foreign markets. For the six-month period ended
April 30, 2010, there have been no changes to the fair value methodologies.
(B) FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")
applicable to regulated investment companies and to distribute all of the
taxable income to the shareholders of the Fund within the allowable time limits.
Therefore, no federal income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken
meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the
purposes of measuring and recognizing tax liabilities in the financial
statements. Recognition of tax benefits of an uncertain tax position is required
only when the position is "more likely than not" to be sustained assuming
examination by taxing authorities. Management has analyzed the Fund's tax
positions taken on federal income tax returns for all open tax years (current
and prior three tax years), and has concluded that no provision for federal
income tax is required in the Fund's financial statements. The Fund's federal
and state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by the Internal Revenue Service and state departments of revenue.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions
are recorded on the ex-dividend date. The Fund intends to declare and pay
dividends of net investment income monthly and distributions of net realized
capital and currency gains, if any, annually, Unless the shareholder elects
otherwise, all dividends and distributions are reinvested in the same class of
shares of the Fund, at NAV. Dividends and distributions to shareholders are
determined in accordance with federal income tax regulations and may differ from
GAAP.
(D) SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage-backed securities. Interest
income is accrued as earned using the effective interest rate method. Discounts
and premiums on securities purchased, other than short-term investments, for the
Fund are accreted and amortized, respectively, on the effective interest rate
method over the life of the respective securities or, in the case of a callable
security, over the period to the first date of call. Discounts and premiums on
short-term investments are accreted and amortized, respectively, on the
straight-line method. Income from payment-in-kind securities is recorded daily
based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of
the Fund are allocated to separate classes of shares pro rata based upon their
relative net assets on the date the income is earned or realized and unrealized
gains and losses are incurred.
(E) EXPENSES. Expenses of the Trust are allocated to the individual Funds in
proportion to the net assets of the respective Funds when the expenses are
incurred, except where direct allocations of expenses can be made. Expenses
(other than transfer agent expenses and fees incurred under the shareholder
services plans and the distribution plans further discussed in Note 3(B)) are
allocated to separate classes of shares pro rata based upon their relative NAV
on the date the expenses are incurred. The expenses borne by the Fund, including
those of related parties to the Fund, are shown in the Statement of Operations.
(F) USE OF ESTIMATES. In preparing financial statements in conformity with
GAAP, management makes estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
(G) REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements to
earn income. The Fund may enter into repurchase agreements only with financial
institutions that are deemed by the Manager or Subadvisor to
mainstayinvestments.com 19
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
be creditworthy, pursuant to guidelines established by the Fund's Board.
Repurchase agreements are considered under the 1940 Act to be collateralized
loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund's custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings and possible
realized loss to the Fund.
(H) MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage dollar roll ("MDR")
transactions in which it sells mortgage-backed securities ("MBS") from its
portfolio to a counterparty from whom it simultaneously agrees to buy a similar
security on a delayed delivery basis. The MDR transactions of the Fund are
classified as purchase and sale transactions. The securities sold in connection
with the MDRs are removed from the portfolio and a realized gain or loss is
recognized. The securities the Fund has agreed to acquire are included at market
value in the Portfolio of Investments and liabilities for such purchase
commitments are included as payables for investments purchased. During the roll
period, the Fund foregoes principal and interest paid on the securities. The
Fund is compensated by the difference between the current sales price and the
forward price for the future as well as by the earnings on the cash proceeds of
the initial sale. MDRs may be renewed without physical delivery of the
securities subject to the contract. The Fund maintains liquid assets from its
portfolio having a value not less than the repurchase price, including accrued
interest. MDR transactions involve certain risks, including the risk that the
MBS returned to the Fund at the end of the roll, while substantially similar,
could be inferior to what was initially sold to the counterparty.
(I) SECURITIES LENDING. In order to realize additional income, the Fund may
engage in securities lending, subject to the limitations set forth in the 1940
Act, and relevant guidance by the staff of the Securities and Exchange
Commission. In the event the Fund does engage in securities lending, the Fund
will lend through its custodian, State Street Bank and Trust Company ("State
Street"). State Street will manage the Fund's cash collateral in accordance with
the Lending Agreement between the Fund and State Street, and indemnify the
Fund's portfolio against counterparty risk. The loans will be collateralized by
cash or securities at least equal at all times to the market value of the
securities loaned. Collateral will consist of U.S. Government securities, cash
equivalents or irrevocable letters of credit. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund may also
record realized gain or loss on securities deemed sold due to a borrower's
inability to return securities on loan. The Fund will receive compensation for
lending its securities in the form of fees or retain a portion of interest on
the investment of any cash received as collateral. The Fund also will continue
to receive interest and dividends on the securities loaned and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have
temporarily suspended securities lending, the Fund and New York Life Investments
reserve the right to reinstitute lending when deemed appropriate. The Fund had
no portfolio securities on loan as of April 30, 2010.
