N-CSRS 1 y96423nvcsrs.txt FORM N-CSRS 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 811-06175 Eclipse Funds Inc. (Exact name of Registrant as specified in charter) 51 Madison Avenue, New York, NY 10010 (Address of principal executive offices) (Zip code) Robert A. Anselmi, Esq. Michael Hession, Esq. 169 Lackawanna Avenue Parsippany, New Jersey 07054 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 576-7000 Date of fiscal year end: 10/31/04 Date of reporting period: 11/1/03-4/30/04 Item 1. Reports to Stockholders. [New York Life Investment Management LLC LOGO] EQUITY FUNDS MainStay All Cap Growth Fund MainStay All Cap Value Fund MainStay Mid Cap Core Fund MainStay Mid Cap Opportunity Fund MainStay S&P 500 Index Fund MainStay Small Cap Opportunity Fund INCOME FUNDS MainStay Cash Reserves Fund MainStay Indexed Bond Fund MainStay Intermediate Term Bond Fund MainStay Short Term Bond Fund BLENDED FUNDS MainStay Asset Manager Fund MainStay Balanced Fund MAINSTAY(R) FUNDS SEMIANNUAL REPORT Unaudited April 30, 2004 MESSAGE FROM THE PRESIDENT Most domestic and international stock markets advanced during the six months ended April 30, 2004. The U.S. economy generally improved, with real gross domestic product growing at a seasonally adjusted annual rate of 4.1% in the fourth quarter of 2003 and, according to preliminary estimates, rising 4.4% in the first quarter of 2004. Inflation remained relatively modest throughout the reporting period but increased enough to reassure the Federal Reserve that unwanted deflation was no longer a serious concern. Increases in corporate productivity led to worries that we might be having a "jobless recovery." In early April, however, the release of March employment figures showed a dramatic rise in nonfarm payrolls. Unfortunately, the combination of higher employment and rising inflation suggested that the Federal Reserve might soon move to raise interest rates. Bond markets adjusted to accommodate this perception, with yields rising and prices declining in April. The stock market, which had recorded relatively steady gains since mid-March of 2003, became increasingly volatile from late January through the end of April 2004. In March and April, bond yields rose to reflect the increasing likelihood of a less-accommodative monetary policy. Since bond prices and yields tend to move in opposite directions, several bond indices recorded negative price performance during the six-month reporting period, but most provided positive total returns. A weak U.S. dollar helped strengthen the performance of international stocks and was good news for U.S. exporters. The strengthening Japanese economy was greeted as positive news by international investors, but moves to decelerate the rapid economic growth in China were not as favorably received. Several international markets provided double-digit total returns for the six-month reporting period. On January 1, 2004, the Eclipse Funds were re-branded as MainStay Funds. The change was part of a repositioning initiative at New York Life Investment Management LLC. During the reporting period, some Funds were merged, others liquidated, and still others renamed. The result was a single, robust, and integrated mutual fund family that gives investors a more comprehensive array of alternatives. At MainStay, each of our Funds seeks to achieve its investment objective through consistent application of an established investment process. Whether the investments you've chosen use quantitative analysis, fundamental research, or a combination of the two, our disciplines remain the same, even when the markets move. We believe that our time-tested investment strategies can help you pursue your long-range goals with confidence. We hope to continue to serve your investment needs for many years to come. Sincerely, [/s/ Gary E. Wendlandt] Gary E. Wendlandt President TABLE OF CONTENTS Message from the President 1 --------------------------------------------------- EQUITY FUNDS MainStay All Cap Growth Fund 2 --------------------------------------------------- MainStay All Cap Value Fund 16 --------------------------------------------------- MainStay Mid Cap Core Fund 30 --------------------------------------------------- MainStay Mid Cap Opportunity Fund 46 --------------------------------------------------- MainStay S&P 500 Index Fund 60 --------------------------------------------------- MainStay Small Cap Opportunity Fund 76 INCOME FUNDS MainStay Cash Reserves Fund 92 --------------------------------------------------- MainStay Indexed Bond Fund 103 --------------------------------------------------- MainStay Intermediate Term Bond Fund 123 --------------------------------------------------- MainStay Short Term Bond Fund 140 --------------------------------------------------- BLENDED FUNDS MainStay Asset Manager Fund 152 --------------------------------------------------- MainStay Balanced Fund 184 --------------------------------------------------- Notes to Financial Statements 202 --------------------------------------------------- Board Members and Officers 213
www.mainstayfunds.com 1 MAINSTAY ALL CAP GROWTH FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS S&P 500(R) INDEX(1) 6.27% 22.88% -2.26% 11.36% RUSSELL 1000(R) GROWTH INDEX(2) 4.14 21.65 -6.37 9.61 RUSSELL 3000(R) GROWTH INDEX(3) 4.13 22.93 -5.95 9.21 AVERAGE LIPPER LARGE-CAP GROWTH FUND(4) 2.45 18.27 -5.46 7.94
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -2.95% 12.47% -7.79% 7.07% Excluding sales charges 2.70 19.02 -6.74 7.68
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH GROWTH FUND S&P 500 INDEX INDEX(1) INDEX ---------------- ------------- ------------------- ------------------- 4/30/94 945 1000 1000 1000 1023 1175 1196 1186 1421 1530 1585 1580 1573 1914 1935 1867 2232 2700 2750 2653 2807 3289 3479 3280 3427 3622 4438 4193 2595 3152 3007 2862 2087 2754 2402 2310 1663 2388 2058 1963 4/30/04 1980 2934 2503 2413
-- MainStay All Cap Growth Fund -- Russell 1000 Growth Index -- S&P 500 Index -- Russell 3000 Growth Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -2.58% 13.22% -7.83% 6.71% Excluding sales charges 2.42 18.22 -7.53 6.71
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH GROWTH FUND S&P 500 INDEX INDEX(1) INDEX ---------------- ------------- ------------------- ------------------- 4/30/94 1000 1000 1000 1000 1072 1175 1196 1186 1477 1530 1585 1580 1621 1914 1935 1867 2275 2700 2750 2653 2832 3289 3479 3280 3423 3622 4438 4193 2564 3152 3007 2862 2046 2754 2402 2310 1619 2388 2058 1963 4/30/04 1914 2934 2503 2413
-- MainStay All Cap Growth Fund -- Russell 1000 Growth Index -- S&P 500 Index -- Russell 3000 Growth Index
CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 1.48% 17.29% -7.52% 6.72% Excluding sales charges 2.48 18.29 -7.52 6.72
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH GROWTH FUND S&P 500 INDEX INDEX(1) INDEX ---------------- ------------- ------------------- ------------------- 4/30/94 1000 1000 1000 1000 1072 1175 1196 1186 1477 1530 1585 1580 1621 1914 1935 1867 2275 2700 2750 2653 2832 3289 3479 3280 3423 3622 4438 4193 2564 3152 3007 2862 2046 2754 2402 2310 1619 2388 2058 1963 4/30/04 1915 2934 2503 2413
-- MainStay All Cap Growth Fund -- Russell 1000 Growth Index -- S&P 500 Index -- Russell 3000 Growth Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A, B, and C shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 2 MainStay All Cap Growth Fund CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 2.84% 19.34% -6.59% 7.87%
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 GROWTH RUSSELL 3000 GROWTH GROWTH FUND S&P 500 INDEX INDEX(1) INDEX ---------------- ------------- ------------------- ------------------- 4/30/94 1000 1000 1000 1000 1085 1175 1196 1186 1510 1530 1585 1580 1676 1914 1935 1867 2382 2700 2750 2653 2999 3289 3479 3280 3666 3622 4438 4193 2775 3152 3007 2862 2237 2754 2402 2310 1787 2388 2058 1963 4/30/04 2133 2934 2503 2413
-- MainStay All Cap Growth Fund -- Russell 1000 Growth Index -- S&P 500 Index -- Russell 3000 Growth Index
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. The Russell 1000(R) Growth Index is an unmanaged index that measures the performance of those Russell 1000(R) companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. MainStay All Cap Growth Fund, going forward, will measure its performance against the Russell 3000(R) Growth Index. 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 and 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 into an index. 4. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 3 $1,000 INVESTED IN MAINSTAY ALL CAP GROWTH FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $ 982 $4 $1,046 $4 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $ 980 $7 $1,043 $7 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(1,2) $1,000 $ 981 $7 $1,043 $7 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,029 $5 $1,045 $5 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares, Class B shares and Class C shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had these shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $7, $10 and $10, respectively, and the ending account value would be $1,044, $1,040 and $1,040, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 4 MainStay All Cap Growth Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Rudolph C. Carryl and Edmund C. Spelman of MacKay Shields LLC MAINSTAY ALL CAP GROWTH FUND (FORMERLY ECLIPSE GROWTH EQUITY FUND) DID THE FUND'S PORTFOLIO-MANAGEMENT MANDATE CHANGE DURING THE REPORTING PERIOD? Prior to January 2004, the Fund invested primarily in large-cap growth stocks. As its new name implies, MainStay All Cap Growth Fund has the flexibility to diversify its portfolio without capitalization restrictions. We have added a number of new stocks to the portfolio to reflect this added flexibility. WHAT FACTORS AFFECTED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? A number of factors kept the market volatile as investor sentiment shifted from positive to negative. The chief concern was uncertainty over the timing and magnitude of an anticipated Federal Reserve move to increase interest rates. Other worries included global terrorist activity, ongoing tensions in Iraq, and the threat that high oil prices could slow consumer spending. Despite these negatives, the U.S. economy continued on a strong growth track, and recent employment data suggest that the long-awaited recovery in the job market is finally beginning to take hold. WHY DID THE FUND LAG ITS BENCHMARK OVER THE REPORTING PERIOD? The primary reason why the Fund underperformed the Russell 3000(R) Index(1) was an overweighted position in consumer discretionary stocks, where company-specific issues negatively affected results. The Fund was also hurt by its underweighted position in consumer staples, a sector that rose as investors grew more defensive. Company-specific issues also had a negative impact on several of the Fund's financial holdings. WHICH SECTORS PRODUCED THE STRONGEST RESULTS DURING THE REPORTING PERIOD? The Fund's energy holdings gained the most ground, rising 31.0%(2) as the price of oil rose. This compared with a 27.2% increase for related stocks in the Index. The Fund's three energy holdings, Weatherford International (+25.2%), BJ Services (+33.7%), and Baker Hughes (+28.8%) were all strong performers. The second-best-performing sector was health care, which delivered a 15.8% return versus an 11.8% increase for related stocks in the Index. The Fund's best performers in this sector were Caremark Rx (+76.1%), Genentech (+47.0%), Forest Laboratories (+29.5%), WellPoint Health Networks (+24.1%), and Cardinal Health (+21.8%). HOW DID THE FUND'S INDUSTRIAL HOLDINGS PERFORM? The Fund's industrials holdings rose 8.7% during the first half of the fiscal year versus a 6.5% increase for related stocks in the Index. Cendant (+19.8%) and Illinois Tool Works (+16.6%) advanced on strength in their various business segments. Danaher (+11.4%) was well positioned for an economic recovery. FedEx (-6.0%) fell on concerns over declining domestic market share. Lockheed Martin (-2.2%) declined on uncertainty over the direction of defense spending, and we sold the Fund's position in the stock. WHICH SECTORS LAGGED THE BENCHMARK? The Fund's consumer discretionary stocks declined 1.2% versus a 2.1% increase for the sector in the Index. The Fund did, however, hold a number of strong performers, including International Game Technology (+91.6%), Harley-Davidson (+16.7%), and TJX (+16.4%). Unfortunately, these gains were more than offset by weakness in other holdings. Kohl's (-25.2%) fell on competitive concerns. InterActive (-13.7%) declined on investor worries over InterActive's third-party bookings (Expedia and Hotels.com) versus competitors' direct Internet bookings. Other laggards in the consumer discretionary sector were Bed Bath & Beyond (-10.7%), Lowe's (-10.9%), and Lennar (-1.2%). Overall, the Fund's information technology holdings fell 4.8%, versus a 5.3% decline for related stocks in the Index. Investors generally rotated out of the sector and into more-defensive issues as business spending remained modest and evidence mounted that the semiconductor cycle had peaked. The Fund's top information technology performer was Symantec Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. 1. See footnote on page 3 for more information on the Russell 3000(R) Index. 2. Percentages for Fund holdings reflect the total return performance of the indicated securities or sectors for the six months ended 4/30/04, or for the portion of the reporting period such securities or sector holdings were held in the Fund, if shorter. Due to purchases and sales, the performance of Fund holdings may differ from the performance of the securities or sectors themselves. www.mainstayfunds.com 5 (+32.2%), which advanced on strong demand for its antivirus and Internet security software. Most of the major detractors in the sector were in semiconductor-related businesses. Among the semiconductor-related holdings that experienced significant declines were KLA-Tencor (-12.2%), Applied Materials (-8.6%), Intel (-17.5%), and Texas Instruments (-1.0%). Network storage software vendor VERITAS Software (-23.8%) declined after its January 2004 announcement that the company would likely miss sales and profit forecasts in the coming quarter. HOW DID THE FUND'S FINANCIAL HOLDINGS PERFORM? The Fund's financials stocks declined 1.9% during the period versus a 4.1% gain for related stocks in the Index. Most financial stocks performed well until early March 2004, when interest-rate concerns began to take hold. Morgan Stanley (-3.7%) declined even though it handily beat earnings estimates during the period. Fannie Mae (-1.9%) was eliminated from the portfolio early in the year. Other financials positions sold during the period included Bank of America and Fifth Third Bancorp. Both were eliminated as growth slowed and the commercial loan market remained sluggish. During the period, we added positions in Capital One Financial, Doral Financial, New Century Financial, IndyMac Bancorp, and New York Community Bancorp. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET AND HOW IS THE FUND POSITIONED GOING FORWARD? Investors are clearly focused on the potential for a Federal Reserve interest-rate hike. Terrorism and geopolitical conflicts are also important concerns. Despite these issues, we continue to take a long-term view and believe that holding a broadly based portfolio of best-in-class companies with strong growth prospects is the appropriate strategy for any market environment. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 100.00 Short-Term Investments (collateral from securities lending 2.00 is 2.0%) Liabilities in Excess of Cash and Other Assets -2.0
6 MainStay All Cap Growth Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (100.0%)+ ------------------------------------------------------------------------------ AEROSPACE & DEFENSE (1.6%) United Technologies Corp. 58,800 $ 5,072,088 ------------- AIR FREIGHT & LOGISTICS (1.6%) FedEx Corp. 71,600 5,148,756 ------------- AUTOMOBILES (1.4%) Harley-Davidson, Inc. 81,000 4,561,920 ------------- BEVERAGES (0.9%) PepsiCo, Inc. 54,700 2,980,603 ------------- BIOTECHNOLOGY (2.9%) Amgen, Inc. (a) 67,500 3,798,225 Genentech, Inc. (a) 25,200 3,094,560 Gilead Sciences, Inc. (a) 38,700 2,354,121 ------------- 9,246,906 ------------- BUILDING PRODUCTS (0.8%) Eagle Materials, Inc. 32,842 2,157,719 Eagle Materials, Inc. Class B 2,831 180,901 ------------- 2,338,620 ------------- CAPITAL MARKETS (1.5%) Morgan Stanley 91,400 4,697,046 ------------- CHEMICALS (1.5%) Praxair, Inc. 133,700 4,886,735 ------------- COMMERCIAL SERVICES & SUPPLIES (2.2%) Apollo Group, Inc. Class A (a) 23,000 2,090,240 Cendant Corp. 214,400 5,076,992 ------------- 7,167,232 ------------- COMMUNICATIONS EQUIPMENT (2.8%) Avaya, Inc. (a) 253,000 3,461,040 Cisco Systems, Inc. (a) 243,800 5,088,106 QLogic Corp. (a) 20,000 539,800 ------------- 9,088,946 ------------- COMPUTERS & PERIPHERALS (4.3%) *Dell, Inc. (a) 157,000 5,449,470 Hewlett-Packard Co. 230,000 4,531,000 International Business Machines Corp. 44,200 3,897,114 ------------- 13,877,584 ------------- CONSUMER FINANCE (2.4%) American Express Co. 75,900 3,715,305 Capital One Financial Corp. 58,300 3,820,399 ------------- 7,535,704 ------------- DIVERSIFIED FINANCIAL SERVICES (1.6%) Citigroup, Inc. 107,493 5,169,338 -------------
SHARES VALUE ELECTRICAL EQUIPMENT (0.5%) Roper Industries, Inc. 36,000 $ 1,747,800 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (2.1%) Agilent Technologies, Inc. (a) 136,800 3,694,968 Amphenol Corp. Class A (a) 98,400 3,110,424 ------------- 6,805,392 ------------- ENERGY EQUIPMENT & SERVICES (1.8%) Baker Hughes, Inc. 46,600 1,709,288 BJ Services Co. (a) 51,400 2,287,300 Weatherford International Ltd. (a) 43,700 1,900,076 ------------- 5,896,664 ------------- FOOD & STAPLES RETAILING (2.7%) *Sysco Corp. 137,100 5,244,075 Walgreen Co. 97,400 3,358,352 ------------- 8,602,427 ------------- HEALTH CARE EQUIPMENT & SUPPLIES (3.2%) *Boston Scientific Corp. (a) 136,300 5,614,197 Medtronic, Inc. 95,100 4,798,746 ------------- 10,412,943 ------------- HEALTH CARE PROVIDERS & SERVICES (8.4%) *Cardinal Health, Inc. 78,200 5,728,150 *Caremark Rx, Inc. (a) 163,100 5,520,935 HCA, Inc. 39,100 1,588,633 Odyssey Healthcare, Inc. (a) 66,000 1,109,460 Oxford Health Plans, Inc. 43,500 2,368,140 Unitedhealth Group, Inc. 83,200 5,115,136 *WellPoint Health Networks, Inc. (a) 50,800 5,673,852 ------------- 27,104,306 ------------- HOTELS, RESTAURANTS & LEISURE (1.4%) International Game Technology 118,200 4,460,868 ------------- HOUSEHOLD DURABLES (4.5%) Centex Corp. 68,000 3,260,600 Harman International Industries, Inc. 21,000 1,592,850 Hovnanian Enterprises, Inc. Class A (a) 60,000 2,158,200 Lennar Corp. Class A 87,200 4,085,320 Mohawk Industries, Inc. (a) 21,700 1,673,938 Toro Co. (The) 30,000 1,744,500 ------------- 14,515,408 ------------- HOUSEHOLD PRODUCTS (0.6%) Colgate-Palmolive Co. 30,200 1,747,976 ------------- INDUSTRIAL CONGLOMERATES (1.2%) General Electric Co. 129,200 3,869,540 -------------
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 7 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ------------------------------------------------------------------------------ w INTERNET & CATALOG RETAIL (1.9%) InterActive Corp. (a)(c) 151,700 $ 4,834,679 Netflix, Inc. (a)(c) 48,000 1,213,920 ------------- 6,048,599 ------------- IT SERVICES (1.8%) *First Data Corp. 126,600 5,746,374 ------------- LEISURE EQUIPMENT & PRODUCTS (0.8%) Brunswick Corp. 61,300 2,520,043 ------------- MACHINERY (5.2%) *Danaher Corp. 60,400 5,588,208 Dover Corp. 130,300 5,215,909 *Illinois Tool Works, Inc. 68,500 5,905,385 ------------- 16,709,502 ------------- MEDIA (4.9%) Clear Channel Communications, Inc. 76,320 3,166,517 Gannett Co., Inc. 49,900 4,325,332 Omnicom Group, Inc. 64,700 5,144,297 Viacom, Inc. Class B 82,661 3,194,847 ------------- 15,830,993 ------------- MULTILINE RETAIL (2.9%) Kohl's Corp. (a) 102,200 4,270,938 Target Corp. 114,100 4,948,517 ------------- 9,219,455 ------------- PHARMACEUTICALS (6.2%) Forest Laboratories, Inc. (a) 76,900 4,958,512 Johnson & Johnson 78,100 4,219,743 Pfizer, Inc. 125,400 4,484,304 Taro Pharmaceutical Industries Ltd. (a) 25,000 1,081,250 *Teva Pharmaceutical Industries Ltd. ADR (b) 86,200 5,306,472 ------------- 20,050,281 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (8.1%) Analog Devices, Inc. 115,000 4,899,000 Applied Materials, Inc. (a) 196,300 3,578,549 Intel Corp. 155,000 3,988,150 KLA-Tencor Corp. (a) 66,800 2,783,556
SHARES VALUE SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) Maxim Integrated Products, Inc. 102,900 $ 4,732,371 Silicon Laboratories, Inc. 30,000 1,414,500 Texas Instruments, Inc. 186,800 4,688,680 ------------- 26,084,806 ------------- SOFTWARE (7.3%) Electronic Arts, Inc. (a) 103,200 5,223,984 Microsoft Corp. 175,100 4,547,347 Oracle Corp. (a) 401,948 4,509,857 Symantec Corp. (a) 104,700 4,716,735 VERITAS Software Corp. (a) 170,600 4,549,902 ------------- 23,547,825 ------------- SPECIALTY RETAIL (5.5%) Advanced Auto Parts, Inc. (a) 45,000 1,941,750 Bed Bath & Beyond, Inc. (a) 115,600 4,291,072 Chico's Fas, Inc. (a) 35,000 1,425,550 Lowe's Cos., Inc. 91,700 4,773,902 TJX Cos., Inc. (The) 209,900 5,157,243 ------------- 17,589,517 ------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) Coach, Inc. (a) 37,000 1,576,200 ------------- THRIFTS & MORTGAGE FINANCE (3.0%) Doral Financial Corp. 60,000 1,967,400 IndyMac Bancorp, Inc. (a) 55,000 1,768,800 New Century Financial Corp. 39,500 1,675,985 New York Community Bancorp, Inc. 170,566 4,276,090 ------------- 9,688,275 ------------- Total Common Stocks (Cost $290,768,068) 321,546,672 ------------- PRINCIPAL AMOUNT VALUE w SHORT-TERM INVESTMENTS (2.0%) ------------------------------------------------------------------------------ INVESTMENT COMPANY (0.1%) AIM Institutional Funds Group (d) $ 181,108 181,108 ------------- Total Investment Company (Cost $181,108) 181,108 -------------
8 MainStay All Cap Growth Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) ------------------------------------------------------------------------------ REPURCHASE AGREEMENTS (1.9%) Credit Suisse First Boston 1.113%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $3,000,278 (d) (Collateralized by Various Bonds with a Principal Amount of $2,914,317 and a Market Value of $3,056,564) $3,000,000 $ 3,000,000 ------------- Lehman Brothers, Inc. 1.113%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $3,000,278 (d) (Collateralized by Various Bonds with a Principal Amount of $3,936,592 and a Market Value of $3,144,565) 3,000,000 3,000,000 ------------- Total Repurchase Agreements (Cost $6,000,000) 6,000,000 ------------- Total Short-Term Investments (Cost $6,181,108) 6,181,108 -------------
Total Investments (Cost $296,949,176) (e) 102.0% 327,727,780(f) Liabilities in Excess of Cash and Other Assets (2.0) (6,271,090) ------ ------------- Net Assets 100.0% $ 321,456,690 ====== =============
(a) Non-income producing security. (b) ADR-American Depositary Receipt. (c) Represents securities out on loan or a portion which is out on loan. (d) Represents a security or a portion thereof, purchased with cash collateral received for securities on loan. (e) The cost for federal Income tax purposes is $297,063,845. (f) At April 30, 2004 net unrealized appreciation was $30,663,935, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $49,210,914 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $18,546,979.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 9 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $296,949,176) including $6,048,599 market value of securities loaned $327,727,780 Receivables: Investment securities sold 445,507 Dividends and interest 156,441 Fund shares sold 133,565 Other assets 17,786 ------------ Total assets 328,481,079 ------------ LIABILITIES: Securities lending collateral 6,181,108 Payables: Fund shares redeemed 263,931 Due to Custodian 210,079 Manager 208,794 Transfer agent 84,691 Professional 44,972 NYLIFE Distributors 3,526 Directors 804 Accrued expenses 26,484 ------------ Total liabilities 7,024,389 ------------ Net assets $321,456,690 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 1 billion shares authorized Class A $ 648 Class B 66 Class C 11 Class I 16,045 Additional paid-in capital 329,956,625 Accumulated net investment loss (362,960) Accumulated net realized loss on investments (38,932,349) Net unrealized appreciation on investments 30,778,604 ------------ Net assets $321,456,690 ============ CLASS A Net assets applicable to outstanding shares $ 12,094,930 ============ Shares of capital stock outstanding 648,359 ============ Net asset value per share outstanding $ 18.65 Maximum sales charge (5.50% of offering price) 1.09 ------------ Maximum offering price per share outstanding $ 19.74 ============ CLASS B Net assets applicable to outstanding shares $ 1,222,082 ============ Shares of capital stock outstanding 65,649 ============ Net asset value and offering price per share outstanding $ 18.62 ============ CLASS C Net assets applicable to outstanding shares $ 199,686 ============ Shares of capital stock outstanding 10,721 ============ Net asset value and offering price per share outstanding $ 18.63 ============ CLASS I Net assets applicable to outstanding shares $307,939,992 ============ Shares of capital stock outstanding 16,044,803 ============ Net asset value and offering price per share outstanding $ 19.19 ============
10 MainStay All Cap Growth Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends (a) $ 1,279,023 Interest 5,656 Income from securities loaned -- net 1,171 ----------- Total income 1,285,850 ----------- EXPENSES: Manager 1,492,105 Transfer agent 149,416 Professional 54,512 Shareholder communication 20,565 Custodian 17,604 Directors 16,190 Registration 12,495 Service -- Class A 9,342 Service -- Class B 460 Service -- Class C 72 Service -- Service Class 4,802 Distribution -- Class B 1,380 Distribution -- Class C 215 Miscellaneous 11,912 ----------- Total expenses before reimbursement 1,791,070 Expense reimbursement from Manager (142,260) ----------- Net expenses 1,648,810 ----------- Net investment loss (362,960) ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 5,718,457 Net change in unrealized appreciation on investments 6,370,248 ----------- Net realized and unrealized gain on investments 12,088,705 ----------- Net increase in net assets resulting from operations $11,725,745 ===========
(a) Dividends recorded net of foreign withholding taxes in the amount of $3,274. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 11 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment loss $ (362,960) $ (142,962) Net realized gain (loss) on investments and written option transactions 5,718,457 (2,856,949) Net change in unrealized appreciation (depreciation) on investments and written option transactions 6,370,248 53,772,257 --------------------------- Net increase in net assets resulting from operations 11,725,745 50,772,346 --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 12,891,854 -- Class B 1,290,127 -- Class C 214,308 -- Class I 20,623,000 49,738,142 Service Class 375,347 3,583,519 --------------------------- 35,394,636 53,321,661 Cost of shares redeemed: Class A (642,872) -- Class B (18,399) -- Class C (6,063) -- Class I (66,986,690) (76,228,177) Service Class (11,343,459) (4,891,991) --------------------------- (78,997,483) (81,120,168) --------------------------- Decrease in net assets derived from capital share transactions (43,602,847) (27,798,507) --------------------------- Net increase (decrease) in net assets (31,877,102) 22,973,839 NET ASSETS: Beginning of period 353,333,792 330,359,953 --------------------------- End of period $321,456,690 $353,333,792 =========================== Accumulated net investment loss at end of period $ (362,960) $ -- ===========================
12 MainStay All Cap Growth Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. This page intentionally left blank 13 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ---------- ---------- ---------- JANUARY 1, JANUARY 1, JANUARY 1, 2004** 2004** 2004** THROUGH THROUGH THROUGH APRIL 30, APRIL 30, APRIL 30, 2004*** 2004*** 2004*** Net asset value at beginning of period $ 18.99 $18.99 $18.99 ------- ------ ------ Net investment loss (a) (0.04) (0.08) (0.08) Net realized and unrealized gain (loss) on investments (0.30) (0.29) (0.28) ------- ------ ------ Total from investment operations (0.34) (0.37) (0.36) ------- ------ ------ Less distributions: From net realized gain on investments -- -- -- ------- ------ ------ Net asset value at end of period $ 18.65 $18.62 $18.63 ======= ====== ====== Total investment return (b) (1.79%) (1.95%) (1.90%) Ratios (to average net assets)/Supplemental Data: Net investment loss (0.57%)+ (1.32%)+ (1.32%)+ Net expenses 1.30%+ 2.05%+ 2.05%+ Expenses (before reimbursement) 1.38%+ 2.13%+ 2.13%+ Portfolio turnover rate 23% 23% 23% Net assets at end of period (in 000's) $12,095 $1,222 $200
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Per share data based on average shares outstanding during the period. (b) Total return is calculated exclusive of sales charges and is not annualized.
14 MainStay All Cap Growth Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I ----------------------------------------------------------------------------------------------- JANUARY 1, SIX MONTHS 1999 YEAR ENDED THROUGH ENDED APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2003 2002 2001 2000 1999* 1998 $ 18.66 $ 16.02 $ 19.92 $ 37.50 $ 36.45 $ 33.48 $ 25.43 -------- -------- -------- -------- ---------- ---------- -------- (0.02) (0.01) (0.04) (0.09) (0.20) (0.14) (0.09) 0.55 2.65 (3.86) (12.79) 4.66 3.45 10.35 -------- -------- -------- -------- ---------- ---------- -------- 0.53 2.64 (3.90) (12.88) 4.46 3.31 10.26 -------- -------- -------- -------- ---------- ---------- -------- -- -- -- (4.70) (3.41) (0.34) (2.21) -------- -------- -------- -------- ---------- ---------- -------- $ 19.19 $ 18.66 $ 16.02 $ 19.92 $ 37.50 $ 36.45 $ 33.48 ======== ======== ======== ======== ========== ========== ======== 2.84% 16.48% (19.58%) (38.34%) 12.24% 9.96% 40.50% (0.20%)+ (0.04%) (0.22%) (0.32%) (0.52%) (0.49%)+ (0.31%) 0.93%+ 0.93% 0.93% 0.93% 0.93% 0.93%+ 0.94% 1.01%+ 1.02% 1.02% 0.98% 0.93% 0.93%+ 0.94% 23% 35% 63% 35% 48% 27% 29% $307,940 $342,761 $320,059 $436,898 $1,197,216 $1,049,756 $975,010
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 15 MAINSTAY ALL CAP VALUE FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS S&P 500(R) INDEX(1) 6.27% 22.88% -2.26% 11.36% RUSSELL 1000(R) VALUE INDEX(2) 8.15 26.26 1.55 12.12 RUSSELL 3000(R) VALUE INDEX(3) 8.23 27.39 2.32 12.09 AVERAGE LIPPER LARGE-CAP VALUE FUND(4) 7.68 24.91 0.35 9.87
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 2.88% 19.59% 0.44% 7.23% Excluding sales charges 8.87 26.55 1.58 7.84
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE VALUE FUND S&P 500 INDEX INDEX INDEX ---------------- ------------- ------------------ ------------------ 4/30/94 945 1000 1000 1000 1033 1175 1126 1118 1290 1530 1463 1449 1505 1914 1793 1763 1979 2700 2549 2507 1858 3289 2908 2791 1765 3622 2796 2698 2027 3152 2975 2902 1972 2754 2859 2839 1588 2388 2487 2458 4/30/04 2010 2934 3140 3131
-- MainStay All Cap Value Fund -- Russell 1000 Value Index -- S&P 500 Index -- Russell 3000 Value Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 3.49% 20.70% 0.48% 7.08% Excluding sales charges 8.49 25.70 0.84 7.08
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE VALUE FUND S&P 500 INDEX INDEX INDEX ---------------- ------------- ------------------ ------------------ 4/30/94 1000 1000 1000 1000 1085 1175 1126 1118 1346 1530 1463 1449 1559 1914 1793 1763 2037 2700 2549 2507 1901 3289 2908 2791 1791 3622 2796 2698 2044 3152 2975 2902 1974 2754 2859 2839 1577 2388 2487 2458 4/30/04 1982 2934 3140 3131
-- MainStay All Cap Value Fund -- Russell 1000 Value Index -- S&P 500 Index -- Russell 3000 Value Index
CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 7.49% 24.70% 0.84% 7.08% Excluding sales charges 8.49 25.70 0.84 7.08
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE VALUE FUND S&P 500 INDEX INDEX INDEX ---------------- ------------- ------------------ ------------------ 4/30/94 1000 1000 1000 1000 1085 1175 1126 1118 1346 1530 1463 1449 1559 1914 1793 1763 2037 2700 2549 2507 1901 3289 2908 2791 1791 3622 2796 2698 2044 3152 2975 2902 1974 2754 2859 2839 1577 2388 2487 2458 4/30/04 1982 2934 3140 3131
-- MainStay All Cap Value Fund -- Russell 1000 Value Index -- S&P 500 Index -- Russell 3000 Value Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A, B, and C shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 16 MainStay All Cap Value Fund CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 9.00% 26.92% 1.82% 8.09%
(in thousands, with sales charges)
MAINSTAY ALL CAP RUSSELL 1000 VALUE RUSSELL 3000 VALUE VALUE FUND S&P 500 INDEX INDEX INDEX ---------------- ------------- ------------------ ------------------ 4/30/94 1000 1000 1000 1000 1096 1175 1126 1118 1372 1530 1463 1449 1604 1914 1793 1763 2114 2700 2549 2507 1990 3289 2908 2791 1894 3622 2796 2698 2181 3152 2975 2902 2126 2754 2859 2839 1716 2388 2487 2458 4/30/04 2178 2934 3140 3131
-- MainStay All Cap Value Fund -- Russell 1000 Value Index -- S&P 500 Index -- Russell 3000 Value Index
1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. The Russell 1000(R) Value Index is an unmanaged index that measures the performance of those Russell 1000(R) companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. MainStay All Cap Value Fund, going forward, will measure its performance against the Russell 3000(R) Value Index. The Russell 3000(R) Value Index measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization and represents approximately 98% of the investable U.S. equity market. Total returns assume reinvestment of all dividends and capital gains. You cannot invest directly in an index. 4. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 17 $1,000 INVESTED IN MAINSTAY ALL CAP VALUE FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES(1,2) $1,000 $1,002 $4 $1,046 $4 ------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES(1,2) $1,000 $ 999 $7 $1,043 $7 ------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES(1,2) $1,000 $ 999 $7 $1,043 $7 ------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES(3) $1,000 $1,090 $5 $1,045 $5 -------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares, Class B shares and Class C shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had these shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $6, $10 and $10, respectively, and the ending account value would be $1,044, $1,040 and $1,040, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 18 MainStay All Cap Value Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio manager Richard A. Rosen of MacKay Shields LLC MAINSTAY ALL CAP VALUE FUND (FORMERLY ECLIPSE VALUE EQUITY FUND) DID THE FUND'S PORTFOLIO-MANAGEMENT MANDATE CHANGE DURING THE REPORTING PERIOD? Prior to January 2004, the Fund invested primarily in large-cap value stocks. As its new name implies, MainStay All Cap Value Fund now has the flexibility to diversify its portfolio without capitalization restrictions. We have added some new stocks to the portfolio to reflect this added flexibility. WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? In November and December 2003, evidence of an improving economy drove stock prices higher. Strong growth in corporate profits helped equities continue their climb in January and February 2004. Fourth-quarter 2003 earnings reports confirmed a strong growth trend, with rapid revenue growth making a significant contribution to bottom-line gains. The interest-rate and inflation outlook remained relatively benign through most of the reporting period. In the last two months, however, strong employment figures and rising inflation data led to concerns that the Federal Reserve might move to raise interest rates. In March and April 2004, the equity market gave back some of the ground it had earlier gained. WERE THERE OTHER FORCES AT WORK? The push and pull of mixed economic signals had a definite effect. While U.S. economic news was generally favorable, the market was affected by geopolitical unrest and signs that economic growth in China might decelerate. First-quarter 2004 corporate profit reports were strong, but inflation and interest-rate concerns seemed to preoccupy investors in April. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG RELATIVE PERFORMANCE? Excluding sales charges, the Fund outperformed its benchmarks largely because of good stock selection within the financials, industrials, and information technology sectors. As of April 30, 2004, the Fund was underweighted in financials and overweighted in industrials. Some holdings in the Fund's overweighted positions in energy, materials, and industrials also benefited from improving trends in manufacturing and industrial data. HOW DID THE FUND'S FINANCIAL STOCKS IN THIS SECTOR FARE DURING THE PERIOD? The financials sector was one of the Fund's weakest-performing sectors on an absolute basis. This was particularly true in April 2004, as concern about the potential for rising interest rates was reflected in the market. Fortunately, the Fund avoided many of the stocks that fell sharply, and it had exposure to some issues that posted good results. The Fund's insurance-related holdings advanced on positive pricing trends. Allstate, Prudential Financial, and Hartford Financial Services Group all enhanced the Fund's results during the reporting period. Bank One and FleetBoston Financial were also strong. FleetBoston Financial received an acquisition bid from Bank of America in late October 2003, and FleetBoston Financial's shares were up 13% for the reporting period.(1) Bank One gained 18%, partly because of a January 2004 takeover bid from J.P. Morgan Chase. Unfortunately, the Fund also held financial stocks that detracted from the Fund's relative performance. Among them were Merrill Lynch, a capital-markets sensitive stock that fell with the broader equity market, and Washington Mutual, a lender that might be negatively affected by higher interest rates. Both stocks were down 8% during the period. HOW DID THE FUND'S INFORMATION TECHNOLOGY HOLDINGS PERFORM? Although the information technology sector generally provided lackluster performance during the reporting period, the Fund's holdings in the sector strongly outperformed information technology stocks in the Russell 1000(R) Value Index and the Russell 3000(R) Value Index. The Fund benefited from its position in Motorola, which rose 36% during the reporting period. Balance sheet strength, new leadership, and improving operating trends in mobile handsets, semiconductors, and telecommunications equipment helped Motorola post first-quarter 2004 earnings well above the most optimistic expectations. Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. 1. Percentages reflect the price performance of the securities mentioned for the six months ended 4/30/04, or for the portion of the reporting period shares were held in the Fund, if shorter. Performance percentages do not reflect the impact of dividends received, if any. Due to purchases and sales, the performance of Fund holdings may differ from that of the securities themselves. www.mainstayfunds.com 19 Although Advanced Micro Devices posted strong gains in 2003, investors began to take profits when the company appeared to be embarking on a major spending initiative. There was also speculation that rival Intel might counter Advanced Micro Devices' 64-bit microprocessor with one of its own. WERE THERE OTHER STOCKS THAT ENHANCED OR DETRACTED FROM RESULTS? The Fund's defense & aerospace industry holdings contributed positively to the Fund's performance, as government spending helped earnings and cash-flow generation. Raytheon was up 23%. Northrop Grumman and Boeing each gained 12%. Within the industrials sector, Navistar International climbed 12%. Navistar International has benefited from rising heavy-duty truck order rates and, in our view, has remained inexpensive relative to its earnings power. High energy prices helped the Fund's integrated energy stocks, with ConocoPhillips rising 26% and ChevronTexaco gaining 25%. We reduced the Fund's positions in these stocks as they approached our price targets. Bowater managed small gains during the reporting period, but the position had a negative impact on relative performance. We remain optimistic about price increases in the paper industry and expect these holdings to respond favorably. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD? At the end of April 2004, the Fund was overweighted in energy, industrials, materials, health care, and consumer staples, and underweighted in the consumer discretionary, financials, and utilities sectors. We remain confident in our investment disciplines and will continue to seek opportunities among undervalued stocks with improving fundamental characteristics. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 92.00 Short-Term Investments (collateral from securities lending 8.70 is 1.4%) Convertible Preferred Stock 0.60 Liabilities in Excess of Cash and Other Assets -1.30
20 MainStay All Cap Value Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (92.0%)+ --------------------------------------------------------------------------------- AEROSPACE & DEFENSE (4.7%) Boeing Co. (The) 55,500 $ 2,369,295 Northrop Grumman Corp. 25,900 2,570,575 Raytheon Co. 75,300 2,429,178 ------------- 7,369,048 ------------- AUTO COMPONENTS (2.3%) Delphi Corp. 210,200 2,144,040 TRW Automotive Holdings Corp. (a) 68,200 1,430,836 ------------- 3,574,876 ------------- BUILDING PRODUCTS (1.3%) American Standard Cos., Inc. (a) 19,600 2,061,724 ------------- CAPITAL MARKETS (4.7%) Goldman Sachs Group, Inc. (The) 22,600 2,186,550 iShares Russell 3000 Value Index (c) 40,000 3,043,200 Merrill Lynch & Co., Inc. 38,800 2,104,124 ------------- 7,333,874 ------------- COMMERCIAL BANKS (8.9%) *Bank of America Corp. 49,277 3,966,306 Bank One Corp. 45,800 2,261,146 PNC Financial Services Group, Inc. (The) 53,600 2,846,160 U.S. Bancorp 76,500 1,961,460 Wachovia Corp. 62,300 2,850,225 ------------- 13,885,297 ------------- COMMUNICATIONS EQUIPMENT (0.9%) Motorola, Inc. 77,400 1,412,550 ------------- COMPUTERS & PERIPHERALS (1.9%) International Business Machines Corp. 33,800 2,980,146 ------------- CONTAINERS & PACKAGING (2.6%) *Smurfit-Stone Container Corp. (a) 233,700 4,017,303 ------------- DIVERSIFIED FINANCIAL SERVICES (2.8%) *Citigroup, Inc. 91,233 4,387,395 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.3%) ALLTEL Corp. 47,100 2,371,014 BellSouth Corp. 74,200 1,915,102 + Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily.