(J) CONCENTRATION OF RISK. The ability of issuers of debt securities held by
the Fund to meet their obligations may be affected by economic or political
developments in a specific country, industry or region.
(K) INDEMNIFICATIONS. Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities that may arise out of
performance of their duties to the Trust. Additionally, in the normal course of
business, the Fund enters into contracts with third-party service providers that
contain a variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. Based on experience, management is of the view that
the risk of loss in connection with these potential indemnification obligations
is remote. However, there can be no assurance that material liabilities related
to such obligations will not arise in the future, which could adversely impact
the Fund.
NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:
(A) MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("New York
Life Investments" or "Manager"), a registered investment adviser and an
indirect, wholly-owned subsidiary of New York Life Insurance Company ("New York
Life"), serves as the Fund's Manager, pursuant to a Management Agreement, as
amended ("Management Agreement"). The Manager provides offices, conducts
clerical, recordkeeping and bookkeeping services, and keeps most of the
financial and accounting records required to be maintained by the Fund. Except
for the portion of salaries and expenses that are the responsibility of the
Fund, the Manager also pays the salaries and expenses of all personnel
affiliated with the Fund and the operational expenses of the Fund. MacKay
20 MainStay Short Term Bond Fund
Shields LLC (the "Subadvisor"), a registered investment adviser and an indirect,
wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and
is responsible for the day-to-day portfolio management of the Fund. Pursuant to
the terms of a Subadvisory Agreement between New York Life Investments and the
Subadvisor, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities
furnished at an annual rate of the Fund's average daily net assets as follows:
0.60% on assets up to $500 million and 0.575% on assets in excess of $500
million. The effective management fee rate (exclusive of any applicable
waivers/reimbursements) was 0.60% for the six-month period ended April 30, 2010.
Effective August 1, 2009, New York Life Investments entered into a written
expense limitation agreement under which it has agreed to waive a portion of the
management fee or reimburse expenses to the extent necessary so that the total
ordinary operating expenses (total ordinary operating expenses excludes taxes,
interest, litigation, extraordinary expenses, brokerage, other transaction
expenses relating to the purchase or sale of portfolio investments, and the fees
and expenses of any other funds in which the Fund invests) for the Fund's Class
A shares do not exceed 0.93% of its average daily net assets. New York Life
Investments will apply an equivalent waiver or reimbursement, in an equal number
of basis points, to the other share classes of the Fund. This agreement expires
on February 28, 2011 and is reviewed annually by the Board in connection with
its review of the Fund's investment advisory agreements. Based on its review,
the Board may agree to maintain, modify or terminate the agreement.
For the six-month period ended April 30, 2010, New York Life Investments earned
fees from the Fund in the amount of $383,738 and waived its fees in the amount
of $122,139.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-
administration and sub-accounting services to the Fund pursuant to an agreement
with New York Life Investments. These services include calculating the daily
NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the
calculation of the Fund's respective NAVs, and assisting New York Life
Investments in conducting various aspects of the Fund's administrative
operations. For providing these services to the Fund, State Street is
compensated by New York Life Investments.
(B) DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has
entered into a Distribution Agreement with NYLIFE Distributors LLC (the
"Distributor"), an indirect, wholly-owned subsidiary of New York Life. The Fund
has adopted distribution plans, (the "Plans") in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a
monthly distribution fee from the Investor Class and Class A shares at an annual
rate of 0.25% of the average daily net assets of the Investor Class and Class A
shares for distribution or service activities as designated by the Distributor.
Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the
Distributor regardless of the amounts actually expended by the Distributor for
distribution of the Fund's shares and service activities.
(C) SALES CHARGES. The Fund was advised by the Distributor that the amount of
sales charges retained on sales of Investor Class and Class A shares were $1,201
and $5,013, respectively, for the six-month period ended April 30, 2010. The
Fund was also advised that the Distributor retained contingent deferred sales
charges on redemptions of Investor Class and Class A of $2 and $144,
respectively for the six-month period ended April 30, 2010.
(D) TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM
Service Company LLC, an affiliate of New York Life Investments, is the Fund's
transfer, dividend disbursing and shareholder servicing agent pursuant to an
agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
LLC has entered into an agreement with Boston Financial Data Services, Inc.
("BFDS") pursuant to which BFDS performs certain transfer agent services on
behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the
Fund for the six-month period ended April 30, 2010, were as follows:
<Table>
Investor Class $ 9,396
- ----------------------------------------------
Class A 25,304
- ----------------------------------------------
Class I 39,734
- ----------------------------------------------
</Table>
(E) SMALL ACCOUNT FEE. Shareholders with small accounts adversely impact the
cost of providing transfer agency services. In an effort to reduce total
transfer agency expenses, the Fund has implemented a small account fee on
certain types of accounts. Certain shareholders with an account balance of less
than $1,000 are charged an annual per account fee of $20 (assessed semi-
annually). These fees are included in transfer agent fees shown on the Statement
of Operations.
mainstayinvestments.com 21
NOTES TO FINANCIAL STATEMENTS UNAUDITED (CONTINUED)
(F) CAPITAL. At April 30, 2010, New York Life and its affiliates beneficially
held shares of the Fund with the following values and percentages of net assets
as follows:
<Table>
Class A $ 1,207 0.0%++
- ---------------------------------------------------
Class I 10,160,232 13.7
- ---------------------------------------------------
</Table>
++ Less than one-tenth of a percent.
(G) OTHER. Pursuant to the Management Agreement, a portion of the cost of legal
services provided to the Fund by the Office of the General Counsel of New York
Life Investments is payable directly by the Fund. For the six-month period ended
April 30, 2010, these fees, which are included in professional fees shown on the
Statement of Operations, were $3,420.
NOTE 4--FEDERAL INCOME TAX:
The Fund utilized $442,432 of capital loss carryforwards during the year ended
October 31, 2009.
The tax character of distributions paid during the year ended October 31, 2009,
shown in the Statement of Changes in Net Assets, was as follows:
<Table>
<Caption>
2009
Distributions paid from:
Ordinary Income $1,287,903
- ------------------------------------------------
</Table>
NOTE 5--CUSTODIAN:
State Street is the custodian of the cash and the securities of the Fund.
Custodial fees are charged to the Fund based on the market value of securities
in the Fund and the number of certain cash transactions incurred by the Fund.
NOTE 6--LINE OF CREDIT:
The Fund and certain affiliated funds maintain a line of credit with a syndicate
of banks in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests.
The line of credit is in the amount of $125,000,000 and the commitment fee rate
is an annual rate of 0.10% of the average commitment amount, plus a 0.04% up-
front payment payable, regardless of usage, to The Bank of New York Mellon,
which serves as agent to the syndicate. The commitment fee and upfront payment
are allocated among certain MainStay Funds based upon net assets and other
factors. Interest on any revolving credit loan is charged based upon the Federal
Funds Advances rate or the one month LIBOR rate, whichever is higher. There were
no borrowings made or outstanding with respect to the Fund on the line of credit
during the six-month period ended April 30, 2010.
NOTE 7--PURCHASES AND SALES OF SECURITIES (IN 000'S):
During the six-month period ended April 30, 2010, purchases and sales of U.S.
Government securities were $34,768 and $68,396, respectively. Purchases and
sales of securities, other than U.S. Government securities and short-term
securities, were $24,791 and $0, respectively.