SHARES VALUE DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) SBC Communications, Inc. 33,000 $ 821,700 Verizon Communications, Inc. 84,500 3,189,030 ------------- 8,296,846 ------------- ELECTRIC UTILITIES (0.6%) FirstEnergy Corp. 24,500 957,950 ------------- ELECTRICAL EQUIPMENT (1.0%) Cooper Industries Ltd. Class A 30,200 1,658,282 ------------- ENERGY EQUIPMENT & SERVICES (4.2%) Diamond Offshore Drilling, Inc. (d) 91,500 2,064,240 Pride International, Inc. (a) 135,200 2,280,824 Transocean, Inc. (a) 83,700 2,324,349 ------------- 6,669,413 ------------- FOOD & STAPLES RETAILING (3.4%) *CVS Corp. 102,200 3,947,986 Kroger Co. (The) (a) 81,300 1,422,750 ------------- 5,370,736 ------------- FOOD PRODUCTS (4.0%) Cadbury Schweppes PLC ADR (e) 58,900 1,923,085 General Mills, Inc. 50,900 2,481,375 Kraft Foods, Inc. Class A 55,800 1,836,378 ------------- 6,240,838 ------------- HEALTH CARE PROVIDERS & SERVICES (3.0%) HCA, Inc. 76,500 3,108,195 Universal Health Services, Inc. Class B 35,100 1,540,890 ------------- 4,649,085 ------------- HOUSEHOLD PRODUCTS (1.6%) Kimberly-Clark Corp. 37,600 2,460,920 ------------- INSURANCE (9.7%) Allstate Corp. (The) 66,000 3,029,400 American International Group, Inc. 27,300 1,956,045 Hartford Financial Services Group, Inc. (The) 49,200 3,005,136 Marsh & McLennan Cos., Inc. 32,500 1,465,750 Prudential Financial, Inc. 60,400 2,653,976 St. Paul Travelers Cos., Inc. (The) 77,834 3,165,509 ------------- 15,275,816 -------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 21 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) --------------------------------------------------------------------------------- IT SERVICES (2.3%) *Computer Sciences Corp. (a) 87,900 $ 3,595,989 ------------- MACHINERY (3.0%) *Navistar International Corp. (a) 104,500 4,718,175 ------------- METALS & MINING (1.5%) Alcoa, Inc. 77,772 2,391,489 ------------- OIL & GAS (9.0%) *ChevronTexaco Corp. 40,121 3,671,071 *ConocoPhillips 51,300 3,657,690 ExxonMobil Corp. 78,300 3,331,665 Kerr-McGee Corp. 70,000 3,425,100 ------------- 14,085,526 ------------- PAPER & FOREST PRODUCTS (2.6%) *Bowater, Inc. 95,700 4,014,615 ------------- PHARMACEUTICALS (4.0%) Bristol-Myers Squibb Co. 81,400 2,043,140 *Merck & Co., Inc. 90,200 4,239,400 ------------- 6,282,540 ------------- ROAD & RAIL (1.6%) Burlington Northern Santa Fe Corp. 76,000 2,485,200 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.5%) Advanced Micro Devices, Inc. (a) 57,000 810,540 ------------- SOFTWARE (1.0%) BMC Software, Inc. (a) 95,900 1,659,070 ------------- SPECIALTY RETAIL (2.3%) Gap, Inc. (The) 162,300 3,572,223 ------------- THRIFTS & MORTGAGE FINANCE (1.3%) Washington Mutual, Inc. 51,500 2,028,585 ------------- Total Common Stocks (Cost $124,532,931) 144,246,051 -------------
SHARES VALUE CONVERTIBLE PREFERRED STOCK (0.6%) --------------------------------------------------------------------------------- OIL & GAS (0.6%) Goldman Sachs Group, Inc. (The) 2.75%, Series BSKT (f) 10,000 $ 988,220 ------------- Total Convertible Preferred Stock (Cost $1,000,000) 988,220 ------------- NUMBER OF CONTRACTS (G) VALUE PURCHASED CALL OPTION (0.0%) (B) --------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.0%) (B) Rowan Cos., Inc. Strike Price $25.00 Expire 10/16/04 (a)(h) 597 71,640 ------------- Total Purchased Call Option (Cost $73,407) 71,640 ------------- PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (8.7%) --------------------------------------------------------------------------------- COMMERCIAL PAPER (7.3%) American Express Credit Corp. 1.02%, due 5/4/04 $ 700,000 699,941 American General Finance Corp. 1.02%, due 5/7/04 1,670,000 1,669,716 Federal National Mortgage Association 0.91%, due 5/3/04 890,000 889,955 General Electric Capital Corp. 1.02%, due 5/6/04 445,000 444,937 Morgan Stanley & Co. 0.97%, due 5/24/04 3,470,000 3,467,716 UBS Finance Delaware LLC 1.02%, due 5/3/04 4,250,000 4,249,759 ------------- Total Commercial Paper (Cost $11,422,024) 11,422,024 ------------- SHARES VALUE INVESTMENT COMPANY (0.1%) AIM Institutional Funds Group (i) 162,367 162,367 ------------- Total Investment Company (Cost $162,367) 162,367 -------------
22 MainStay All Cap Value Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) --------------------------------------------------------------------------------- REPURCHASE AGREEMENT (1.3%) Lehman Brothers, Inc. 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $2,000,185 (i) (Collateralized by Various Bonds with a Principal Amount of $2,628,126 and a Market Value of $2,099,358) $ 2,000,000 $ 2,000,000 ------------- Total Repurchase Agreement (Cost $2,000,000) 2,000,000 ------------- Total Short-Term Investments (Cost $13,584,391) 13,584,391 ------------- Total Investments (Cost $139,190,729) (j) 101.3% 158,890,302(k) Liabilities in Excess of Cash & Other Assets (1.3) (2,107,243) ------ ------------ Net Assets 100.0% $ 156,783,059 ====== ============ NUMBER OF CONTRACTS (g) VALUE WRITTEN CALL OPTIONS (-0.0%) (B) --------------------------------------------------------------------------------- MACHINERY (-0.0%) (B) Navistar International Corp. Strike Price $55.00 Expire 7/17/04 (a)(h) (229) $ (9,160) ------------- OIL & GAS (-0.0%) (B) ChevronTexaco Corp. Strike Price $90.00 Expire 6/19/04 (a)(h) (118) (38,940) ------------- Total Written Call Options (Premium ($52,412)) $ (48,100) =============
(a) Non-income producing security. (b) Less than one tenth of a percent. (c) Exchange Traded Fund -- represents a basket of securities that are traded on an exchange. (d) Represents securities out on loan or a portion which is out on loan. (e) ADR -- American Depositary Receipt. (f) An equity-linked security issued by an entity other than the issuer of the underlying equity instrument. (g) One contract relates to 100 shares. (h) Options can be exercised into the underlying common stock. (i) Represents a security or portion thereof, purchased with cash collateral received for securities on loan. (j) The cost for federal income tax purposes is $140,497,447. (k) At April 30, 2004 net unrealized appreciation was $18,392,855, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $19,699,032 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $1,306,177.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 23 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $139,190,729) including $2,030,400 market value of securities loaned $158,890,302 Cash 1,223 Receivables: Investment securities sold 4,143,291 Fund shares sold 356,524 Dividends and interest 241,398 Other assets 16,839 ------------ Total assets 163,649,577 ------------ LIABILITIES: Securities lending collateral 2,162,367 Written options, at value (premium received $52,412) 48,100 Payables: Investment securities purchased 4,417,310 Manager 89,856 Transfer agent 66,929 Fund shares redeemed 26,967 Custodian 5,498 NYLIFE Distributors 2,744 Accrued expenses 46,747 ------------ Total liabilities 6,866,518 ------------ Net assets $156,783,059 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 1 billion shares authorized Class A $ 635 Class B 116 Class C 34 Class I 12,158 Additional paid-in capital 162,158,260 Accumulated undistributed net investment income 638,318 Accumulated net realized loss on investments and option transactions (25,730,347) Net unrealized appreciation on investments and written options 19,703,885 ------------ Net assets $156,783,059 ============ CLASS A Net assets applicable to outstanding shares $ 7,676,558 ============ Shares of capital stock outstanding 634,552 ============ Net asset value per share outstanding $ 12.10 Maximum sales charge (5.50% of offering price) 0.70 ------------ Maximum offering price per share outstanding $ 12.80 ============ CLASS B Net assets applicable to outstanding shares $ 1,403,822 ============ Shares of capital stock outstanding 116,295 ============ Net asset value and offering price per share outstanding $ 12.07 ============
CLASS C Net assets applicable to outstanding shares $ 410,202 ============ Shares of capital stock outstanding 33,985 ============ Net asset value and offering price per share outstanding $ 12.07 ============ CLASS I Net assets applicable to outstanding shares $147,292,477 ============ Shares of capital stock outstanding 12,158,195 ============ Net asset value and offering price per share outstanding $ 12.11 ============
24 MainStay All Cap Value Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends (a) $ 1,549,022 Interest 37,660 Income from securities loaned -- net 782 ----------- Total income 1,587,464 ----------- EXPENSES: Manager 666,525 Transfer agent 107,047 Professional 31,992 Registration 12,337 Custodian 11,252 Directors 10,514 Shareholder communication 10,456 Service -- Class A 5,255 Service -- Class B 453 Service -- Class C 143 Service -- Service Class 2,596 Distribution -- Class B 1,360 Distribution -- Class C 427 Miscellaneous 10,704 ----------- Total expenses before reimbursement 871,061 Expense reimbursement from Manager (123,724) ----------- Net expenses 747,337 ----------- Net investment income 840,127 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND WRITTEN OPTION TRANSACTIONS: Net realized gain from: Security transactions 8,408,994 Written option transactions 45,210 ----------- Net realized gain on investments and written option transactions 8,454,204 ----------- Net change in unrealized appreciation on: Security transactions 4,211,161 Written option transactions 4,312 ----------- Net unrealized gain on investments and written option transactions 4,215,473 ----------- Net realized and unrealized gain on investments and written option transactions 12,669,677 ----------- Net increase in net assets resulting from operations $13,509,804 =========== (a) Dividends recorded net of foreign withholdings taxes in the amount of $3,414.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 25 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income $ 840,127 $ 2,115,385 Net realized gain (loss) on investments and written option transactions 8,454,204 (5,825,222) Net change in unrealized appreciation on investments and written option transactions 4,215,473 34,319,392 --------------------------- Net increase in net assets resulting from operations 13,509,804 30,609,555 --------------------------- Dividends to shareholders: From net investment income: Class I (2,046,476) (1,595,725) Service Class (65,067) (40,231) --------------------------- Total dividends to shareholders (2,111,543) (1,635,956) --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 8,368,320 -- Class B 1,466,964 -- Class C 420,316 -- Class I 14,779,524 33,010,544 Service Class 429,948 1,233,322 Net asset value of shares issued to shareholders in reinvestment of dividends: Class I 2,043,233 1,593,669 Service Class 52,463 40,013 --------------------------- 27,560,768 35,877,548 Cost of shares redeemed: Class A (652,028) -- Class B (32,442) -- Class C (2,284) -- Class I (44,136,992) (36,240,410) Service Class (6,291,284) (1,037,345) --------------------------- (51,115,030) (37,277,755) --------------------------- Decrease in net assets derived from capital share transactions (23,554,262) (1,400,207) --------------------------- Net increase (decrease) in net assets (12,156,001) 27,573,392 NET ASSETS: Beginning of period 168,939,060 141,365,668 --------------------------- End of period $156,783,059 $168,939,060 =========================== Accumulated undistributed net investment income at end of period $ 638,318 $ 1,909,734 ===========================
26 MainStay All Cap Value Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. This page intentionally left blank 27 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ------------ ------------ ------------ JANUARY 1, JANUARY 1, JANUARY 1, 2004** 2004** 2004** THROUGH THROUGH THROUGH APRIL 30, APRIL 30, APRIL 30, 2004*** 2004*** 2004*** Net asset value at beginning of period $12.08 $12.08 $12.08 ------ ------ ------ Net investment income 0.07(c) 0.04(c) 0.04(c) Net realized and unrealized gain (loss) on investments (0.05) (0.05) (0.05) ------ ------ ------ Total from investment operations 0.02 (0.01) (0.01) ------ ------ ------ Less dividends and distributions: From net investment income -- -- -- From net realized gain on investments -- -- -- ------ ------ ------ Total dividends and distributions -- -- -- ------ ------ ------ Net asset value at end of period $12.10 $12.07 $12.07 ====== ====== ====== Total investment return (b) 0.17% (0.08%) (0.08%) Ratios (to average net assets)/Supplemental Data: Net investment income 0.80%+ 0.05%+ 0.05%+ Net expenses 1.22%+ 1.97%+ 1.97%+ Expenses (before reimbursement) 1.38%+ 2.13%+ 2.13%+ Portfolio turnover rate 24% 24% 24% Net assets at end of period (in 000's) $7,677 $1,404 $ 410
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Less than one cent per share. (b) Total return is calculated exclusive of sales charges and is not annualized. (c) Per share data based on average shares outstanding during the period.
28 MainStay All Cap Value Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I ------------------------------------------------------------------------------------------------- JANUARY 1, SIX MONTHS 1999 ENDED THROUGH YEAR ENDED APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2003 2002 2001 2000 1999* 1998 $ 11.26 $ 9.38 $ 12.55 $ 14.00 $ 12.69 $ 11.76 $ 16.36 -------- -------- -------- -------- -------- -------- -------- 0.07(c) 0.14(c) 0.13(c) 0.16(c) 0.15 0.09 0.18 0.94 1.85 (1.86) (1.15) 1.27 0.84 (1.58) -------- -------- -------- -------- -------- -------- -------- 1.01 1.99 (1.73) (0.99) 1.42 0.93 (1.40) -------- -------- -------- -------- -------- -------- -------- (0.16) (0.11) (0.31) (0.15) (0.11) (0.00)(a) (0.18) -- -- (1.13) (0.31) -- -- (3.02) -------- -------- -------- -------- -------- -------- -------- (0.16) (0.11) (1.44) (0.46) (0.11) (0.00)(a) (3.20) -------- -------- -------- -------- -------- -------- -------- $ 12.11 $ 11.26 $ 9.38 $ 12.55 $ 14.00 $ 12.69 $ 11.76 ======== ======== ======== ======== ======== ======== ======== 9.00% 21.43% (16.46%) (7.29%) 11.31% 7.91% (8.10%) 1.08%+ 1.37% 1.12% 1.28% 1.12% 0.84%+ 1.04% 0.94%+ 0.94% 0.94% 0.94% 0.94% 0.96%+ 0.98% 1.10%+ 1.11% 1.12% 1.00% 0.94% 0.96%+ 0.98% 24% 64% 65% 94% 96% 49% 76% $147,292 $163,551 $137,069 $140,919 $742,924 $741,300 $800,993
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 29 MAINSTAY MID CAP CORE FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE SINCE BENCHMARKS MONTHS YEAR INCEPTION RUSSELL MIDCAP INDEX(1) 7.25% 35.45% 3.52% AVERAGE LIPPER MID-CAP CORE FUND(2) 6.53 33.08 2.88
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE SINCE TOTAL RETURNS MONTHS YEAR INCEPTION ----------------------------------------------------------- With sales charges 0.27% 23.95% 0.45% Excluding sales charges 6.10 31.17 2.17
(in thousands, with sales charges)
MAINSTAY MID CAP CORE FUND RUSSELL MIDCAP INDEX -------------------------- -------------------- 1/2/01 1000 1000 976 972 956 965 819 828 4/30/04 1015 1117
-- MainStay Mid Cap Core Fund -- Russell Midcap Index CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE SINCE TOTAL RETURNS MONTHS YEAR INCEPTION ----------------------------------------------------------- With sales charges 0.74% 25.40% 0.83% Excluding sales charges 5.74 30.40 1.42
(in thousands, with sales charges)
MAINSTAY MID CAP CORE FUND RUSSELL MIDCAP INDEX -------------------------- -------------------- 1/2/01 1000 1000 974 972 947 965 804 828 4/30/04 1028 1117
-- MainStay Mid Cap Core Fund -- Russell Midcap Index CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE SINCE TOTAL RETURNS MONTHS YEAR INCEPTION ----------------------------------------------------------- With sales charges 4.64% 29.28% 1.39% Excluding sales charges 5.64 30.28 1.39
(in thousands, with sales charges)
MAINSTAY MID CAP CORE FUND RUSSELL MIDCAP INDEX -------------------------- -------------------- 1/2/01 1000 1000 974 972 947 965 804 828 4/30/04 1047 1117
-- MainStay Mid Cap Core Fund -- Russell Midcap Index Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A, B, and C shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/01) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 30 MainStay Mid Cap Core Fund CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE SINCE TOTAL RETURNS MONTHS YEAR INCEPTION ----------------------------------------------------------- With sales charges N/A N/A N/A Excluding sales charges 6.21% 31.56% 2.43%
(in thousands, with sales charges)
MAINSTAY MID CAP CORE FUND RUSSELL MIDCAP INDEX -------------------------- -------------------- 1/2/01 1000.00 1000.00 977.00 972.00 960.00 965.00 823.00 828.00 4/30/04 1083.00 1117.00
-- MainStay Mid Cap Core Fund -- Russell Midcap Index 1. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 31 $1,000 INVESTED IN MAINSTAY MID CAP CORE FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $1,003 $6 $1,044 $6 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $1,001 $8 $1,042 $8 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(1,2) $1,000 $1,000 $8 $1,042 $8 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,062 $5 $1,045 $5 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares, Class B shares and Class C shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had these shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $9, $13 and $13, respectively, and the ending account value would be $1,041, $1,038 and $1,038, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 32 MainStay Mid Cap Core Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio manager Harvey Fram, CFA, of New York Life Investment Management LLC MAINSTAY MID CAP CORE FUND WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? U.S. equities began the semiannual period with a bang, but the rally fizzled when the markets experienced a significant downturn in March and April 2004. As a result, six-month returns for the broadly watched equity indices were rather muted. As measured by Russell indices,(1) mid-cap stocks outperformed their large- and small-capitalization counterparts for the six months ended April 30, 2004. Value stocks outperformed growth stocks at all capitalization levels. WHAT FACTORS MOST SIGNIFICANTLY AFFECTED FUND PERFORMANCE DURING THE SEMIANNUAL PERIOD? The Fund's holdings in the telecommunication services and utilities sectors made the largest positive contributions to performance. Unfortunately, these strong holdings were not enough to outweigh the effects of the Fund's health care and industrial positions, which detracted from the Fund's six-month returns. WHAT WERE SOME OF THE FUND'S STRONG PERFORMERS DURING THE REPORTING PERIOD? Within the telecommunication services sector, the Fund's overweighted position in Sprint (PCS Group) (+119.8)(2) made the greatest security-level contribution to the Fund's performance. Sprint (PCS Group) shares skyrocketed more than 60% in the first quarter of 2004 alone, as takeover speculation on the heels of the AT&T Wireless/Cingular deal sparked investor interest. The Fund's underweighted position in Level 3 Communications (-46.8%), a high-speed communications network operation, also helped returns during the reporting period. In the utilities sector, the portfolio's overweighted position in Dallas-based energy company TXU (+51.1%) made a positive contribution to the Fund's return when the company's shares surged. WHICH STOCKS DETRACTED FROM THE FUND'S PERFORMANCE? Within the health care sector, the Fund's underweighted position in Biogen Idec (+54.5%), a rapidly growing biotech concern, proved to be the largest security-level detractor from Fund performance, as the company posted an impressive six-month gain. The Fund was also hurt by its underweighted position in medical-device company Zimmer Holdings (+25.1%), which had relatively strong performance. In the industrials sector, the Fund's overweighted positions in such laggards as SPX (-7.3%) and JetBlue Airways (-27.9%) had a negative impact on results. Career Education (+19.5%) had solid earnings and provided relatively strong performance for the six-month period, but the Fund's underweighted position relative to the Russell Midcap(R) Index detracted from the Fund's performance. WHAT DO YOU ANTICIPATE GOING FORWARD? We will continue to favor issues with an established history of real revenues and earnings. If investors become more fundamentally oriented, we believe that the Fund's model-driven performance will be more likely to produce results in line with our expectations relative to the equity market as a whole. 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. Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Investors should note that funds that invest in companies with market capitalizations below $10 billion involve additional risks. The securities of these companies may be more volatile and less liquid than the securities of larger companies. 1. The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index. The Russell 2000(R) Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization. Results for all indices assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. Percentages reflect total returns of Fund holdings in the securities mentioned, including purchases and sales, for the six months ended 4/30/04, or for the portion of the reporting period such securities were held in the Fund, if shorter. www.mainstayfunds.com 33 PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 99.90 Cash and Other Assets (less liabilities) 0.10
34 MainStay Mid Cap Core Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (99.9%)+ -------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.7%) Goodrich Corp. 4,421 $ 127,281 Precision Castparts Corp. 644 28,986 Rockwell Collins, Inc. 1,964 63,339 United Defense Industries, Inc. (a) 904 31,324 ------------ 250,930 ------------ AIR FREIGHT & LOGISTICS (0.5%) CNF, Inc. 313 11,443 J.B. Hunt Transport Services, Inc. (a) 2,076 65,726 Ryder System, Inc. 2,189 80,534 ------------ 157,703 ------------ AUTO COMPONENTS (2.1%) American Axle & Manufacturing Holdings, Inc. (a) 898 34,546 ArvinMeritor, Inc. 689 14,255 Autoliv, Inc. 3,565 151,620 BorgWarner, Inc. 626 51,295 Dana Corp. 5,218 105,195 Delphi Corp. 3,067 31,283 Johnson Controls, Inc. 3,950 216,697 Lear Corp. 1,968 119,300 ------------ 724,191 ------------ BEVERAGES (1.0%) Adolph Coors Co. Class B 323 21,224 Coca-Cola Enterprises, Inc. 5,870 158,490 PepsiAmericas, Inc. 2,193 43,926 Pepsi Bottling Group, Inc. (The) 4,391 128,525 ------------ 352,165 ------------ BIOTECHNOLOGY (0.6%) Affymetrix, Inc. (a) 385 11,765 Biogen Idec, Inc. (a) 1,776 104,784 IDEXX Laboratories, Inc. (a) 873 53,480 ImClone Systems, Inc. (a) 327 21,870 Protein Design Labs, Inc. (a) 1,206 29,523 ------------ 221,422 ------------ BUILDING PRODUCTS (0.7%) American Standard Cos., Inc. (a) 2,296 241,516 ------------ CAPITAL MARKETS (3.3%) A.G. Edwards, Inc. 832 30,443 Ameritrade Holding Corp. (a) 5,731 70,147 BlackRock, Inc. 498 30,976
SHARES VALUE CAPITAL MARKETS (CONTINUED) E*TRADE Financial Corp. (a) 10,382 $ 117,939 Franklin Resources, Inc. 1,030 56,475 Friedman, Billings, Ramsey Group, Inc. Class A 1,032 19,092 Jefferies Group, Inc. 270 9,207 Northern Trust Corp. 2,096 88,619 Nuveen Investments Class A 264 6,766 Raymond James Financial, Inc. 373 9,370 S&P 500 Index-SPDR Trust Series 1 (c) 2,791 309,689 S&P MidCap 400 Index-MidCap SPDR Trust, Series 1 (c) 2,256 240,264 T.Rowe Price Group, Inc. 2,581 132,354 ------------ 1,121,341 ------------ CHEMICALS (1.9%) Airgas, Inc. 1,161 25,716 Cabot Corp. 1,431 48,368 Eastman Chemical Co. 488 20,774 Engelhard Corp. 2,185 63,452 International Flavors & Fragrances, Inc. 871 31,574 Lyondell Chemical Co. 885 14,470 *Monsanto Co. 9,668 334,416 PPG Industries, Inc. 1,392 82,560 RPM International, Inc. 963 14,522 Scotts Co. (The) Class A (a) 139 9,167 ------------ 645,019 ------------ COMMERCIAL BANKS (3.0%) Associated Banc-Corp. 437 17,895 Bank of Hawaii Corp. 1,464 64,006 CCBT Financial Cos., Inc. 1,608 53,804 Colonial BancGroup, Inc. (The) 791 13,629 Commerce Bancshares, Inc. 855 38,390 First BanCorp. 472 17,398 First Horizon National Corp. 1,566 68,841 Hibernia Corp. Class A 1,732 37,740 International Bancshares Corp. 166 8,848 Marshall & Ilsley Corp. 4,814 177,011 North Fork Bancorp., Inc. 1,727 64,106 Provident Financial Group, Inc. 1,094 43,082 Second Bancorp, Inc. 1,007 30,220 SouthTrust Corp. 6,941 215,726 Trust Company of New Jersey (The) 2,161 80,000 UnionBanCal Corp. 332 17,739 United Bankshares, Inc. 413 12,394
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 35 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- COMMERCIAL BANKS (CONTINUED) xUnizan Financial Corp. 1,277 $ 31,095 Whitney Holding Corp. 237 9,717 ------------ 1,001,641 ------------ COMMERCIAL SERVICES & SUPPLIES (1.8%) Allied Waste Industries, Inc. (a) 5,254 66,148 ARAMARK Corp. Class B 1,869 53,453 Career Education Corp. (a) 611 39,104 Donnelley (R.R.) & Sons Co. 2,300 67,666 H&R Block, Inc. 2,195 99,016 Hewitt Associates, Inc. Class A (a) 460 14,219 HON INDUSTRIES, Inc. 641 23,723 IKON Office Solutions, Inc. 5,392 60,013 ITT Educational Services, Inc. (a) 1,050 42,347 Manpower, Inc. 1,155 54,170 Republic Services, Inc. 1,469 42,337 University of Phoenix Online (a) 157 13,668 Viad Corp. 1,218 30,401 ------------ 606,265 ------------ COMMUNICATIONS EQUIPMENT (3.4%) Avaya, Inc. (a) 13,822 189,085 Corning, Inc. (a) 11,125 122,709 Foundry Networks, Inc. (a) 1,162 13,131 Harris Corp. 1,766 79,558 *Juniper Networks, Inc. (a) 14,658 320,717 Lucent Technologies, Inc. (a) 75,838 255,574 Polycom, Inc. (a) 1,365 26,044 Scientific-Atlanta, Inc. 3,483 112,814 Tellabs, Inc. (a) 2,626 22,925 ------------ 1,142,557 ------------ COMPUTERS & PERIPHERALS (0.9%) Lexmark International, Inc. (a) 652 58,980 Maxtor Corp. (a) 2,163 14,081 NCR Corp. (a) 3,244 144,974 Network Appliance, Inc. (a) 3,309 61,614 Storage Technology Corp. (a) 1,122 29,475 ------------ 309,124 ------------ CONSTRUCTION MATERIALS (0.7%) Florida Rock Industries, Inc. 225 8,953 Lafarge North America, Inc. 204 9,027 Martin Marietta Materials, Inc. 1,213 52,462 Vulcan Materials Co. 3,380 156,291 ------------ 226,733 ------------
SHARES VALUE CONSUMER FINANCE (0.5%) AmeriCredit Corp. (a) 5,496 $ 89,090 Providian Financial Corp. (a) 6,245 75,752 ------------ 164,842 ------------ CONTAINERS & PACKAGING (1.0%) Ball Corp. 1,519 100,254 Bemis Co., Inc. 598 16,152 Owens-Illinois, Inc. (a) 1,362 19,014 Pactiv Corp. (a) 1,018 23,363 Sealed Air Corp. (a) 930 45,644 Sonoco Products Co. 585 14,543 Temple-Inland, Inc. 1,746 107,851 ------------ 326,821 ------------ DIVERSIFIED FINANCIAL SERVICES (1.2%) Chicago Mercantile Exchange (The) 169 19,824 CIT Group, Inc. 4,914 168,894 Instinet Group, Inc. (a) 1,452 9,482 Moody's Corp. 3,265 210,625 ------------ 408,825 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%) Citizens Communications Co. (a) 2,719 35,456 IDT Corp. (a) 706 13,118 NTL, Inc. (a) 2,443 138,689 Qwest Communications International, Inc. (a) 8,772 35,263 ------------ 222,526 ------------ ELECTRIC UTILITIES (6.0%) Alliant Energy Corp. 2,562 63,691 Ameren Corp. 1,777 77,690 CenterPoint Energy, Inc. 10,213 110,198 DPL, Inc. 3,635 64,049 Duquesne Light Holdings, Inc. 2,796 52,481 Edison International 10,250 239,850 Great Plains Energy, Inc. 2,152 67,164 Hawaiian Electric Industries, Inc. 513 25,527 Northeast Utilities 3,953 72,538 NSTAR 1,638 79,279 OGE Energy Corp. 1,942 46,705 *PG&E Corp. (a) 12,968 356,879 Pinnacle West Capital Corp. 231 9,023 PPL Corp. 3,532 151,346 TECO Energy, Inc. 3,733 47,521 Texas Genco Holdings, Inc. 554 19,601 TXU Corp. 8,202 280,016
36 MainStay Mid Cap Core Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- ELECTRIC UTILITIES (CONTINUED) Wisconsin Energy Corp. 1,317 $ 41,354 Xcel Energy, Inc. 13,719 229,519 ------------ 2,034,431 ------------ ELECTRICAL EQUIPMENT (0.6%) Hubbell, Inc. Class B 1,890 84,936 Rockwell Automation, Inc. 3,720 121,607 ------------ 206,543 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (2.8%) Agilent Technologies, Inc. (a) 6,398 172,810 Amphenol Corp. Class A (a) 248 7,839 Arrow Electronics, Inc. (a) 3,767 95,230 Avnet, Inc. (a) 4,505 97,488 AVX Corp. 580 8,230 CDW Corp. (a) 817 51,054 Molex, Inc. 1,417 42,198 PerkinElmer, Inc. 4,061 78,174 Sanmina-SCI Corp. (a) 16,047 160,791 Solectron Corp. (a) 17,052 83,555 Tektronix, Inc. 1,346 39,842 Vishay Intertechnology, Inc. (a) 5,009 87,157 Waters Corp. (a) 793 34,218 ------------ 958,586 ------------ ENERGY EQUIPMENT & SERVICES (0.0%) (B) Grant Prideco, Inc. (a) 629 9,592 ------------ FOOD & STAPLES RETAILING (0.9%) Rite Aid Corp. (a) 11,527 56,482 SUPERVALU, Inc. 4,986 153,519 Whole Foods Market, Inc. 1,295 103,587 ------------ 313,588 ------------ FOOD PRODUCTS (0.8%) Hershey Foods Corp. 976 86,757 Hormel Foods Corp. 942 28,721 Lancaster Colony Corp. 300 12,390 Tyson Foods, Inc. Class A 7,838 146,884 ------------ 274,752 ------------ GAS UTILITIES (1.1%) Kinder Morgan, Inc. 2,693 162,146 NiSource, Inc. 2,367 47,719 Sempra Energy 4,946 157,035 ------------ 366,900 ------------ HEALTH CARE EQUIPMENT & SUPPLIES (1.4%) Apogent Technologies, Inc. (a) 3,255 105,527 Bausch & Lomb, Inc. 2,005 125,974 Beckman Coulter, Inc. 590 32,946 Hillenbrand Industries, Inc. 1,258 84,915
SHARES VALUE HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) Respironics, Inc. (a) 1,120 $ 58,699 Varian Medical Systems, Inc. (a) 941 80,775 Zimmer Holdings, Inc. (a) 22 1,757 ------------ 490,593 ------------ HEALTH CARE PROVIDERS & SERVICES (4.7%) Aetna, Inc. 731 60,490 Andrx Corp. (a) 1,706 39,033 Caremark Rx, Inc. (a) 7,347 248,696 CIGNA Corp. 3,386 218,431 Coventry Health Care, Inc. (a) 759 31,756 DaVita, Inc. (a) 2,234 114,157 Express Scripts, Inc. (a) 1,153 89,173 Humana, Inc. (a) 4,013 65,372 IMS Health, Inc. 4,232 106,858 Manor Care, Inc. 2,587 83,922 PacifiCare Health Systems, Inc. (a) 2,993 107,030 Quest Diagnostics, Inc. 1,468 123,826 Renal Care Group, Inc. (a) 1,777 87,926 Service Corp. International (a) 11,213 82,864 Triad Hospitals, Inc. (a) 1,862 63,327 Universal Health Services, Inc. Class B 814 35,735 WellChoice, Inc. (a) 825 34,980 ------------ 1,593,576 ------------ HOTELS, RESTAURANTS & LEISURE (5.2%) Applebee's International, Inc. 1,469 56,968 Brinker International, Inc. (a) 1,240 47,690 Caesars Entertainment, Inc. (a) 10,391 137,681 CBRL Group, Inc. 307 11,528 Darden Restaurants, Inc. 1,006 22,796 GTECH Holdings Corp. 569 34,663 Harrah's Entertainment, Inc. 2,618 139,225 Hilton Hotels Corp. 2,204 38,548 *International Game Technology 10,009 377,740 International Speedway Corp. Class A 180 7,583 Mandalay Resort Group 1,319 75,777 MGM Mirage (a) 1,706 78,152 Starwood Hotels & Resorts Worldwide, Inc. 7,162 284,976 Station Casinos, Inc. 1,001 45,125 Wendy's International, Inc. 3,541 138,099 Yum! Brands, Inc. (a) 6,886 267,108 ------------ 1,763,659 ------------ HOUSEHOLD DURABLES (3.6%) Black & Decker Corp. (The) 1,851 107,080 Centex Corp. 2,871 137,664 D.R. Horton, Inc. 6,575 189,360
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 37 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (CONTINUED) Fortune Brands, Inc. 2,889 $ 220,286 Furniture Brands International, Inc. 299 8,414 Harman International Industries, Inc. 1,927 146,163 KB HOME 675 46,528 Lennar Corp. Class A 686 32,139 Maytag Corp. 491 13,699 NVR, Inc. (a) 138 62,238 Ryland Group, Inc. (The) 276 21,790 Snap-on, Inc. 564 19,052 Stanley Works (The) 2,358 100,239 Whirlpool Corp. 1,609 105,406 ------------ 1,210,058 ------------ INDUSTRIAL CONGLOMERATES (1.0%) Alleghany Corp. (a) 126 33,070 ALLETE, Inc. 949 32,788 Carlisle Cos., Inc. 546 32,350 Textron, Inc. 4,306 237,605 ------------ 335,813 ------------ INSURANCE (6.4%) Ambac Financial Group, Inc. 2,165 149,385 American Financial Group, Inc. 915 28,091 Aon Corp. 2,754 71,769 Arthur J. Gallagher & Co. 993 32,004 Cincinnati Financial Corp. 2,893 118,617 Fidelity National Financial, Inc. 5,707 208,876 First American Corp. 2,371 64,302 HCC Insurance Holdings, Inc. 795 25,456 Lincoln National Corp. 6,687 300,113 Loews Corp. 4,709 273,169 Mercury General Corp. 267 13,614 Nationwide Financial Services, Inc. Class A 2,038 70,107 Odyssey Re Holdings Corp. 430 10,204 Old Republic International Corp. 3,369 78,228 Protective Life Corp. 1,681 60,449 SAFECO Corp. 2,618 114,642 St. Paul Travelers Cos., Inc. (The) 281 11,428 StanCorp Financial Group, Inc. 320 19,799 Torchmark Corp. 4,355 226,634 Transatlantic Holdings, Inc. 752 67,304 Unitrin, Inc. 1,679 66,572 UnumProvident Corp. 3,169 49,278 W. R. Berkley Corp. 2,457 99,509 Wesco Financial Corp. 25 9,911 ------------ 2,169,461 ------------
SHARES VALUE INTERNET SOFTWARE & SERVICES (0.3%) VeriSign, Inc. (a) 6,504 $ 104,910 ------------ IT SERVICES (1.5%) Acxiom Corp. 2,449 56,670 CheckFree Corp. (a) 811 24,362 Cognizant Technology Solutions Corp. (a) 1,526 66,015 Computer Sciences Corp. (a) 1,961 80,224 Convergys Corp. (a) 1,631 23,682 DST Systems, Inc. (a) 1,115 49,227 Electronic Data Systems Corp. 10,333 188,991 Sabre Holdings Corp. 845 19,934 ------------ 509,105 ------------ LEISURE EQUIPMENT & PRODUCTS (0.6%) Brunswick Corp. 3,061 125,838 Hasbro, Inc. 2,465 46,564 Polaris Industries, Inc. 758 32,518 ------------ 204,920 ------------ MACHINERY (3.9%) Cummins, Inc. 849 50,779 Dover Corp. 1,292 51,719 Eaton Corp. 5,226 310,320 Graco, Inc. 946 26,677 Harsco Corp. 1,210 52,671 ITT Industries, Inc. 1,175 93,166 *PACCAR, Inc. 5,996 338,534 Parker Hannifin Corp. 4,458 246,483 Pentair, Inc. 625 37,244 SPX Corp. 1,936 85,861 Timken Co. (The) 1,254 27,663 ------------ 1,321,117 ------------ MEDIA (0.9%) Cablevision Systems New York Group Class A (a) 909 19,843 Cox Radio, Inc. Class A (a) 373 7,725 McClatchy Co. (The) Class A 663 47,073 Media General, Inc. Class A 99 7,116 PanAmSat Corp. (a) 946 21,834 Radio One, Inc. Class D (a) 508 9,632 Regal Entertainment Group Class A 896 19,524 Sirius Satellite Radio, Inc. (a) 6,977 23,024 UnitedGlobalCom, Inc. Class A (a) 3,437 25,709
38 MainStay Mid Cap Core Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- MEDIA (CONTINUED) Wiley (John) & Sons, Inc. Class A 615 $ 18,819 XM Satellite Radio Holdings, Inc. Class A (a) 4,821 115,511 ------------ 315,810 ------------ METALS & MINING (1.8%) CONSOL Energy, Inc. 629 18,008 Freeport-McMoRan Copper & Gold, Inc. Class B 4,219 128,680 Nucor Corp. 1,588 94,327 Peabody Energy Corp. 399 18,709 Phelps Dodge Corp. (a) 3,134 206,311 United States Steel Corp. 4,025 115,236 Worthington Industries, Inc. 1,592 28,736 ------------ 610,007 ------------ MULTILINE RETAIL (4.2%) Dollar General Corp. 3,146 59,019 *Federated Department Stores, Inc. 6,807 333,543 *J.C. Penney Co., Inc. Holding Co. 10,006 338,803 May Department Stores Co. (The) 7,715 237,622 Neiman Marcus Group, Inc. (The) Class A 657 31,956 Class B 226 10,227 Nordstrom, Inc. 3,564 126,985 Saks, Inc. 4,717 67,925 Sears, Roebuck and Co. 5,299 212,225 ------------ 1,418,305 ------------ MULTI-UTILITIES & UNREGULATED POWER (2.3%) AES Corp. (The) (a) 15,739 136,457 Constellation Energy Group 5,808 223,492 Dynegy, Inc. Class A (a) 7,482 29,629 Energy East Corp. 1,606 37,821 MDU Resources Group, Inc. 711 15,926 National Fuel Gas Co. 826 20,229 Questar Corp. 2,177 77,218 Reliant Energy, Inc. (a) 6,470 53,766 Williams Cos., Inc. (The) 18,518 190,735 ------------ 785,273 ------------ OFFICE ELECTRONICS (1.0%) *Xerox Corp. (a) 24,647 331,009 ------------ OIL & GAS (5.4%) Amerada Hess Corp. 2,656 188,921 Ashland, Inc. 2,554 122,337 Chesapeake Energy Corp. 1,311 18,026
SHARES VALUE OIL & GAS (CONTINUED) EOG Resources, Inc. 712 $ 35,066 Marathon Oil Corp. 9,536 320,028 Newfield Exploration Co. (a) 418 22,020 Noble Energy, Inc. 2,146 98,931 Pioneer Natural Resources Co. 751 24,565 Pogo Producing Co. 1,437 70,873 Sunoco, Inc. 2,849 179,202 Unocal Corp. 8,445 304,358 Valero Energy Corp. 3,252 207,348 Western Gas Resources, Inc. 463 25,210 Westport Resources Corp. (a) 4,138 141,644 XTO Energy, Inc. 2,677 71,476 ------------ 1,830,005 ------------ PAPER & FOREST PRODUCTS (1.4%) Boise Cascade Corp. 2,429 81,930 *Georgia-Pacific Corp. 9,367 328,782 Rayonier, Inc. 2,071 80,769 ------------ 491,481 ------------ PERSONAL PRODUCTS (0.4%) Estee Lauder Cos., Inc. (The) Class A 3,174 145,084 ------------ PHARMACEUTICALS (0.9%) American Pharmaceutical Partners, Inc. (a) 462 19,543 Endo Pharmaceuticals Holdings, Inc. (a) 1,130 26,973 Eon Labs, Inc. (a) 74 4,865 Medicis Pharmaceutical Corp. Class A 660 28,327 Mylan Laboratories, Inc. 2,624 60,116 Sepracor, Inc. (a) 1,001 47,858 Valeant Pharmaceuticals International 2,665 61,561 Watson Pharmaceuticals, Inc. (a) 1,116 39,741 ------------ 288,984 ------------ REAL ESTATE (2.9%) AMB Property Corp. 830 25,149 Archstone-Smith Trust 715 19,613 Arden Realty, Inc. 1,433 40,439 Boston Properties, Inc. 1,722 80,934 Camden Property Trust 372 15,743 CBL & Associates Properties, Inc. 245 12,311 Cousins Properties, Inc. 1,276 35,881 Crescent Real Estate Equities Co. 862 13,335 Developers Diversified Realty Corp. 1,586 51,942