NOTE 8--CAPITAL SHARE TRANSACTIONS:
<Table>
<Caption>
INVESTOR CLASS SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 74,990 $ 730,139
Shares issued to shareholders
in reinvestment of
dividends and distributions 4,694 45,587
Shares redeemed (64,774) (630,391)
------------------------
Net increase in shares
outstanding before
conversion 14,910 145,335
Shares converted into
Investor Class (See Note 1) 4,408 42,667
Shares converted from
Investor Class (See Note 1) (10,017) (97,131)
------------------------
Net increase 9,301 $ 90,871
========================
Year ended October 31, 2009:
Shares sold 191,699 $ 1,849,784
Shares issued to shareholders
in reinvestment of
dividends 2,868 27,668
Shares redeemed (90,976) (880,922)
------------------------
Net increase in shares
outstanding before
conversion 103,591 996,530
Shares converted into
Investor Class (See Note 1) 13,627 132,513
Shares converted from
Investor Class (See Note 1) (36,461) (353,143)
------------------------
Net increase 80,757 $ 775,900
========================
</Table>
22 MainStay Short Term Bond Fund
<Table>
<Caption>
CLASS A SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 1,945,171 $ 18,867,427
Shares issued to shareholders
in reinvestment of
dividends and distributions 55,142 534,091
Shares redeemed (2,899,049) (28,142,650)
------------------------
Net decrease in shares
outstanding before
conversion (898,736) (8,741,132)
Shares converted into Class A
(See Note 1) 10,048 97,131
Shares converted from Class A
(See Note 1) (4,417) (42,667)
Shares converted from
Class A (a) (813,781) (7,869,266)
------------------------
Net decrease (1,706,886) $(16,555,934)
========================
Year ended October 31, 2009:
Shares sold 7,277,076 $ 70,145,404
Shares issued to shareholders
in reinvestment of
dividends 30,096 290,570
Shares redeemed (3,906,363) (37,798,438)
------------------------
Net increase in shares
outstanding before
conversion 3,400,809 32,637,536
Shares converted into Class A
(See Note 1) 36,567 353,143
Shares converted from Class A
(See Note 1) (13,663) (132,513)
------------------------
Net increase 3,423,713 $ 32,858,166
========================
<Caption>
CLASS I SHARES AMOUNT
Six-month period ended
April 30, 2010:
Shares sold 2,664,811 $ 25,851,341
Shares issued to shareholders
in reinvestment of
dividends and distributions 138,698 1,343,624
Shares redeemed (4,053,355) (39,241,740)
------------------------
Net decrease in shares
outstanding before
conversion (1,249,846) (12,046,775)
Shares converted into
Class I (a) 813,781 7,869,266
------------------------
Net decrease (436,065) $ (4,177,509)
========================
Year ended October 31, 2009:
Shares sold 6,997,108 $ 67,764,834
Shares issued to shareholders
in reinvestment of
dividends 74,351 718,030
Shares redeemed (2,924,348) (28,123,869)
------------------------
Net increase 4,147,111 $ 40,358,995
========================
(a) In addition to any automatic conversion features
described above in Note 1 with respect to Investor
Class and Class A, you generally may also elect to
convert your shares on a voluntary basis into
another share class of the same fund for which you
are eligible. However, the following limitations
apply:
</Table>
- Investor Class and Class A shares that remain subject to a CDSC are
ineligible for a voluntary conversion; and
- All Class C shares are ineligible for a voluntary conversion.
These limitations do not impact any automatic conversion features described in
Note 1 with respect to Investor Class and Class A shares.
An investor or an investor's financial intermediary may contact the Fund to
request a voluntary conversion between shares classes of the same Fund. You may
be required to provide sufficient information to establish eligibility to
convert to the new share class. All permissible conversions will be made on the
basis of the relevant NAVs of the two classes without the imposition of any
sales load, fee or other charge. If you fail to remain eligible for the new
share class, you may automatically be converted back to your original share
class, or into another share class, if appropriate.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENT:
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures about
Fair Value Measurements". ASU 2010-06 requires reporting entities to make new
disclosures about amount and reasons for significant transfers in and out of
Level 1 and Level 2 fair value measurements and input and valuation techniques
used to measure fair value for both recurring and nonrecurring fair value
measurements that fall in either Level 2 or Level 3, and information on
purchased, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new and revised disclosure requirements are
effective for interim and annual reporting periods beginning after December 15,
2009 except for the disclosures about purchased, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measures,
which are effective for fiscal years beginning after December 15, 2010. As of
April 30, 2010, the Fund has adopted ASU 2010-06. The adoption of ASU 2010-06
has not impacted the amounts reported in the financial statements; however,
there are additional disclosures in the Portfolio of Investments.