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 39 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- REAL ESTATE (CONTINUED) Forest City Enterprises, Inc. Class A 719 $ 37,704 Healthcare Realty Trust, Inc. 805 28,859 Hospitality Properties Trust 807 31,538 Host Marriot Corp. (a) 3,782 45,006 Liberty Property Trust 444 16,228 Macerich Co. (The) 1,748 73,189 Mack-Cali Realty Corp. 795 29,693 New Plan Excel Realty Trust 1,920 43,085 Public Storage, Inc. 2,475 103,430 Rouse Co. (The) 1,916 82,963 Simon Property Group, Inc. 1,691 81,523 Trizec Properties, Inc. 2,972 42,559 United Dominion Realty Trust, Inc. 627 11,255 Vornado Realty Trust 1,376 69,419 ------------ 991,798 ------------ ROAD & RAIL (0.8%) CSX Corp. 2,356 72,470 Norfolk Southern Corp. 8,896 211,903 ------------ 284,373 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.5%) Advanced Micro Devices, Inc. (a) 9,238 131,364 Agere Systems, Inc. Class B (a) 15,962 34,637 Altera Corp. (a) 3,899 78,019 Amkor Technology, Inc. (a) 1,045 8,444 Atmel Corp. (a) 15,481 90,409 Broadcom Corp. Class A (a) 7,503 283,313 Cypress Semiconductor Corp. (a) 2,936 41,016 Fairchild Semiconductor International, Inc. (a) 3,336 64,952 International Rectifier Corp. (a) 2,011 79,716 Lam Research Corp. (a) 1,397 30,930 LSI Logic Corp. (a) 1,161 8,638 National Semiconductor Corp. (a) 5,730 233,727 PMC-Sierra, Inc. (a) 3,632 44,129 Rambus, Inc. (a) 266 4,955 Teradyne, Inc. (a) 2,039 41,555 ------------ 1,175,804 ------------ SOFTWARE (2.9%) Autodesk, Inc. 4,204 140,834 BMC Software, Inc. (a) 8,756 151,479 Cadence Design Systems, Inc. (a) 2,944 37,742 Compuware Corp. (a) 13,690 104,728 Jack Henry & Associates, Inc. 736 13,388
SHARES VALUE SOFTWARE (CONTINUED) Novell, Inc. (a) 3,787 $ 36,507 Red Hat, Inc. (a) 3,010 68,357 *Symantec Corp. (a) 9,214 415,091 ------------ 968,126 ------------ SPECIALTY RETAIL (3.5%) Advanced Auto Parts, Inc. (a) 1,810 78,102 Barnes & Noble, Inc. (a) 1,085 32,409 Borders Group, Inc. 2,317 55,539 Claire's Stores, Inc. 3,046 62,077 Foot Locker, Inc. 5,315 127,560 Limited Brands 8,810 181,838 RadioShack Corp. 6,270 192,865 Regis Corp. 1,646 71,469 Rent-A-Center, Inc. (a) 778 22,772 Sherwin-Williams Co. (The) 1,548 58,901 Staples, Inc. 4,055 104,457 TJX Cos., Inc. (The) 5,856 143,882 Toys 'R' Us, Inc. (a) 2,722 42,055 ------------ 1,173,926 ------------ TEXTILES, APPAREL & LUXURY GOODS (0.8%) Coach, Inc. (a) 4,332 184,543 Polo Ralph Lauren Corp. 860 29,756 Reebok International Ltd. 318 11,569 Timberland Co. (The) Class A (a) 463 29,039 ------------ 254,907 ------------ THRIFTS & MORTGAGE FINANCE (1.1%) Astoria Financial Corp. 1,923 66,190 Countrywide Financial Corp. 1,150 68,195 Doral Financial Corp. 657 21,543 Downey Financial Corp. 652 31,459 IndyMac Bancorp, Inc. 675 21,708 MGIC Investment Corp. 919 67,657 New York Community Bancorp, Inc. 774 19,404 People's Bank 512 21,612 Sovereign Bancorp, Inc. 2,174 43,436 Webster Financial Corp. 628 27,318 ------------ 388,522 ------------ TOBACCO (0.7%) Loews Corp.- Carolina Group 1,018 26,712 R.J. Reynolds Tobacco Holdings, Inc. 3,157 204,479 ------------ 231,191 ------------ TRADING COMPANIES & DISTRIBUTORS (0.0%) (B) MSC Industrial Direct Co., Inc. Class A 530 15,190 ------------
40 MainStay Mid Cap Core Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- x WIRELESS TELECOMMUNICATION SERVICES (0.6%) American Tower Corp. Class A (a) 1,857 $ 23,120 Crown Castle International Corp. (a) 2,976 41,515 Nextel Partners, Inc. Class A (a) 1,005 13,417 Telephone & Data Systems, Inc. 1,565 103,227 United States Cellular Corp. (a) 403 13,811 ------------ 195,090 ------------ Total Investments (Cost $30,426,640) (d) 99.9% 33,886,110(e) Cash and Other Assets, Less Liabilities 0.1 48,742 ----- ------------ Net Assets 100.0% $ 33,934,852 ======== ===============
(a) Non-income producing security. (b) Less than one tenth of a percent. (c) Exchange Traded Fund -- represents a basket of securities that are traded on an exchange. (d) The cost for federal income tax purposes is $30,475,087. (e) At April 30, 2004 net unrealized appreciation was $3,411,023, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $4,400,971 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $989,948.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 41 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $30,426,640) $33,886,110 Cash 113,876 Receivables: Investment securities sold 3,093,876 Dividends and interest 36,550 Fund shares sold 10,596 Other assets 12,743 ----------- Total assets 37,153,751 ----------- LIABILITIES: Payables: Investment securities purchased 3,173,530 Manager 16,775 Custodian 5,787 Transfer agent 3,756 NYLIFE Distributors 781 Accrued expenses 18,270 ----------- Total liabilities 3,218,899 ----------- Net assets $33,934,852 =========== COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 1 billion shares authorized Class A $ 58 Class B 76 Class C 7 Class I 3,029 Additional paid-in capital 31,576,848 Accumulated undistributed net investment income 48,416 Accumulated net realized loss on investments (1,153,052) Net unrealized appreciation on investments 3,459,470 ----------- Net assets $33,934,852 =========== CLASS A Net assets applicable to outstanding shares $ 619,614 =========== Shares of capital stock outstanding 57,904 =========== Net asset value per share outstanding $ 10.70 Maximum sales charge (5.50% of offering price) 0.62 ----------- Maximum offering price per share outstanding $ 11.32 =========== CLASS B Net assets applicable to outstanding shares $ 807,026 =========== Shares of capital stock outstanding 75,584 =========== Net asset value and offering price per share outstanding $ 10.68 =========== CLASS C Net assets applicable to outstanding shares $ 76,021 =========== Shares of capital stock outstanding 7,122 =========== Net asset value and offering price per share outstanding $ 10.67 =========== CLASS I Net assets applicable to outstanding shares $32,432,191 =========== Shares of capital stock outstanding 3,028,622 =========== Net asset value and offering price per share outstanding $ 10.71 ===========
42 MainStay Mid Cap 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, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends (a) $ 252,786 Interest 27 ----------- Total income 252,813 ----------- EXPENSES: Manager 139,599 Custodian 16,731 Professional 14,598 Transfer agent 8,551 Registration 7,580 Portfolio pricing 6,712 Directors 6,535 Shareholder communication 2,177 Distribution -- Class B 1,158 Distribution -- Class C 72 Service -- Class A 203 Service -- Class B 386 Service -- Class C 24 Miscellaneous 9,360 ----------- Total expenses before reimbursement 213,686 Expense reimbursement from Manager (47,608) ----------- Net expenses 166,078 ----------- Net investment income 86,735 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 3,443,564 Net change in unrealized appreciation on investments (1,718,671) ----------- Net realized and unrealized gain on investments 1,724,893 ----------- Net increase in net assets resulting from operations $ 1,811,628 ===========
(a) Dividends recorded net of foreign withholding taxes in the amount of $24. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 43 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE IN NET ASSETS: Operations: Net investment income $ 86,735 $ 115,176 Net realized gain on investments 3,443,564 512,384 Net change in unrealized appreciation (depreciation) on investments (1,718,671) 6,009,353 ------------------------- Net increase in net assets resulting from operations 1,811,628 6,636,913 ------------------------- Dividends to shareholders: From net investment income: Class I (113,396) (82,305) ------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 643,411 -- Class B 848,805 -- Class C 79,730 -- Class I 1,142,952 2,326,100 Net asset value of shares issued to shareholders in reinvestment of dividends: Class I 18,593 8,055 ------------------------- 2,733,491 2,334,155 Cost of shares redeemed: Class A (3,585) -- Class B (14,096) -- Class C (124) -- Class I (202,129) (1,117,764) ------------------------- (219,934) (1,117,764) ------------------------- Increase in net assets derived from capital share transactions 2,513,557 1,216,391 ------------------------- Net increase in net assets 4,211,789 7,770,999 NET ASSETS: Beginning of period 29,723,063 21,952,064 ------------------------- End of period $33,934,852 $29,723,063 ========================= Accumulated undistributed net investment income at end of period $ 48,416 $ 75,077 =========================
44 MainStay Mid Cap Core Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C CLASS I ---------- ---------- ---------- --------------------------------------------- JANUARY 1, JANUARY 1, JANUARY 1, SIX JANUARY 2, 2004* 2004* 2004* MONTHS 2001* THROUGH THROUGH THROUGH ENDED YEAR ENDED THROUGH APRIL 30, APRIL 30, APRIL 30, APRIL 30, OCTOBER 31, OCTOBER 31, 2004** 2004** 2004** 2004** 2003 2002 2001 Net asset value at beginning of period $10.67 $10.67 $10.67 $ 10.12 $ 7.82 $ 8.41 $ 10.00 ------ ------ ------ ------- ------- ------- ------- Net investment income (loss) 0.01(b) (0.01)(b) (0.01)(b) 0.03(b) 0.04 0.03 0.03 Net realized and unrealized gain (loss) on investments 0.02 0.02 0.01 0.60 2.29 (0.58) (1.62) ------ ------ ------ ------- ------- ------- ------- Total from investment operations 0.03 0.01 0.00 0.63 2.33 (0.55) (1.59) ------ ------ ------ ------- ------- ------- ------- Less dividends: From net investment income -- -- -- (0.04) (0.03) (0.04) -- ------ ------ ------ ------- ------- ------- ------- Net asset value at end of period $10.70 $10.68 $10.67 $ 10.71 $ 10.12 $ 7.82 $ 8.41 ====== ====== ====== ======= ======= ======= ======= Total investment return (a) 0.28% 0.09% 0.00% 6.21% 29.90% (6.66%) (15.90%) Ratios (to average net assets)/Supplemental Data: Net investment income (loss) (0.19%)+ (0.94%)+ (0.94%)+ 0.54%+ 0.48% 0.34% 0.35%+ Net expenses 1.73%+ 2.48%+ 2.48%+ 1.00%+ 1.00% 1.00% 1.00%+ Expenses (before reimbursement) 2.02%+ 2.77%+ 2.77%+ 1.29%+ 1.42% 1.27% 1.27%+ Portfolio turnover rate 89% 89% 89% 89% 150% 151% 106% Net assets at end of period (in 000's) $ 620 $ 807 $ 76 $32,432 $29,723 $21,952 $21,156
* Commencement of Operations. ** Unaudited. + Annualized. (a) Total return is calculated exclusive of sales charges and is not annualized. (b) Per share data based on average shares outstanding during the period.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 45 MAINSTAY MID CAP OPPORTUNITY FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE SINCE BENCHMARKS MONTHS YEAR YEARS INCEPTION RUSSELL MIDCAP(R) VALUE INDEX(1) 8.30% 34.92% 7.65% 14.41% RUSSELL MIDCAP(R) INDEX(2) 7.25 35.45 6.09 13.51 S&P 500(R) INDEX(3) 6.27 22.88 -2.26 11.72 AVERAGE LIPPER MID-CAP CORE FUND(4) 6.53 33.08 7.82 12.27
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE SINCE TOTAL RETURNS MONTHS YEAR YEARS INCEPTION ---------------------------------------------------------- With sales charges 0.11% 26.26% 4.83% 12.27% Excluding sales charges 5.94 33.60 6.02 12.95
(in thousands, with sales charges)
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP OPPORTUNITY FUND VALUE INDEX(1) INDEX S&P 500 INDEX ---------------- -------------- -------------- ------------- 12/27/94 945.00 1000.00 1000.00 1000.00 1022.00 1124.00 1121.00 1129.00 1277.00 1437.00 1466.00 1470.00 1511.00 1692.00 1626.00 1839.00 2219.00 2385.00 2293.00 2594.00 2202.00 2430.00 2429.00 3161.00 1961.00 2321.00 2818.00 3481.00 2264.00 2776.00 2826.00 3029.00 2515.00 3010.00 2806.00 2647.00 2208.00 2604.00 2409.00 2294.00 4/30/04 2950.00 3513.00 3264.00 2819.00
-- MainStay Mid Cap Opportunity Fund -- Russell Midcap Value Index -- Russell Midcap Index -- S&P 500 Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE SINCE TOTAL RETURNS MONTHS YEAR YEARS INCEPTION ---------------------------------------------------------- With sales charges 0.54% 27.56% 4.88% 12.02% Excluding sales charges 5.54 32.56 5.21 12.02
(in thousands, with sales charges)
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP OPPORTUNITY FUND VALUE INDEX(1) INDEX S&P 500 INDEX ---------------- -------------- -------------- ------------- 12/27/94 1000.00 1000.00 1000.00 1000.00 1079.00 1124.00 1121.00 1129.00 1337.00 1437.00 1466.00 1470.00 1565.00 1692.00 1626.00 1839.00 2281.00 2385.00 2293.00 2594.00 2243.00 2430.00 2429.00 3161.00 1980.00 2321.00 2818.00 3481.00 2269.00 2776.00 2826.00 3029.00 2502.00 3010.00 2806.00 2647.00 2181.00 2604.00 2409.00 2294.00 4/30/04 2891.00 3513.00 3264.00 2819.00
-- MainStay Mid Cap Opportunity Fund -- Russell Midcap Value Index -- Russell Midcap Index -- S&P 500 Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A and B shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (12/27/94) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. Prior to 1/1/04, the Fund offered Class L shares, which were subject to a 1% sales charge and a 1% CDSC on THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 46 MainStay Mid Cap Opportunity Fund CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE SINCE TOTAL RETURNS MONTHS YEAR YEARS INCEPTION ---------------------------------------------------------- With sales charges 4.54% 31.62% 5.25% 12.04% Excluding sales charges 5.54 32.62 5.25 12.04
(in thousands, with sales charges)
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP OPPORTUNITY FUND VALUE INDEX(1) INDEX S&P 500 INDEX ---------------- -------------- -------------- ------------- 12/27/94 1000.00 1000.00 1000.00 1000.00 1078.00 1124.00 1121.00 1129.00 1337.00 1437.00 1466.00 1470.00 1565.00 1692.00 1626.00 1839.00 2282.00 2385.00 2293.00 2594.00 2243.00 2430.00 2429.00 3161.00 1980.00 2321.00 2818.00 3481.00 2269.00 2776.00 2826.00 3029.00 2502.00 3010.00 2806.00 2647.00 2184.00 2604.00 2409.00 2294.00 4/30/04 2896.00 3513.00 3264.00 2819.00
-- MainStay Mid Cap Opportunity Fund -- Russell Midcap Value Index -- Russell Midcap Index -- S&P 500 Index
CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE SINCE TOTAL RETURNS MONTHS YEAR YEARS INCEPTION ---------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 6.02% 33.87% 6.27% 13.21%
(in thousands, with sales charges)
MAINSTAY MID CAP RUSSELL MIDCAP RUSSELL MIDCAP OPPORTUNITY FUND VALUE INDEX(1) INDEX S&P 500 INDEX ---------------- -------------- -------------- ------------- 12/27/94 1000.00 1000.00 1000.00 1000.00 1083.00 1124.00 1121.00 1129.00 1356.00 1437.00 1466.00 1470.00 1608.00 1692.00 1626.00 1839.00 2366.00 2385.00 2293.00 2594.00 2353.00 2430.00 2429.00 3161.00 2100.00 2321.00 2818.00 3481.00 2431.00 2776.00 2826.00 3029.00 2706.00 3010.00 2806.00 2647.00 2383.00 2604.00 2409.00 2294.00 4/30/04 3190.00 3513.00 3264.00 2819.00
-- MainStay Mid Cap Opportunity Fund -- Russell Midcap Value Index -- Russell Midcap Index -- S&P 500 Index
redemptions within one year of purchase. Performance for Class L shares, first offered 12/30/02, includes the historical performance of Class I shares from inception through 12/29/02 adjusted to reflect the applicable sales charge, CDSC, and fees and expenses for such shares. Effective 1/1/04, all outstanding Class L shares of the Fund were converted to and/or redesignated Class C shares. 1. The Russell Midcap(R) Value Index is an unmanaged index that measures the performance of those Russell Midcap(R) companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results for all indices assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. "S&P 500" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 4. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 47 $1,000 INVESTED IN MAINSTAY MID CAP OPPORTUNITY FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $1,005 $ 5 $1,045 $ 5 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $1,003 $ 7 $1,043 $ 7 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(3) $1,000 $1,056 $11 $1,039 $11 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,061 $ 6 $1,045 $ 5 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares and Class B shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares and Class B shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $7 and $11, respectively, and the ending account value would be $1,043 and $1,039, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 48 MainStay Mid Cap Opportunity Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Wesley G. McCain and Kathy A. O'Connor of New York Life Investment Management LLC MAINSTAY MID CAP OPPORTUNITY FUND (FORMERLY ECLIPSE MID CAP VALUE FUND) WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? Most broadly watched equity indices provided positive performance for the six months ended April 30, 2004. Mid-caps and small-caps tended to outperform large-capitalization issues. The market favored the value style over the growth style of investing at all capitalization levels. For much of the semiannual period, positive investor sentiment boosted the U.S. equity markets. Low interest rates and indications of rebounding economic activity helped to fuel an optimistic outlook. In March and April, however, heightened geopolitical tensions and growing concerns over potential interest-rate increases contributed to generally declining equity indices. WHAT FACTORS MOST SIGNIFICANTLY AFFECTED FUND PERFORMANCE DURING THE SEMIANNUAL PERIOD? Fund holdings in the consumer durables & apparel, capital goods, and materials industry groups showed weaker relative performance than related stocks in the Russell Midcap(R) Value Index.(1) The Fund's relative performance was also affected by its underweighted exposure to the top 50% of companies within the Russell Midcap(R) Value Index, as measured by market capitalization. For the six months ended April 30, 2004, these larger mid-cap companies outperformed the smaller mid-cap companies in the Index. Unlike the Index, which has a larger weighting in securities with larger market capitalizations, the Fund attempts to have equal weights among the securities in its portfolio. It is important to note that the Fund was invested in some, but not all, of the companies in the Russell Midcap(R) Value Index. WHAT WERE SOME OF THE FUND'S STRONG PERFORMERS DURING THE REPORTING PERIOD? Software company Autodesk (+73.8%)(2) provided outstanding results. Other strong performers included Activision (+48.4%), Mandalay Resort Group (+47.4%), Kmart Holding (+47.3%), and MGIC Investment (+40.9%). WHICH STOCKS UNDERPERFORMED? Maxtor (-52.4%), which operates in the computers & peripherals industry, was the Fund's worst-performing stock during the reporting period. Quanta Services (-32.4%), Citrix Systems (-24.3%), Ascential Software (-23.7%), and United States Steel (-18.3%) also detracted from the Fund's performance. WERE THERE ANY SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD? The Fund purchases stocks that have relatively improving operating characteristics and are relatively undervalued based on our proprietary model. Among the securities that fit the Fund's purchase criteria during the reporting period were Activision, Apogent Technologies, and Bausch & Lomb. WHAT STOCKS DID THE FUND SELL? The Fund sells stocks that exhibit deteriorating operating results and/or are relatively overvalued. During the reporting period, AdvancePCS was acquired by Caremark Rx in a stock and cash transaction. The Fund sold its entire position in American Eagle Outfitters when weakening sales hampered earnings. The Fund also sold JDS Uniphase when declining demand caused the company to dramatically reduce its workforce. DID THE FUND CHANGE ITS INDUSTRY GROUP WEIGHTINGS? Weighting changes in the Fund result from a combination of security performance, industry performance, and the Fund's proprietary security selection process. From the end of October 2003 to the end of April 2004, the Fund increased its weighting in the banks industry group from 8.70% to 15.46%. The shift reflected new purchases and improved performance among banks relative to other industry groups. Over the same period, the Fund decreased its technology hardware & equipment industry group Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Investors should note that funds that invest in companies with market capitalizations below $10 billion involve additional risks. The securities of these companies may be more volatile and less liquid than the securities of larger companies. 1. See footnote on page 47 for more information on the Russell Midcap(R) Value Index. 2. Percentages reflect total returns of Fund holdings in the securities mentioned, including purchases and sales, for the six months ended 4/30/04, or for the portion of the reporting period such securities were held in the Fund, if shorter. www.mainstayfunds.com 49 weighting from 12.38% to 7.21%. The decline reflected position sales and weaker relative performance of the industry group. HOW DO THE FUND'S WEIGHTINGS DIFFER FROM THOSE OF ITS BENCHMARK? As of April 30, 2004, the Fund was overweighted relative to the Russell Midcap(R) Value Index in the health care equipment & services, consumer durables & apparel, and banks industry groups. The Fund's overweighted position in banks helped performance, but an overweighted position in consumer durables & apparel detracted from the Fund's results. At the end of the reporting period, the Fund was underweighted relative to the Russell Midcap(R) Value Index in the utilities, insurance, and materials industry groups. Although the Fund was underweighted in the insurance and materials industry groups, the Fund's positions underperformed related securities in the benchmark. WHAT DO YOU ANTICIPATE GOING FORWARD? We will continue to utilize the Fund's proprietary quantitative methodologies to select mid-capitalization stocks of companies that our model indicates are relatively undervalued and have strong operating characteristics. Whatever the markets or the economy may bring, the Fund will continue to seek high total return. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 96.5 Short-Term Investment 3.3 Cash and Other Assets (less liabilities) 0.2
50 MainStay Mid Cap Opportunity Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (96.5%)+ -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (1.0%) J.B. Hunt Transport Services, Inc. 6,200 $ 196,292 ------------ AUTO COMPONENTS (1.4%) Dana Corp. 12,900 260,064 ------------ CAPITAL MARKETS (1.6%) Bear Stearns Cos., Inc. (The) 2,097 168,053 Lehman Brothers Holdings, Inc. 1,700 124,780 ------------ 292,833 ------------ COMMERCIAL BANKS (1.9%) International Bancshares Corp. 2,700 143,910 Silicon Valley Bancshares (a) 6,300 216,468 ------------ 360,378 ------------ COMMERCIAL SERVICES & SUPPLIES (2.7%) Cendant Corp. 9,100 215,488 Deluxe Corp. 600 24,786 *Kelly Services, Inc. Class A 9,400 279,368 ------------ 519,642 ------------ COMPUTERS & PERIPHERALS (2.6%) Dell, Inc. (a) 4,800 166,608 InFocus Corp. (a) 27,300 223,041 Maxtor Corp. (a) 16,200 105,462 ------------ 495,111 ------------ CONSTRUCTION & ENGINEERING (0.7%) Quanta Services, Inc. (a) 25,300 138,391 ------------ CONSUMER FINANCE (3.1%) AmeriCredit Corp. (a) 14,100 228,561 Student Loan Corp. (The) 700 99,120 WFS Financial, Inc. (a) 5,700 253,878 ------------ 581,559 ------------ DIVERSIFIED FINANCIAL SERVICES (1.2%) CIT Group, Inc. 6,700 230,279 ------------ ELECTRIC UTILITIES (1.4%) *Edison International 11,500 269,100 ------------ ELECTRICAL EQUIPMENT (0.3%) American Power Conversion Corp. 3,300 61,578 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (4.6%) Avnet, Inc. (a) 10,700 231,548 Sanmina-SCI Corp. (a) 24,800 248,496
SHARES VALUE Solectron Corp. (a) 26,100 $ 127,890 Tektronix, Inc. 8,700 257,520 ------------ 865,454 ------------ FOOD & STAPLES RETAILING (1.9%) Albertson's, Inc. 10,600 247,616 SUPERVALU, Inc. 3,900 120,081 ------------ 367,697 ------------ FOOD PRODUCTS (3.5%) Hershey Foods Corp. 2,200 195,558 Hormel Foods Corp. 6,400 195,136 *Tyson Foods, Inc. Class A 14,800 277,352 ------------ 668,046 ------------ HEALTH CARE EQUIPMENT & SUPPLIES (2.6%) Apogent Technologies, Inc. (a) 7,800 252,876 Bausch & Lomb, Inc. 3,800 238,754 ------------ 491,630 ------------ HEALTH CARE PROVIDERS & SERVICES (7.6%) *Caremark Rx, Inc. (a) 7,740 261,999 Coventry Health Care, Inc. (a) 5,850 244,764 HEALTHSOUTH Corp. (a) 29,900 130,065 Humana, Inc. (a) 15,700 255,753 *Manor Care, Inc. 8,100 262,764 *PacifiCare Health Systems, Inc. (a) 7,800 278,928 ------------ 1,434,273 ------------ HOTELS, RESTAURANTS & LEISURE (3.6%) Bob Evans Farms, Inc. 6,300 193,158 CBRL Group, Inc. 2,200 82,610 Choice Hotels International, Inc. 1,900 85,310 Mandalay Resort Group 2,500 143,625 Outback Steakhouse, Inc. 3,900 171,327 ------------ 676,030 ------------ HOUSEHOLD DURABLES (8.2%) Centex Corp. 3,400 163,030 Fortune Brands, Inc. 3,300 251,625 Hovnanian Enterprises, Inc. Class A (a) 4,400 158,268 KB HOME 1,200 82,716 La-Z-Boy, Inc. 5,600 116,704 M.D.C. Holdings, Inc. 1,320 81,563 NVR, Inc. (a) 400 180,400 Ryland Group, Inc. (The) 1,300 102,635
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 51 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (CONTINUED) Stanley Works (The) 5,800 $ 246,558 Toll Brothers, Inc. (a) 4,400 174,108 ------------ 1,557,607 ------------ HOUSEHOLD PRODUCTS (1.4%) Energizer Holdings, Inc. (a) 6,000 259,800 ------------ INDUSTRIAL CONGLOMERATES (0.4%) Alleghany Corp. 306 80,313 ------------ INSURANCE (1.6%) MBIA, Inc. 2,600 153,114 Torchmark Corp. 2,900 150,916 ------------ 304,030 ------------ LEISURE EQUIPMENT & PRODUCTS (1.4%) Callaway Golf Co. 7,100 120,487 Hasbro, Inc. 7,900 149,231 ------------ 269,718 ------------ MACHINERY (1.3%) Terex Corp. (a) 7,200 236,520 ------------ METALS & MINING (1.1%) United States Steel Corp. 7,400 211,862 ------------ MULTILINE RETAIL (4.2%) Federated Department Stores, Inc. 3,400 166,600 Kmart Holding Corp. (a) 4,700 210,278 Neiman Marcus Group, Inc. (The) Class A 1,800 87,552 Saks, Inc. 13,700 197,280 Sears, Roebuck & Co. 3,400 136,170 ------------ 797,880 ------------ MULTI-UTILITIES & UNREGULATED POWER (1.3%) Williams Cos., Inc. (The) 23,700 244,110 ------------ OIL & GAS (1.3%) Overseas Shipholding Group, Inc. 7,600 249,052 ------------ PERSONAL PRODUCTS (1.6%) *Estee Lauder Cos., Inc. (The) Class A 6,400 292,544 ------------ PHARMACEUTICALS (0.7%) Mylan Laboratories, Inc. 5,600 128,296 ------------
SHARES VALUE REAL ESTATE (4.9%) AMB Property Corp. 4,400 $ 133,320 Cousins Properties, Inc. 3,800 106,856 Equity Office Properties Trust 9,200 231,564 Hospitality Properties Trust 2,400 93,792 LNR Property Corp. 3,600 180,792 Reckson Associates Realty Corp. 7,900 187,783 ------------ 934,107 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.7%) Advanced Micro Devices, Inc. (a) 5,400 76,788 Novellus Systems, Inc. (a) 1,600 46,336 ------------ 123,124 ------------ SOFTWARE (5.7%) *Activision, Inc. (a) 18,300 275,598 Ascential Software Corp. (a) 5,200 88,400 *Autodesk, Inc. 8,600 288,100 Cadence Design Systems, Inc. (a) 19,700 252,554 Citrix Systems, Inc. (a) 9,200 175,260 ------------ 1,079,912 ------------ SPECIALTY RETAIL (3.3%) Barnes & Noble, Inc. (a) 3,500 104,545 Circuit City Stores, Inc. 10,900 127,312 Home Depot, Inc. (The) 2,300 80,937 Sherwin-Williams Co. (The) 3,800 144,590 Zale Corp. (a) 2,900 162,168 ------------ 619,552 ------------ TEXTILES, APPAREL & LUXURY GOODS (0.7%) Reebok International Ltd. 3,500 127,330 ------------ THRIFTS & MORTGAGE FINANCE (13.5%) Astoria Financial Corp. 6,900 237,498 Countrywide Financial Corp. 2,799 165,981 Doral Financial Corp. 4,800 157,392 Freddie Mac 1,600 93,440 Fremont General Corp. 10,500 226,275 GreenPoint Financial Corp. 5,000 195,000 Independence Community Bank Corp. 4,800 174,864 IndyMac Bancorp, Inc. 6,900 221,904 MGIC Investment Corp. 3,000 220,860 New Century Financial Corp. 5,300 224,879 New York Community Bancorp, Inc. 8,333 208,908 PMI Group, Inc. (The) 5,600 240,968 Radian Group, Inc. 4,200 195,342 ------------ 2,563,311 ------------
52 MainStay Mid Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------------- TOBACCO (1.5%) *R.J. Reynolds Tobacco Holdings, Inc. 4,500 $ 291,465 ------------ Total Common Stocks (Cost $15,695,601) 18,278,890 ------------ PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENT (3.3%) -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (3.3%) Bank of New York (The) 0.90%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $616,046 (Collateralized by Federal National Mortgage Association 3.921%, due 3/1/33 with a Principal Amount of $753,000 and a Market Value of $751,759 including accrued interest) $ 616,000 616,000 ------------ Total Short-Term Investment (Cost $616,000) 616,000 ------------ Total Investments (Cost $16,311,601) (b) 99.8% 18,894,890(c) Cash and Other Assets, Less Liabilities 0.2 44,369 ----- ------------ Net Assets 100.0% $ 18,939,259 ======== ============
(a) Non-income producing security. (b) The cost for federal income tax purposes is $16,325,932. (c) At April 30, 2004 net unrealized appreciation was $2,568,958, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $3,162,570 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $593,612.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 53 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $16,311,601) $18,894,890 Cash 38,536 Receivables: Investment securities sold 919,022 Fund shares sold 54,729 Dividends and interest 38,710 Other assets 24,325 ----------- Total assets 19,970,212 ----------- LIABILITIES: Payables: Investment securities purchased 648,931 Fund shares redeemed 328,110 Transfer agent 11,454 Custodian 3,818 Manager 3,214 NYLIFE Distributors 2,373 Accrued expenses 33,053 ----------- Total liabilities 1,030,953 ----------- Net assets $18,939,259 =========== COMPOSITION OF NET ASSETS: Capital stock (par value of $.01 per share) 1 billion shares authorized Class A $ 1,033 Class B 776 Class C 538 Class I 6,234 Additional paid-in capital 15,383,145 Accumulated undistributed net investment income 23,197 Accumulated undistributed net realized gain on investments 941,047 Net unrealized appreciation on investments 2,583,289 ----------- Net assets $18,939,259 =========== CLASS A Net assets applicable to outstanding shares $ 2,276,391 =========== Shares of capital stock outstanding 103,254 =========== Net asset value per share outstanding $ 22.05 Maximum sales charge (5.50% of offering price) 1.28 ----------- Maximum offering price per share outstanding $ 23.33 =========== CLASS B Net assets applicable to outstanding shares $ 1,694,943 =========== Shares of capital stock outstanding 77,555 =========== Net asset value and offering price per share outstanding $ 21.85 =========== CLASS C Net assets applicable to outstanding shares $ 1,176,630 =========== Shares of capital stock outstanding 53,828 =========== Net asset value and offering price per share outstanding $ 21.86 =========== CLASS I Net assets applicable to outstanding shares $13,791,295 =========== Shares of capital stock outstanding 623,449 =========== Net asset value and offering price per share outstanding $ 22.12 ===========
54 MainStay Mid Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends (a) $ 110,414 Interest 2,854 --------- Total income 113,268 --------- EXPENSES: Manager 74,188 Transfer agent 22,934 Registration 21,285 Professional 18,008 Trustees 7,941 Custodian 5,165 Portfolio pricing 2,395 Distribution -- Class B 1,748 Distribution -- Class C 887 Shareholder communication 1,556 Service -- Class A 820 Service -- Class B 583 Service -- Class C 296 Service -- Service Class 9 Miscellaneous 8,809 --------- Total expenses before reimbursement 166,624 Expense reimbursement from Manager (73,243) Fees paid indirectly (See Note 2(D)) (3,310) --------- Net expenses 90,071 --------- Net investment income 23,197 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 955,651 Net change in unrealized appreciation on investments (266,238) --------- Net realized and unrealized gain on investments 689,413 --------- Net increase in net assets resulting from operations $ 712,610 =========
(a) Dividends recorded net of foreign withholding taxes in the amount of $58. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 55 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income $ 23,197 $ 229,089 Net realized gain on investments 955,651 10,470,034 Net change in unrealized appreciation on investments (266,238) 787,704 -------------------------- Net increase in net assets resulting from operations 712,610 11,486,827 -------------------------- Dividends and distributions to shareholders: From net investment income: Class I -- (220,660) Service Class -- (1) From net realized gain on investments: Class C (11) -- Class I (109,405) -- Service Class (167) -- -------------------------- Total dividends and distributions to shareholders (109,583) (220,661) -------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 2,423,081 -- Class B 1,805,423 -- Class C 1,225,685 1,148 Class I 3,356,404 6,543,744 Service Class 21,108 1,529 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions: Class C 10 -- Class I 109,130 219,240 Service Class 167 1 -------------------------- 8,941,008 6,765,662 Cost of shares redeemed: Class A (45,696) -- Class B (31,937) -- Class C (1,408) (104) Class I (4,121,428) (55,643,197) Service Class (24,327) -- -------------------------- (4,224,796) (55,643,301) -------------------------- Increase (decrease) in net assets derived from capital share transactions 4,716,212 (48,877,639) -------------------------- Net increase (decrease) in net assets 5,319,239 (37,611,473)
2004 2003 NET ASSETS: Beginning of period $13,620,020 $ 51,231,493 -------------------------- End of period $18,939,259 $ 13,620,020 ========================== Accumulated undistributed net investment income at end of period $ 23,197 $ -- ==========================
56 MainStay Mid Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. This page intentionally left blank 57 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ----------------- ----------------- ------------------------------- JANUARY 1, JANUARY 1, DECEMBER 30, 2004** 2004** SIX MONTHS 2002** THROUGH THROUGH ENDED THROUGH APRIL 30, APRIL 30, APRIL 30, OCTOBER 31, 2004*** 2004*** 2004*** 2003 Net asset value at beginning of period $21.93 $21.79 $20.86 $15.87 ------ ------ ------ ------ Net investment income (loss) 0.00(b) (0.02) (0.01) (0.06)(a) Net realized and unrealized gain (loss) on investments 0.12 0.08 1.16 5.05 ------ ------ ------ ------ Total from investment operations 0.12 0.06 1.15 4.99 ------ ------ ------ ------ Less dividends and distributions: From net investment income -- -- -- -- From net realized gain on investments -- -- (0.15) -- ------ ------ ------ ------ Total dividends and distributions -- -- (0.15) -- ------ ------ ------ ------ Net asset value at end of period $22.05 $21.85 $21.86 $20.86 ====== ====== ====== ====== Total investment return (c) 0.55% 0.28% 5.54% 31.44% Ratios (to average net assets)/Supplemental Data: Net investment income (loss) 0.05%+ (0.70%)+ (0.70%)+ (0.53%)+ Net expenses 1.36%+# 2.11%+# 2.11%+# 2.13%+# Expenses (before reimbursement) 2.25%+# 3.00%+# 3.00%+# 2.37%+# Portfolio turnover rate 25% 25% 25% 90% Net assets at end of period (in 000's) $2,276 $1,695 $1,177 $ 1
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. # Includes transfer agent fees paid indirectly which amounted to 0.04%, 0.09%, 0.13% and 0.15% of average net assets for the six months ended April 30, 2004, the years ended October 31, 2003 and October 31, 2002 and the ten months ended October 31, 2001, respectively, and custodian fees and other expenses paid indirectly which amounted to 0.02% of average net assets for the year ended December 31, 2000. (a) Per share data based on average shares outstanding during the period. (b) Less than one cent per share. (c) Total return is calculated exclusive of sales charges and is not annualized. (d) Restated.