NOTE 10--SUBSEQUENT EVENTS:
In connection with the preparation of the financial statements of the Fund as of
and for the fiscal six-month period ended April 30, 2010, events and
transactions subsequent to April 30, 2010 through the date the financial
statements were issued have been evaluated by the Fund's management for possible
adjustment and/or disclosure. No subsequent events requiring financial statement
adjustment or disclosure have been identified.
mainstayinvestments.com 23
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A description of the policies and procedures that New York Life Investments uses
to vote proxies related to the Fund's securities is available without charge,
upon request, (i) by visiting the Fund's website at mainstayinvestments.com; and
(ii) on the Securities and Exchange Commission's (SEC) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-
month period ending June 30 on Form N-PX. The Fund's most recent Form N-PX is
available free of charge upon request by calling 800-MAINSTAY (624-6782);
visiting the Funds' website at mainstayinvestments.com; or on the SEC's website
at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Fund is required to file its complete schedule of portfolio holdings with
the SEC for its first and third fiscal quarters on Form N-Q. The Funds' Form N-Q
is available without charge, on the SEC's website at www.sec.gov or by calling
MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review
copies of Form N-Q by visiting the SEC's Public Reference Room in Washington, DC
(information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330).
24 MainStay Short Term Bond Fund
MAINSTAY FUNDS
MAINSTAY OFFERS A WIDE RANGE OF FUNDS FOR VIRTUALLY ANY INVESTMENT NEED. THE
FULL ARRAY OF MAINSTAY OFFERINGS IS LISTED HERE, WITH INFORMATION ABOUT THE
MANAGER, SUBADVISORS, LEGAL COUNSEL, AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
EQUITY FUNDS
MainStay 130/30 Core Fund
MainStay 130/30 Growth Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund(1)
MAINSTAY GROWTH EQUITY FUND
MAINSTAY ICAP EQUITY FUND
MAINSTAY ICAP SELECT EQUITY FUND
MAINSTAY LARGE CAP GROWTH FUND
MAINSTAY MAP FUND
MAINSTAY S&P 500 INDEX FUND
MAINSTAY U.S. SMALL CAP FUND
INCOME FUNDS
MainStay Cash Reserves Fund
MainStay Diversified Income Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
BLENDED FUNDS
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
INTERNATIONAL FUNDS
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
ASSET ALLOCATION FUNDS
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
RETIREMENT FUNDS
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MANAGER
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
New York, New York
SUBADVISORS
EPOCH INVESTMENT PARTNERS, INC.
New York, New York
INSTITUTIONAL CAPITAL LLC(2)
Chicago, Illinois
MACKAY SHIELDS LLC(2)
New York, New York
MADISON SQUARE INVESTORS LLC(2)
New York, New York
MARKSTON INTERNATIONAL LLC
White Plains, New York
WINSLOW CAPITAL MANAGEMENT, INC.
Minneapolis, Minnesota
LEGAL COUNSEL
DECHERT LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
1. Closed to new investors and new purchases as of January 1, 2002.
2. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
MAINSTAYINVESTMENTS.COM
MainStay Investments, an indirect subsidiary of New York
Life Insurance Company, New York, NY 10010, provides
investment
advisory products and services. Securities are
distributed by NYLIFE Distributors LLC, 169 Lackawanna
Avenue, Parsippany,
New Jersey, 07054.
This report may be distributed only when preceded or
accompanied by a current Fund prospectus.
2010 by NYLIFE Distributors LLC. All rights reserved.
<Table>
<Caption>
- -----------------------------------------------------------------
Not Not a May Lose No Bank Not Insured by Any
FDIC/NCUA Deposit Value Guarantee Government Agency
Insured
- -----------------------------------------------------------------
</Table>
NYLIM-AO18325 MS121-10 MSSB10-06/10
B5
FORM N-CSR
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1 of this
report.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the Registrant's Disclosure Controls and
Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) (the "Disclosure Controls"), as of a date within 90 days prior to the
filing date (the "Filing Date") of this Form N-CSR (the "Report"), the
Registrant's principal executive officer and principal financial officer have
concluded that the Disclosure Controls are reasonably designed to ensure that
information required to be disclosed by the Registrant in the Report is
recorded, processed, summarized and reported by the Filing Date, including
ensuring that information required to be disclosed in the Report is accumulated
and communicated to the Registrant's management, including the Registrant's
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940
that occurred during the second fiscal quarter of the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MAINSTAY FUNDS TRUST
By: /s/ Stephen P. Fisher
---------------------------------
Stephen P. Fisher
President and Principal Executive
Officer
Date: July 6, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Stephen P. Fisher
---------------------------------
Stephen P. Fisher
President and Principal Executive
Officer
Date: July 6, 2010
By: /s/ Jack R. Benintende
---------------------------------
Jack R. Benintende
Treasurer and Principal Financial
and Accounting Officer
Date: July 6, 2010
EXHIBIT INDEX
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940.
(b) Certification of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.