58 MainStay Mid Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I ------------------------------------------------------------------------------------ JANUARY 1, SIX MONTHS 2001 ENDED YEAR ENDED THROUGH APRIL 30, OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31, 2004*** 2003 2002 2001* 2000 1999 1998 $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06 $ 17.73 $ 17.76 ------- ------- ------- ------- ------- ------- -------- 0.04 0.08(a) 0.09 0.06 0.06 0.11 0.06 1.22 4.84 (0.14) (0.69) 0.88 (0.13) 1.76 ------- ------- ------- ------- ------- ------- -------- 1.26 4.92 (0.05) (0.63) 0.94 (0.02) 1.82 ------- ------- ------- ------- ------- ------- -------- -- (0.07) (0.09) -- (0.06) (0.11) (0.06) (0.15) -- -- -- (0.01) (1.54) (1.79) ------- ------- ------- ------- ------- ------- -------- (0.15) (0.07) (0.09) -- (0.07) (1.65) (1.85) ------- ------- ------- ------- ------- ------- -------- $ 22.12 $ 21.01 $ 16.16 $ 16.30 $ 16.93 $ 16.06 $ 17.73 ======= ======= ======= ======= ======= ======= ======== 6.02% 30.59% (0.38%) (3.72%) 5.83% 0.04% 10.35% 0.33%+ 0.47% 0.46% 0.41%+ 0.35% 0.51% 0.33% 1.08%+# 1.13%# 1.17%# 1.19%+#(d) 1.06%# 1.05% 0.98% 1.97%+# 1.37%# 1.29%# 1.22%+#(d) 1.06%# 1.05% 1.08% 25% 90% 75% 69% 114% 51% 81% $13,791 $13,617 $51,231 $56,907 $67,401 $83,064 $124,525
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 59 MAINSTAY S&P 500 INDEX FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS S&P 500(R) INDEX(1) 6.27% 22.88% -2.26% 11.36% AVERAGE LIPPER S&P 500 INDEX OBJECTIVE FUND(2) 5.92 22.05 -2.78 10.91
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 2.80% 18.61% -3.18% 10.54% Excluding sales 5.98 22.28 -2.59 10.88 charges
(in thousands, with sales charges)
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX --------------------------- ------------- 4/30/94 970.00 1000.00 1133.00 1175.00 1465.00 1530.00 1822.00 1914.00 2556.00 2700.00 3106.00 3289.00 3408.00 3622.00 2965.00 3152.00 2579.00 2754.00 2228.00 2388.00 4/30/04 2725.00 2934.00
-- MainStay S&P 500 Index Fund -- S&P 500 Index CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS ---------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 6.12% 22.63% -2.38% 11.12%
(in thousands, with sales charges)
MAINSTAY S&P 500 INDEX FUND S&P 500 INDEX --------------------------- ------------- 4/30/94 1000.00 1000.00 1171.00 1175.00 1517.00 1530.00 1891.00 1914.00 2659.00 2700.00 3239.00 3289.00 3560.00 3622.00 3102.00 3152.00 2704.00 2754.00 2342.00 2388.00 4/30/04 2872.00 2934.00
-- MainStay S&P 500 Index Fund -- S&P 500 Index Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 3% and an annual 12b-1 fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are contractual and may be discontinued at any time after December 31, 2004. Performance for Class A shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge and fees and expenses for such shares. 1. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use. Standard & Poor's does not sponsor, endorse, sell, or promote the Fund or represent the advisability of investing in the Fund. The S&P 500(R) is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. 60 MainStay S&P 500 Index Fund $1,000 INVESTED IN MAINSTAY S&P 500 INDEX FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $ 999 $2 $1,048 $2 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,061 $2 $1,049 $2 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $3, and the ending account value would be $1,047. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). www.mainstayfunds.com 61 PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio manager Francis J. Ok of New York Life Investment Management LLC MAINSTAY S&P 500 INDEX FUND (FORMERLY ECLIPSE INDEXED EQUITY FUND) WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? When the reporting period began, investor sentiment was changing, since most indicators seemed to show that the U.S. economy was firmly on the path of expansion. Bearish gloom gave way to a general sense of optimism, prompting investors to question how high the stock market might rise. Several factors served as catalysts in the U.S. economic recovery. These included the lowest interest rates in more than four decades, President Bush's tax-cut program, the positive impact of a weaker U.S. dollar on export activity, and slim inventories that stimulated business investment. The U.S. equity markets, however, were not able to sustain the tremendous gains they had seen in the last months of 2003. Stocks surged in early February 2004, but late February through the end of April proved to be a troublesome time for U.S. equities. Terrorism muted any momentum that had been building in the equity markets, as the train bombing in Madrid and the assassination of Hamas leader Sheik Ahmed Yasin drove equities lower. Ongoing violence against civilians and coalition troops involved in the rebuilding of Iraq continued to trouble the financial markets through the end of the semiannual period. WHAT FACTORS MOST SIGNIFICANTLY AFFECTED FUND PERFORMANCE DURING THE SEMIANNUAL PERIOD? Excluding all shares charges, the differences in return between the Fund and its benchmark, the S&P 500(R) Index,(1) and between the Fund and the average Lipper(2) S&P 500 Index objective fund over the semiannual period were modest. Since the Fund includes real-world expenses that a hypothetical index does not, there may be times when the Fund underperforms the Index. Excluding sales charges, the Fund's modest outperformance of its Lipper peer group may be attributed to a difference in annual expenses. WHAT WERE THE BEST-PERFORMING SUBINDUSTRIES(3) IN THE S&P 500(R) INDEX DURING THE REPORTING PERIOD? Based on total returns alone, wireless services (+44.16%)(4) was the best-performing subindustry for the six months ended April 30, 2004. Other top- performing subindustries included Internet retail (+42.69%), oil & gas refineries (+38.16%), fertilizers & agricultural chemicals (+38.08%), and office electronics (+27.94%). Because of their higher weightings in the Index, however, subindustries with lower total returns were among the five top contributors to the overall performance of the S&P 500(R) Index. Taking weightings and total returns both into consideration, the leading subindustry was integrated oil & gas (+19.37%), followed by pharmaceuticals (+7.52%), health care equipment (+18.56%), multi-line insurance (+17.97%), and industrial conglomerates (+7.28%). WHICH SUBINDUSTRIES WERE THE WORST PERFORMERS? Based solely on total returns, the worst-performing subindustries in the Index for the reporting period were airlines (-28.85%), semiconductor equipment (-22.98%), semiconductors (-15.72%), IT consulting (-15.17%), and gold (-14.57%). Because of a higher Index weighting, semiconductors (-15.72%) had the greatest negative impact on the total return of the Index for the reporting period when weightings and total returns were taken into account. Other poor- performing subindustries by impact were computer hardware (-3.50%), semiconductor equipment (-22.98%), investment banking & brokerage (-5.30%), and home improvement retail (-6.65%). Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Index funds generally seek to reflect the performance of an index or an allocation among indices, unlike other funds, whose objectives may, in some cases, involve seeking to outperform an index or other benchmark. 1. See footnote on page 60 for more information on the S&P 500 Index. 2. See footnote on page 60 for more information about Lipper Inc. 3. The Global Industry Classification Standard categorizes companies by sector, industry group, industry, and subindustry. Results in these sections of the semiannual report reflect subindustry and company performance. In the Portfolio of Investments that follows, companies are listed by industry. 4. Percentages reflect the total return performance, including reinvestment of all dividends and capital gains, of the subindustries or the securities mentioned for the six months ended 4/30/04. Due to purchases and sales, the performance of Fund holdings may differ from that of the subindustries or securities themselves. 62 MainStay S&P 500 Index Fund WHO WERE THE CORPORATE LEADERS DURING THE REPORTING PERIOD? For the six months ended April 30, 2004, the best-performing company in the S&P 500(R) Index based on total return alone was AT&T Wireless Services (+90.48%). Other top-performing companies based solely on total returns were Autodesk (+74.03%), Visteon (+68.11%), Biogen Idec (+67.95%), and Novell (+64.22%). As impressive as these returns may be, the five stocks with the greatest positive impact on the performance of the S&P 500(R) Index all had higher weightings and lower total returns. Taking weightings and total returns both into account, the strongest positive contributors to the performance of the Index for the six-month period were ExxonMobil (+16.30%), followed by Pfizer (+13.10%), American International Group (+17.00%), ChevronTexaco (+23.10%), and Altria Group (+19.10%). WHICH COMPANIES' STOCKS LAGGED THE S&P 500(R) INDEX? Not surprisingly, based on total returns alone, the worst-performing security in the S&P 500(R) Index for the reporting period was a member of the worst- performing subindustry. That company was Delta Air Lines (-52.23%). Other poor-performing securities (based on total returns alone) were QLogic (-51.85%), Ciena (-35.41%), PMC-Sierra (-33.13%), and Apartment Investment & Management (-31.12%). Similarly, when taking both weightings and total returns into account, semiconductor company Intel (-22.15%), a company from the worst performing subindustry, made the greatest negative contribution to the performance of the Index. Other laggards (based on weightings and total returns) included Wal-Mart Stores (-3.30%), Wyeth (-13.70%), Applied Materials (-21.99%), and Comcast (-11.26%). WERE THERE ANY CHANGES MADE TO THE FUND OR THE INDEX DURING THE PERIOD? The Fund seeks to track the performance and weightings of stocks in the S&P 500(R) Index. The Index itself, however, may change from time to time as companies merge, divest units, add to their market capitalization, or face financial difficulties. Standard & Poor's may also occasionally adjust the Index to better reflect the companies that it believes are most representative of the makeup of our economy. During the six months ended April 30, 2004, there were eight companies deleted from the Index and eight companies added to it. WHAT DO YOU ANTICIPATE GOING FORWARD? We believe that interest rates are a key factor that could affect the outlook for the U.S. equity market for the remainder of the year. Most investors feel that the Federal Reserve will not be able to keep the targeted federal funds rate at its current record low of 1.0%. Indeed, we believe that surging oil prices may prompt the Federal Reserve to increase interest rates sooner rather than later to head off the prospect of inflation. Signs of inflation have already materialized in the Consumer Price Index, the Producer Price Index, and the ISM Index, the last of which tracks manufacturing costs. Political uncertainty is another variable that could hold off a stock market rally. The mere possibility of a change in leadership may add to the instability of the global landscape. Finally, heightened geopolitical tensions and ongoing terrorist threats remain obstacles with no clear resolution in sight. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 95.5 Short Term Investments 4.4 Cash and Other Assets (less liabilities) 0.1
www.mainstayfunds.com 63 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (95.5%)+ ---------------------------------------------------------------------------------- AEROSPACE & DEFENSE (1.8%) Boeing Co. (The) 90,008 $ 3,842,442 General Dynamics Corp. 21,076 1,973,135 Goodrich Corp. 12,544 361,142 Honeywell International, Inc. 91,671 3,169,983 Lockheed Martin Corp. 48,183 2,298,329 Northrop Grumman Corp. 19,930 1,978,052 Raytheon Co. 44,053 1,421,150 Rockwell Collins, Inc. 19,069 614,975 United Technologies Corp. 55,106 4,753,444 -------------- 20,412,652 -------------- AIR FREIGHT & LOGISTICS (1.0%) FedEx Corp. 31,960 2,298,244 Ryder System, Inc. 6,770 249,068 United Parcel Service, Inc. Class B 120,611 8,460,862 -------------- 11,008,174 -------------- AIRLINES (0.1%) Delta Air Lines, Inc. (a) 13,301 82,732 Southwest Airlines Co. 83,781 1,196,393 -------------- 1,279,125 -------------- AUTO COMPONENTS (0.2%) Cooper Tire & Rubber Co. 7,942 169,880 Dana Corp. 15,970 321,955 Delphi Corp. 60,051 612,520 Goodyear Tire & Rubber Co. (The) (a) 18,792 163,678 Johnson Controls, Inc. 20,145 1,105,155 Visteon Corp. 13,808 149,955 -------------- 2,523,143 -------------- AUTOMOBILES (0.7%) Ford Motor Co. 195,965 3,010,022 General Motors Corp. 60,007 2,845,532 Harley-Davidson, Inc. 32,419 1,825,838 -------------- 7,681,392 -------------- BEVERAGES (2.7%) Adolph Coors Co. Class B 3,884 255,218 Anheuser-Busch Cos., Inc. 87,142 4,465,156 Brown-Forman Corp. Class B 13,025 610,352 Coca-Cola Co. (The) 261,085 13,203,068 Coca-Cola Enterprises, Inc. 48,457 1,308,339 Pepsi Bottling Group, Inc. (The) 27,716 811,247 PepsiCo, Inc. 182,612 9,950,528 -------------- 30,603,908 -------------- BIOTECHNOLOGY (1.1%) Amgen, Inc. (a) 137,829 7,755,638 Biogen Idec, Inc. (a) 35,029 2,066,711
SHARES VALUE BIOTECHNOLOGY (CONTINUED) Chiron Corp. (a) 20,070 $ 931,248 Genzyme Corp. (a) 23,790 1,036,292 MedImmune, Inc. (a) 26,969 653,729 -------------- 12,443,618 -------------- BUILDING PRODUCTS (0.2%) American Standard Cos., Inc. (a) 7,725 812,593 Masco Corp. 48,768 1,365,991 -------------- 2,178,584 -------------- CAPITAL MARKETS (3.4%) Bank of New York Co., Inc. (The) 82,414 2,401,544 Bear Stearns Cos., Inc. (The) 11,031 884,024 Charles Schwab Corp. (The) 144,385 1,485,722 E*TRADE Financial Corp. (a) 39,000 443,040 Federated Investors, Inc. Class B 11,525 338,835 Franklin Resources, Inc. 26,777 1,468,183 Goldman Sachs Group, Inc. (The) 51,569 4,989,301 J.P. Morgan Chase & Co. 219,829 8,265,570 Janus Capital Group, Inc. 25,664 390,093 Lehman Brothers Holdings, Inc. 29,517 2,166,548 Mellon Financial Corp. 46,149 1,367,856 Merrill Lynch & Co., Inc. 103,624 5,619,529 Morgan Stanley 117,147 6,020,184 Northern Trust Corp. 23,715 1,002,670 State Street Corp. 35,667 1,740,550 T.Rowe Price Group, Inc. 13,207 677,255 -------------- 39,260,904 -------------- CHEMICALS (1.4%) Air Products & Chemicals, Inc. 24,399 1,215,314 Dow Chemical Co. (The) 99,909 3,965,388 E.I. du Pont de Nemours & Co. 106,614 4,579,071 Eastman Chemical Co. 8,304 353,501 Ecolab, Inc. 27,758 827,189 Engelhard Corp. 13,689 397,529 Great Lakes Chemical Corp. 5,368 134,844 Hercules, Inc. (a) 11,823 131,354 International Flavors & Fragrances, Inc. 10,044 364,095 Monsanto Co. 28,030 969,558 PPG Industries, Inc. 18,162 1,077,188 Praxair, Inc. 34,967 1,278,044 Rohm & Haas Co. 23,677 918,194 Sigma-Aldrich Corp. 7,644 432,956 -------------- 16,644,225 -------------- COMMERCIAL BANKS (5.9%) AmSouth Bancorp. 37,966 836,011 *Bank of America Corp. 217,863 17,535,793 Bank One Corp. 119,507 5,900,061
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily. 64 MainStay S&P 500 Index Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- COMMERCIAL BANKS (CONTINUED) BB&T Corp. 58,445 $ 2,015,768 Charter One Financial, Inc. 24,227 808,455 Comerica, Inc. 18,827 972,038 Fifth Third Bancorp 60,321 3,236,825 First Horizon National Corp. 13,474 592,317 Huntington Bancshares, Inc. 24,392 521,989 KeyCorp 45,024 1,337,213 M&T Bank Corp. 12,833 1,090,805 Marshall & Ilsley Corp. 23,995 882,296 National City Corp. 64,958 2,252,094 North Fork Bancorp., Inc. 16,031 595,071 PNC Financial Services Group, Inc. (The) 29,609 1,572,238 Regions Financial Corp. 23,743 824,119 SouthTrust Corp. 35,579 1,105,795 SunTrust Banks, Inc. 30,059 2,045,515 Synovus Financial Corp. 32,260 770,046 U.S. Bancorp 204,976 5,255,585 Union Planters Corp. 20,181 561,032 Wachovia Corp. 140,367 6,421,790 Wells Fargo & Co. 180,680 10,201,193 Zions Bancorp 9,593 542,196 -------------- 67,876,245 -------------- COMMERCIAL SERVICES & SUPPLIES (1.0%) Allied Waste Industries, Inc. (a) 34,207 430,666 Apollo Group, Inc. Class A (a) 18,820 1,710,362 Avery Dennison Corp. 11,873 762,603 Cendant Corp. 107,467 2,544,819 Cintas Corp. 18,192 817,912 Deluxe Corp. 5,830 240,837 Donnelley (R.R.) & Sons Co. 22,837 671,864 Equifax, Inc. 15,209 372,773 H&R Block, Inc. 19,182 865,300 Monster Worldwide, Inc. (a) 11,987 306,987 Pitney Bowes, Inc. 24,946 1,091,387 Robert Half International, Inc. 18,245 497,541 Waste Management, Inc. 61,654 1,750,974 -------------- 12,064,025 -------------- COMMUNICATIONS EQUIPMENT (2.8%) ADC Telecommunications, Inc. (a) 86,090 215,225 Andrew Corp. (a) 17,185 291,286 Avaya, Inc. (a) 45,329 620,101 CIENA Corp. (a) 50,600 209,484 Cisco Systems, Inc. (a) 732,860 15,294,788 Comverse Technology, Inc. (a) 20,249 331,274 Corning, Inc. (a) 145,751 1,607,633 JDS Uniphase Corp. (a) 153,553 466,801 Lucent Technologies, Inc. (a) 454,886 1,532,966 Motorola, Inc. 249,964 4,561,843 QLogic Corp. (a) 10,012 270,224 QUALCOMM, Inc. 85,997 5,371,372
SHARES VALUE COMMUNICATIONS EQUIPMENT (CONTINUED) Scientific-Atlanta, Inc. 16,013 $ 518,661 Tellabs, Inc. (a) 44,260 386,390 -------------- 31,678,048 -------------- COMPUTERS & PERIPHERALS (3.4%) Apple Computer, Inc. (a) 38,723 996,343 Dell, Inc. (a) 273,397 9,489,610 EMC Corp. (a) 258,310 2,882,740 Gateway, Inc. (a) 39,954 192,578 Hewlett-Packard Co. 325,599 6,414,300 International Business Machines Corp. 181,206 15,976,933 Lexmark International, Inc. (a) 13,653 1,235,050 NCR Corp. (a) 10,224 456,911 Network Appliance, Inc. (a) 36,471 679,090 Silicon Graphics, Inc. (a) 35 67 Sun Microsystems, Inc. (a) 345,873 1,348,905 -------------- 39,672,527 -------------- CONSTRUCTION & ENGINEERING (0.0%) (B) Fluor Corp. 8,568 326,955 -------------- CONSTRUCTION MATERIALS (0.0%) (B) Vulcan Materials Co. 10,899 503,970 -------------- CONSUMER FINANCE (1.2%) American Express Co. 137,157 6,713,835 Capital One Financial Corp. 24,635 1,614,332 MBNA Corp. 136,677 3,332,185 Providian Financial Corp. (a) 31,073 376,915 SLM Corp. 48,210 1,846,925 -------------- 13,884,192 -------------- CONTAINERS & PACKAGING (0.2%) Ball Corp. 6,053 399,498 Bemis Co., Inc. 11,318 305,699 Pactiv Corp. (a) 16,976 389,599 Sealed Air Corp. (a) 9,008 442,113 Temple-Inland, Inc. 5,789 357,586 -------------- 1,894,495 -------------- DISTRIBUTORS (0.1%) Genuine Parts Co. 18,810 673,398 -------------- DIVERSIFIED FINANCIAL SERVICES (2.5%) *Citigroup, Inc. 549,259 26,413,865 Moody's Corp. 15,919 1,026,935 Principal Financial Group, Inc. 34,548 1,219,544 -------------- 28,660,344 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES (2.8%) ALLTEL Corp. 33,323 1,677,480 AT&T Corp. 84,395 1,447,374 BellSouth Corp. 195,170 5,037,338 CenturyTel, Inc. 15,283 441,373 Citizens Communications Co. (a) 30,265 394,655
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 65 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) Qwest Communications International, Inc. (a) 189,067 $ 760,049 SBC Communications, Inc. 353,219 8,795,153 Sprint Corp. (FON Group) 151,629 2,712,643 Verizon Communications, Inc. 294,447 11,112,430 -------------- 32,378,495 -------------- ELECTRIC UTILITIES (2.0%) Allegheny Energy, Inc. (a) 13,470 185,616 Ameren Corp. 19,387 847,600 American Electric Power Co., Inc. 42,232 1,285,542 CenterPoint Energy, Inc. 32,670 352,509 Cinergy Corp. 19,020 721,619 CMS Energy Corp. (a) 15,597 129,611 Consolidated Edison, Inc. 23,980 988,216 Dominion Resources, Inc. 34,544 2,204,253 DTE Energy Co. 17,971 701,228 Edison International 34,897 816,590 Entergy Corp. 24,263 1,324,760 Exelon Corp. 35,115 2,350,598 FirstEnergy Corp. 34,845 1,362,439 FPL Group, Inc. 19,601 1,247,016 PG&E Corp. (a) 44,439 1,222,961 Pinnacle West Capital Corp. 9,732 380,132 PPL Corp. 19,137 820,020 Progress Energy, Inc. 25,851 1,105,647 Public Service Enterprise Group, Inc. 25,102 1,076,876 Southern Co. (The) 77,593 2,231,575 TECO Energy, Inc. 20,137 256,344 TXU Corp. 34,563 1,179,981 Xcel Energy, Inc. 42,767 715,492 -------------- 23,506,625 -------------- ELECTRICAL EQUIPMENT (0.4%) American Power Conversion Corp. 21,039 392,588 Cooper Industries, Ltd. Class A 9,844 540,534 Emerson Electric Co. 45,029 2,711,646 Power-One, Inc. (a) 8,592 73,891 Rockwell Automation, Inc. 19,884 650,008 Thomas & Betts Corp. (a) 6,251 150,274 -------------- 4,518,941 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.5%) Agilent Technologies, Inc. (a) 50,817 1,372,567 Jabil Circuit, Inc. (a) 21,284 561,685 Molex, Inc. 20,546 611,860 PerkinElmer, Inc. 13,526 260,376 Sanmina-SCI Corp. (a) 54,693 548,024 Solectron Corp. (a) 88,730 434,777 Symbol Technologies, Inc. 24,721 296,652 Tektronix, Inc. 9,084 268,886
SHARES VALUE ELECTRONIC EQUIPMENT & INSTRUMENTS (CONTINUED) Thermo Electron Corp. (a) 17,585 $ 513,482 Waters Corp. (a) 13,282 573,118 -------------- 5,441,427 -------------- ENERGY EQUIPMENT & SERVICES (0.8%) Baker Hughes, Inc. 35,824 1,314,024 BJ Services Co. (a) 16,887 751,471 Halliburton Co. 46,807 1,394,849 Nabors Industries, Ltd. (a) 15,570 690,685 Noble Corp. (a) 14,328 532,428 Rowan Cos., Inc. (a) 10,105 225,342 Schlumberger Ltd. 62,837 3,677,850 Transocean, Inc. (a) 34,284 952,067 -------------- 9,538,716 -------------- FOOD & STAPLES RETAILING (3.5%) Albertson's, Inc. 39,421 920,875 Costco Wholesale Corp. 48,981 1,834,338 CVS Corp. 42,196 1,630,031 Kroger Co. (The) (a) 80,396 1,406,930 Safeway, Inc. (a) 47,263 1,084,686 SUPERVALU, Inc. 14,298 440,235 Sysco Corp. 68,894 2,635,196 Walgreen Co. 109,696 3,782,318 *Wal-Mart Stores, Inc. 461,479 26,304,303 Winn-Dixie Stores, Inc. 15,093 115,009 -------------- 40,153,921 -------------- FOOD PRODUCTS (1.3%) Archer-Daniels-Midland Co. 69,196 1,215,082 Campbell Soup Co. 44,021 1,216,300 ConAgra Foods, Inc. 57,616 1,664,526 General Mills, Inc. 39,688 1,934,790 H.J. Heinz Co. 37,677 1,438,885 Hershey Foods Corp. 13,909 1,236,371 Kellogg Co. 43,994 1,887,342 McCormick & Co., Inc. 14,910 509,326 Sara Lee Corp. 84,555 1,951,529 Wm. Wrigley Jr. Co. 24,100 1,486,970 -------------- 14,541,121 -------------- GAS UTILITIES (0.3%) KeySpan Corp. 16,829 608,368 Kinder Morgan, Inc. 13,117 789,775 Nicor, Inc. 4,708 160,025 NiSource, Inc. 28,254 569,599 Peoples Energy Corp. 3,910 163,438 Sempra Energy 23,931 759,809 -------------- 3,051,014 -------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.1%) Applera Corp. Applied Biosystems Group 22,410 416,154 Bausch & Lomb, Inc. 5,703 358,319 Baxter International, Inc. 65,179 2,062,915 Becton, Dickinson & Co. 27,274 1,378,701 Biomet, Inc. 27,418 1,083,011 Boston Scientific Corp. (a) 87,502 3,604,207
66 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.
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) C.R. Bard, Inc. 5,517 $ 586,292 Guidant Corp. 33,283 2,097,162 Medtronic, Inc. 129,501 6,534,620 Millipore Corp. (a) 5,215 273,422 St. Jude Medical, Inc. (a) 18,260 1,392,508 Stryker Corp. 21,363 2,113,442 Zimmer Holdings, Inc. (a) 25,828 2,062,366 -------------- 23,963,119 -------------- HEALTH CARE PROVIDERS & SERVICES (2.0%) Aetna, Inc. 16,431 1,359,665 AmerisourceBergen Corp. 11,924 690,280 Anthem, Inc. (a) 14,807 1,311,604 Cardinal Health, Inc. 46,487 3,405,173 Caremark Rx, Inc. (a) 47,600 1,611,260 CIGNA Corp. 14,969 965,650 Express Scripts, Inc. (a) 8,341 645,093 HCA, Inc. 52,929 2,150,505 Health Management Associates, Inc. 25,617 592,521 Humana, Inc. (a) 17,379 283,104 IMS Health, Inc. 25,462 642,916 Manor Care, Inc. 9,667 313,598 McKesson Corp. 31,194 1,025,035 Medco Health Solutions, Inc. (a) 28,977 1,025,786 Quest Diagnostics, Inc. 11,281 951,552 Tenet Healthcare Corp. (a) 49,788 585,507 UnitedHealth Group, Inc. 66,869 4,111,106 WellPoint Health Networks, Inc. (a) 16,557 1,849,251 -------------- 23,519,606 -------------- HOTELS, RESTAURANTS & LEISURE (1.3%) Carnival Corp. 67,395 2,875,745 Darden Restaurants, Inc. 17,590 398,589 Harrah's Entertainment, Inc. 11,828 629,013 Hilton Hotels Corp. 40,445 707,390 International Game Technology 36,972 1,395,323 Marriott International, Inc. Class A 24,723 1,165,937 McDonald's Corp. 134,790 3,670,332 Starbucks Corp. (a) 42,324 1,644,711 Starwood Hotels & Resorts Worldwide, Inc. 21,553 857,594 Wendy's International, Inc. 12,325 480,675 Yum! Brands, Inc. (a) 31,175 1,209,278 -------------- 15,034,587 -------------- HOUSEHOLD DURABLES (0.5%) American Greetings Corp. Class A (a) 7,085 145,243 Black & Decker Corp. (The) 8,343 482,642 Centex Corp. 13,260 635,817
SHARES VALUE HOUSEHOLD DURABLES (CONTINUED) Fortune Brands, Inc. 15,549 $ 1,185,611 KB HOME 5,120 352,922 Leggett & Platt, Inc. 20,688 467,549 Maytag Corp. 8,410 234,639 Newell Rubbermaid, Inc. 29,598 699,697 Pulte Homes, Inc. 13,233 650,667 Snap-on, Inc. 6,236 210,652 Stanley Works (The) 9,085 386,202 Whirlpool Corp. 7,366 482,547 -------------- 5,934,188 -------------- HOUSEHOLD PRODUCTS (2.0%) Clorox Co. (The) 22,535 1,166,862 Colgate-Palmolive Co. 56,923 3,294,703 Kimberly-Clark Corp. 53,548 3,504,717 Procter & Gamble Co. (The) 138,025 14,596,144 -------------- 22,562,426 -------------- INDUSTRIAL CONGLOMERATES (4.0%) 3M Co. 83,520 7,222,810 *General Electric Co. (c) 1,087,536 32,571,703 Textron, Inc. 14,613 806,345 Tyco International Ltd. 213,762 5,867,767 -------------- 46,468,625 -------------- INSURANCE (4.5%) ACE, Ltd. 29,501 1,293,324 AFLAC, Inc. 54,730 2,311,248 Allstate Corp. (The) 75,255 3,454,205 Ambac Financial Group, Inc. 11,395 786,255 *American International Group, Inc. 278,205 19,933,388 Aon Corp. 33,422 870,977 Chubb Corp. (The) 20,068 1,384,692 Cincinnati Financial Corp. 18,220 746,821 Hartford Financial Services Group, Inc. (The) 31,073 1,897,939 Jefferson-Pilot Corp. 15,072 747,421 Lincoln National Corp. 19,020 853,618 Loews Corp. 19,799 1,148,540 Marsh & McLennan Cos., Inc. 56,991 2,570,294 MBIA, Inc. 15,487 912,029 MetLife, Inc. 80,771 2,786,599 Progressive Corp. (The) 23,305 2,039,654 Prudential Financial, Inc. 57,634 2,532,438 SAFECO Corp. 14,862 650,807 St. Paul Travelers Cos., Inc. (The) 71,107 2,891,922 Torchmark Corp. 12,075 628,383 UnumProvident Corp. 30,962 481,459 XL Capital Ltd. Class A 14,607 1,115,244 -------------- 52,037,257 -------------- INTERNET & CATALOG RETAIL (0.5%) eBay, Inc. (a) 68,997 5,507,341 --------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 67 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.3%) Yahoo!, Inc. (a) 71,034 $ 3,584,376 -------------- IT SERVICES (1.2%) Affiliated Computer Services, Inc. Class A (a) 14,500 703,250 Automatic Data Processing, Inc. 62,522 2,739,089 Computer Sciences Corp. (a) 20,107 822,578 Convergys Corp. (a) 15,711 228,124 Electronic Data Systems Corp. 51,118 934,948 First Data Corp. 94,747 4,300,566 Fiserv, Inc. (a) 20,731 757,925 Paychex, Inc. 40,265 1,501,079 Sabre Holdings Corp. 15,269 360,196 SunGard Data Systems, Inc. (a) 30,411 792,815 Unisys Corp. (a) 35,178 458,369 -------------- 13,598,939 -------------- LEISURE EQUIPMENT & PRODUCTS (0.2%) Brunswick Corp. 9,643 396,424 Eastman Kodak Co. 30,676 791,134 Hasbro, Inc. 18,616 351,656 Mattel, Inc. 46,809 793,881 -------------- 2,333,095 -------------- MACHINERY (1.4%) Caterpillar, Inc. 37,039 2,879,041 Crane Co. 6,385 196,722 Cummins, Inc. 4,396 262,925 Danaher Corp. 16,371 1,514,645 Deere & Co. 26,018 1,770,265 Dover Corp. 21,726 869,692 Eaton Corp. 16,174 960,412 Illinois Tool Works, Inc. 32,936 2,839,413 Ingersoll-Rand Co. Class A 18,831 1,215,541 ITT Industries, Inc. 9,815 778,231 Navistar International Corp. (a) 7,268 328,150 PACCAR, Inc. 18,669 1,054,052 Pall Corp. 13,207 314,062 Parker-Hannifin Corp. 12,602 696,765 -------------- 15,679,916 -------------- MEDIA (3.6%) Clear Channel Communications, Inc. 65,835 2,731,494 Comcast Corp. Class A (a) 239,984 7,223,519 Dow Jones & Co., Inc. 8,750 403,288 Gannett Co., Inc. 28,824 2,498,464 Interpublic Group of Cos., Inc. (The) (a) 44,325 695,459 Knight-Ridder, Inc. 8,585 664,822 McGraw-Hill Cos., Inc. (The) 20,433 1,611,346 Meredith Corp. 5,310 270,491
SHARES VALUE MEDIA (CONTINUED) New York Times Co. (The) Class A 16,194 $ 741,847 Omnicom Group, Inc. 20,379 1,620,334 Time Warner, Inc. (a) 486,190 8,177,716 Tribune Co. 35,237 1,687,148 Univision Communications, Inc. Class A (a) 34,466 1,166,674 Viacom, Inc. Class B 186,507 7,208,496 Walt Disney Co. (The) 218,790 5,038,734 -------------- 41,739,832 -------------- METALS & MINING (0.6%) Alcoa, Inc. 92,818 2,854,153 Allegheny Technologies, Inc. 8,627 88,168 Freeport-McMoRan Copper & Gold, Inc. Class B 18,315 558,607 Newmont Mining Corp. 46,252 1,729,825 Nucor Corp. 8,332 494,921 Phelps Dodge Corp. (a) 9,990 657,642 United States Steel Corp. 12,095 346,280 Worthington Industries, Inc. 9,225 166,511 -------------- 6,896,107 -------------- MULTILINE RETAIL (1.0%) Big Lots, Inc. (a) 12,421 175,881 Dillard's, Inc. Class A 9,019 151,790 Dollar General Corp. 35,831 672,190 Family Dollar Stores, Inc. 18,387 590,958 Federated Department Stores, Inc. 19,276 944,524 J.C. Penney Co., Inc. Holding Co. 28,852 976,929 Kohl's Corp. (a) 36,392 1,520,822 May Department Stores Co. (The) 30,970 953,876 Nordstrom, Inc. 14,594 519,984 Sears, Roebuck and Co. 23,779 952,349 Target Corp. 97,430 4,225,539 -------------- 11,684,842 -------------- MULTI-UTILITIES & UNREGULATED POWER (0.4%) AES Corp. (The) (a) 66,034 572,515 Calpine Corp. (a) 40,882 177,428 Constellation Energy Group, Inc. 17,719 681,827 Duke Energy Corp. 96,766 2,037,892 Dynegy, Inc. Class A (a) 39,935 158,143 El Paso Corp. 68,428 479,680 Williams Cos., Inc. (The) 55,448 571,114 -------------- 4,678,599 -------------- OFFICE ELECTRONICS (0.1%) Xerox Corp. (a) 84,621 1,136,460 -------------- OIL & GAS (5.1%) Amerada Hess Corp. 9,531 677,940 Anadarko Petroleum Corp. 26,619 1,426,246
68 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.
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- OIL & GAS (CONTINUED) Apache Corp. 34,781 $ 1,456,281 Ashland, Inc. 7,251 347,323 Burlington Resources, Inc. 21,169 1,424,039 ChevronTexaco Corp. 114,140 10,443,810 ConocoPhillips 73,098 5,211,887 Devon Energy Corp. 24,977 1,528,592 EOG Resources, Inc. 12,346 608,041 *ExxonMobil Corp. 699,311 29,755,683 Kerr-McGee Corp. 10,808 528,835 Marathon Oil Corp. 36,288 1,217,825 Occidental Petroleum Corp. 41,008 1,935,578 Sunoco, Inc. 8,226 517,415 Unocal Corp. 27,691 997,984 Valero Energy Corp. 7,100 452,696 -------------- 58,530,175 -------------- PAPER & FOREST PRODUCTS (0.5%) Boise Cascade Corp. 9,157 308,866 Georgia-Pacific Corp. 26,916 944,752 International Paper Co. 51,377 2,071,521 Louisiana-Pacific Corp. 11,186 263,878 MeadWestvaco Corp. 21,463 561,257 Weyerhaeuser Co. 23,793 1,408,545 -------------- 5,558,819 -------------- PERSONAL PRODUCTS (0.6%) Alberto-Culver Co. 9,448 445,568 Avon Products, Inc. 25,170 2,114,280 Gillette Co. (The) 107,501 4,398,941 -------------- 6,958,789 -------------- PHARMACEUTICALS (8.0%) Abbott Laboratories 166,737 7,339,763 Allergan, Inc. 13,848 1,219,316 Bristol-Myers Squibb Co. 207,340 5,204,234 Forest Laboratories, Inc. (a) 39,409 2,541,092 *Johnson & Johnson 316,459 17,098,280 King Pharmaceuticals, Inc. (a) 25,794 444,947 Lilly (Eli) & Co. 120,117 8,865,836 Merck & Co., Inc. 237,515 11,163,205 Mylan Laboratories, Inc. 28,600 655,226 *Pfizer, Inc. 813,143 29,077,994 Schering-Plough Corp. 157,269 2,631,110 Watson Pharmaceuticals, Inc. (a) 11,443 407,485 Wyeth 142,441 5,422,729 -------------- 92,071,217 -------------- REAL ESTATE (0.4%) Apartment Investment & Management Co. Class A 9,989 281,390 Equity Office Properties Trust 42,712 1,075,061 Equity Residential 29,093 798,894 Plum Creek Timber Co., Inc. 19,805 585,436
SHARES VALUE REAL ESTATE (CONTINUED) ProLogis 19,198 $ 564,805 Simon Property Group, Inc. 21,795 1,050,737 -------------- 4,356,323 -------------- ROAD & RAIL (0.4%) Burlington Northern Santa Fe Corp. 39,871 1,303,782 CSX Corp. 22,918 704,958 Norfolk Southern Corp. 41,754 994,580 Union Pacific Corp. 27,595 1,626,173 -------------- 4,629,493 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.3%) Advanced Micro Devices, Inc. (a) 36,943 525,329 Altera Corp. (a) 40,968 819,770 Analog Devices, Inc. 39,875 1,698,675 Applied Materials, Inc. (a) 179,558 3,273,342 Applied Micro Circuits Corp. (a) 32,588 143,713 Broadcom Corp. Class A (a) 31,888 1,204,091 *Intel Corp. 691,450 17,791,009 KLA-Tencor Corp. (a) 20,768 865,403 Linear Technology Corp. 33,483 1,192,999 LSI Logic Corp. (a) 40,359 300,271 Maxim Integrated Products, Inc. 35,095 1,614,019 Micron Technology, Inc. (a) 65,301 889,400 National Semiconductor Corp. (a) 18,970 773,786 Novellus Systems, Inc. (a) 16,059 465,069 NVIDIA Corp. (a) 16,951 348,174 PMC-Sierra, Inc. (a) 18,043 219,222 Teradyne, Inc. (a) 20,253 412,756 Texas Instruments, Inc. 185,164 4,647,616 Xilinx, Inc. 36,265 1,219,592 -------------- 38,404,236 -------------- SOFTWARE (4.1%) Adobe Systems, Inc. 25,469 1,052,888 Autodesk, Inc. 11,990 401,665 BMC Software, Inc. (a) 24,933 431,341 Citrix Systems, Inc. (a) 17,472 332,842 Computer Associates International, Inc. 62,187 1,667,233 Compuware Corp. (a) 40,609 310,659 Electronic Arts, Inc. (a) 31,611 1,600,149 Intuit, Inc. (a) 21,227 901,511 Mercury Interactive Corp. (a) 9,200 391,460 *Microsoft Corp. (c) 1,151,049 29,892,743 Novell, Inc. (a) 41,699 401,978 Oracle Corp. (a) 558,071 6,261,557 Parametric Technology Corp. (a) 28,220 129,248 PeopleSoft, Inc. (a) 38,900 656,632 Siebel Systems, Inc. (a) 52,184 536,451
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 69 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ---------------------------------------------------------------------------------- SOFTWARE (CONTINUED) Symantec Corp. (a) 33,207 $ 1,495,975 VERITAS Software Corp. (a) 45,529 1,214,258 -------------- 47,678,590 -------------- SPECIALTY RETAIL (2.3%) AutoNation, Inc. (a) 29,380 500,048 AutoZone, Inc. (a) 9,359 819,568 Bed Bath & Beyond, Inc. (a) 31,549 1,171,099 Best Buy Co., Inc. 34,518 1,872,601 Circuit City Stores, Inc. 22,252 259,903 Gap, Inc. (The) 95,559 2,103,254 Home Depot, Inc. (The) 243,237 8,559,510 Limited Brands 49,667 1,025,127 Lowe's Cos., Inc. 84,009 4,373,508 Office Depot, Inc. (a) 33,105 579,669 RadioShack Corp. 18,022 554,357 Sherwin-Williams Co. (The) 15,725 598,336 Staples, Inc. 52,335 1,348,150 Tiffany & Co. 15,515 605,085 TJX Cos., Inc. (The) 54,550 1,340,293 Toys "R" Us, Inc. (a) 22,869 353,326 -------------- 26,063,834 -------------- TEXTILES, APPAREL & LUXURY GOODS (0.3%) Jones Apparel Group, Inc. 13,702 501,493 Liz Claiborne, Inc. 11,505 403,825 NIKE, Inc. Class B 28,367 2,041,006 Reebok International Ltd. 6,392 232,541 V.F. Corp. 11,568 533,979 -------------- 3,712,844 -------------- THRIFTS & MORTGAGE FINANCE (1.7%) Countrywide Financial Corp. 29,277 1,736,126 Fannie Mae 103,575 7,117,674 Freddie Mac 73,390 4,285,976 Golden West Financial Corp. 16,302 1,713,503 MGIC Investment Corp. 10,572 778,311 Washington Mutual, Inc. 96,040 3,783,015 -------------- 19,414,605 -------------- TOBACCO (1.2%) Altria Group, Inc. 218,561 12,103,908 R.J. Reynolds Tobacco Holdings, Inc. 9,098 589,278 UST, Inc. 17,987 669,296 -------------- 13,362,482 --------------
SHARES VALUE TRADING COMPANIES & DISTRIBUTORS (0.0%) (B) Grainger (W.W.), Inc. 9,778 $ 512,367 -------------- WIRELESS TELECOMMUNICATION SERVICES (0.6%) AT&T Wireless Services, Inc. (a) 290,941 4,017,895 Nextel Communications, Inc. Class A (a) 117,447 2,802,286 -------------- 6,820,181 -------------- Total Common Stocks (Cost $1,052,160,038) 1,098,833,454(d) -------------- PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (4.4%) ---------------------------------------------------------------------------------- COMMERCIAL PAPER (3.2%) 7-Eleven, Inc. 1.02%, due 6/15/04 $ 8,200,000 8,189,542 1.03%, due 5/28/04 3,235,000 3,232,500 American Honda Finance Corp. 1.00%, due 5/5/04 1,600,000 1,599,822 1.00%, due 5/11/04 9,800,000 9,797,274 1.01%, due 5/5/04 600,000 599,933 1.01%, due 5/11/04 900,000 899,747 Dealers Capital Access Trust 1.06%, due 6/4/04 4,200,000 4,195,792 HBOS Treasury Services PLC 1.04%, due 5/27/04 1,400,000 1,398,953 Hitachi Credit America Corp. 1.01%, due 5/13/04 2,200,000 2,199,259 International Lease Finance Corp. 1.03%, due 5/25/04 700,000 699,519 Toyota Credit Puerto Rico 1.03%, due 5/25/04 500,000 499,657 Yorkshire Building Society 1.03%, due 5/26/04 2,200,000 2,198,425 1.04%, due 5/26/04 1,700,000 1,698,777 -------------- Total Commercial Paper (Cost $37,209,200) 37,209,200 --------------
70 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.
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) ---------------------------------------------------------------------------------- U.S. GOVERNMENT (1.2%) United States Treasury Bills 0.89%, due 7/15/04 (c) $ 2,900,000 $ 2,894,473 0.91%, due 7/8/04 (c) 10,900,000 10,881,274 -------------- Total U.S. Government (Cost $13,775,853) 13,775,747 -------------- Total Short-Term Investments (Cost $50,985,053) 50,984,947 -------------- Total Investments (Cost $1,103,145,091) (e) 99.9% 1,149,818,401(f) Cash and Other Assets, Less Liabilities 0.1 317,701 ------ ------------- Net Assets 100.0% $1,150,136,102 ====== ==============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 71
CONTRACTS UNREALIZED LONG DEPRECIATION (G) FUTURES CONTRACTS (-0.1%) ------------------------------------------------------------------------------------ Standard & Poor's 500 Index June 2004 188 $ (1,507,228) Mini June 2004 17 (4,392) -------------- Total Futures Contracts (Settlement Value $52,926,885) (d) $ (1,511,620) ==============
(a) Non-income producing security. (b) Less than one tenth of a percent. (c) Segregated or designated as collateral for futures contracts. (d) The combined market value of common stocks and settle- ment value of Standard & Poor's 500 Index futures contracts represents 100.1% of net assets. (e) The cost for federal income tax purposes is $1,107,133,096. (f) At April 30, 2004 net unrealized appreciation was $42,685,305, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $158,103,779 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $115,418,474. (g) Represents the difference between the value of the con- tracts at the time they were opened and the value at April 30, 2004.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 71 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $1,103,145,091) $1,149,818,401 Cash 7,913 Receivables: Fund shares sold 2,257,769 Dividends 1,391,692 Other assets 20,492 -------------- Total assets 1,153,496,267 -------------- LIABILITIES: Payables: Investment securities purchased 976,000 Fund shares redeemed 852,654 Variation margin on futures contracts 771,667 Transfer agent 338,791 Manager 192,997 Professional 82,049 NYLIFE Distributors 49,558 Shareholder communication 48,951 Custodian 27,369 Directors 5,691 Accrued expenses 14,438 -------------- Total liabilities 3,360,165 -------------- Net assets $1,150,136,102 ============== COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 500 million shares authorized Class A $ 9,341 Class I 35,609 Additional paid-in capital 1,137,528,987 Accumulated undistributed net investment income 4,519,580 Accumulated net realized loss on investments and futures contracts (37,119,105) Net unrealized appreciation on investments and futures contracts 45,161,690 -------------- Net assets $1,150,136,102 ============== CLASS A Net assets applicable to outstanding shares $ 237,650,869 ============== Shares of capital stock outstanding 9,341,438 ============== Net asset value per share outstanding $ 25.44 Maximum sales charge (3.00% of offering price) 0.79 -------------- Maximum offering price per share outstanding $ 26.23 ============== CLASS I Net assets applicable to outstanding shares $ 912,485,233 ============== Shares of capital stock outstanding 35,609,025 ============== Net asset value and offering price per share outstanding $ 25.63 ==============
72 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, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends $ 8,602,554 Interest 392,402 ----------- Total income 8,994,956 ----------- EXPENSES: Manager 2,753,945 Transfer agent 192,002 Service -- Class A 185,699 Service -- Service Class 93,676 Professional 122,121 Custodian 66,086 Shareholder communication 62,008 Directors 36,081 Registration 13,738 Miscellaneous 28,682 ----------- Total expenses before reimbursement 3,554,038 Expense reimbursement from Manager (1,622,296) ----------- Net expenses 1,931,742 ----------- Net investment income 7,063,214 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Security transactions (2,679,335) Futures transactions 7,890,356 ----------- Net realized gain on investments 5,211,021 ----------- Net change in unrealized appreciation (depreciation) on investments: Security transactions 49,967,663 Futures transactions (2,252,296) ----------- Net unrealized gain on investments 47,715,367 ----------- Net realized and unrealized gain on investments 52,926,388 ----------- Net increase in net assets resulting from operations $59,989,602 ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 73 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE IN NET ASSETS: Operations: Net investment income $ 7,063,214 $ 10,878,788 Net realized gain on investments and futures contracts 5,211,021 2,197,918 Net change in unrealized appreciation (depreciation) on investments and futures contracts 47,715,367 138,389,476 ------------------------------ Net increase in net assets resulting from operations 59,989,602 151,466,182 ------------------------------ Dividends to shareholders: From net investment income: Class I (9,637,543) (7,726,950) Service Class (2,029,294) (1,659,778) ------------------------------ Total dividends to shareholders (11,666,837) (9,386,728) ------------------------------ Capital share transactions: Net proceeds from sale of shares: Class A 270,105,432 -- Class I 191,904,616 293,140,422 Service Class 16,110,983 105,806,918 Net asset value of shares issued to shareholders in reinvestment of dividends: Class I 9,634,831 7,719,756 Service Class 2,029,015 1,659,778 ------------------------------ 489,784,877 408,326,874 Cost of shares redeemed: Class A (31,820,360) -- Class I (105,456,500) (164,877,116) Service Class (225,114,946) (66,922,507) ------------------------------ (362,391,806) (231,799,623) ------------------------------ Increase in net assets derived from capital share transactions 127,393,071 176,527,251 ------------------------------ Net increase in net assets 175,715,836 318,606,705 NET ASSETS: Beginning of period 974,420,266 655,813,561 ------------------------------ End of period $1,150,136,102 $ 974,420,266 ============================== Accumulated undistributed net investment income at end of period $ 4,519,580 $ 9,123,203 ==============================
74 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
CLASS A CLASS I ------------ --------------------------------------------------------------------------- JANUARY 1, JANUARY 1, 2004** SIX MONTHS 1999 THROUGH ENDED THROUGH APRIL 30, APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, 2004*** 2004*** 2003 2002 2001 2000 1999* Net asset value at beginning of period $ 25.46 $ 24.43 $ 20.57 $ 25.84 $ 37.38 $ 36.99 $ 33.39 -------- -------- -------- -------- -------- ---------- ---------- Net investment income 0.08 0.15 0.32(a) 0.31 0.30(a) 0.37 0.31 Net realized and unrealized gain (loss) on investments (0.10) 1.34 3.85 (3.86) (9.06) 1.86 3.60 -------- -------- -------- -------- -------- ---------- ---------- Total from investment operations (0.02) 1.49 4.17 (3.55) (8.76) 2.23 3.91 -------- -------- -------- -------- -------- ---------- ---------- Less dividends and distributions: From net investment income -- (0.29) (0.31) (0.32) (0.36) (0.38) -- From net realized gain on investments -- -- -- (1.40) (2.42) (1.46) (0.31) -------- -------- -------- -------- -------- ---------- ---------- Total dividends and distributions -- (0.29) (0.31) (1.72) (2.78) (1.84) (0.31) -------- -------- -------- -------- -------- ---------- ---------- Net asset value at end of period $ 25.44 $ 25.63 $ 24.43 $ 20.57 $ 25.84 $ 37.38 $ 36.99 ======== ======== ======== ======== ======== ========== ========== Total investment return (b) (0.08%) 6.12% 20.59% (15.23%) (24.90%) 5.98% 11.80% Ratios (to average net assets)/Supplemental Data: Net investment income 1.04%+ 1.33%+ 1.46% 1.31% 1.03% 0.95% 1.06%+ Net expenses 0.59%+ 0.30%+ 0.30% 0.30% 0.30% 0.30% 0.30%+ Expenses (before reimbursement) 0.88%+ 0.59%+ 0.61% 0.59% 0.57% 0.54% 0.55%+ Portfolio turnover rate 1% 1% 3% 4% 5% 11% 7% Net assets at end of period (in 000's) $237,651 $912,485 $777,843 $527,277 $612,937 $1,503,224 $1,641,591 CLASS I ------------ YEAR ENDED DECEMBER 31, 1998 Net asset value at beginning of period $ 27.05 ---------- Net investment income 0.38 Net realized and unrealized gain (loss) on investments 7.36 ---------- Total from investment operations 7.74 ---------- Less dividends and distributions: From net investment income (0.38) From net realized gain on investments (1.02) ---------- Total dividends and distributions (1.40) ---------- Net asset value at end of period $ 33.39 ========== Total investment return (b) 28.62% Ratios (to average net assets)/Supplemental Data: Net investment income 1.29% Net expenses 0.30% Expenses (before reimbursement) 0.56% Portfolio turnover rate 8% Net assets at end of period (in 000's) $1,472,263
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Per share data based on average shares outstanding during the period. (b) Total return is calculated exclusive of sales charges and is not annualized.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 75 MAINSTAY SMALL CAP OPPORTUNITY FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS RUSSELL 2000(R) VALUE INDEX(1) 9.09% 42.45% 12.92% 12.90% S&P 500(R) INDEX(2) 6.27 22.88 -2.26 11.36 S&P SMALLCAP 600(R) INDEX(3) 8.47 39.94 10.92 12.17 LIPPER SMALL CAP VALUE FUNDS INDEX(4) 10.46 46.70 13.68 12.38 AVERAGE LIPPER SMALL-CAP VALUE FUND(5) 10.45 42.48 13.58 13.28
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 3.83% 37.84% 8.78% 11.72% Excluding sales 9.87 45.86 10.02 12.35 charges
(in thousands, with sales charges)
MAINSTAY SMALL CAP OPPORTUNITY LIPPER SM-CAP RUSSELL 2000 S&P SMALL CAP FUND S&P 500 INDEX VALUE INDEX VALUE INDEX(1) 600 INDEX --------------- ------------- ------------- -------------- ------------- 4/30/94 945.00 1000.00 1000.00 1000.00 1000.00 940.00 1175.00 1061.00 1056.00 1060.00 1185.00 1530.00 1307.00 1333.00 1439.00 1379.00 1914.00 1439.00 1527.00 1493.00 2110.00 2700.00 2044.00 2165.00 2191.00 1879.00 3289.00 1693.00 1833.00 1878.00 1893.00 3622.00 1817.00 1913.00 2262.00 1940.00 3152.00 2208.00 2377.00 2446.00 2342.00 2754.00 2648.00 2911.00 2850.00 2077.00 2388.00 2191.00 2362.00 2253.00 4/30/04 3029.00 2934.00 3214.00 3365.00 3153.00
-- MainStay Small Cap -- S&P SmallCap 600 -- S&P 500 Index Opportunity Fund Index -- Lipper Small Cap -- Russell 2000 Value Value Funds Index Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 4.42% 39.73% 8.94% 11.32% Excluding sales charges 9.42 44.73 9.22 11.32
(in thousands, with sales charges)
MAINSTAY SMALL CAP OPPORTUNITY LIPPER SM-CAP RUSSELL 2000 S&P SMALL CAP FUND S&P 500 INDEX VALUE INDEX VALUE INDEX(1) 600 INDEX --------------- ------------- ------------- -------------- ------------- 4/30/94 1000.00 1000.00 1000.00 1000.00 1000.00 986.00 1175.00 1061.00 1056.00 1060.00 1231.00 1530.00 1307.00 1333.00 1439.00 1413.00 1914.00 1439.00 1527.00 1493.00 2134.00 2700.00 2044.00 2165.00 2191.00 1879.00 3289.00 1693.00 1833.00 1878.00 1880.00 3622.00 1817.00 1913.00 2262.00 1912.00 3152.00 2208.00 2377.00 2446.00 2290.00 2754.00 2648.00 2911.00 2850.00 2019.00 2388.00 2191.00 2362.00 2253.00 4/30/04 2921.00 2934.00 3214.00 3365.00 3153.00
-- MainStay Small Cap -- S&P SmallCap 600 -- S&P 500 Index Opportunity Fund Index -- Lipper Small Cap -- Russell 2000 Value Value Funds Index Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A and B shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/12/87) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. Prior to 1/1/04, the Fund offered Class L shares, which were subject to a 1% sales charge and a 1% CDSC on redemptions within one year of purchase. Performance for Class L shares, first offered 12/30/02, includes the historical performance of Class I shares from inception through 12/29/02 adjusted to reflect the applicable sales charge, CDSC, and fees and expenses for such shares. Effective 1/1/04, all outstanding Class L shares of the Fund were converted and/or redesignated Class C shares. THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 76 MainStay Small Cap Opportunity Fund CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 8.36% 43.76% 9.23% 11.33% Excluding sales charges 9.36 44.76 9.23 11.33
(in thousands, with sales charges)
MAINSTAY SMALL CAP OPPORTUNITY LIPPER SM-CAP RUSSELL 2000 S&P SMALL CAP FUND S&P 500 INDEX VALUE INDEX VALUE INDEX(1) 600 INDEX --------------- ------------- ------------- -------------- ------------- 4/30/94 1000.00 1000.00 1000.00 1000.00 1000.00 985.00 1175.00 1061.00 1056.00 1060.00 1231.00 1530.00 1307.00 1333.00 1439.00 1414.00 1914.00 1439.00 1527.00 1493.00 2134.00 2700.00 2044.00 2165.00 2191.00 1881.00 3289.00 1693.00 1833.00 1878.00 1882.00 3622.00 1817.00 1913.00 2262.00 1914.00 3152.00 2208.00 2377.00 2446.00 2291.00 2754.00 2648.00 2911.00 2850.00 2021.00 2388.00 2191.00 2362.00 2253.00 4/30/04 2925.00 2934.00 3214.00 3365.00 3153.00
-- MainStay Small Cap -- S&P SmallCap 600 -- S&P 500 Index Opportunity Fund Index -- Lipper Small Cap -- Russell 2000 Value Value Funds Index Index
CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales 9.86% 46.06% 10.27% 12.65% charges
(in thousands, with sales charges)
MAINSTAY SMALL LIPPER SMALL CAP CAP OPPORTUNITY RUSSELL 2000 S&P SMALL CAP VALUE FUNDS FUND S&P 500 INDEX VALUE INDEX 600 INDEX INDEX --------------- ------------- ------------ ------------- ---------------- 4/30/94 1000.00 1000.00 1000.00 1000.00 1000.00 998.00 1175.00 1056.00 1060.00 1061.00 1261.00 1530.00 1333.00 1439.00 1307.00 1473.00 1914.00 1527.00 1493.00 1439.00 2260.00 2700.00 2165.00 2191.00 2044.00 2018.00 3289.00 1833.00 1878.00 1693.00 2039.00 3622.00 1913.00 2262.00 1817.00 2095.00 3152.00 2377.00 2446.00 2208.00 2533.00 2754.00 2911.00 2850.00 2648.00 2253.00 2388.00 2362.00 2253.00 2191.00 4/30/04 3291.00 2934.00 3365.00 3153.00 3214.00
-- MainStay Small Cap -- S&P SmallCap 600 -- S&P 500 Index Opportunity Fund Index -- Lipper Small Cap -- Russell 2000 Value Value Funds Index Index
1. The Russell 2000(R) Value Index is an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000(R) Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 3,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. "S&P 500(R)" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500(R) is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. S&P SmallCap 600(R) Index is a market-value weighted benchmark of 600 small-capitalization common stocks. Results assume reinvestment of all dividend and capital-gain distributions. An investment cannot be made directly into an index. 4. Lipper Small Cap Value Funds Index is an unmanaged index that tracks the performance of the 30 largest small-company value funds, after expenses. Results assume reinvestment of all dividend and capital-gain distributions. An investment cannot be made directly into an index. 5. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 77 $1,000 INVESTED IN MAINSTAY SMALL CAP OPPORTUNITY FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $1,011 $ 6 $1,044 $ 6 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $1,008 $ 9 $1,041 $ 9 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(3) $1,000 $1,095 $14 $1,037 $14 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,099 $ 6 $1,044 $ 6 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares and Class B shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares and Class B shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $10 and $14, respectively, and the ending account value would be $1,040 and $1,037, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 78 MainStay Small Cap Opportunity Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Wesley G. McCain and Kathy A. O'Connor of New York Life Investment Management LLC MAINSTAY SMALL CAP OPPORTUNITY FUND (FORMERLY ECLIPSE SMALL CAP VALUE FUND) WHAT MAJOR FACTORS INFLUENCED THE STOCK MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? All broadly watched equity indices provided positive performance for the six months ended April 30, 2004. Small-capitalization stocks outperformed large- capitalization stocks. The market favored the value style over the growth style of investing across all capitalization levels. For much of the semiannual period, positive investor sentiment boosted the U.S. equity markets. Low interest rates and indications of rebounding economic activity helped to fuel an optimistic outlook. In April, however, heightened geopolitical tensions and growing concerns over potential interest-rate increases contributed to market uncertainty. WHAT FACTORS MOST SIGNIFICANTLY AFFECTED FUND PERFORMANCE DURING THE SEMIANNUAL PERIOD? The relative performance of Fund holdings in the real estate, energy, transportation, and media industry groups was stronger than that of related stocks in the Fund's benchmark, the Russell 2000(R) Value Index.(1) The Fund's relative performance was also enhanced by its overweighted exposure to the bottom 25% of companies within the Russell 2000(R) Value Index, as measured by market capitalization. For the six months ended April 30, 2004, these smaller small-cap companies outperformed the larger small-cap companies in the Index. Unlike the Index, which has a larger weighting in securities with larger market capitalizations, the Fund attempts to have relatively equal weightings among the securities in its portfolio. It is important to note that the Fund was invested in some, but not all, of the companies in the Russell 2000(R) Value Index. WHAT WERE SOME OF THE FUND'S STRONG PERFORMERS DURING THE REPORTING PERIOD? Wireless telecommunication services company Arch Wireless (+117.0%)(2) provided outstanding results. Other strong performers included Harvest Natural Resources (+110.0%), Ocwen Financial (+104.4%), Petroleum Development (+84.9%), and EnPro Industries (+83.1%). WHICH STOCKS UNDERPERFORMED? Quovadx (-64.4%), which operates in the Internet software & services industry, was the Fund's worst-performing stock during the reporting period. Brightpoint (-59.4%), Time Warner Telecom (-57.9%), Bookham Technology (-57.6%), and Friedman's (-46.3%) also detracted from the Fund's results. WERE THERE ANY SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD? The Fund purchases stocks that have relatively improving operating characteristics and are relatively undervalued based on our proprietary model. Among the securities that fit the Fund's purchase criteria during the reporting period were Petroleum Development, Titanium Metals, Nuevo Energy, Res-Care, and Lakes Entertainment. WHAT STOCKS DID THE FUND SELL? The Fund sells stocks that exhibit deteriorating operating results and/or are relatively overvalued. During the reporting period, Enesco Group, R&G Financial, Dura Automotive Systems, and New Focus were among the stocks that were eliminated from the Fund's portfolio based on the Fund's proprietary sell disciplines. DID THE FUND CHANGE ITS INDUSTRY-GROUP WEIGHTINGS? Weighting changes in the Fund result from a combination of security performance, industry performance, and the Fund's proprietary security selection process. From the end of October 2003 to the end of April 2004, the Fund increased its weighting in the insurance industry group from 7.8% to 14.4%, in Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Percentages reflect total returns of Fund holdings in the securities mentioned, including purchases and sales, for the six months ended 4/30/04, or for the portion of the reporting period such securities were held in the Fund, if shorter. Stocks of small companies may be subject to greater price volatility, significantly lower trading volumes, and greater spreads between bid and ask prices than stocks of larger companies. Small companies may be more vulnerable to adverse business or market development than mid- or large-capitalization companies. 1. See footnote on page 77 for more information on the Russell 2000(R) Value Index. 2. Percentages reflect total returns of Fund holdings in the securities mentioned, including purchases and sales, for the six months ended 4/30/04, or for the portion of the reporting period such securities were held in the Fund, if shorter. www.mainstayfunds.com 79 health care equipment & services from 1.5% to 4.7%, and in energy from 5.2% to 8.2%. The shifts reflected new purchases and improved performance among these industry groups relative to other industry groups. Over the same period, the Fund decreased its weightings in banks from 16.7% to 10.8%, in food, beverage & tobacco from 9.4% to 3.8%, and in telecommunication services from 7.0% to 2.0%. The decline in these industry group weightings reflected position sales and weaker relative performance of the groups. HOW DO THE FUND'S WEIGHTINGS DIFFER FROM THOSE OF ITS BENCHMARK? As of April 30, 2004, the Fund was overweighted relative to the Russell 2000(R) Value Index in the insurance, energy, consumer durables & apparel, and health care equipment & services industry groups. The Fund's overweighted positions in insurance, energy, and consumer durables & apparel helped Fund performance. At the end of the reporting period, the Fund was underweighted relative to the Russell 2000(R) Value Index in the capital goods, materials, and banks industry groups. Security selection in each of these industry groups was quite strong. Although the Fund was underweighted in capital goods and banks, these industry groups made a relatively strong contribution to Fund performance. In the materials industry group, the Fund's underweighted position detracted from relative performance. WHAT DO YOU ANTICIPATE GOING FORWARD? We will continue to utilize the Fund's proprietary quantitative methodologies to select small-capitalization stocks of companies that our model indicates are relatively undervalued and have strong operating characteristics. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 100.10 Short-Term Investments 0.50 Liabilities in Excess of Cash and Other Assets -0.60
80 MainStay Small Cap Opportunity Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
SHARES VALUE COMMON STOCKS (100.1%)+ --------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.1%) Ducommun, Inc. (a) 10,800 $ 254,880 ------------- AIR FREIGHT & LOGISTICS (0.2%) Hub Group, Inc. Class A (a) 12,000 414,000 ------------- AUTO COMPONENTS (0.1%) Tenneco Automotive, Inc. (a) 20,400 281,520 ------------- BIOTECHNOLOGY (0.2%) Caliper Life Sciences, Inc. (a) 65,000 436,800 ------------- BUILDING PRODUCTS (0.9%) Jacuzzi Brands, Inc. (a) 196,300 1,715,662 ------------- CAPITAL MARKETS (5.2%) iShares Russell 2000 Index Fund (b) 22,800 2,533,308 iShares Russell 2000 Value Index Fund (b) 15,800 2,556,440 iShares S&P SmallCap 600 Index Fund (b) 18,900 2,586,654 iShares S&P SmallCap 600/ BARRA Value Index Fund (b) 25,200 2,590,056 SWS Group, Inc. 4,000 64,960 ------------- 10,331,418 ------------- CHEMICALS (0.6%) Ethyl Corp. (a) 19,600 364,952 Octel Corp. 400 9,320 OM Group, Inc. (a) 29,800 758,410 ------------- 1,132,682 ------------- COMMERCIAL BANKS (4.7%) BFC Financial Corp. Class A (a) 83,663 1,087,619 Center Financial Corp. 29,500 427,750 Century Bancorp, Inc. Class A 6,800 222,700 Columbia Bancorp 8,300 240,700 F.N.B. Corp. 1,900 37,240 First Citizens BancShares, Inc. Class A 6,800 833,068 First Financial Corp. 7,000 206,500 First M&F Corp. 6,900 237,636 First Republic Bank 15,000 571,500 FLAG Financial Corp. 6,100 79,300 FNB Corp. 5,700 114,000 Humboldt Bancorp 72,400 1,388,632 Independent Bank Corp. 34,476 862,934 Nara Bancorp, Inc. 2,900 83,520
SHARES VALUE COMMERCIAL BANKS (CONTINUED) Oak Hill Financial, Inc. 8,800 $ 284,944 Provident Bankshares Corp. 33,000 929,610 Republic Bancorp, Inc. Class A 11,870 222,563 S&T Bancorp, Inc. 14,500 412,235 Southern Financial Bancorp, Inc. 2,880 121,047 Southside Bancshares, Inc. 3,835 70,602 State Financial Services Corp. Class A 7,100 207,817 Taylor Capital Group, Inc. 2,500 51,925 Trust Company of New Jersey (The) 2,600 96,252 U.S.B. Holding Co., Inc. 4,400 92,620 West Coast Bancorp 19,300 424,600 ------------- 9,307,314 ------------- COMMERCIAL SERVICES & SUPPLIES (4.1%) Ambassadors International, Inc. 48,200 624,190 Brink's Co. (The) 10,200 282,846 Century Business Services, Inc. (a) 94,000 388,220 Consolidated Graphics, Inc. (a) 14,500 541,140 Geo Group, Inc. (The) (a) 17,500 411,250 Gundle/SLT Environmental, Inc. (a) 2,300 42,389 Imagistics International, Inc. (a) 11,900 481,831 Mail-Well, Inc. (a) 216,100 875,205 MemberWorks, Inc. (a) 34,700 1,023,997 *United Rentals, Inc. (a) 201,600 3,467,520 ------------- 8,138,588 ------------- COMMUNICATIONS EQUIPMENT (1.3%) Audiovox Corp. Class A (a) 35,700 539,070 Bookham Technology PLC ADR (a)(c) 278,954 387,745 CommScope, Inc. (a) 14,600 255,646 Digi International, Inc. (a) 80,600 783,432 Enterasys Networks, Inc. (a) 9,100 19,110 MRV Communications, Inc. (a) 252,300 592,905 ------------- 2,577,908 ------------- COMPUTERS & PERIPHERALS (1.0%) Intergraph Corp. (a) 34,100 859,661 Komag, Inc. (a) 5,600 71,176 Quantum Corp. (a) 15,900 49,767 Western Digital Corp. (a) 128,400 1,037,472 ------------- 2,018,076 ------------- CONSTRUCTION & ENGINEERING (1.8%) Comfort Systems USA, Inc. (a) 80,200 546,964 Perini Corp. (a) 86,100 1,214,010
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 81 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) --------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (CONTINUED) Quanta Services, Inc. (a) 4,200 $ 22,974 Washington Group International, Inc. (a) 46,900 1,694,028 ------------- 3,477,976 ------------- CONSTRUCTION MATERIALS (0.3%) Texas Industries, Inc. 16,900 569,699 ------------- CONSUMER FINANCE (2.4%) Advanta Corp. Class B 108,500 1,738,170 ASTA Funding, Inc. 45,200 724,556 CompuCredit Corp. (a) 400 6,628 World Acceptance Corp. (a) 152,600 2,334,780 ------------- 4,804,134 ------------- CONTAINERS & PACKAGING (0.2%) Crown Holdings, Inc. (a) 29,600 249,824 Greif, Inc. Class A 4,900 161,063 ------------- 410,887 ------------- DISTRIBUTORS (0.3%) Noland Co. 15,200 674,880 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.3%) Cincinnati Bell, Inc. (a) 168,900 667,155 ITC-DeltaCom, Inc. (a) 63,700 377,741 Primus Telecommunications Group, Inc. (a) 14,400 80,208 Time Warner Telecom, Inc. (a) 364,900 1,386,620 ------------- 2,511,724 ------------- ELECTRIC UTILITIES (0.6%) Green Mountain Power Corp. 50,400 1,288,728 ------------- ELECTRICAL EQUIPMENT (0.2%) General Cable Corp. (a) 61,000 469,700 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.5%) Brightpoint, Inc. (a) 45,625 496,856 CellStar Corp. (a) 13,700 95,489 MTS Systems Corp. 16,200 381,510 Pemstar, Inc. (a) 27,200 88,672 ------------- 1,062,527 ------------- FOOD & STAPLES RETAILING (0.9%) NeighborCare, Inc. (a) 59,600 1,379,144 Pantry, Inc. (The) (a) 8,400 167,580 Smart & Final, Inc. (a) 23,500 271,425 ------------- 1,818,149 -------------
SHARES VALUE FOOD PRODUCTS (3.7%) Cal-Maine Foods, Inc. 18,200 $ 200,928 Central Garden & Pet Co. (a) 21,900 843,369 Chiquita Brands International, Inc. (a) 8,000 144,080 Corn Products International, Inc. 7,100 301,750 John B. Sanfilippo & Son, Inc. (a) 27,200 853,264 *M & F Worldwide Corp. (a) 311,700 3,871,314 Omega Protein Corp. (a) 10,600 84,482 Pilgrim's Pride Corp. 11,700 270,621 Sanderson Farms, Inc. 20,000 743,600 Zapata Corp. (a) 1,000 58,500 ------------- 7,371,908 ------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.2%) ALARIS Medical Systems, Inc. (a) 19,800 384,516 *Dade Behring Holdings, Inc. (a) 88,500 4,071,000 ------------- 4,455,516 ------------- HEALTH CARE PROVIDERS & SERVICES (2.4%) Alderwoods Group, Inc. (a) 180,000 2,210,400 Gentiva Health Services, Inc. (a) 63,300 924,813 Mariner Health Care, Inc. (a) 14,800 267,288 MedCath Corp. (a) 20,500 311,600 Res-Care, Inc. (a) 72,400 981,744 ------------- 4,695,845 ------------- HOTELS, RESTAURANTS & LEISURE (2.7%) Aztar Corp. (a) 10,300 266,770 Dave & Buster's, Inc. (a) 24,600 457,806 Isle of Capri Casinos, Inc. (a) 47,400 995,400 La Quinta Corp. (a) 74,000 532,060 Lakes Entertainment, Inc. (a) 114,400 2,594,592 Prime Hospitality Corp. (a) 53,000 532,650 ------------- 5,379,278 ------------- HOUSEHOLD DURABLES (4.7%) Brookfield Homes Corp. 48,300 1,561,539 Emerson Radio Corp. (a) 8,900 36,223 Fedders Corp. 4,900 26,509 Hooker Furniture Corp. 13,000 296,140 *M.D.C. Holdings, Inc. 65,960 4,075,669 Standard Pacific Corp. 35,800 1,805,752 Technical Olympic USA, Inc. (a) 2,100 68,775 William Lyon Homes, Inc. (a) 16,000 1,410,560 ------------- 9,281,167 ------------- INDUSTRIAL CONGLOMERATES (0.1%) United Capital Corp. (a) 9,800 196,000 -------------
82 MainStay Small Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) --------------------------------------------------------------------------------- INSURANCE (14.4%) Allmerica Financial Corp. (a) 40,200 $ 1,397,352 AmerUs Group Co. 21,200 818,320 Argonaut Group, Inc. (a) 32,900 608,650 *Ceres Group, Inc. (a) 528,300 3,618,855 Delphi Financial Group, Inc. Class A 26,050 1,046,168 Donegal Group, Inc. Class B 62,500 1,319,375 Enstar Group, Inc. (The) (a) 4,800 211,200 FBL Financial Group, Inc. Class A 70,400 1,874,752 FPIC Insurance Group, Inc. (a) 75,700 1,672,970 Independence Holding Co. 6,200 223,200 Kansas City Life Insurance Co. 29,600 1,184,000 LandAmerica Financial Group, Inc. 49,300 2,031,653 National Western Life Insurance Co. Class A (a) 8,100 1,176,930 NYMAGIC, Inc. 34,500 883,200 Odyssey Re Holdings Corp. 2,700 64,071 Ohio Casualty Corp. (a) 15,700 308,034 Phoenix Cos., Inc. (The) 90,500 1,146,635 *Safety Insurance Group, Inc. 190,800 4,123,188 SCPIE Holdings, Inc. 65,600 541,200 Stewart Information Services Corp. 72,600 2,577,300 United Fire & Casualty Co. 42,200 1,849,626 ------------- 28,676,679 ------------- INTERNET & CATALOG RETAIL (1.1%) Blair Corp. 34,400 894,400 Systemax, Inc. (a) 243,100 1,217,931 ------------- 2,112,331 ------------- INTERNET SOFTWARE & SERVICES (3.3%) Equinix, Inc. (a) 6,100 179,279 *InfoSpace, Inc. (a) 115,200 3,765,888 Keynote Systems, Inc. (a) 220,800 2,618,688 Quovadx, Inc. (a) 26,500 61,745 ------------- 6,625,600 ------------- IT SERVICES (0.1%) Sykes Enterprises, Inc. (a) 38,600 211,142 ------------- LEISURE EQUIPMENT & PRODUCTS (0.2%) K2, Inc. (a) 28,200 413,412 Steinway Musical Instruments, Inc. (a) 200 7,250 ------------- 420,662 -------------
SHARES VALUE MACHINERY (2.7%) Alamo Group, Inc. 33,900 $ 561,723 Ampco-Pittsburgh Corp. 1,600 20,704 Astec Industries, Inc. (a) 18,500 330,040 EnPro Industries, Inc. (a) 6,600 130,680 Greenbrier Cos., Inc. (The) (a) 61,100 1,032,590 Joy Global, Inc. 82,900 2,176,125 NACCO Industries, Inc. Class A 9,900 842,292 Terex Corp. (a) 8,000 262,800 ------------- 5,356,954 ------------- MEDIA (0.4%) Carmike Cinemas, Inc. (a) 8,300 313,242 Pegasus Communications Corp. (a) 3,000 60,102 PRIMEDIA, Inc. (a) 63,300 184,836 Young Broadcasting, Inc. Class A (a) 7,800 137,748 ------------- 695,928 ------------- METALS & MINING (1.9%) Brush Engineered Materials, Inc. (a) 13,500 218,430 Carpenter Technology Corp. 9,800 267,638 Gibraltar Steel Corp. 2,200 54,120 Metal Management, Inc. (a) 140,400 2,035,800 Metals USA, Inc. (a) 44,300 560,439 Oregon Steel Mills, Inc. (a) 200 1,706 Quanex Corp. 4,800 195,840 Schnitzer Steel Industries, Inc. Class A 3,000 78,810 Steel Technologies, Inc. 300 5,787 Stillwater Mining Co. (a) 17,300 232,339 Titanium Metals Corp. (a) 1,000 79,250 ------------- 3,730,159 ------------- MULTILINE RETAIL (0.6%) Dillard's, Inc. Class A 66,600 1,120,878 ------------- MULTI-UTILITIES & UNREGULATED POWER (3.0%) Avista Corp. 20,400 344,760 *Energen Corp. 85,800 3,547,830 Westar Energy, Inc. 100,500 2,051,205 ------------- 5,943,795 ------------- OFFICE ELECTRONICS (0.0%) (D) Gerber Scientific, Inc. (a) 7,800 46,800 ------------- OIL & GAS (8.2%) Comstock Resources, Inc. (a) 95,900 1,951,565 Denbury Resources, Inc. (a) 5,200 94,952 General Maritime Corp. (a) 152,900 3,071,761
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 83 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) --------------------------------------------------------------------------------- OIL & GAS (CONTINUED) Harvest Natural Resources, Inc. (a) 39,200 $ 644,448 *KCS Energy, Inc. (a) 291,400 3,502,628 Nuevo Energy Co. (a) 14,100 486,450 Overseas Shipholding Group, Inc. 42,700 1,399,279 Petroleum Development Corp. (a) 27,100 715,982 Plains Exploration & Production Co. (a) 16,400 323,080 Resource America, Inc. Class A 73,300 1,419,088 Swift Energy Co. (a) 14,700 318,843 Tesoro Petroleum Corp. (a) 116,400 2,364,084 ------------- 16,292,160 ------------- PAPER & FOREST PRODUCTS (0.7%) Louisiana-Pacific Corp. 42,400 1,000,216 Potlatch Corp. 12,600 477,288 ------------- 1,477,504 ------------- REAL ESTATE (8.2%) American Land Lease, Inc. 35,700 690,795 American Mortgage Acceptance Co. 3,400 45,492 Anworth Mortgage Asset Corp. 15,800 184,386 Avatar Holdings, Inc. (a) 400 15,264 Bluegreen Corp. (a) 82,200 1,048,872 Corporate Office Properties Trust 6,900 140,415 Corrections Corp. of America (a) 45,600 1,661,664 Cousins Properties, Inc. 45,000 1,265,400 CRIIMI MAE, Inc. (a) 46,300 492,169 HRPT Properties Trust 8,300 79,265 Impac Mortgage Holdings, Inc. 159,600 3,002,076 Koger Equity, Inc. 59,500 1,246,525 LaSalle Hotel Properties 42,100 926,200 LNR Property Corp. 5,600 281,232 LTC Properties, Inc. 29,000 451,240 National Health Investors, Inc. 25,900 620,823 Newcastle Investment Corp. 67,800 1,811,616 Novastar Financial, Inc. 18,600 603,756 Prime Group Realty Trust (a) 2,000 11,060 Redwood Trust, Inc. 17,100 742,995 Senior Housing Properties Trust 57,700 862,615 Thornburg Mortgage, Inc. 2,900 75,052 ------------- 16,258,912 -------------
SHARES VALUE ROAD & RAIL (1.8%) AMERCO (a) 7,800 $ 219,414 RailAmerica, Inc. (a) 24,800 303,056 *SCS Transportation, Inc. (a) 137,300 3,141,424 ------------- 3,663,894 ------------- SOFTWARE (0.1%) RSA Security, Inc. (a) 6,600 105,732 ------------- SPECIALTY RETAIL (1.5%) Building Materials Holding Corp. 4,100 67,404 Friedman's, Inc. Class A (a) 33,500 168,170 Rent-Way, Inc. (a) 200,400 1,871,736 Stage Stores, Inc. (a) 20,900 820,534 TBC Corp. (a) 2,200 61,468 Trans World Entertainment Corp. (a) 700 7,266 ------------- 2,996,578 ------------- TEXTILES, APPAREL & LUXURY GOODS (2.4%) Brown Shoe Co., Inc. 6,900 252,402 Haggar Corp. 76,800 1,508,352 Hampshire Group, Ltd. (a) 13,600 405,987 Hartmarx Corp. (a) 161,700 942,711 Kellwood Co. 2,200 86,790 Movado Group, Inc. 6,300 189,000 Perry Ellis International, Inc. (a) 8,200 231,650 Phillips-Van Heusen Corp. 64,400 1,163,708 ------------- 4,780,600 ------------- THRIFTS & MORTGAGE FINANCE (6.0%) BankAtlantic Bancorp, Inc. Class A 45,400 710,510 BankUnited Financial Corp. Class A (a) 26,300 695,109 Berkshire Hills Bancorp, Inc. 12,800 433,280 Corus Bankshares, Inc. 7,600 286,900 EverTrust Financial Group, Inc. 28,100 452,972 Fidelity Bankshares, Inc. 11,400 379,050 First Federal Financial Corp. of Kentucky 2,300 57,500 FIRSTFED AMERICA BANCORP, Inc. 5,100 124,950 FirstFed Financial Corp. (a) 26,400 1,067,088 Flagstar Bancorp, Inc. 20,600 420,858 Fremont General Corp. 27,100 584,005 Hawthorne Financial Corp. (a) 35,500 1,198,480 Heritage Financial Corp. 2,600 50,700 Hudson River Bancorp., Inc. 25,100 452,051 ITLA Capital Corp. (a) 36,700 1,578,100 New Century Financial Corp. 1,650 70,009 Ocwen Financial Corp. (a) 110,600 1,202,222 PennFed Financial Services, Inc. 16,000 481,600
84 MainStay Small Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) --------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (CONTINUED) Provident Financial Holdings, Inc. 10,950 $ 268,275 Sterling Financial Corp. (a) 23,657 780,918 United Community Financial Corp. 7,300 89,571 Warwick Community Bancorp, Inc. 400 12,548 WSFS Financial Corp. 11,900 576,674 ------------- 11,973,370 ------------- TOBACCO (0.1%) Universal Corp. 5,100 256,224 ------------- WIRELESS TELECOMMUNICATION SERVICES (0.7%) American Tower Corp. Class A (a) 3,200 39,840 Arch Wireless, Inc. Class A (a) 8,600 293,862 Crown Castle International Corp. (a) 19,000 265,050 Dobson Communications Corp. Class A (a) 71,400 255,612 SBA Communications Corp. (a) 153,900 615,600 ------------- 1,469,964 ------------- Total Common Stocks (Cost $176,697,536) 199,292,832 ------------- PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENT (0.5%) --------------------------------------------------------------------------------- REPURCHASE AGREEMENT (0.5%) Bank of New York (The) 0.90%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $930,070 (Collateralized by Federal National Mortgage Association 3.917%, due 3/1/33 with a Principal Amount of $1,129,351 and a Market Value of $1,127,459 including accrued interest) $ 930,000 $ 930,000 ------------- Total Short-Term Investment (Cost $930,000) 930,000 ------------- Total Investments (Cost $177,627,536) (e) 100.6% 200,222,832(f) Liabilities in Excess of Cash and Other Assets (0.6) (1,120,723) -------- ------------- Net Assets 100.0% $ 199,102,109 ======== =============
(a) Non-income producing security. (b) Exchange Traded Fund -- represents a basket of securities that are traded on an exchange. (c) ADR -- American Depositary Receipt. (d) Less than one tenth of a percent. (e) The cost for federal income tax purposes is $177,631,905. (f) At April 30, 2004 net unrealized appreciation was $22,590,927, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $29,559,836 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $6,968,909.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 85 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $177,627,536) $200,222,832 Cash 5,046 Receivables: Investment securities sold 7,317,807 Fund shares sold 993,904 Dividends and interest 111,112 Other assets 28,327 ------------ Total assets 208,679,028 ------------ LIABILITIES: Payables: Investment securities purchased 6,725,988 Fund shares redeemed 2,608,380 Manager 175,255 Transfer agent 10,010 NYLIFE Distributors 6,442 Custodian 2,036 Accrued expenses 48,808 ------------ Total liabilities 9,576,919 ------------ Net assets $199,102,109 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.01 per share) 1 billion shares authorized: Class A $ 3,515 Class B 3,516 Class C 961 Class I 109,229 Additional paid-in capital 146,294,327 Accumulated undistributed net investment income 8,053 Accumulated undistributed net realized gain on investments 30,087,212 Net unrealized appreciation on investments 22,595,296 ------------ Net assets $199,102,109 ============ CLASS A Net assets applicable to outstanding shares $ 5,964,422 ============ Shares of capital stock outstanding 351,502 ============ Net asset value per share outstanding $ 16.97 Maximum sales charge (5.50% of offering price) 0.99 ------------ Maximum offering price per share outstanding $ 17.96 ============ CLASS B Net assets applicable to outstanding shares $ 5,923,454 ============ Shares of capital stock outstanding 351,612 ============ Net asset value and offering price per share outstanding $ 16.85 ============ CLASS C Net assets applicable to outstanding shares $ 1,617,871 ============ Shares of capital stock outstanding 96,060 ============ Net asset value and offering price per share outstanding $ 16.84 ============ CLASS I Net assets applicable to outstanding shares $185,596,362 ============ Shares of capital stock outstanding 10,922,850 ============ Net asset value and offering price per share outstanding $ 16.99 ============
86 MainStay Small Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Dividends (a) $ 1,465,513 Interest 21,517 ------------ Total income 1,487,030 ------------ EXPENSES: Manager 996,135 Transfer agent 71,400 Professional 27,042 Registration 23,141 Custodian 22,004 Shareholder communication 20,621 Trustees 16,367 Distribution -- Class B 6,815 Distribution -- Class C 1,902 Service -- Class A 2,601 Service -- Class B 2,272 Service -- Class C 634 Service -- Service Class 573 Miscellaneous 14,365 ------------ Total expenses before reimbursement 1,205,872 Fees paid indirectly (See Note 2(D)) (42,247) ------------ Net expenses 1,163,625 ------------ Net investment income 323,405 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 30,151,180 Net change in unrealized depreciation on investments (14,074,188) ------------ Net realized and unrealized gain on investments 16,076,992 ------------ Net increase in net assets resulting from operations $ 16,400,397 ============
(a) Dividends recorded net of foreign withholding taxes in the amount of $93. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 87 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE IN NET ASSETS: Operations: Net investment income $ 323,405 $ 653,795 Net realized gain on investments 30,151,180 14,921,032 Net change in unrealized depreciation on investments (14,074,188) 30,247,013 --------------------------- Net increase in net assets resulting from operations 16,400,397 45,821,840 --------------------------- Dividends and distributions to shareholders: From net investment income: Class I (528,959) (1,275,510) Service Class (2,412) (1,461) From net realized gain on investments: Class C (75) -- Class I (8,784,719) -- Service Class (58,962) -- --------------------------- Total dividends and distributions to shareholders (9,375,127) (1,276,971) --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 7,459,250 -- Class B 6,397,595 -- Class C 1,700,145 1,149 Class I 89,271,484 123,830,893 Service Class 150,100 853,598 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions: Class C 74 -- Class I 8,970,887 1,237,937 Service Class 61,284 1,461 --------------------------- 114,010,819 125,925,038 Cost of shares redeemed: Class A (1,255,362) -- Class B (152,430) -- Class C (1,050) (102) Class I (83,612,671) (117,287,648) Service Class (1,347,714) (16,449) --------------------------- (86,369,227) (117,304,199) --------------------------- Increase in net assets derived from capital share transactions 27,641,592 8,620,839 --------------------------- Net increase in net assets 34,666,862 53,165,708
2004 2003 NET ASSETS: Beginning of period $164,435,247 $111,269,539 --------------------------- End of period $199,102,109 $164,435,247 =========================== Accumulated undistributed net investment income at end of period $ 8,053 $ 216,019 ===========================
88 MainStay Small Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. This page intentionally left blank 89 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ----------- ----------- ------------------------- JANUARY 1, JANUARY 1, DECEMBER 30, 2004** 2004** SIX MONTHS 2002** THROUGH THROUGH ENDED THROUGH APRIL 30, APRIL 30, APRIL 30, OCTOBER 31, 2004*** 2004*** 2004*** 2003 Net asset value at beginning of period $16.78 $16.71 $16.15 $ 11.46 ------ ------ ------ ------- Net investment income (loss) (0.02)(d) (0.06)(d) (0.13)(d) (0.05)(d) Net realized and unrealized gain (loss) on investments 0.21 0.20 1.63 4.74 ------ ------ ------ ------- Total from investment operations 0.19 0.14 1.50 4.69 ------ ------ ------ ------- Less dividends and distributions: From net investment income -- -- -- -- From net realized gain on investments -- -- (0.81) -- ------ ------ ------ ------- Total dividends and distributions -- -- (0.81) -- ------ ------ ------ ------- Net asset value at end of period $16.97 $16.85 $16.84 $ 16.15 ====== ====== ====== ======= Total investment return (b) 1.13% 0.84% 9.36% 40.92% Ratios (to average net assets)/Supplemental Data: Net investment income (loss) (0.63%)++ (1.12%)++ (1.12%)++ (0.47%)++ Net expenses 1.92%++# 2.67%++# 2.67%++# 2.27%++# Expenses (before reimbursement) 1.92%++# 2.67%++# 2.67%++# 2.34%++# Portfolio turnover rate 68% 68% 68% 135% Net assets at end of period (in 000's) $5,964 $5,923 $1,618 $ 2
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Less than 0.01% of average net assets. ++ Annualized. # Includes transfer agent fees paid indirectly which amounted to 0.05%, 0.08%, 0.07% and 0.08% of average net assets for the six months ended April 30, 2004, the years ended October 31, 2003 and October 31, 2002 and the ten months ended October 31, 2001, respectively, and custodian fees and other expenses paid indirectly which amounted to 0.02% of average net assets for the year ended December 31, 2000 and less than 0.01% of average net assets for the other years indicated. (a) Less than one cent per share. (b) Total return is calculated exclusive of sales charges and is not annualized. (c) Restated. (d) Per share data based on average shares outstanding during the period.
90 MainStay Small Cap Opportunity Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I --------------------------------------------------------------------------------------------------- SIX JANUARY 1, MONTHS 2001 ENDED THROUGH APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, YEAR ENDED DECEMBER 31, 2004*** 2003 2002 2001* 2000 1999 1998 $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76 $ 11.93 $ 14.19 -------- -------- -------- -------- -------- -------- -------- 0.03(d) 0.07(d) 0.15 0.08 (0.00)(a) 0.01 (0.00)(a) 1.56 4.74 0.50 0.31 (1.11) 0.35 0.42 -------- -------- -------- -------- -------- -------- -------- 1.59 4.81 0.65 0.39 (1.11) 0.36 0.42 -------- -------- -------- -------- -------- -------- -------- (0.05) (0.13) (0.11) -- -- (0.01) -- (0.81) -- -- -- -- (0.52) (2.68) -------- -------- -------- -------- -------- -------- -------- (0.86) (0.13) (0.11) -- -- (0.53) (2.68) -------- -------- -------- -------- -------- -------- -------- $ 16.99 $ 16.26 $ 11.58 $ 11.04 $ 10.65 $ 11.76 $ 11.93 ======== ======== ======== ======== ======== ======== ======== 9.86% 42.04% 5.84% 3.66% (9.44%) 3.05% 3.40% 0.36%++ 0.53% 1.08% 0.70%++ (0.00%)+ 0.05% (0.00%)+ 1.19%++# 1.27%# 1.26%# 1.23%++#(c) 1.21%# 1.18%# 1.14%# 1.19%++# 1.34%# 1.27%# 1.23%++#(c) 1.21%# 1.18%# 1.14%# 68% 135% 103% 77% 105% 56% 73% $185,596 $163,362 $111,181 $108,105 $157,630 $251,229 $201,492
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 91 MAINSTAY CASH RESERVES FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS AVERAGE LIPPER MONEY MARKET FUND(1) 0.17% 0.37% 2.75% 3.86% AVERAGE LIPPER INSTITUTIONAL MONEY MARKET FUND(1) 0.34 0.71 3.19 4.26
CLASS I SHARES(2) --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 0.31% 0.65% 3.15% 4.14%
(in thousands, with sales charges)
AVERAGE LIPPER MONEY MARKET MAINSTAY CASH RESERVES FUND FUND --------------------------- --------------------------- 4/30/94 1000.00 1000.00 1048.00 1045.00 1105.00 1099.00 1161.00 1151.00 1223.00 1208.00 1285.00 1264.00 1352.00 1325.00 1434.00 1398.00 1473.00 1429.00 1491.00 1440.00 4/30/04 1500.00 1446.00
-- MainStay Cash Reserves Fund -- Average Lipper money market fund SWEEP SHARES CLASS(2) --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 0.06% 0.15% 2.64% 3.57%
(in thousands, with sales charges)
AVERAGE LIPPER INSTITUTIONAL MAINSTAY CASH RESERVES FUND MONEY MARKET FUND --------------------------- ---------------------------- 4/30/94 1000.00 1000.00 1042.00 1045.00 1091.00 1099.00 1139.00 1151.00 1194.00 1208.00 1247.00 1264.00 1305.00 1325.00 1377.00 1398.00 1408.00 1429.00 1418.00 1440.00 4/30/04 1420.00 1510.00
-- MainStay Cash Reserves Fund -- Average Lipper institutional money market fund Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price and reinvestment of dividend and capital-gain distributions. The graphs assume an initial investment of $1,000. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fees, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Sweep Shares Class shares are sold with no initial sales charge or CDSC, have an annual 12b-1 fee of .25%, and are available only through financial institutions participating in a sweep account arrangement. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for the Sweep Shares Class shares, first offered 12/8/98, includes the performance of Class I shares from inception (1/2/91) through 12/7/98. 1. MainStay Cash Reserves Fund, going forward, will measure its Sweep Shares Class performance against the average Lipper institutional money market fund. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. 2. As of 4/30/04, MainStay Cash Reserves Fund had an effective 7-day yield and current yield of 0.62% for the Class I shares and 0.12% for the Sweep Shares Class. These yields reflect certain expense limitations. Had these expense limitations not been in effect, the effective 7-day yield and the current 7-day yield would have been 0.51% and 0.50% for the Class I Shares and 0.01% and 0.01% for the Sweep Shares Class. These expense limitations are voluntary and may be terminated or revised at any time. The current yield is more reflective of the Fund's earnings than the total return. 92 MainStay Cash Reserves Fund $1,000 INVESTED IN MAINSTAY CASH RESERVES FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(1) $1,000 $1,003 $2 $1,048 $3 ------------------------------------------------------------------------------------------------------------------------ SWEEP SHARES(1) $1,000 $1,001 $5 $1,045 $5 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). www.mainstayfunds.com 93 PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Mark C. Boyce and David E. Clement, CFA, of New York Life Investment Management LLC MAINSTAY CASH RESERVES FUND (FORMERLY ECLIPSE MONEY MARKET FUND) WHAT MAJOR FACTORS INFLUENCED THE MONEY MARKETS DURING THE SIX MONTHS ENDED APRIL 30, 2004? The sustained war in Iraq, ongoing tensions in the Middle East, and growing domestic budget deficits continued to influence the financial markets. The money markets, although relatively quiet, were affected by the overall low level of interest rates. The Federal Reserve remained largely out of sight from the money markets. The targeted federal funds rate remained at 1.0% for the entire period. From November through March, the LIBOR(1) 30-day to one-year yield curve flattened by approximately 10 basis points, reflecting the likelihood of no Federal Open Market Committee action. In April, however, the financial markets began to anticipate that the FOMC might move to tighten interest rates, and the LIBOR curve steepened by approximately 47 basis points. Aside from this rise late in the period, yields on most short-term debt instruments remained relatively stable. HOW DID FEDERAL RESERVE POLICY INFLUENCE THE FUND'S DURATION POSITIONING DURING THE SEMIANNUAL PERIOD? The Federal Reserve's accommodative monetary policy kept the money market yield curve relatively flat for most of the semiannual period, making it difficult to find attractive investment opportunities with more than a six-month maturity. As a result of current market conditions and the uncertainty regarding when the Federal Reserve might tighten interest rates, we managed the Fund's duration using a laddered maturity approach. WHAT IS A LADDERED MATURITY? A laddered portfolio staggers maturities to allow different securities in the portfolio to come due at progressive dates. The strategy was designed to help the Fund react to future interest-rate increases. The decision caused the Fund's weighted average maturity to decline to 74 days at the end of April 2004 from 82 days at the end of October 2003. HOW DID THE FUND INVEST DURING THE REPORTING PERIOD? We continued to seek opportunities for yield enhancement by investing in short-term corporate notes. For example, the Fund purchased corporate notes of Bank One, Minnesota Mining & Manufacturing, AIG SunAmerica, and Lehman Brothers Holdings. During the reporting period, we purchased a General Electric floating-rate security and a DaimlerChrysler asset-backed security. We also purchased Yankee certificates of deposit in the longer maturity range (four months or longer). Some names included Toronto Dominion Bank, Barclay's Bank, and Deutsche Bank. A portion of the Fund's assets were invested in callable agency securities. DID THE FUND CHANGE ITS ASSET CLASS WEIGHTINGS? During the six-month reporting period, significant weighting changes included an increase in the Fund's exposure to short-term corporate notes and a decrease in the Fund's exposure to asset-backed securities. WHAT DO YOU ANTICIPATE GOING FORWARD? In the coming quarter, we expect the Federal Reserve to remain on hold, as it continues to review economic data in search of a clearer picture of the economy's potential. In our opinion, the risks appear slanted toward a stronger economy with inflationary pressure, which will likely lead to Federal Reserve tightening in the fall. 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. Past performance is no guarantee of future results and yields will fluctuate. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. 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. 1. The London interbank offered rate (LIBOR) is a floating interest rate that is widely used as a base rate in bank, corporate, and government lending agreements. 94 MainStay Cash Reserves Fund PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Commercial Paper 64.80 Certificates of Deposit 9.60 Medium-Term Notes 9.50 Corporate Bonds 7.90 U.S. Government & Federal Agency 4.70 Asset-Backed Securities 2.10 Bank Note 1.50 Liabilities in Excess of Cash and Other Assets -0.10
www.mainstayfunds.com 95 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMORTIZED AMOUNT COST SHORT-TERM INVESTMENTS (100.1%)+ --------------------------------------------------------------------------------- ASSET-BACKED SECURITIES (2.1%) Carmax Auto Owner Trust Series 2003-2 Class A1 1.13%, due 11/15/04 (c) $ 500,306 $ 500,306 CIT Equipment Collateral Series 2003-EF1 Class A1 1.139%, due 10/15/04 (c) 907,908 907,908 DaimlerChrysler Auto Trust Series 2003-B 1 Class A1 1.14%, due 12/8/04 (c) 4,322,633 4,322,633 GE Commercial Equipment Financing LLC Series 2003-1 Class A1 1.06%, due 9/20/04 (b)(c) 2,870,987 2,870,987 Nissan Auto Lease Trust Series 2002-A Class A1 1.166%, due 10/15/04 (c) 912,846 912,846 Whole Auto Loan Trust Series 2003-1 Class A1 1.10%, due 9/15/04 (c) 899,358 899,358 ------------- 10,414,038 ------------- BANK NOTE (1.5%) Bank One Corp. 1.17%, due 6/16/04 (c) 7,475,000 7,475,000 ------------- CERTIFICATES OF DEPOSIT (9.6%) (D) Barclay's Bank PLC NY 1.14%, due 10/4/04 (c) 7,000,000 7,000,000 Deutsche Bank NY 1.11%, due 12/17/04 (c) 10,000,000 9,992,136 Rabobank Nederland N.V. NY 1.18%, due 7/30/04 (c) 25,000,000 25,000,604 Toronto Dominion Bank 1.41%, due 1/5/05 (c) 5,000,000 5,000,000 ------------- 46,992,740 ------------- COMMERCIAL PAPER (64.8%) Archer-Daniels-Midland Co. 1.05%, due 6/22/04 (a) 6,225,000 6,215,922 Bank of America Corp. 1.11%, due 7/6/04 10,000,000 9,980,267 Barton Capital Corp. 1.03%, due 5/14/04 (a) 5,000,000 4,998,426 Cafco LLC 1.02%, due 5/25/04 (a) 6,105,000 6,101,194 Chevron Texaco Funding Corp. 1.00%, due 5/6/04 10,000,000 9,999,167 Ciesco LP 1.02%, due 5/7/04 12,855,000 12,853,543
PRINCIPAL AMORTIZED AMOUNT COST COMMERCIAL PAPER (CONTINUED) Citigroup Global Markets Holdings, Inc. 1.02%, due 5/4/04 $ 9,923,000 $ 9,922,719 1.03%, due 6/2/04 10,000,000 9,991,417 Coca-Cola Enterprises, Inc. 1.04%, due 7/2/04 (a) 10,000,000 9,982,667 Countrywide Home Loans, Inc 1.04%, due 5/7/04 2,186,000 2,185,747 CXC, Inc. 1.075%, due 8/23/04 (a) 8,308,000 8,280,214 Delaware Funding Corp. 1.03%, due 5/20/04 (a) 3,929,000 3,927,089 E.I. Du Pont de Nemours & Co. 1.00%, due 5/5/04 6,735,000 6,734,626 Edison Asset Securitization LLC 1.05%, due 6/1/04 (a) 10,000,000 9,991,542 1.12%, due 10/4/04 (a) 10,980,000 10,927,394 Govco, Inc. 1.03%, due 6/18/04 (a) 10,000,000 9,986,839 1.06%, due 7/19/04 (a) 10,000,000 9,977,328 HBOS Treasury Services PLC 1.06%, due 8/9/04 4,173,000 4,160,959 Ing U.S. Funding LLC 1.03%, due 6/7/04 8,235,000 8,226,753 J.P. Morgan Chase & Co. 1.04%, due 6/2/04 2,700,000 2,697,660 Lehman Brothers Holdings, Inc. 1.10%, due 9/20/04 2,000,000 1,991,444 Liberty Street Funding Co. 1.05%, due 6/3/04 (a) 10,000,000 9,990,958 Marsh & McLennan Cos., Inc. 1.05%, due 7/7/04 (a) 7,091,000 7,077,557 Morgan Stanley Dean Witter & Co. 1.02%, due 5/5/04 5,153,000 5,152,708 National Rural Utilities Cooperative Finance Corp. 1.03%, due 5/13/04 10,000,000 9,997,139 Nordea North America, Inc. 1.08%, due 8/17/04 10,000,000 9,968,200 PACCAR Financial Corp. 1.02%, due 5/18/04 11,805,000 11,799,983 Park Avenue Receivables Corp. 1.02%, due 5/19/04 (a) 10,000,000 9,995,467 Province of Quebec 1.05%, due 7/26/04 7,782,000 7,762,934 1.17%, due 6/8/04 (a) 5,203,000 5,196,912
+ Percentages indicated are based on Fund net assets. 96 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.
PRINCIPAL AMORTIZED AMOUNT COST SHORT-TERM INVESTMENTS (CONTINUED) --------------------------------------------------------------------------------- COMMERCIAL PAPER (CONTINUED) xRepublic of Italy 1.06%, due 9/2/04 $ 5,942,000 $ 5,920,655 1.065%, due 8/23/04 5,000,000 4,983,355 Royal Bank of Canada 1.10%, due 10/4/04 10,000,000 9,952,944 Societe Generale North America 1.04%, due 6/3/04 13,302,000 13,290,087 Three Rivers Funding Corp. 1.03%, due 5/17/04 (a) 13,730,000 13,724,500 Toyota Credit Puerto Rico 1.03%, due 5/12/04 8,398,000 8,395,837 Toyota Motor Credit Corp. 1.05%, due 6/3/04 3,275,000 3,272,039 Windmill Funding Corp. 1.03%, due 5/3/04 (a) 5,040,000 5,040,000 1.03%, due 5/11/04 (a) 8,000,000 7,998,169 World Omni Vehicle Leasing, Inc. 1.06%, due 5/3/04 (a) 7,363,000 7,363,000 ------------- 316,015,361 ------------- CORPORATE BONDS (7.9%) 3M Co. 5.639%, due 12/13/04 (a) 10,000,000 10,263,511 Abbott Laboratories 5.13%, due 7/1/04 5,000,000 5,031,719 AIG SunAmerica Global Financing 5.20%, due 5/10/04 (a) 5,000,000 5,003,933 Diageo Capital PLC 6.625%, due 6/24/04 3,000,000 3,022,958 Lehman Brothers Holdings, Inc. Series G 7.75%, due 1/15/05 (b)(c) 5,050,000 5,278,213 Tennessee Valley Authority 4.75%, due 7/15/04 5,000,000 5,036,704 Wachovia Corp. 7.10%, due 8/15/04 5,000,000 5,082,564 ------------- 38,719,602 ------------- MEDIUM-TERM NOTES (9.5%) American Honda Finance Corp. 1.06%, due 9/16/04 (a)(b)(c) 10,000,000 10,000,000 General Electric Capital Corp. Series A 1.26%, due 9/15/04 (b)(c) 3,400,000 3,402,542 1.323%, due 9/24/04 (b)(c) 5,000,000 5,003,361
PRINCIPAL AMORTIZED AMOUNT COST MEDIUM-TERM NOTES (CONTINUED) Household Finance Corp. 1.12%, due 8/18/04 (b)(c) $ 10,000,000 $ 10,000,000 Lehman Brothers Holdings, Inc. Series A 1.07%, due 5/16/05 (b)(c) 7,000,000 7,000,000 Series G 1.513%, due 9/20/04 (b)(c) 5,000,000 5,006,965 Merrill Lynch & Co., Inc. Series B 5.35%, due 6/15/04 (c) 5,800,000 5,828,037 ------------- 46,240,905 ------------- U.S. GOVERNMENT & FEDERAL AGENCIES (4.7%) Federal Home Loan Mortgage Corp. 5.00%, due 5/15/04 5,000,000 5,006,222 Federal National Mortgage Association 1.75%, due 5/23/04 10,000,000 10,000,000 U.S. Treasury Bill 0.935%, due 5/6/04 169,000 168,987 U.S. Treasury Notes 1.10%, due 4/30/04 5,000,000 5,010,021 1.625%, due 3/31/05 3,000,000 3,007,692 ------------- 23,192,922 ------------- Total Short-Term Investments (Amortized Cost $489,050,568) (e) 100.1% 489,050,568 Liabilities in Excess of Cash and Other Assets (0.1) (274,857) ------ ------------ Net Assets 100.0% $ 488,775,711 ======== ===============
(a) May be sold to institutional investors only. (b) Floating rate. Rate shown is the rate in effect at April 30, 2004. (c) Coupon interest bearing security. (d) Yankee certificate of deposit (CD) -- dollar-denominated CD issued in the United States by foreign banks and corporations. (e) The cost stated also represents the aggregate cost for federal income tax purposes.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 97 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED) The table below sets forth the diversification of Cash Reserves Fund investments by industry. INDUSTRY DIVERSIFICATION
AMORTIZED COST PERCENT + Agency $ 39,133,636 8.0% Automobile -- Sequential 5,221,990 1.1 Beverages -- Non-Alcoholic 9,982,667 2.0 Beverages -- Wine/Spirits 3,022,958 0.6 Chemicals -- Diversified 6,734,626 1.4 Commercial Banks -- Central U.S. 7,475,000 1.5 Commercial Banks -- Eastern U.S. 41,992,740 8.6 Commercial Banks -- Europe 13,290,087 2.7 Commercial Banks -- Non-U.S. 5,000,000 1.0 Diversified Financial Services 21,245,091 4.3 Diversified Manufacturing 10,263,511 2.1 Finance -- Auto Loans 26,485,175 5.4 Finance -- Consumer Loans 10,000,000 2.0 Finance -- Equipment Loans 907,907 0.2 Finance -- Investment Banker/ Broker 55,267,878 11.3 Finance -- Mortgage Loan/ Banker 2,185,748 0.5 Finance -- Other Services 48,352,610 9.9 Finance -- Receivables 107,024,066 21.9 Food -- Flour & Grain 6,215,922 1.3 Insurance Brokers 7,077,557 1.5 Life/Health Insurance 5,003,933 1.0 Medical -- Drugs 5,031,719 1.0 Money Center Banks 14,113,903 3.0 Oil Companies Integrated 9,999,167 2.0 Regional Authority 12,959,847 2.7 Super -- Regional Banks -- U.S. 15,062,830 3.1 ------------ ------ 489,050,568 100.1 Liabilities in Excess of Cash and Other Assets (274,857) (0.1) ------------ ------ Net Assets $ 488,775,711 100.0% ============= =========
+ Percentages indicated are based on Fund net assets. 98 MainStay Cash Reserves Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (amortized cost $489,050,568) $489,050,568 Cash 395 Receivables: Investment securities sold 8,159,000 Interest 1,442,869 Fund shares sold 688,959 Other assets 23,796 ------------ Total assets 499,365,587 ------------ LIABILITIES: Payables: Investment securities purchased 7,362,350 Fund shares redeemed 2,625,683 Manager 163,198 NYLIFE Distributors 120,967 Shareholder communication 66,808 Transfer agent 31,766 Custodian 13,221 Directors 2,016 Accrued expenses 69,432 Dividend payable 134,435 ------------ Total liabilities 10,589,876 ------------ Net assets $488,775,711 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 8 billion shares authorized Class I $ 216,996 Sweep Shares Class 271,777 Additional paid-in capital 488,286,428 Accumulated undistributed net realized gain on investments 510 ------------ Net assets $488,775,711 ============ CLASS I Net assets applicable to outstanding shares $216,983,072 ============ Shares of capital stock outstanding 216,996,077 ============ Net asset value and offering price per share outstanding $ 1.00 ============ SWEEP SHARES CLASS Net assets applicable to outstanding shares $271,792,639 ============ Shares of capital stock outstanding 271,776,956 ============ Net asset value and offering price per share outstanding $ 1.00 ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 99 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Interest $2,809,951 ---------- EXPENSES: Manager 1,247,763 Distribution -- Sweep Shares Class 342,718 Service -- Sweep Shares Class 342,718 Service -- Service Class 6,946 Professional 76,343 Shareholder communication 67,704 Transfer agent 57,538 Custodian 25,496 Directors 20,898 Registration 3,083 Portfolio pricing 1,573 Miscellaneous 25,216 ---------- Total expenses before reimbursement 2,217,996 Expense reimbursement from Manager (277,846) ---------- Net expenses 1,940,150 ---------- Net investment income 869,801 ---------- REALIZED LOSS ON INVESTMENTS: Net realized loss on investments (39) ---------- Net increase in net assets resulting from operations $ 869,762 ==========
100 MainStay Cash Reserves Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 DECREASE IN NET ASSETS: Operations: Net investment income $ 869,801 $ 3,273,616 Net realized gain (loss) on investments (39) 8,311 ------------------------------- Net increase in net assets resulting from operations 869,762 3,281,927 ------------------------------- Dividends and distributions to shareholders: From net investment income: Class I (686,684) (2,263,628) Service Class (10,765) (85,667) Sweep Shares Class (172,352) (924,321) From net realized gain on investments: Class I (3,421) (8,060) Service Class (230) (313) Sweep Shares Class (4,111) (7,760) ------------------------------- Total dividends and distributions to shareholders (877,563) (3,289,749) ------------------------------- Capital share transactions: Net proceeds from sale of shares: Class I 257,328,463 490,606,863 Service Class 2,796,267 29,010,391 Sweep Shares Class 71,596,624 97,731,999 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions: Class I 573,579 2,250,176 Service Class 6,148 84,448 Sweep Shares Class 144,513 932,002 ------------------------------- 332,445,594 620,615,879 Cost of shares redeemed: Class I (261,973,693) (601,715,257) Service Class (20,300,483) (23,255,832) Sweep Shares Class (72,800,453) (117,116,374) ------------------------------- (355,074,629) (742,087,463) ------------------------------- Decrease in net assets derived from capital share transactions (22,629,035) (121,471,584) ------------------------------- Net decrease in net assets (22,636,836) (121,479,406) NET ASSETS: Beginning of period 511,412,547 632,891,953 ------------------------------- End of period $ 488,775,711 $ 511,412,547 ===============================
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 101 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I -------------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2004*** 2003 2002 2001 2000 Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Net investment income 0.00(a) 0.01 0.02 0.04 0.06 Net realized gain on investments 0.00(a) 0.00(a) 0.00(a) -- -- -------- -------- -------- -------- -------- Total from investment operations 0.00(a) 0.01 0.02 0.04 0.06 -------- -------- -------- -------- -------- Less dividends and distributions: From net investment income (0.00)(a) (0.01) (0.02) (0.04) (0.06) From net realized gain on investments (0.00)(a) (0.00)(a) (0.00)(a) -- -- -------- -------- -------- -------- -------- Total dividends and distributions (0.00)(a) (0.01) (0.02) (0.04) (0.06) -------- -------- -------- -------- -------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total investment return (b) 0.31% 0.83% 1.65% 4.67% 5.98% Ratios (to average net assets)/ Supplemental Data: Net investment income 0.63%+ 0.84% 1.61% 4.50% 5.81% Net expenses 0.50%+ 0.50% 0.50% 0.50% 0.50% Expenses (before reimbursement) 0.61%+ 0.60% 0.62% 0.61% 0.57% Net assets at end of period (in 000's) $216,983 $221,058 $329,921 $199,495 $160,942 CLASS I -------------------------- JANUARY 1, 1999 THROUGH YEAR ENDED OCTOBER 31, DECEMBER 31, 1999* 1998 Net asset value at beginning of period $ 1.00 $ 1.00 -------- -------- Net investment income 0.04 0.05 Net realized gain on investments -- -- -------- -------- Total from investment operations 0.04 0.05 -------- -------- Less dividends and distributions: From net investment income (0.04) (0.05) From net realized gain on investments -- -- -------- -------- Total dividends and distributions (0.04) (0.05) -------- -------- Net asset value at end of period $ 1.00 $ 1.00 ======== ======== Total investment return (b) 3.96% 5.25% Ratios (to average net assets)/ Supplemental Data: Net investment income 4.68%+ 5.12% Net expenses 0.50%+ 0.50% Expenses (before reimbursement) 0.62%+ 0.63% Net assets at end of period (in 000's) $246,713 $194,338
SWEEP SHARES CLASS ---------------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2004*** 2003 2002 2001 2000 Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Net investment income 0.00(a) 0.00(a) 0.01 0.04 0.05 Net realized gain on investments 0.00(a) 0.00(a) 0.00(a) -- -- -------- -------- -------- -------- -------- Total from investment operations 0.00(a) 0.00(a) 0.01 0.04 0.05 -------- -------- -------- -------- -------- Less dividends and distributions: From net investment income (0.00)(a) (0.00)(a) (0.01) (0.04) (0.05) From net realized gain on investments (0.00)(a) (0.00)(a) (0.00)(a) -- -- -------- -------- -------- -------- -------- Total dividends and distributions (0.00)(a) (0.00)(a) (0.01) (0.04) (0.05) -------- -------- -------- -------- -------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total investment return (b) 0.06% 0.33% 1.14% 4.15% 5.46% Ratios (to average net assets)/ Supplemental Data: Net investment income 0.13%+ 0.34% 1.11% 4.00% 5.31% Net expenses 1.00%+ 1.00% 1.00% 1.00% 1.00% Expenses (before reimbursement) 1.11%+ 1.10% 1.12% 1.11% 1.07% Net assets at end of period (in 000's) $271,793 $272,856 $291,312 $285,034 $221,935 SWEEP SHARES CLASS -------------------------- JANUARY 1, DECEMBER 8, 1999 1998 THROUGH THROUGH OCTOBER 31, DECEMBER 31, 1999* 1998** Net asset value at beginning of period $ 1.00 $ 1.00 -------- -------- Net investment income 0.04 0.00(a) Net realized gain on investments -- -- -------- -------- Total from investment operations 0.04 0.00(a) -------- -------- Less dividends and distributions: From net investment income (0.04) (0.00)(a) From net realized gain on investments -- -- -------- -------- Total dividends and distributions (0.04) (0.00)(a) -------- -------- Net asset value at end of period $ 1.00 $ 1.00 ======== ======== Total investment return (b) 3.53% 0.31% Ratios (to average net assets)/ Supplemental Data: Net investment income 4.18%+ 4.62%+ Net expenses 1.00%+ 1.00%+ Expenses (before reimbursement) 1.12%+ 1.13%+ Net assets at end of period (in 000's) $152,268 $ 6,957
* The Fund changed its fiscal year end from December 31 to October 31. ** Sweep Shares Class first offered on December 8, 1998. *** Unaudited. + Annualized. (a) Less than one cent per share. (b) Total return is calculated exclusive of sales charges and is not annualized.
102 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. MAINSTAY INDEXED BOND FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS CITIGROUP BROAD INVESTMENT GRADE (BIG) BOND INDEX(1) 1.32% 1.88% 6.65% 7.35% AVERAGE LIPPER GENERAL U.S. GOVERNMENT FUND(2) 0.56 -0.25 5.31 6.07
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -2.13% -2.11% 5.23% 6.12% Excluding sales charges 0.90 0.92 5.87 6.44
(in thousands, with sales charges)
MAINSTAY INDEXED BOND FUND CITIGROUP BIG BOND INDEX -------------------------- ------------------------ 04/30/94 970.00 1000.00 1033.00 1073.00 1115.00 1164.00 1181.00 1248.00 1299.00 1385.00 1362.00 1472.00 1371.00 1490.00 1525.00 1674.00 1630.00 1805.00 1795.00 1994.00 04/30/04 1811.00 2032.00
-- MainStay Indexed Bond Fund -- Citigroup BIG Bond Index CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 1.02% 1.17% 6.13% 6.70%
(in thousands, with sales charges)
MAINSTAY INDEXED BOND FUND CITIGROUP BIG BOND INDEX -------------------------- ------------------------ 4/30/94 1000.00 1000.00 1067.00 1073.00 1155.00 1164.00 1226.00 1248.00 1352.00 1385.00 1420.00 1472.00 1433.00 1490.00 1598.00 1674.00 1712.00 1805.00 1890.00 1994.00 4/30/04 1912.00 2032.00
-- MainStay Indexed Bond Fund -- Citigroup BIG Bond Index Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 3% and an annual 12b-1 fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge and fees and expenses for such shares. 1. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG Bond Index--is an unmanaged index that is considered representative of the U.S. investment-grade bond market. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. www.mainstayfunds.com 103 $1,000 INVESTED IN MAINSTAY INDEXED BOND FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $ 998 $2 $1,048 $3 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,010 $2 $1,048 $3 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $4, and the ending account value would be $1,046. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 104 MainStay Indexed Bond Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Paul Cunningham and Eric Greenman of the New York Life Investment Management LLC MAINSTAY INDEXED BOND FUND WHAT ECONOMIC FORCES AFFECTED THE INVESTMENT-GRADE BOND MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? Generally, the economy expanded. Real gross domestic product, which had grown at an unusually high 8.2% in the third quarter 2003, advanced 4.1% in the fourth quarter. According to preliminary estimates, real gross domestic product grew at a seasonally adjusted annual rate of 4.4% in the first quarter of 2004. Through much of the reporting period, disappointing payroll figures grabbed national headlines and dominated the market's attention. This changed in early April 2004, however, when the U.S. Department of Labor announced that some 308,000 jobs had been added in March. HOW DID THE FEDERAL RESERVE RESPOND TO SIGNS OF ECONOMIC GROWTH? The Federal Reserve maintained its accommodative fiscal policy. The targeted federal funds rate remained at 1.0%, its lowest level since 1958. As the probability of "an unwelcome fall in inflation" diminished, the Federal Open Market Committee began to suggest that removing its policy accommodation was a possibility, and investors began to anticipate that the FOMC might tighten monetary policy in the future by raising the targeted federal funds rate. HOW DID THE OVERALL BOND MARKET PERFORM DURING THE REPORTING PERIOD? As a result of the weak job market, the five-year Treasury yield fell approximately 40 basis points, or 0.40%, during the first five months of the reporting period. When the employment outlook improved, however, Treasury yields reversed course, rising roughly 85 basis points in April 2004. Volatility in the Treasury market clouded the outlook and led to increased volatility elsewhere in the bond market. Corporate credits provided the strongest performance within the Citigroup Broad Investment Grade (BIG) Bond Index,(1) returning 1.86% overall, AAA-rated bonds(2) gained only 0.93%, AA-rated bonds gained 1.04%, and A-rated bonds gained 1.37%. BBB-rated bonds led the way returning 2.62%. Mortgage-backed bonds were also relatively strong, returning 1.44% for the six months ended April 30, 2004. Asset-backed securities returned 1.06%, bonds issued by government-sponsored entities returned 0.92%, and U.S. Treasuries returned 0.77%. HOW DID YOU POSITION THE FUND DURING THE REPORTING PERIOD? As indexed-fund managers, we seek to track the performance of the Citigroup (BIG) Bond Index. Since the Fund's portfolio does not contain every security in the Index, however, its performance may vary. The Fund also incurs real-world expenses that a hypothetical index does not, so there may be times when the Fund underperforms the Index. During the reporting period, some of the Fund's underperformance relative to the Citigroup BIG Bond Index resulted from sector and issuer selection. As in the past, one of the indexing strategies we utilized was to diversify the Fund's holdings in the corporate sector. We are currently buying positions as low as less than 0.1% of the portfolio (primarily BBB credits) to minimize issuer overweights, while striving to achieve neutrality among industries, credit rating categories, and the overall corporate sector. Past performance is no guarantee of future results. Investment objectives may not be met, as underlying investment options are subject to market risk and fluctuations in value. Index funds generally seek to reflect the performance of an index or an allocation among indices, unlike other funds, whose objectives may, in some cases, involve seeking to outperform an index or other benchmark. 1. See footnote on page 103 for more information on the Citigroup BIG Bond Index. 2. Debt rated AAA has the highest rating assigned by Standard & Poor's, and in the opinion of Standard & Poor's, the obligor's capacity to meet its financial commitment on the obligation is extremely strong. Debt rated AA by Standard & Poor's is deemed by Standard & Poor's to differ from the highest-rated issues only in small degree. In the opinion of Standard & Poor's, the obligor's capacity to meet its financial commitment on the obligation is very strong. Debt rated A by Standard & Poor's is deemed by Standard & Poor's to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. In the opinion of Standard & Poor's, however, the obligor's capacity to meet its financial commitment on the obligation is still strong. Debt rated BBB by Standard & Poor's is deemed by Standard & Poor's to exhibit adequate protection parameters. It is the opinion of Standard & Poor's, however, that adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation than would be the case for debt in higher-rated categories. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. www.mainstayfunds.com 105 WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE BOND MARKET GOING FORWARD? As we move into the second half of 2004, several factors may have an impact on performance in the investment-grade bond market. Economic reports that indicate continuing strength in the economy, an improving job market, and/or potential inflation may increase the likelihood of Federal Reserve tightening before the November elections rather than after. Perceived and actual progress in the economic cycle will impact Treasury rates as well as securities that typically trade at a spread to Treasuries. Global issues--including Iraq, terrorist threats, and other sources of uncertainty--could result in rotation to or from different quality sectors. The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART)
U.S. GOVERNMENT & FEDERAL AGENCIES 68.3 Corporate Bonds 20.70 Short-Term Investments 14.10 Foreign Corporate Bonds 4.00 Yankee Bonds 1.40 Asset-Backed Securities 1.00 Liabilities in Excess of Cash and Other Assets -9.50
106 MainStay Indexed Bond Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMOUNT VALUE LONG-TERM BONDS (95.4%)+ ASSET-BACKED SECURITIES (1.0%) ---------------------------------------------------------------------------------- AIRLINES (0.1%) Northwest Airlines, Inc. Series 2000-1 Class G 8.072%, due 10/1/19 $ 183,001 $ 201,476 --------------- CONSUMER FINANCE (0.5%) MBNA Credit Card Master Note Trust Series 2002-A1 Class A1 4.95%, due 1/15/07 1,000,000 1,051,446 --------------- DIVERSIFIED FINANCIAL SERVICES (0.4%) Bank One Issuance Trust Series 2002-A3 Class A3 3.59%, due 9/15/07 1,000,000 1,004,908 --------------- Total Asset-Backed Securities (Cost $2,222,569) 2,257,830 --------------- CORPORATE BONDS (20.7%) ---------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.7%) Boeing Co. (The) 6.125%, due 2/15/33 250,000 245,168 General Dynamics Corp. 4.25%, due 5/15/13 100,000 93,841 Goodrich Corp. 6.45%, due 12/15/07 100,000 109,088 Honeywell International, Inc. 7.50%, due 3/1/10 100,000 115,418 Litton Industries, Inc. 8.00%, due 10/15/09 100,000 116,342 Lockheed Martin Corp. 7.65%, due 5/1/16 250,000 295,034 Northrop Grumman Corp. 7.125%, due 2/15/11 100,000 112,437 Raytheon Co. 5.50%, due 11/15/12 100,000 101,318 6.75%, due 8/15/07 150,000 164,380 United Technologies Corp. 6.35%, due 3/1/11 250,000 274,275 --------------- 1,627,301 --------------- AUTO COMPONENTS (0.0%) (E) Delphi Corp. 6.50%, due 5/1/09 100,000 106,186 ---------------
PRINCIPAL AMOUNT VALUE AUTOMOBILES (0.6%) DaimlerChrysler North America Holdings, Inc. 4.05%, due 6/4/08 $ 250,000 $ 245,567 6.40%, due 5/15/06 250,000 265,990 8.50%, due 1/18/31 250,000 288,928 General Motors Corp. 8.375%, due 7/15/33 500,000 540,759 --------------- 1,341,244 --------------- BEVERAGES (0.4%) Anheuser-Busch Cos., Inc. 5.95%, due 1/15/33 250,000 248,612 Coca-Cola Enterprises, Inc. 8.50%, due 2/1/22 252,000 321,140 Pepsi Bottling Holdings, Inc. 5.625%, due 2/17/09 (a) 250,000 268,073 --------------- 837,825 --------------- BUILDING PRODUCTS (0.1%) Masco Corp. 6.75%, due 3/15/06 100,000 107,240 --------------- CAPITAL MARKETS (2.0%) Bear Stearns Cos., Inc. (The) 5.70%, due 11/15/14 250,000 254,407 Credit Suisse FirstBoston USA, Inc. 4.625%, due 1/15/08 250,000 257,350 6.50%, due 1/15/12 250,000 273,067 FPL Group Capital, Inc. 7.375%, due 6/1/09 250,000 284,518 Goldman Sachs Group, Inc. (The) 4.75%, due 7/15/13 250,000 237,820 5.70%, due 9/1/12 250,000 257,752 6.875%, due 1/15/11 250,000 278,173 J.P. Morgan Chase & Co. 6.75%, due 2/1/11 500,000 558,557 Lehman Brothers Holdings, Inc. 6.625%, due 2/5/06 250,000 267,053 7.00%, due 2/1/08 250,000 278,464 Merrill Lynch & Co., Inc. Series B 5.30%, due 9/30/15 250,000 246,606 6.00%, due 2/17/09 250,000 269,319
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 107 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) Morgan Stanley Dean Witter & Co. 3.625%, due 4/1/08 $ 250,000 $ 248,478 6.10%, due 4/15/06 250,000 266,436 6.60%, due 4/1/12 250,000 275,176 Salomon, Smith Barney Holdings, Inc. 6.875%, due 6/15/05 504,000 531,840 --------------- 4,785,016 --------------- CHEMICALS (0.3%) Dow Chemical Co. (The) 6.00%, due 10/1/12 100,000 105,595 E.I. du Pont de Nemours & Co. 4.75%, due 11/15/12 250,000 249,130 Eastman Chemical Co. 7.25%, due 1/15/24 100,000 106,407 ICI Wilmington, Inc. 4.375%, due 12/1/08 100,000 99,241 Praxair, Inc. 3.95%, due 6/1/13 100,000 92,207 Rohm & Haas Co. 7.85%, due 7/15/29 100,000 120,446 --------------- 773,026 --------------- COMMERCIAL BANKS (2.1%) ABN-Amro Bank N.V. 7.55%, due 6/28/06 403,000 446,841 Bank of America Corp. 3.875%, due 1/15/08 250,000 251,964 7.40%, due 1/15/11 500,000 574,947 Bank One Corp. 5.90%, due 11/15/11 250,000 267,036 6.875%, due 8/1/06 250,000 271,989 Bankers Trust Corp. 8.25%, due 5/1/05 250,000 264,840 Branch Banking & Trust Co. Wilson, North Carolina 4.875%, due 1/15/13 100,000 98,255 Fleet National Bank 5.75%, due 1/15/09 250,000 267,632 Key Bank National Association 5.00%, due 7/17/07 100,000 104,879 National City Bank of Pennsylvania 6.25%, due 3/15/11 250,000 273,221
PRINCIPAL AMOUNT VALUE COMMERCIAL BANKS (CONTINUED) PNC Funding Corp. 7.50%, due 11/1/09 $ 100,000 $ 115,150 SunTrust Banks, Inc. 5.05%, due 7/1/07 250,000 262,000 U.S. Bank National Association 6.375%, due 8/1/11 250,000 274,718 UFJ Bank Ltd. 7.40%, due 6/15/11 100,000 111,465 Union Bank of Switzerland-New York 7.25%, due 7/15/06 250,000 273,959 Wachovia Bank National Association 4.85%, due 7/30/07 500,000 523,042 Wells Fargo Bank N.A. 6.45%, due 2/1/11 500,000 551,453 --------------- 4,933,391 --------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Cendant Corp. 6.25%, due 1/15/08 200,000 216,011 Science Applications International Corp. 6.25%, due 7/1/12 100,000 107,553 Waste Management, Inc. 7.00%, due 10/15/06 100,000 108,792 7.125%, due 12/15/17 100,000 108,893 --------------- 541,249 --------------- COMMUNICATIONS EQUIPMENT (0.1%) Motorola, Inc. 7.50%, due 5/15/25 100,000 108,097 7.60%, due 1/1/07 100,000 108,564 --------------- 216,661 --------------- COMPUTERS & PERIPHERALS (0.2%) Hewlett-Packard Co. 3.625%, due 3/15/08 250,000 249,200 International Business Machines Corp. 4.25%, due 9/15/09 150,000 151,306 6.50%, due 1/15/28 100,000 105,485 --------------- 505,991 --------------- CONSTRUCTION MATERIALS (0.0%) (E) CRH America, Inc. 5.30%, due 10/15/13 100,000 99,264 ---------------
108 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.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- CONSUMER FINANCE (2.1%) American Express Credit Corp. 3.00%, due 5/16/08 $ 250,000 $ 242,996 Aristar, Inc. 6.875%, due 5/15/11 100,000 114,193 Capital One Bank 6.875%, due 2/1/06 100,000 106,613 CitiFinancial Credit Co. 8.70%, due 6/15/10 227,000 274,313 Deere (John) Capital Corp. 7.00%, due 3/15/12 250,000 282,997 Ford Motor Credit Co. 6.50%, due 1/25/07 250,000 265,111 7.00%, due 10/1/13 250,000 257,108 7.25%, due 10/25/11 250,000 265,278 7.375%, due 2/1/11 500,000 534,663 7.875%, due 6/15/10 504,000 553,703 General Motors Acceptance Corp. 5.85%, due 1/14/09 100,000 103,149 6.125%, due 9/15/06 250,000 263,829 6.75%, due 1/15/06 250,000 264,726 6.875%, due 8/28/12 250,000 260,665 Household Finance Corp. 5.75%, due 1/30/07 250,000 266,245 6.375%, due 10/15/11 250,000 271,248 6.40%, due 6/17/08 250,000 272,942 MBNA America Bank 5.375%, due 1/15/08 300,000 313,763 SLM Corp. 5.625%, due 8/1/33 100,000 91,423 --------------- 5,004,965 --------------- DIVERSIFIED FINANCIAL SERVICES (0.8%) CIT Group, Inc. 7.75%, due 4/2/12 250,000 288,690 Citigroup, Inc. 5.00%, due 3/6/07 250,000 262,332 5.875%, due 2/22/33 250,000 238,162 Mellon Funding Corp. 5.00%, due 12/1/14 250,000 245,248 National Rural Utilities Cooperative Finance Corp. 5.75%, due 8/28/09 250,000 266,396 NiSource Finance Corp. 7.625%, due 11/15/05 100,000 107,413
PRINCIPAL AMOUNT VALUE DIVERSIFIED FINANCIAL SERVICES (CONTINUED) Verizon Global Funding Corp. 6.125%, due 6/15/07 $ 250,000 $ 269,703 7.75%, due 12/1/30 250,000 286,060 --------------- 1,964,004 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%) ALLTEL Corp. 7.00%, due 7/1/12 250,000 280,798 AT&T Corp. 8.75%, due 11/15/31 250,000 264,580 BellSouth Corp. 6.875%, due 10/15/31 250,000 264,845 CenturyTel, Inc., Series H 8.375%, due 10/15/10 100,000 114,532 Citizens Communications Co. 9.25%, due 5/15/11 100,000 105,243 SBC Communications, Inc. 6.25%, due 3/15/11 250,000 269,734 Sprint Capital Corp. 8.375%, due 3/15/12 500,000 586,824 Verizon Pennsylvania Series A 5.65%, due 11/15/11 250,000 258,328 --------------- 2,144,884 --------------- ELECTRIC UTILITIES (1.3%) American Electric Power Co., Inc. 5.375%, due 3/15/10 200,000 206,813 Arizona Public Service Co. 6.375%, due 10/15/11 100,000 107,486 CenterPoint Energy Houston Electric LLC, Series K2 6.95%, due 3/15/33 100,000 108,415 Consolidated Edison Co. of New York, Series 2002 A 5.625%, due 7/1/12 100,000 104,812 Consumers Energy Co. Series B 5.375%, due 4/15/13 100,000 98,423 Dominion Resources, Inc. 5.00%, due 3/15/13 100,000 97,199 Series B 6.25%, due 6/30/12 400,000 426,739 DTE Energy Co. 7.05%, due 6/1/11 100,000 110,199 Exelon Corp. 6.75%, due 5/1/11 200,000 220,790
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 109 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- ELECTRIC UTILITIES (CONTINUED) FirstEnergy Corp. Series B 6.45%, due 11/15/11 $ 200,000 $ 210,560 MidAmerican Energy Holdings Co. 5.875%, due 10/1/12 100,000 103,368 Northern States Power Co. 6.875%, due 8/1/09 100,000 111,738 Oncor Electric Delivery Co. 6.375%, due 5/1/12 100,000 108,341 7.00%, due 9/1/22 100,000 107,623 Pepco Holdings, Inc. 6.45%, due 8/15/12 100,000 106,574 Progress Energy, Inc. 6.85%, due 4/15/12 250,000 274,324 PSI Energy, Inc. 5.00%, due 9/15/13 100,000 97,579 Southern California Edison Co. 5.00%, due 1/15/14 100,000 98,104 Southern Power Co. Series B 6.25%, due 7/15/12 100,000 106,574 Union Electric Co. 4.65%, due 10/1/13 100,000 96,659 Wisconsin Energy Corp. 6.50%, due 4/1/11 100,000 108,961 --------------- 3,011,281 --------------- ELECTRICAL EQUIPMENT (0.1%) Emerson Electric Co. 7.125%, due 8/15/10 250,000 285,417 --------------- ENERGY EQUIPMENT & SERVICES (0.1%) Halliburton Co. 5.50%, due 10/15/10 100,000 102,195 Transocean, Inc. 7.375%, due 4/15/18 100,000 114,933 --------------- 217,128 --------------- FOOD & STAPLES RETAILING (0.4%) Albertson's, Inc. 8.00%, due 5/1/31 100,000 114,742 Kroger Co. (The) 5.50%, due 2/1/13 250,000 252,568 Safeway, Inc. 5.80%, due 8/15/12 100,000 102,727
PRINCIPAL AMOUNT VALUE FOOD & STAPLES RETAILING (CONTINUED) Wal-Mart Stores, Inc. 6.875%, due 8/10/09 $ 250,000 $ 282,234 7.55%, due 2/15/30 100,000 119,892 --------------- 872,163 --------------- FOOD PRODUCTS (0.9%) Archer-Daniels-Midland Co. 8.125%, due 6/1/12 250,000 303,208 Campbell Soup Co. 4.875%, due 10/1/13 100,000 98,477 ConAgra Foods, Inc. 6.00%, due 9/15/06 100,000 106,459 7.875%, due 9/15/10 100,000 116,518 General Mills, Inc. 5.125%, due 2/15/07 100,000 104,921 H.J. Heinz Finance Co. 6.625%, due 7/15/11 250,000 278,929 Kellogg Co. Series B 6.00%, due 4/1/06 100,000 106,156 Kraft Foods, Inc. 6.25%, due 6/1/12 250,000 267,794 Sara Lee Corp. 6.25%, due 9/15/11 250,000 273,692 Tyson Foods, Inc. 7.25%, due 10/1/06 140,000 151,502 Unilever Capital Corp. 6.875%, due 11/1/05 285,000 304,307 --------------- 2,111,963 --------------- GAS UTILITIES (0.2%) KeySpan Corp. 4.65%, due 4/1/13 100,000 96,453 Kinder Morgan Energy Partners, L.P. 6.75%, due 3/15/11 100,000 109,380 7.125%, due 3/15/12 150,000 168,159 Sempra Energy 6.00%, due 2/1/13 100,000 104,473 --------------- 478,465 --------------- HEALTH CARE PROVIDERS & SERVICES (0.2%) HCA, Inc. 6.75%, due 7/15/13 100,000 102,811 7.125%, due 6/1/06 100,000 106,330 Lion Connecticut Holdings, Inc. 7.625%, due 8/15/26 254,000 285,086 --------------- 494,227 ---------------
110 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.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.1%) Harrah's Operating Co., Inc. 8.00%, due 2/1/11 $ 100,000 $ 115,525 --------------- HOUSEHOLD DURABLES (0.1%) Centex Corp. 7.50%, due 1/15/12 100,000 113,978 Pulte Homes, Inc. 7.875%, due 8/1/11 100,000 114,631 --------------- 228,609 --------------- HOUSEHOLD PRODUCTS (0.1%) Procter & Gamble Co. (The) 6.875%, due 9/15/09 250,000 284,090 --------------- INDUSTRIAL CONGLOMERATES (0.2%) Textron, Inc. 6.375%, due 7/15/04 504,000 508,699 --------------- INSURANCE (0.5%) AIG SunAmerican Global Financing VI 6.30%, due 5/10/11(a) 250,000 270,211 Allstate Corp. (The) 7.20%, due 12/1/09 100,000 115,003 Aon Corp. 7.375%, due 12/14/12 100,000 112,376 Chubb Corp. (The) 5.20%, due 4/1/13 100,000 99,483 Hartford Financial Services Group, Inc. (The) 7.90%, due 6/15/10 100,000 116,785 MetLife, Inc. 6.125%, due 12/1/11 100,000 108,158 SAFECO Corp. 4.20%, due 2/1/08 100,000 102,048 Travelers Property Casualty Corp. 5.00%, due 3/15/13 100,000 97,903 UnumProvident Corp. 7.625%, due 3/1/11 100,000 102,725 --------------- 1,124,692 --------------- INTERNET & CATALOG RETAIL (0.0%) (E) InterActive Corp. 7.00%, due 1/15/13 100,000 108,804 ---------------
PRINCIPAL AMOUNT VALUE IT SERVICES (0.1%) Computer Sciences Corp. 5.00%, due 2/15/13 $ 100,000 $ 98,597 Electronic Data Systems Corp. Series B 6.00%, due 8/1/13 100,000 92,939 First Data Corp. 4.70%, due 8/1/13 100,000 97,557 --------------- 289,093 --------------- MACHINERY (0.1%) Caterpillar, Inc. 8.00%, due 2/15/23 250,000 304,230 --------------- MEDIA (1.2%) Belo Corp. 8.00%, due 11/1/08 100,000 114,607 Clear Channel Communications, Inc. 6.00%, due 11/1/06 100,000 106,391 7.65%, due 9/15/10 100,000 114,267 Comcast Cable Communications, Inc. 7.125%, due 6/15/13 250,000 277,068 Comcast Corp. 5.50%, due 3/15/11 250,000 256,133 7.05%, due 3/15/33 100,000 105,199 Cox Communications, Inc. 7.75%, due 8/15/06-11/1/10 200,000 224,809 Liberty Media Corp. 8.25%, due 2/1/30 100,000 115,438 News America, Inc. 6.55%, due 3/15/33 100,000 101,555 7.25%, due 5/18/18 100,000 111,010 Time Warner, Inc. 5.625%, due 5/1/05 250,000 259,072 6.625%, due 5/15/29 250,000 246,479 6.75%, due 4/15/11 250,000 272,017 Viacom, Inc. 5.625%, due 8/15/12 250,000 260,293 Walt Disney Co. (The) 6.375%, due 3/1/12 250,000 270,698 --------------- 2,835,036 ---------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 111 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- METALS & MINING (0.2%) Alcoa, Inc. 6.00%, due 1/15/12 $ 250,000 $ 269,671 Phelps Dodge Corp. 8.75%, due 6/1/11 100,000 120,601 --------------- 390,272 --------------- MULTILINE RETAIL (0.2%) Federated Department Stores, Inc. 6.625%, due 9/1/08 100,000 109,487 May Department Stores Co. (The) 6.70%, due 9/15/28 100,000 103,118 Target Corp. 5.875%, due 3/1/12 150,000 159,754 7.00%, due 7/15/31 100,000 111,373 --------------- 483,732 --------------- MULTI-UTILITIES & UNREGULATED POWER (0.3%) Constellation Energy Group, Inc. 6.125%, due 9/1/09 100,000 107,246 Duke Energy Corp. 6.45%, due 10/15/32 250,000 245,768 Pacific Electric & Gas Co. 6.05%, due 3/1/34 150,000 141,855 PSE&G Power LLC 7.75%, due 4/15/11 100,000 115,134 Scana Corp. 6.25%, due 2/1/12 100,000 107,593 --------------- 717,596 --------------- OIL & GAS (1.2%) Amerada Hess Corp. 7.30%, due 8/15/31 100,000 101,894 Amoco Co. 6.50%, due 8/1/07 250,000 274,681 Anadarko Petroleum Corp. 5.375%, due 3/1/07 250,000 264,041 Burlington Resources, Inc. 7.375%, due 3/1/29 104,000 117,500 Conoco, Inc. 6.35%, due 4/15/09 250,000 274,351 ConocoPhillips 5.90%, due 10/15/32 250,000 243,276
PRINCIPAL AMOUNT VALUE OIL & GAS (CONTINUED) Devon Financing Corp. ULC 6.875%, due 9/30/11 $ 200,000 $ 222,049 Enterprise Products Partners L.P. Series B 6.875%, due 3/1/33 100,000 98,690 Kerr-McGee Corp. 6.625%, due 10/15/07 100,000 108,735 Marathon Oil Corp. 6.80%, due 3/15/32 100,000 105,428 Occidental Petroleum Corp. 7.20%, due 4/1/28 100,000 111,969 Pemex Project Funding Master Trust 7.375%, due 12/15/14 350,000 365,750 Texaco Capital, Inc. 9.75%, due 3/15/20 176,000 252,252 Union Oil Co. of California 7.35%, due 6/15/09 100,000 113,671 Valero Energy Corp. 7.50%, due 4/15/32 100,000 112,382 --------------- 2,766,669 --------------- PAPER & FOREST PRODUCTS (0.3%) International Paper Co. 5.25%, due 4/1/16 100,000 94,732 5.85%, due 10/30/12 100,000 103,236 MeadWestvaco Corp. 6.85%, due 4/1/12 100,000 108,505 Weyerhaeuser Co. 6.75%, due 3/15/12 200,000 219,251 7.375%, due 3/15/32 100,000 109,552 --------------- 635,276 --------------- PHARMACEUTICALS (0.5%) Bristol-Myers Squibb Co. 5.75%, due 10/1/11 250,000 263,840 Merck & Co., Inc. 4.375%, due 2/15/13 250,000 242,797 Pfizer, Inc. 4.65%, due 3/1/18 250,000 233,039 Schering-Plough Corp. 6.50%, due 12/1/33 100,000 101,420 Wyeth 5.50%, due 3/15/13 250,000 250,155 --------------- 1,091,251 ---------------
112 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.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- REAL ESTATE (0.2%) Boston Properties, Inc. 6.25%, due 1/15/13 $ 100,000 $ 105,605 EOP Operating LP 7.75%, due 11/15/07 175,000 198,093 ERP Operating LP 6.95%, due 3/2/11 100,000 110,888 Simon Property Group, L.P. 5.375%, due 8/28/08 100,000 104,550 --------------- 519,136 --------------- ROAD & RAIL (0.4%) Burlington Northern Santa Fe Corp. 6.75%, due 7/15/11 100,000 111,616 7.125%, due 12/15/10 100,000 112,706 CSX Corp. 6.30%, due 3/15/12 100,000 106,645 7.95%, due 5/1/27 100,000 116,913 Norfolk Southern Corp. 7.80%, due 5/15/27 250,000 289,842 Union Pacific Corp. 6.125%, due 1/15/12 100,000 106,939 --------------- 844,661 --------------- SPECIALTY RETAIL (0.1%) Lowe's Cos., Inc. 6.875%, due 2/15/28 100,000 109,597 --------------- THRIFTS & MORTGAGE FINANCE (0.9%) Countrywide Home Loans, Inc. 3.25%, due 5/21/08 250,000 242,694 5.625%, due 5/15/07 100,000 106,080 General Electric Capital Corp. 5.00%, due 6/15/07 250,000 262,145 6.00%, due 6/15/12 750,000 799,713 6.75%, due 3/15/32 250,000 269,152 Series A 6.80%, due 11/1/05 250,000 266,658 Washington Mutual, Inc. 7.50%, due 8/15/06 250,000 274,661 --------------- 2,221,103 --------------- TOBACCO (0.0%) (E) Altria Group, Inc. 7.65%, due 7/1/08 100,000 110,373 ---------------
PRINCIPAL AMOUNT VALUE TRANSPORTATION INFRASTRUCTURE (0.1%) International Lease Finance Corp. Series O 4.375%, due 11/1/09 $ 250,000 $ 250,697 --------------- WIRELESS TELECOMMUNICATION SERVICES (0.2%) AT&T Wireless Services, Inc. 7.35%, due 3/1/06 150,000 162,310 8.125%, due 5/1/12 100,000 116,638 8.75%, due 3/1/31 100,000 121,993 Cingular Wireless LLC 6.50%, due 12/15/11 100,000 107,762 --------------- 508,703 --------------- Total Corporate Bonds (Cost $48,137,418) 48,906,735 --------------- FOREIGN CORPORATE BONDS (4.0%) ---------------------------------------------------------------------------------- BEVERAGES (0.1%) Diageo Capital PLC 3.375%, due 3/20/08 250,000 246,532 --------------- CAPITAL MARKETS (0.2%) Kreditanstalt fuer Wiederaufbau 3.375%, due 1/23/08 550,000 551,138 --------------- COMMERCIAL BANKS (0.4%) Bank of Tokyo-Mitsubishi, Ltd. 8.40%, due 4/15/10 100,000 119,829 HSBC Holding PLC 7.50%, due 7/15/09 250,000 286,890 International Bank of Reconstruction & Development Series C (zero coupon), due 3/11/31 504,000 94,781 Korea Development Bank 4.25%, due 11/13/07 100,000 101,016 Landwirtschaftliche Rentenbank Series E 3.25%, due 6/16/08 250,000 246,215 Royal Bank of Scotland Group PLC 5.00%, due 11/12/13 100,000 98,609 --------------- 947,340 ---------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 113 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE FOREIGN CORPORATE BONDS (CONTINUED) ---------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.1%) Hanson Australia Funding 5.25%, due 3/15/13 $ 100,000 $ 98,182 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%) British Telecommunications PLC 8.375%, due 12/15/10 250,000 297,572 Deutsche Telekom International Finance BV 5.25%, due 7/22/13 100,000 99,264 8.50%, due 6/15/10 250,000 295,394 France Telecom S.A. 9.75%, due 3/1/31 250,000 320,613 Koninklijke (Royal) KPN N.V. 8.00%, due 10/1/10 100,000 116,968 Telecom Italia Capital 6.375%, due 11/15/33 (a) 100,000 98,082 Telefonica Europe B.V. 7.35%, due 9/15/05 150,000 159,836 8.25%, due 9/15/30 100,000 122,777 Telefonos de Mexico, S.A. de C.V. 4.50%, due 11/19/08 (a) 100,000 98,827 --------------- 1,609,333 --------------- FOREIGN GOVERNMENTS (2.0%) Canadian Government 5.25%, due 11/5/08 500,000 533,052 Malaysian Government 7.50%, due 7/15/11 100,000 113,850 Province of British Columbia 5.375%, due 10/29/08 250,000 266,153 Province of Nova Scotia 5.75%, due 2/27/12 250,000 266,961 Province of Ontario 6.00%, due 2/21/06 511,000 541,050 Republic of Chile 5.50%, due 1/15/13 100,000 100,620 Republic of Finland 4.75%, due 3/6/07 250,000 261,405 Republic of Italy Series DTC 4.375%, due 10/25/06 250,000 258,511 5.625%, due 6/15/12 750,000 800,938 Republic of Korea 8.875%, due 4/15/08 250,000 293,000
PRINCIPAL AMOUNT VALUE FOREIGN GOVERNMENTS (CONTINUED) Republic of Poland 5.25%, due 1/15/14 $ 100,000 $ 99,250 Republic of South Africa 7.375%, due 4/25/12 100,000 109,750 United Mexican States 6.375%, due 1/16/13 550,000 556,874 7.50%, due 1/14/12 250,000 272,500 Series A 8.50%, due 2/1/06 250,000 273,750 --------------- 4,747,664 --------------- INSURANCE (0.1%) Axa 8.60%, due 12/15/30 105,000 130,501 --------------- MEDIA (0.1%) Intelsat Ltd. 7.625%, due 4/15/12 100,000 99,657 Thomson Corp. (The) 6.20%, due 1/5/12 100,000 108,078 --------------- 207,735 --------------- METALS & MINING (0.1%) BHP Finance USA Ltd. 4.80%, due 4/15/13 100,000 98,658 Inco Ltd. 5.70%, due 10/15/15 100,000 99,912 --------------- 198,570 --------------- MULTI-UTILITIES & UNREGULATED POWER (0.1%) Hydro-Quebec Series JL 6.30%, due 5/11/11 250,000 275,806 --------------- OIL & GAS (0.0%) (E) EnCana Corp. 4.75%, due 10/15/13 100,000 96,088 --------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) Vodafone Group PLC 7.75%, due 2/15/10 250,000 289,505 --------------- Total Foreign Corporate Bonds (Cost $9,315,124) 9,398,394 ---------------
114 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.
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (68.3%) ---------------------------------------------------------------------------------- FEDERAL HOME LOAN BANK (1.3%) Series 405 1.625%, due 4/15/05 $ 2,000,000 $ 2,000,090 Series 430 2.875%, due 9/15/06 1,000,000 1,003,202 --------------- 3,003,292 --------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (5.8%) 1.50%, due 8/15/05 1,500,000 1,492,422 1.875%, due 2/15/06 2,000,000 1,984,554 2.75%, due 8/15/06 1,000,000 1,001,850 2.875%, due 12/15/06 3,000,000 3,000,645 4.50%, due 7/15/13 1,000,000 967,787 5.25%, due 1/15/06 3,000,000 3,145,722 6.25%, due 7/15/32 2,000,000 2,124,014 --------------- 13,716,994 --------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE PASS-THROUGH SECURITIES) (12.5%) 4.50%, due 9/1/18-8/1/33 2,925,588 2,863,022 4.50%, due 6/15/19-5/15/34 TBA (b) 1,000,000 960,000 5.00%, due 5/1/18-11/1/33 6,595,984 6,537,923 5.50%, due 3/1/17-11/1/33 1,548,530 1,586,017 *5.50%, due 5/15/34-6/15/34 TBA (b) 9,500,000 9,479,536 6.00%, due 12/1/13-4/1/33 3,556,678 3,668,078 6.00%, due 5/15/34 TBA (b) 1,000,000 1,022,812 6.50%, due 4/1/11-7/1/32 1,996,533 2,089,321 7.00%, due 11/1/04-3/1/32 963,305 1,017,008 7.50%, due 9/1/11-2/1/32 351,044 376,927 8.00%, due 7/1/26 21,131 22,998 --------------- 29,623,642 ---------------
PRINCIPAL AMOUNT VALUE FEDERAL NATIONAL MORTGAGE ASSOCIATION (5.5%) *1.875%, due 9/15/05 $ 4,000,000 $ 3,993,692 3.25%, due 8/15/08 2,000,000 1,959,854 4.25%, due 7/15/07 3,000,000 3,089,700 4.625%, due 10/15/13 2,000,000 1,947,108 5.00%, due 1/15/07 1,500,000 1,577,899 6.21%, due 8/6/38 475,000 503,052 --------------- 13,071,305 --------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (17.4%) 4.50%, due 4/1/18-11/1/33 5,754,644 5,648,860 4.50%, due 5/15/19 TBA (b) 1,000,000 984,062 5.00%, due 10/1/17-11/1/33 4,060,158 4,054,342 *5.00%, due 5/15/19-5/15/34 TBA (b) 6,500,000 6,315,313 5.50%, due 6/1/16-12/1/33 6,893,201 6,910,409 5.50%, due 5/15/19-5/15/34 TBA (b) 2,000,000 2,009,219 6.00%, due 6/1/16-5/1/33 5,461,520 5,605,205 6.00%, due 5/15/34 TBA (b) 1,500,000 1,534,218 6.50%, due 3/1/11-9/1/32 5,000,416 5,217,140 7.00%, due 2/1/09-5/1/32 2,093,977 2,217,754 7.50%, due 1/1/28-8/1/31 249,064 266,441 8.00%, due 7/1/07-1/1/28 211,639 229,830 9.50%, due 3/1/16-9/1/19 212,666 235,530 --------------- 41,228,323 --------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (4.3%) 5.00%, due 7/5/33-8/15/33 1,432,842 1,394,112 5.50%, due 3/15/33-9/15/33 2,221,086 2,223,957 5.50%, due 5/15/34 TBA (b) 500,000 500,000 6.00%, due 3/20/29-12/15/32 1,598,905 1,641,401 6.00%, due 5/15/34 TBA (b) 500,000 512,500 6.50%, due 2/15/29-10/15/32 1,820,111 1,901,592 7.00%, due 3/15/07-8/15/32 1,097,993 1,167,064 7.50%, due 8/15/08-3/15/32 505,631 543,384
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 115 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED) ---------------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (CONTINUED) 8.00%, due 6/15/26-11/15/30 $ 187,999 $ 205,221 8.50%, due 7/15/26-11/15/26 18,091 19,903 --------------- 10,109,134 --------------- UNITED STATES TREASURY BONDS (5.1%) *5.375%, due 2/15/31 4,500,000 4,559,063 6.00%, due 2/15/26 2,500,000 2,703,515 6.25%, due 5/15/30 1,007,000 1,131,655 7.50%, due 11/15/16 403,000 501,027 8.50%, due 2/15/20 201,000 273,839 8.75%, due 5/15/17-8/15/20 756,000 1,047,690 8.875%, due 2/15/19 302,000 421,243 9.875%, due 11/15/15 302,000 439,056 10.375%, due 11/15/12 252,000 312,411 11.25%, due 2/15/15 201,000 313,458 12.75%, due 11/15/10 201,000 232,830 --------------- 11,935,787 --------------- UNITED STATES TREASURY NOTES (16.4%) *1.125%, due 6/30/05 3,500,000 3,476,347 *1.625%, due 10/31/05-2/28/06 8,000,000 7,948,048 *2.00%, due 5/15/06 5,000,000 4,966,405 2.125%, due 8/31/04 1,000,000 1,003,477 *2.375%, due 8/15/06 5,000,000 4,985,350 *2.625%, due 11/15/06 5,000,000 4,996,485 2.875%, due 6/30/04 1,511,000 1,515,663 *4.00%, due 2/15/14 5,250,000 5,043,281 4.75%, due 11/15/08 1,007,000 1,059,750 5.00%, due 2/15/11 648,000 683,564 6.00%, due 8/15/09 327,000 362,715 6.125%, due 8/15/07 705,000 773,489
PRINCIPAL AMOUNT VALUE UNITED STATES TREASURY NOTES (CONTINUED) 6.75%, due 5/15/05 $ 1,511,000 $ 1,589,501 7.50%, due 2/15/05 302,000 316,180 --------------- 38,720,255 --------------- Total U.S. Government & Federal Agencies (Cost $161,926,179) 161,408,732(d) --------------- YANKEE BONDS (1.4%) (F) ---------------------------------------------------------------------------------- COMMERCIAL BANKS (0.6%) Abbey National PLC 7.95%, due 10/26/29 100,000 120,184 Australia & New Zealand Banking Group Ltd. 7.55%, due 9/15/06 353,000 387,997 Inter-American Development Bank 6.80%, due 10/15/25 604,000 685,315 Santander Financial Issuances 6.375%, due 2/15/11 250,000 272,184 --------------- 1,465,680 --------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%) TELUS Corp. 7.50%, due 6/1/07 100,000 110,504 --------------- FOREIGN GOVERNMENTS (0.3%) Province of Manitoba 5.50%, due 10/1/08 250,000 266,413 Province of Quebec Series NJ 7.50%, due 7/15/23 302,000 367,637 --------------- 634,050 --------------- GAS UTILITIES (0.0%) (E) TransCanada Pipelines Ltd. 4.00%, due 6/15/13 100,000 92,052 --------------- INDUSTRIAL CONGLOMERATES (0.1%) Tyco International Group SA 6.375%, due 10/15/11 250,000 263,254 --------------- METALS & MINING (0.0%) (E) Alcan, Inc. 6.45%, due 3/15/11 100,000 108,565 ---------------
116 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.
PRINCIPAL AMOUNT VALUE YANKEE BONDS (CONTINUED) ---------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.0%) (E) United Utilities PLC 5.375%, due 2/1/19 $ 100,000 $ 94,395 --------------- OIL & GAS (0.2%) Canadian National Resources Ltd. 5.45%, due 10/1/12 100,000 102,014 Norsk Hydro ASA 7.25%, due 9/23/27 250,000 284,454 Petro-Canada 4.00%, due 7/15/13 100,000 90,553 --------------- 477,021 --------------- ROAD & RAIL (0.1%) Canadian National Railway Co. 6.375%, due 10/15/11 100,000 108,955 --------------- Total Yankee Bonds (Cost $3,203,833) 3,354,476 --------------- Total Long-Term Bonds (Cost $224,805,123) 225,326,167 --------------- SHORT-TERM INVESTMENTS (14.1%) (C) ---------------------------------------------------------------------------------- COMMERCIAL PAPER (13.1%) Ciesco LP 1.021%, due 5/7/04 5,000,000 4,999,149 Countrywide Home Loans, Inc. 1.051%, due 5/13/04 5,711,000 5,709,001 E.I. du Pont de Nemours & Co. 1.00%, due 5/3/04 1,816,000 1,815,899 Morgan Stanley Dean Witter & Co. 1.03%, due 5/10/04 3,000,000 2,999,227
PRINCIPAL AMOUNT VALUE COMMERCIAL PAPER (CONTINUED) South Carolina Electric & Gas Co. 1.051%, due 5/19/04 $ 5,000,000 $ 4,997,374 Three Rivers Funding Corp. 1.031%, due 5/17/04 5,000,000 4,997,710 UBS Finance Delaware LLC 1.02%, due 5/3/04 5,570,000 5,569,685 --------------- Total Commercial Paper (Cost $31,088,045) 31,088,045 --------------- U.S. GOVERNMENT (1.0%) United States Treasury Bills 0.983%, due 8/26/04 2,000,000 1,993,662 1.010%, due 9/2/04 300,000 298,966 --------------- Total U.S. Government (Cost $2,292,431) 2,292,628 --------------- Total Short-Term Investments (Cost $33,380,476) 33,380,673 --------------- Total Investments (Cost $258,185,599) (g) 109.5% 258,706,840(h) Liabilities in Excess of Cash and Other Assets (9.5) (22,538,246) ------ ------------ Net Assets 100.0% $ 236,168,594 ======= =============== CONTRACTS UNREALIZED LONG DEPRECIATION (I) FUTURES CONTRACTS (-0.1%) ----------------------------------------------------------------------------------- United States Treasury Note June 2004 (5 Year) 69 $ (129,284) --------------- Total Futures Contracts (Settlement Value $7,585,688) (d) $ (129,284) ===============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 117 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED) (a) May be sold to institutional investors only. (b) TBA: Securities purchased on a forward commitment basis with an approximate principal amount and maturity date. The actual principal amount and maturity date will be determined upon settlement. The market value of these securities at April 30, 2004 is $23,305,160. (c) Segregated, partially segregated or designated as collateral for futures contracts and TBAs. (d) The combined market value of U.S. Government and Federal Agencies investments and settlement value of U.S. Treasury Note futures contracts represents 71.8% of net assets. (e) Less than one tenth of a percent. (f) Yankee bond--dollar-denominated bond issued in the United States by foreign banks and corporations. (g) The cost for federal income tax purposes is $258,332,733. (h) At April 30, 2004 net unrealized appreciation was $374,107, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $3,365,841 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $2,991,734. (i) Represents the difference between the value of the con- tracts at the time they were opened and the value at April 30, 2004.
118 MainStay Indexed Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $258,185,599) $258,706,840 Cash 188 Receivables: Investment securities sold 7,235,381 Interest 2,011,348 Fund shares sold 481,032 Other assets 15,936 ------------ Total assets 268,450,725 ------------ LIABILITIES: Payables: Investment securities purchased 31,449,356 Manager 65,442 Fund shares redeemed 36,928 Transfer agent 19,038 Custodian 15,043 NYLIFE Distributors 8,587 Variation margin on futures contracts 2,879 Directors 60 Accrued expenses 65,619 Dividend payable 619,179 ------------ Total liabilities 32,282,131 ------------ Net assets $236,168,594 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 500 million shares authorized Class A $ 3,895 Class I 17,916 Additional paid-in capital 238,286,131 Accumulated undistributed net investment income 619,925 Accumulated net realized loss on investments and futures contracts (3,151,230) Net unrealized appreciation on investments and futures contracts 391,957 ------------ Net assets $236,168,594 ============ CLASS A Net assets applicable to outstanding shares $ 42,155,147 ============ Shares of capital stock outstanding 3,894,542 ============ Net asset value per share outstanding $ 10.82 Maximum sales charge (3.00% of offering price) 0.33 ------------ Maximum offering price per share outstanding $ 11.15 ============ CLASS I Net assets applicable to outstanding shares $194,013,447 ============ Shares of capital stock outstanding 17,916,454 ============ Net asset value and offering price per share outstanding $ 10.83 ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 119 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Interest $ 4,446,300 ----------- EXPENSES: Manager 567,360 Professional 40,263 Transfer agent 33,960 Service -- Class A 32,884 Service -- Service Class 14,118 Portfolio pricing 32,307 Custodian 30,300 Shareholder communication 14,647 Directors 12,171 Registration 1,958 Miscellaneous 20,218 ----------- Total expenses before reimbursement 800,186 Expense reimbursement from Manager (185,823) ----------- Net expenses 614,363 ----------- Net investment income 3,831,937 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Security transactions 507,290 Futures transactions 179,292 ----------- Net realized gain on investments 686,582 ----------- Net change in unrealized appreciation on investments: Security transactions (2,398,196) Futures transactions (161,486) ----------- Net unrealized loss on investments (2,559,682) ----------- Net realized and unrealized loss on investments (1,873,100) ----------- Net increase in net assets resulting from operations $ 1,958,837 ===========
120 MainStay Indexed Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE IN NET ASSETS: Operations: Net investment income $ 3,831,937 $ 5,782,093 Net realized gain on investments and futures contracts 686,582 1,010,704 Net change in unrealized appreciation (depreciation) on investments and futures contracts (2,559,682) (1,651,848) --------------------------- Net increase in net assets resulting from operations 1,958,837 5,140,949 --------------------------- Dividends to shareholders: From net investment income: Class A (402,182) -- Class I (2,980,190) (5,405,294) Service Class (156,873) (688,954) --------------------------- Total dividends to shareholders (3,539,245) (6,094,248) --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 52,974,525 -- Class I 31,698,052 114,645,556 Service Class 5,080,305 27,017,252 Net asset value of shares issued to shareholders in reinvestment of dividends: Class A 298,392 -- Class I 2,461,381 5,371,984 Service Class 156,825 688,954 --------------------------- 92,669,480 147,723,746 Cost of shares redeemed: Class A (45,076,253) -- Class I (22,988,783) (60,146,907) Service Class (1,721,780) (14,596,471) --------------------------- (69,786,816) (74,743,378) --------------------------- Increase in net assets derived from capital share transactions 22,882,664 72,980,368 --------------------------- Net increase in net assets 21,302,256 72,027,069 NET ASSETS: Beginning of period 214,866,338 142,839,269 --------------------------- End of period $236,168,594 $214,866,338 =========================== Accumulated undistributed net investment income at end of period $ 619,925 $ 327,233 ===========================
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 121 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS I ---------- --------------------------------------------------------------------------------------- JANUARY 1, SIX JANUARY 1, 2004** MONTHS 1999 THROUGH ENDED THROUGH YEAR ENDED APRIL 30, APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2004*** 2003 2002 2001 2000 1999* 1998 Net asset value at beginning of period $ 10.95 $ 10.89 $ 10.86 $ 11.21 $ 10.73 $ 10.76 $ 10.93 $ 10.74 ------- -------- -------- -------- ------- -------- -------- -------- Net investment income 0.12 0.18 0.39 0.52(c) 0.65(c)(d) 0.72 0.62 0.69 Net realized and unrealized gain (loss) on investments (0.14) (0.07) 0.04 0.08 0.72(d) 0.00(b) (0.79) 0.19 ------- -------- -------- -------- ------- -------- -------- -------- Total from investment operations (0.02) 0.11 0.43 0.60 1.37 0.72 (0.17) 0.88 ------- -------- -------- -------- ------- -------- -------- -------- Less dividends: From net investment income (0.11) (0.17) (0.40) (0.95) (0.89) (0.75) -- (0.69) ------- -------- -------- -------- ------- -------- -------- -------- Net asset value at end of period $ 10.82 $ 10.83 $ 10.89 $ 10.86 $ 11.21 $ 10.73 $ 10.76 $ 10.93 ======= ======== ======== ======== ======= ======== ======== ======== Total investment return (a) (0.23%) 1.02% 3.97% 5.92% 13.44% 7.27% (1.56%) 8.21% Ratios (to average net assets)/Supplemental Data: Net investment income 3.17%+ 3.42%+ 3.39% 4.83% 6.00%(d) 6.63% 6.42%+ 6.37% Net expenses 0.75%+ 0.50%+ 0.50% 0.50% 0.50% 0.50% 0.50%+ 0.50% Expenses (before reimbursement) 0.91%+ 0.66%+ 0.68% 0.74% 0.71% 0.63% 0.62%+ 0.65% Portfolio turnover rate 45% 45% 110% 56% 57% 20% 31% 14% Net assets at end of period (in 000's) $42,155 $194,013 $184,051 $125,169 $81,890 $136,033 $145,427 $156,244
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Total return is calculated exclusive of sales charges and is not annualized. (b) Less than one cent per share. (c) Per share data based on average shares outstanding during the period. (d) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended October 31, 2001 is shown below. Per share ratios and supplemental data for periods prior to November 1, 2000 have not been restated to reflect this change in presentation.
CLASS I ------- Decrease net investment income ($0.02) Increase net realized and unrealized gains and losses 0.02 Decrease ratio of net investment income (0.16%)
122 MainStay Indexed Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. MAINSTAY INTERMEDIATE TERM BOND FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS LEHMAN BROTHERS(R) AGGREGATE BOND INDEX(1) 1.25% 1.82% 6.66% 7.34% AVERAGE LIPPER INTERMEDIATE INVESTMENT GRADE FUND(2) 1.17 1.91 5.86 6.55
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -3.73% -3.42% 4.22% 5.55% Excluding sales charges 0.81 1.14 5.18 6.04
(in thousands, with sales charges)
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE BOND FUND BOND INDEX -------------------------- ------------------------- 4/30/94 955.00 1000.00 1011.00 1073.00 1090.00 1166.00 1159.00 1248.00 1269.00 1385.00 1333.00 1472.00 1325.00 1490.00 1478.00 1675.00 1552.00 1806.00 1697.00 1995.00 4/30/04 1716.00 2031.00
-- MainStay Intermediate Term Bond Fund -- Lehman Brothers Aggregate Bond Index CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -4.41% -4.40% 4.08% 5.27% Excluding sales charges 0.55 0.50 4.42 5.27
(in thousands, with sales charges)
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE BOND FUND BOND INDEX -------------------------- ------------------------- 4/30/94 1000.00 1000.00 1052.00 1073.00 1125.00 1166.00 1187.00 1248.00 1290.00 1385.00 1346.00 1472.00 1327.00 1490.00 1470.00 1675.00 1532.00 1806.00 1662.00 1995.00 4/30/04 1671.00 2031.00
-- MainStay Intermediate Term Bond Fund -- Lehman Brothers Aggregate Bond Index CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -0.44% -0.48% 4.42% 5.27% Excluding sales charges 0.55 0.50 4.42 5.27
(in thousands, with sales charges)
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE BOND FUND BOND INDEX -------------------------- ------------------------- 4/30/94 1000.00 1000.00 1052.00 1073.00 1125.00 1166.00 1187.00 1248.00 1290.00 1385.00 1346.00 1472.00 1327.00 1490.00 1470.00 1675.00 1532.00 1806.00 1662.00 1995.00 4/30/04 1671.00 2031.00
-- MainStay Intermediate Term Bond Fund -- Lehman Brothers Aggregate Bond Index Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 4.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A, B, and C shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 123 CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 0.93% 1.38% 5.43% 6.29%
(in thousands, with sales charges)
MAINSTAY INTERMEDIATE TERM LEHMAN BROTHERS AGGREGATE BOND FUND BOND INDEX -------------------------- ------------------------- 4/30/94 1000.00 1000.00 1062.00 1073.00 1146.00 1166.00 1222.00 1248.00 1341.00 1385.00 1413.00 1472.00 1407.00 1490.00 1573.00 1675.00 1656.00 1806.00 1815.00 1995.00 4/30/04 1840.00 2031.00
-- MainStay Intermediate Term Bond Fund -- Lehman Brothers Aggregate Bond Index 1. The Lehman Brothers(R) Aggregate Bond Index is an unmanaged index that includes the following other unmanaged Lehman Brothers(R) indices: the Government Index, the Corporate Index, the Mortgage-Backed Securities Index and the Asset-Backed Securities Index. To qualify for inclusion in the Lehman Brothers(R) Aggregate Bond Index, securities must be U.S. dollar denominated and investment grade and have a fixed-rate coupon, a remaining maturity of at least one year, and a par amount outstanding of at least $150 million. Results assume reinvestment of all income and capital-gains. An investment cannot be made directly into an index. 2. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 124 MainStay Intermediate Term Bond Fund $1,000 INVESTED IN MAINSTAY INTERMEDIATE TERM BOND FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $ 997 $4 $1,046 $4 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $ 995 $6 $1,044 $6 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(1,2) $1,000 $ 995 $6 $1,044 $6 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,009 $4 $1,046 $4 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares, Class B shares and Class C shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had these shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $5, $9 and $9, respectively, and the ending account value would be $1,045, $1,041 and $1,041, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). www.mainstayfunds.com 125 PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Gary Goodenough and Christopher Harms of MacKay Shields LLC MAINSTAY INTERMEDIATE TERM BOND FUND (FORMERLY ECLIPSE BOND FUND) WHAT ECONOMIC FACTORS INFLUENCED THE BOND MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? The Federal Reserve maintained the targeted federal funds rate at an accommodative 1.0%, and for much of the period, economic data was mixed. In April 2004, however, key economic releases showed that core inflation had risen at a 0.4% monthly rate, nonfarm payrolls had grown by 308,000, and first- quarter 2004 real gross domestic product had surpassed the 4.1% annualized growth rate in the fourth quarter of 2003. The risk of deflation appeared to be waning, while trend-level growth seemed to be firming. HOW DID THESE FACTORS AFFECT TREASURY YIELDS? Quite a bit. The two-year, five-year, 10-year, and 30-year benchmark Treasury issues began the reporting period with yields of 1.8%, 3.2%, 4.3%, and 5.1%, respectively. Over the next five months, benchmark Treasury yields drifted lower on inconclusive economic data. In April, interest rates turned sharply higher as the bond market began to brace for a less stimulative monetary policy. At the end of the reporting period, the benchmark rates had risen to 2.3%, 3.6%, 4.5%, and 5.3%, respectively. HOW DID YOU POSITION THE FUND'S PORTFOLIO? During the period, there were only modest changes to the Fund's overall asset allocation. The adjustments we made served to reduce the Fund's overall duration. Early in the reporting period, we shortened the Fund's duration by swapping longer-maturity Treasuries for shorter-maturity issues and by selling some longer-duration lower-coupon mortgage-backed securities. The Fund's duration fell from 4.61 years to 4.49 years, consistent with our view that interest rates would gradually rise as 2004 unfolded. To reinforce our view that interest rates were likely to rise, we purchased mortgage-backed securities collateralized by balloon loans, because the durations of these securities are less prone to lengthen when interest rates rise. WERE THERE ANY PARTICULAR HOLDINGS THAT ENHANCED RESULTS? The Fund's corporate-bond exposure focused on industries that were aggressively rationalizing excess capacity to improve their pricing power. We had particular success with a few triple-B rated issuers,(1) such as Medco Health Solutions and Fund American. These gains were partially offset by the Fund's holdings in Citizens Communications, a telecommunications company that unexpectedly announced its intent to explore strategic alternatives. To protect the portfolio from increased credit risk, we sold a portion of the position and are closely monitoring the performance of our remaining holdings in the company. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND INTEREST RATES? We expect employment data to play a role in Federal Reserve decisions, and we anticipate market turbulence around the time when payroll data is released. Over the longer term, we expect interest rates to gradually trend higher until the Federal Reserve initiates a tightening cycle. Even then, interest rates may remain unsettled until the Federal Reserve specifies the kinds of conditions that would prompt a neutral stand. We continue to favor corporate bonds for their total-return potential. If default rates continue to decline and our economic outlook remains positive, we may increase the Fund's allocation to high-yield corporate bonds. A portion of these purchases may include emerging-market bonds. In particular, we will target areas where globalization and free-trade policies have lowered market barriers. Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Foreign securities may be subject to greater risks than U.S. investments, including currency fluctuations, less-liquid trading markets, greater price volatility, political and economic instability, less publicly available information, and changes in tax or currency laws or monetary policy. These risks are likely to be greater in emerging markets than in developed markets. 1. 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. 126 MainStay Intermediate Term Bond Fund The core themes in the Fund's portfolio--positioning for higher interest rates, tighter credit spreads, and crossover buying from Treasuries to higher-yielding high-quality sectors, such as asset-backed securities--are working well. We believe this is an effective strategy and we plan to stay the course. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) U.S. Government & Federal Agencies 61.0 Short-Term Investments (collateral from securities lending is 12.3%) 31.1 Corporate Bonds 24.3 Asset-Backed Securities 4.2 Foreign Corporate Bonds 3.7 Foreign Government Bonds 1.0 Yankee Bond 0.6 Municipal Bond 0.2 Liabilities in Excess of Cash and Other Assets -26.1
www.mainstayfunds.com 127 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMOUNT VALUE LONG-TERM INVESTMENTS (95.0%)+ ASSET-BACKED SECURITIES (4.2%) ------------------------------------------------------------------------------- CONSUMER FINANCE (2.3%) BMW Vehicle Owner Trust Series 2003-A Class A3 1.94%, due 2/25/07 $ 825,000 $ 826,077 Harley-Davidson Motorcycle Trust Series 2004-1 Class A2 2.53%, due 11/15/11 1,695,000 1,670,284 Volkswagen Auto Loan Enhanced Trust Series 2003-2 Class A3 2.27%, due 10/22/07 1,495,000 1,493,878 ------------- 3,990,239 ------------- CONSUMER LOANS (0.4%) Atlantic City Electric Transition Funding LLC Series 2002-1 Class A4 5.55%, due 10/20/23 675,000 682,760 ------------- DIVERSIFIED FINANCIAL SERVICES (0.6%) Capital One Master Trust Series 2001-5 Class A 5.30%, due 6/15/09 460,000 484,646 DaimlerChrysler Auto Trust Series 2001-D Class A3 3.15%, due 11/6/05 535,779 537,438 ------------- 1,022,084 ------------- MULTI-UTILITIES & UNREGULATED POWER (0.7%) Public Service of New Hampshire Funding LLC Pass-Through Certificates Series 2002-1 Class A 4.58%, due 2/1/08 1,128,274 1,168,767 ------------- THRIFTS & MORTGAGE FINANCE (0.2%) Vanderbilt Mortgage Finance Series 1999-B Class 1A4 6.545%, due 4/7/18 416,567 432,914 ------------- Total Asset-Backed Securities (Cost $7,276,872) 7,296,764 ------------- CORPORATE BONDS (24.3%) ------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.3%) General Dynamics Corp. 4.50%, due 8/15/10 600,000 599,734 -------------
PRINCIPAL AMOUNT VALUE AUTOMOBILES (0.8%) DaimlerChrysler N.A. Holding Corp. 6.50%, due 11/15/13 $ 715,000 $ 737,500 General Motors Corp. 8.375%, due 7/15/33 600,000 648,910 ------------- 1,386,410 ------------- BEVERAGES (0.5%) Miller Brewing Co. 4.25%, due 8/15/08 (c) 825,000 827,838 ------------- BUILDING PRODUCTS (0.1%) Masco Corp. 6.50%, due 8/15/32 195,000 199,314 ------------- CAPITAL MARKETS (2.5%) Bear Stearns Cos., Inc. (The) 4.00%, due 1/31/08 450,000 453,759 Goldman Sachs Group, Inc. (The) 5.25%, due 10/15/13 1,670,000 1,641,396 6.345%, due 2/15/34 810,000 774,229 Morgan Stanley 3.625%, due 4/1/08 630,000 626,164 4.75%, due 4/1/14 830,000 775,461 ------------- 4,271,009 ------------- COMMERCIAL BANKS (1.5%) Bank of America Corp. 5.125%, due 11/15/14 970,000 950,662 BankBoston N.A. 7.00%, due 9/15/07 520,000 575,016 FleetBoston Financial Corp. 3.85%, due 2/15/08 500,000 502,669 PNC Funding Corp. 5.25%, due 11/15/15 615,000 601,988 ------------- 2,630,335 ------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Waste Management, Inc. 5.00%, due 3/15/14 395,000 379,793 ------------- COMPUTERS & PERIPHERALS (0.2%) International Business Machines Corp. 8.375%, due 11/1/19 330,000 422,267 -------------
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily.
128 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.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ------------------------------------------------------------------------------- CONSUMER FINANCE (1.9%) Capital One Bank 5.75%, due 9/15/10 $ 355,000 $ 368,885 Ford Motor Credit Co. 5.80%, due 1/12/09 80,000 81,481 7.00%, due 10/1/13 1,315,000 1,352,385 General Motors Acceptance Corp. 6.875%, due 8/28/12 460,000 479,623 7.75%, due 1/19/10 410,000 450,947 Household Finance Corp. 7.25%, due 5/15/06 208,000 226,367 MBNA Corp. 6.25%, due 1/17/07 370,000 396,106 ------------- 3,355,794 ------------- CONTAINERS & PACKAGING (0.2%) Rock-Tenn Co. 8.20%, due 8/15/11 345,000 404,608 ------------- DIVERSIFIED FINANCIAL SERVICES (1.3%) FGIC Corp. 6.00%, due 1/15/34 (c) 530,000 516,037 Glencore Funding, Inc. 6.00%, due 4/15/14 (c) 855,000 808,002 J Paul Getty Trust Series 2003 5.875%, due 10/1/33 460,000 451,809 NiSource Finance Corp. 5.40%, due 7/15/14 435,000 429,246 ------------- 2,205,094 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.1%) Citizens Communications Co. 9.00%, due 8/15/31 740,000 726,415 9.25%, due 5/15/11 380,000 399,925 Sprint Capital Corp. 8.75%, due 3/15/32 650,000 776,433 ------------- 1,902,773 ------------- ELECTRIC UTILITIES (1.1%) American Electric Power Co., Inc. Series C 5.375%, due 3/15/10 215,000 222,324 CenterPoint Energy, Inc. Series B 5.875%, due 6/1/08 380,000 387,001
PRINCIPAL AMOUNT VALUE ELECTRIC UTILITIES (CONTINUED) Southern California Edison Co. 6.00%, due 1/15/34 $ 265,000 $ 255,660 Tenaska Virginia Partners L.P. 6.119%, due 3/30/24 (c) 990,000 982,704 ------------- 1,847,689 ------------- ELECTRICAL EQUIPMENT (0.2%) Emerson Electric Co. 6.00%, due 8/15/32 340,000 339,044 ------------- ENERGY EQUIPMENT & SERVICES (0.7%) Entergy-Koch, L.P. 3.65%, due 8/20/06 (c) 1,195,000 1,194,362 ------------- FOOD & STAPLES RETAILING (1.1%) CVS Corp. 5.789%, due 1/10/26 (c) 437,746 431,937 Safeway, Inc. 4.125%, due 11/1/08 355,000 350,987 6.15%, due 3/1/06 670,000 709,276 Wal-Mart Stores, Inc. 7.55%, due 2/15/30 290,000 347,687 ------------- 1,839,887 ------------- FOOD PRODUCTS (0.3%) Cargill, Inc. 5.00%, due 11/15/13 (c) 570,000 553,521 ------------- HEALTH CARE PROVIDERS & SERVICES (1.0%) Highmark, Inc. 6.80%, due 8/15/13 (c) 920,000 984,559 Medco Health Solutions, Inc. 7.25%, due 8/15/13 615,000 663,562 ------------- 1,648,121 ------------- INSURANCE (0.7%) Fund American Cos., Inc. 5.875%, due 5/15/13 850,000 854,910 Marsh & McLennan Cos., Inc. 7.125%, due 6/15/09 345,000 389,631 ------------- 1,244,541 ------------- MEDIA (2.9%) AT&T Broadband Corp. 9.455%, due 11/15/22 370,000 480,934 Liberty Media Corp. 3.50%, due 9/25/06 250,000 250,483
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 129 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ------------------------------------------------------------------------------- MEDIA (CONTINUED) Tele-Communications, Inc. 9.80%, due 2/1/12 $ 810,000 $ 1,034,052 Time Warner Entertainment Co. L.P. 10.15%, due 5/1/12 1,714,000 2,218,386 Time Warner, Inc. 6.875%, due 6/15/18 510,000 539,996 8.05%, due 1/15/16 455,000 526,239 ------------- 5,050,090 ------------- MULTILINE RETAIL (0.9%) Target Corp. 6.35%, due 11/1/32 990,000 1,020,515 8.60%, due 1/15/12 390,000 483,400 ------------- 1,503,915 ------------- MULTI-UTILITIES & UNREGULATED POWER (1.4%) Pacific Electric & Gas Co. 6.05%, due 3/1/34 570,000 539,049 PSE&G Power LLC 6.875%, due 4/15/06 1,805,000 1,937,886 ------------- 2,476,935 ------------- OIL & GAS (1.1%) Kern River Funding Corp. 4.893%, due 4/30/18 (c) 650,760 634,725 Tosco Corp. 8.125%, due 2/15/30 975,000 1,210,422 ------------- 1,845,147 ------------- PERSONAL PRODUCTS (0.2%) Estee Lauder Cos., Inc. 5.75%, due 10/15/33 395,000 380,884 ------------- PHARMACEUTICALS (0.7%) Wyeth 5.50%, due 2/1/14 935,000 932,043 6.50%, due 2/1/34 310,000 308,305 ------------- 1,240,348 ------------- REAL ESTATE (0.8%) HRPT Properties Trust 5.75%, due 2/15/14 845,000 836,331 iStar Financial, Inc. 5.125%, due 4/1/11 (c) 280,000 266,700 Rouse Co. (The) 3.625%, due 3/15/09 290,000 277,920 ------------- 1,380,951 -------------
PRINCIPAL AMOUNT VALUE THRIFTS & MORTGAGE FINANCE (0.6%) Washington Mutual, Inc. 4.00%, due 1/15/09 $ 990,000 $ 975,726 ------------- Total Corporate Bonds (Cost $42,689,238) 42,106,130 ------------- FOREIGN CORPORATE BONDS (3.7%) ------------------------------------------------------------------------------- BERMUDA (0.2%) Arch Capital Group Ltd. 7.35%, due 5/1/34 325,000 330,148 ------------- BRAZIL (0.5%) CIA Brazileira de Bebidas 10.50%, due 12/15/11 800,000 916,000 ------------- CANADA (0.2%) Inco Ltd. 5.70%, due 10/15/15 345,000 344,700 ------------- CAYMAN ISLANDS (0.6%) Hutchison Whamp International Ltd. 5.45%, due 11/24/10 (c) 990,000 976,269 ------------- CHILE (0.2%) Corporacion Nacional del Cobre-Codelco, Inc. 5.50%, due 10/15/13 (c) 330,000 328,309 ------------- GERMANY (0.2%) Citibank Global Markets Deutschland for Severstal 9.25%, due 4/19/14 (c) 335,000 308,200 ------------- MEXICO (0.4%) Telefonos de Mexico S.A. de C.V. 4.50%, due 11/19/08 (c) 350,000 345,894 8.25%, due 1/26/06 315,000 340,912 ------------- 686,806 ------------- NETHERLANDS (0.1%) Coca-Cola HBC Finance B.V. 5.125%, due 9/17/13 260,000 258,742 -------------
130 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.
PRINCIPAL AMOUNT VALUE FOREIGN CORPORATE BONDS (CONTINUED) ------------------------------------------------------------------------------- SINGAPORE (0.2%) PSA Corp. Ltd. 7.125%, due 8/1/05 (c) $ 80,000 $ 84,808 Singapore Powerassets Ltd. 5.00%, due 10/22/13 (c) 305,000 297,411 ------------- 382,219 ------------- UNITED KINGDOM (1.1%) HSBC Holdings PLC Tier II 5.25%, due 12/12/12 615,000 620,455 Vodafone Group PLC 3.95%, due 1/30/08 1,190,000 1,199,246 ------------- 1,819,701 ------------- Total Foreign Corporate Bonds (Cost $6,329,448) 6,351,094 ------------- FOREIGN GOVERNMENT BONDS (1.0%) ------------------------------------------------------------------------------- CANADA (0.4%) Province of Quebec 5.00%, due 7/17/09 570,000 592,310 ------------- MEXICO (0.6%) United Mexican States 1.84%, due 1/13/09 380,000 380,000 4.625%, due 10/8/08 90,000 89,550 6.625%, due 3/3/15 245,000 246,837 7.50%, due 1/14/12 240,000 261,600 ------------- 977,987 ------------- RUSSIA (0.0%) (B) Russian Federation 5.00%, due 3/31/30 68,000 62,356 ------------- Total Foreign Government Bonds (Cost $1,573,231) 1,632,653 ------------- MUNICIPAL BOND (0.2%) ------------------------------------------------------------------------------- TEXAS (0.2%) Harris County Texas Industrial Development Corp. Solid Waste Deer Park 5.683%, due 3/1/23 390,000 393,615 ------------- Total Municipal Bond (Cost $390,000) 393,615 -------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (61.0%) ------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE PASS-THROUGH SECURITIES) (8.1%) 3.00%, due 8/1/10 (g) $ 503,592 $ 490,338 * 5.00%, due 8/1/33 (g) 3,248,327 3,151,747 5.50%, due 2/1/33 (g) 2,824,583 2,822,671 * 5.50%, due 6/14/34 TBA (d) 7,580,000 7,539,735 ------------- 14,004,491 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.0%) 4.00%, due 9/2/08 (g) 780,000 779,779 4.625%, due 5/1/13 670,000 641,193 4.75%, due 1/2/07 1,585,000 1,651,667 5.25%, due 8/1/12 1,845,000 1,860,432 * 5.50%, due 5/2/06 2,860,000 3,015,695 6.25%, due 2/1/11 255,000 276,457 6.625%, due 9/15/09 790,000 885,242 7.00%, due 7/15/05 1,175,000 1,246,552 ------------- 10,357,017 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (23.6%) 4.00%, due 5/18/19 TBA (d) 1,775,000 1,705,665 * 4.50%, due 4/1/18-11/1/18 (g) 7,852,865 7,739,583 5.00%, due 9/1/17 (g) 2,075,008 2,090,695 5.00%, due 5/13/34 TBA (d) 1,655,000 1,603,281 5.50%, due 2/1/17-11/1/33 (g) 7,131,318 7,164,142 5.50%, due 5/18/19-6/15/34 TBA (d) 3,900,000 3,911,515 6.00%, due 8/1/17-3/1/33 (g) 2,396,356 2,459,063 * 6.00%, due 5/15/34-6/15/34 TBA (d) 9,520,000 9,719,813 6.50%, due 6/1/31-6/1/32 (g) 1,489,036 1,550,017 7.00%, due 2/1/32-4/1/32 (g) 1,669,014 1,764,384 7.50%, due 8/1/31 (g) 1,060,115 1,133,984 ------------- 40,842,142 ------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (3.0%) 6.00%, due 2/15/29-8/15/32 (g) 3,381,052 3,469,083 6.50%, due 7/15/28-5/15/29 (g) 424,720 444,137 7.50%, due 12/15/28-8/15/30 (g) 1,169,830 1,257,991 ------------- 5,171,211 ------------- UNITED STATES TREASURY BONDS (1.9%) 5.375%, due 2/15/31 910,000 921,944 6.875%, due 8/15/25 (e) 1,960,000 2,338,754 ------------- 3,260,698 ------------- UNITED STATES TREASURY NOTES (18.4%) * 3.00%, due 2/15/08 (e) 8,745,000 8,682,491 4.25%, due 11/15/13 1,345,000 1,319,467 * 4.375%, due 5/15/07 (e) 4,520,000 4,713,334
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 131 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED) ------------------------------------------------------------------------------- UNITED STATES TREASURY NOTES (CONTINUED) * 4.625%, due 5/15/06 (e) $ 5,955,000 $ 6,222,278 4.875%, due 2/15/12 (e) 265,000 275,496 * 5.75%, due 11/15/05-8/15/10 4,745,000 5,024,080 * 6.00%, due 8/15/09 5,100,000 5,657,017 ------------- 31,894,163 ------------- Total U.S. Government & Federal Agencies (Cost $106,272,782) 105,529,722 ------------- YANKEE BOND (0.6%) (h) ------------------------------------------------------------------------------- INSURANCE (0.6%) Montpelier Re Holdings Ltd. 6.125%, due 8/15/13 1,010,000 1,021,634 ------------- Total Yankee Bond (Cost $1,009,332) 1,021,634 ------------- Total Long-Term Investments (Cost $165,540,903) 164,331,612 -------------
SHARES VALUE
WARRANTS (0.0%) (b) ------------------------------------------------------------------------------- MEDIA (0.0%) (b) Ono Finance PLC Strike Price $0.01 Expire 2/15/11 (a)(c)(i) 60 1 Ziff Davis Media, Inc. Strike Price $0.001 Expire 8/12/12 (a)(c) 1,210 121 ------------- Total Warrants (Cost $2,393) 122 ------------- PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (31.1%) ------------------------------------------------------------------------------- COMMERCIAL PAPER (11.8%) American Express Credit Corp. 1.02%, due 5/4/04 $ 2,000,000 1,999,830 American General Finance Corp. 1.00%, due 5/6/04 1,000,000 999,861 1.01%, due 5/4/04 2,500,000 2,499,790 1.02%, due 5/7/04 2,080,000 2,079,646 General Electric Capital Corp. 1.02%, due 5/6/04 1,600,000 1,599,773 1.02%, due 5/11/04 725,000 724,795
PRINCIPAL AMOUNT VALUE COMMERCIAL PAPER (CONTINUED) Merrill Lynch & Co., Inc. 1.00%, due 5/4/04 $ 1,000,000 $ 999,917 Morgan Stanley 1.03%, due 5/24/04 4,000,000 3,997,368 UBS Finance Delaware LLC 1.02%, due 5/3/04 5,445,000 5,444,691 ------------- Total Commercial Paper (Cost $20,345,671) 20,345,671 ------------- FEDERAL AGENCIES (2.4%) Federal Home Loan Bank 0.92%, due 5/3/04 3,210,000 3,209,836 Federal National Mortgage Association 0.91%, due 5/3/04 980,000 979,950 ------------- Total Federal Agencies (Cost $4,189,786) 4,189,786 ------------- SHARES VALUE INVESTMENT COMPANIES (4.6%) AIM Institutional Funds Group (f) 54,000 54,000 Merrill Lynch Premier Institutional Fund 7,925,245 7,925,245 ------------- Total Investment Companies (Cost $7,979,245) 7,979,245 ------------- PRINCIPAL AMOUNT VALUE MASTER NOTE (1.5%) Bank of America Securities LLC 1.1874%, due 5/3/04 (f) $ 2,650,000 2,650,000 ------------- Total Master Note (Cost $2,650,000) 2,650,000 ------------- REPURCHASE AGREEMENTS (10.8%) Countrywide Securities Corp. 1.1324%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,505,190 (f) (Collateralized by Various Bonds with a Principal Amount of $5,755,235 and a Market Value of $5,730,949) 5,500,000 5,500,000
132 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.
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (CONTINUED) xCredit Suisse First Boston LLC 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,004,635 (f) (Collateralized by Various Bonds with a Principal Amount of $4,862,777 and a Market Value of $5,100,128) $ 5,000,000 $ 5,000,000 Lehman Brothers, Inc. 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $2,001,854 (f) (Collateralized by Various Bonds with a Principal Amount of $2,628,126 and a Market Value of $2,099,358) 2,000,000 2,000,000 Merrill Lynch Pierce Fenner & Smith, Inc. 1.1424%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $2,101,999 (f) (Collateralized by Various Bonds with a Principal Amount of $2,060,228 and a Market Value of $2,205,054) 2,100,000 2,100,000
PRINCIPAL AMOUNT VALUE REPURCHASE AGREEMENTS (CONTINUED) Morgan Stanley & Co., Inc. 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $4,003,708 (f) (Collateralized by Various Bonds with a Principal Amount of $5,166,621 and a Market Value of $4,192,505) $ 4,000,000 $ 4,000,000 ------------- Total Repurchase Agreements (Cost $18,600,000) 18,600,000 ------------- Total Short-Term Investments (Cost $53,764,702) 53,764,702 ------------- Total Investments (Cost $219,307,998) (j) 126.1% 218,096,436(k) Liabilities in Excess of Cash and Other Assets (26.1) (45,119,547) ------- ------------- Net Assets 100.0% $ 172,976,889 ======== ===============
(a) Non-income producing security. (b) Less than one tenth of a percent. (c) May be sold to institutional investors only. (d) 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, 2004 is $45,006,697. (e) Represents securities out on loan or a portion which is out on loan. (f) Represents security or a portion thereof, purchased with cash collateral received for securities on loan. (g) Segregated or partially segregated as collateral for TBAs. (h) Yankee bond--dollar-denominated bond issued in the United States by foreign banks and corporations. (i) Illiquid security. (j) The cost for federal income tax purposes is $219,456,492. (k) At April 30, 2004 net unrealized depreciation was $1,360,056, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $1,247,715 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $2,607,771.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 133 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $219,307,998) including $20,257,176 market value of securities loaned $218,096,436 Cash 857 Receivables: Investment securities sold 6,636,167 Dividends and interest 1,678,660 Fund shares sold 138,750 Other assets 17,572 ------------ Total assets 226,568,442 ------------ LIABILITIES: Securities lending collateral 21,304,000 Payables: Investment securities purchased 31,624,348 Manager 86,633 Fund shares redeemed 41,234 Custodian 5,470 NYLIFE Distributors 3,023 Accrued expenses 43,998 Dividend payable 482,847 ------------ Total liabilities 53,591,553 ------------ Net assets $172,976,889 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 1 billion shares authorized Class A $ 679 Class B 158 Class C 76 Class I 16,832 Additional paid-in capital 183,520,547 Accumulated undistributed net investment income 148,175 Accumulated net realized loss on investments (9,498,016) Net unrealized depreciation on investments (1,211,562) ------------ Net assets $172,976,889 ============ CLASS A Net assets applicable to outstanding shares $ 6,604,048 ============ Shares of capital stock outstanding 678,660 ============ Net asset value per share outstanding $ 9.73 Maximum sales charge (4.50% of offering price) 0.46 ------------ Maximum offering price per share outstanding $ 10.19 ============ CLASS B Net assets applicable to outstanding shares $ 1,541,970 ============ Shares of capital stock outstanding 158,297 ============ Net asset value and offering price per share outstanding $ 9.74 ============ CLASS C Net assets applicable to outstanding shares $ 736,170 ============ Shares of capital stock outstanding 75,620 ============ Net asset value and offering price per share outstanding $ 9.74 ============ CLASS I Net assets applicable to outstanding shares $164,094,701 ============ Shares of capital stock outstanding 16,832,450 ============ Net asset value and offering price per share outstanding $ 9.75 ============
134 MainStay Intermediate Term Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Interest $ 3,273,201 Income from securities loaned -- net 14,523 ----------- Total income 3,287,724 ----------- EXPENSES: Manager 604,999 Professional 29,819 Transfer agent 19,135 Custodian 14,685 Registration 12,688 Directors 10,254 Shareholder communication 8,906 Portfolio pricing 7,529 Service -- Class A 4,768 Service -- Class B 642 Service -- Class C 254 Service -- Service Class 2,607 Distribution -- Class B 1,928 Distribution -- Class C 762 Miscellaneous 8,684 ----------- Total expenses before reimbursement 727,660 Expense reimbursement from Manager (111,445) ----------- Net expenses 616,215 ----------- Net investment income 2,671,509 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 1,494,753 Net change in unrealized appreciation on investments (3,263,649) ----------- Net realized and unrealized loss on investments (1,768,896) ----------- Net increase in net assets resulting from operations $ 902,613 ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 135 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE IN NET ASSETS: Operations: Net investment income $ 2,671,509 $ 4,993,706 Net realized gain on investments 1,494,753 2,529,860 Net change in unrealized appreciation on investments (3,263,649) (117,475) --------------------------- Net increase in net assets resulting from operations 902,613 7,406,091 --------------------------- Dividends to shareholders: From net investment income: Class A (62,726) -- Class B (7,340) -- Class C (3,096) -- Class I (2,630,024) (4,956,086) Service Class (34,690) (216,223) --------------------------- Total dividends to shareholders (2,737,876) (5,172,309) --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 7,245,488 -- Class B 1,597,611 -- Class C 754,721 -- Class I 30,900,927 25,071,012 Service Class 122,232 2,413,628 Net asset value of shares issued in connection with acquisition of Eclipse Core Bond Plus Fund 26,793,396 -- Net asset value of shares issued to shareholders in reinvestment of dividends: Class A 43,858 -- Class B 2,890 -- Class C 1,025 -- Class I 1,926,941 4,950,953 Service Class 34,517 214,243 --------------------------- 69,423,606 32,649,836 Cost of shares redeemed: Class A (593,855) -- Class B (22,718) -- Class C (2,834) -- Class I (26,859,814) (29,935,885) Service Class (5,930,466) (2,840,675) --------------------------- (33,409,687) (32,776,560) --------------------------- Increase (decrease) in net assets derived from capital share transactions 36,013,919 (126,724) --------------------------- Net increase in net assets 34,178,656 2,107,058
2004 2003 NET ASSETS: Beginning of period $138,798,233 $136,691,175 --------------------------- End of period $172,976,889 $138,798,233 =========================== Accumulated undistributed net investment income at end of period $ 148,175 $ 146,030 ===========================
136 MainStay Intermediate Term Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. This page intentionally left blank 137 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ---------- ---------- ---------- JANUARY 1, JANUARY 1, JANUARY 1, 2004** 2004** 2004** THROUGH THROUGH THROUGH APRIL 30, APRIL 30, APRIL 30, 2004*** 2004*** 2004*** Net asset value at beginning of period $ 9.86 $ 9.86 $ 9.86 ------ ------ ------ Net investment income 0.11 0.08 0.08 Net realized and unrealized gain (loss) on investments (0.14) (0.12) (0.12) ------ ------ ------ Total from investment operations (0.03) (0.04) (0.04) ------ ------ ------ Less dividends: From net investment income (0.10) (0.08) (0.08) ------ ------ ------ Net asset value at end of period $ 9.73 $ 9.74 $ 9.74 ====== ====== ====== Total investment return (b) (0.31%) (0.45%) (0.45%) Ratios (to average net assets)/Supplemental Data: Net investment income 3.01%+ 2.26%+ 2.26%+ Net expenses 1.07%+ 1.82%+ 1.82%+ Expenses (before reimbursement) 1.21%+ 1.96%+ 1.96%+ Portfolio turnover rate 97% 97% 97% Net assets at end of period (in 000's) $6,604 $1,542 $ 736
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Less than one cent per share. (b) Total return is calculated exclusive of sales charges and is not annualized. (c) Per share data based on average shares outstanding during the period. (d) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended October 31, 2001 is shown below. Per share ratios and supplemental data for periods prior to November 1, 2000 have not been restated to reflect this change in presentation.
CLASS I ------- Decrease net investment income ($0.02) Increase net realized and unrealized gains and losses 0.02 Decrease ratio of net investment income (0.21%)
138 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
CLASS I ---------------------------------------------------------------------------------------------------- JANUARY 1, SIX MONTHS 1999 ENDED THROUGH YEAR ENDED APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2003 2002 2001 2000 1999* 1998 $ 9.83 $ 9.66 $ 10.32 $ 9.75 $ 9.75 $ 9.91 $ 9.71 -------- -------- -------- -------- -------- -------- -------- 0.17 0.36(c) 0.45(c) 0.55(c)(d) 0.57 0.47 0.57 (0.08) 0.18 (0.30) 0.76(d) (0.01) (0.63) 0.20 -------- -------- -------- -------- -------- -------- -------- 0.09 0.54 0.15 1.31 0.56 (0.16) 0.77 -------- -------- -------- -------- -------- -------- -------- (0.17) (0.37) (0.81) (0.74) (0.56) (0.00)(a) (0.57) -------- -------- -------- -------- -------- -------- -------- $ 9.75 $ 9.83 $ 9.66 $ 10.32 $ 9.75 $ 9.75 $ 9.91 ======== ======== ======== ======== ======== ======== ======== 0.93% 5.69% 1.73% 14.06% 6.21% (1.61%) 7.93% 3.33%+ 3.66% 4.62% 5.53%(d) 6.05% 5.55%+ 5.57% 0.75%+ 0.75% 0.75% 0.75% 0.75% 0.75%+ 0.75% 0.89%+ 0.90% 0.91% 0.88% 0.83% 0.85%+ 0.86% 97% 153% 159% 257% 361% 245% 335% $164,095 $133,041 $130,813 $116,344 $193,466 $174,521 $182,402
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 139 MAINSTAY SHORT TERM BOND FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS CITIGROUP 1-3 YEAR TREASURY INDEX(1) 0.53% 1.09% 5.17% 5.75% AVERAGE LIPPER SHORT U.S. GOVERNMENT FUND(2) 0.41 0.51 4.44 5.12
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -2.68% -2.45% 3.81% 4.72% Excluding sales charges 0.33 0.57 4.44 5.04
(in thousands, with sales charges)
MAINSTAY SHORT TERM BOND CITIGROUP 1-3 YEAR TREASURY FUND INDEX ------------------------ --------------------------- 4/30/94 970.00 1000.00 1021.00 1056.00 1083.00 1128.00 1143.00 1197.00 1215.00 1283.00 1276.00 1359.00 1311.00 1408.00 1436.00 1544.00 1502.00 1641.00 1577.00 1729.00 4/30/04 1586.00 1748.00
-- MainStay Short Term Bond Fund -- Citigroup 1-3 Year Treasury Index CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 0.45% 0.82% 4.69% 5.28%
(in thousands, with sales charges)
MAINSTAY SHORT TERM BOND CITIGROUP 1-3 YEAR TREASURY FUND INDEX ------------------------ --------------------------- 4/30/94 1000.00 1000.00 1054.00 1056.00 1120.00 1128.00 1186.00 1197.00 1264.00 1283.00 1330.00 1359.00 1370.00 1408.00 1504.00 1544.00 1577.00 1641.00 1659.00 1729.00 4/30/04 1672.00 1748.00
-- MainStay Short Term Bond Fund -- Citigroup 1-3 Year Treasury Index Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 3% and an annual 12b-1 fee of .25%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A shares, first offered 1/1/04, includes the historical performance of Class I shares from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge and fees and expenses for such shares. 1. The Citigroup 1-3 Year Treasury Index is an unmanaged index comprised of U.S. Treasury notes and bonds with maturities of one year or greater, but less than three years (minimum amount outstanding is $1 billion per issue). Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. 140 MainStay Short Term Bond Fund $1,000 INVESTED IN MAINSTAY SHORT TERM BOND FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $ 998 $3 $1,047 $3 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,005 $3 $1,047 $3 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $4, and the ending account value would be $1,046. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). www.mainstayfunds.com 141 PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Claude Athaide, Ph.D., CFA, and Gary Goodenough of MacKay Shields LLC MAINSTAY SHORT TERM BOND FUND WHAT MAJOR FACTORS AFFECTED THE SHORT-TERM BOND MARKET DURING THE SIX MONTHS ENDED APRIL 30, 2004? Although the Federal Reserve remained accommodative throughout the reporting period, economic developments had a major impact on the performance of short-term bonds. HOW STRONG WAS THE ECONOMY DURING THE REPORTING PERIOD? Real U.S. gross domestic product grew at a seasonally adjusted annual rate of 4.1% in the fourth quarter of 2003. Preliminary estimates show that GDP rose 4.4% in the first quarter of 2004. Personal consumption grew at 3.9% while consumption of durable goods fell 4.2%. Personal consumption has now lagged overall GDP growth for three quarters. Meanwhile, capital spending grew for three quarters in a row, with spending on equipment and software advancing at a double-digit pace during the reporting period. WERE THERE ANY SIGNIFICANT DEVELOPMENTS IN PRODUCTIVITY AND EMPLOYMENT? Productivity rose 5.4% while unit labor costs fell at a 1.3% rate over the year ending March 31, 2004. High productivity enabled firms to meet most of the pickup in demand without much additional hiring. As a result, corporate profits rebounded strongly during the semiannual period, increasing 7.2% in the fourth quarter of 2003 alone. As productivity starts to slow down (it was 3.5% in the first quarter of this year), employers will have to increase hiring. The March and April employment reports showed that nonfarm payrolls increased by 625,000 during those two months. The economy has now added approximately 215,000 jobs per month in 2004. HOW DID THE SHORT-TERM BOND MARKET REACT TO THE EMPLOYMENT GAINS? The strength of the March employment figures, along with a positive retail report and unexpectedly high inflation data, led to a sharp rise in bond yields during the month of April. The yield on the benchmark two-year Treasury note rose 73 basis points during the month to finish the reporting period at 2.31%. HOW WAS THE FUND POSITIONED DURING THE SEMIANNUAL PERIOD? We positioned the Fund for a flattening yield curve during the period. In fact, the spread between one-year and five-year constant-maturity Treasury rates decreased from nearly 200 basis points at the end of October 2003 to a low of 148 basis points in the middle of March, when the rate on the five-year Treasury fell to 2.64%. Unfortunately, the yield spread between one-year and five-year Treasuries increased during the last six weeks of the reporting period to 211 basis points, and the performance of the Fund lagged that of its benchmark index during that span. DID THE FUND CHANGE ITS ASSET CLASS WEIGHTINGS? As interest rates rose and yield spreads widened, we used the opportunity to increase the Fund's exposure to federal agency bonds. Indeed, during the month of April, we increased the Fund's allocation to federal agency securities from 19.8% on October 31, 2003, to approximately 29% of net assets. HOW DID THE FUND INVEST DURING THE REPORTING PERIOD? The Fund continued to invest in a wide range of securities, including asset-backed securities, mortgage-backed securities, corporate bonds, foreign corporate bonds, U.S. government securities, and federal agency obligations. WHAT DO YOU ANTICIPATE GOING FORWARD? At the end of the six-month period, the Federal Reserve maintained that the upside and downside risks to economic growth and price stability were about equal. The Federal Open Market Committee has since suggested that "policy accommodation can be removed at a pace that is likely to be measured." While payrolls have finally increased after months of anemic growth, we believe that strong wage growth will be necessary to sustain spending in the months ahead, as the effects of the tax cuts fade and higher rates make mortgages less likely to be refinanced. We are only slightly defensive on interest rates at this juncture. Evidence from the federal funds futures market shows that extensive Federal Reserve tightening has already been priced into the market. The hurdles to profit from a more-aggressive duration Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. 142 MainStay Short Term Bond Fund posture are quite high, and the opportunity to capture higher yields may become significantly limited. In the coming weeks, we may continue to increase the Fund's exposure to federal agency bonds. To take advantage of widening swap rates, we may also seek opportunities among securities that are priced off swap rates and have two- or three-year maturities. Certain credit-card asset-backed securities and commercial mortgage-backed securities fit this profile. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) U.S. Government & Federal Agencies 72.60 Short-Term Investments (collateral from securities lending 40.00 is 33.2%) Corporate Bonds 14.80 Asset-Backed Securities 3.20 Foreign Corporate Bonds 1.40 Liabilities in Excess of Cash and Other Assets -32.0
www.mainstayfunds.com 143 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMOUNT VALUE LONG-TERM BONDS (92.0%)+ ASSET-BACKED SECURITIES (3.2%) --------------------------------------------------------------------------------- CONSUMER FINANCE (1.7%) BMW Vehicle Owner Trust Series 2003-A Class A3 1.94%, due 2/25/07 $ 190,000 $ 190,248 Discover Card Master Trust I Series 1999-5 Class A 1.28%, due 12/18/06 (b) 415,000 415,085 First USA Credit Card Master Trust Series 1997-2 Class A 1.23%, due 1/17/07 (b) 150,000 150,001 Harley-Davidson Motorcycle Trust Series 2002-1 Class A2 4.50%, due 1/15/10 500,000 516,161 MBNA Master Credit Card Trust Series 1997-J Class A 1.22%, due 2/15/07 (b) 400,000 400,184 Volkswagen Auto Loan Enhanced Trust Series 2003-2 Class A3 2.27%, due 10/22/07 310,000 309,767 ------------- 1,981,446 ------------- CONSUMER LOANS (1.0%) Atlantic City Electric Transition Funding LLC Series 2002-1 Class A1 2.89%, due 7/20/08 1,128,744 1,130,160 ------------- DIVERSIFIED FINANCIAL SERVICES (0.2%) Capital One Master Trust Series 2001-5 Class A 5.30%, due 6/15/09 110,000 115,894 DaimlerChrysler Auto Trust Series 2001-D Class A3 3.15%, due 11/6/05 118,289 118,655 ------------- 234,549 ------------- THRIFTS & MORTGAGE FINANCE (0.3%) Vanderbilt Mortgage Finance Series 1999-B Class 1A4 6.545%, due 4/7/18 291,597 303,039 ------------- Total Asset-Backed Securities (Cost $3,639,618) 3,649,194 -------------
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (14.8%) --------------------------------------------------------------------------------- AEROSPACE & DEFENSE (1.3%) General Dynamics Corp. 2.125%, due 5/15/06 $ 375,000 $ 370,554 *Honeywell International 6.875%, due 10/3/05 1,000,000 1,064,482 ------------- 1,435,036 ------------- BEVERAGES (0.6%) Coca-Cola Co. (The) 4.00%, due 6/1/05 630,000 642,917 ------------- CAPITAL MARKETS (0.7%) Merrill Lynch & Co., Inc. 6.55%, due 8/1/04 750,000 759,515 ------------- COMMERCIAL BANKS (1.4%) *Bank of America Corp. 7.50%, due 9/15/06 960,000 1,056,299 Wachovia Corp. 6.70%, due 6/21/04 250,000 251,794 Wells Fargo & Co. 6.625%, due 7/15/04 250,000 252,632 ------------- 1,560,725 ------------- CONSUMER FINANCE (0.9%) *Household Finance Corp. 6.50%, due 1/24/06 1,000,000 1,067,253 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%) BellSouth Telecommunications, Inc. 6.50%, due 6/15/05 470,000 493,514 ------------- ELECTRIC UTILITIES (0.6%) Alabama Power Co. 2.65%, due 2/15/06 625,000 626,380 ------------- ELECTRICAL EQUIPMENT (0.2%) Emerson Electric Co. 7.875%, due 6/1/05 300,000 317,983 ------------- FOOD & STAPLES RETAILING (0.7%) *Wal-Mart Stores, Inc. 5.45%, due 8/1/06 750,000 793,364 ------------- FOOD PRODUCTS (1.1%) *Cargill, Inc. 6.25%, due 5/1/06 (a) 1,210,000 1,289,463 -------------
+ Percentages indicated are based on Fund net assets. V Fund's 10 largest holdings. May be subject to change daily.
144 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.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) --------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.8%) *Quest Diagnostics, Inc. 6.75%, due 7/12/06 $ 1,860,000 $ 2,010,147 ------------- INSURANCE (0.6%) Marsh & McLennan Cos., Inc. 6.625%, due 6/15/04 630,000 633,716 ------------- MEDIA (0.2%) Liberty Media Corp. 3.50%, due 9/25/06 180,000 180,348 ------------- MULTI-UTILITIES & UNREGULATED POWER (1.2%) PSE&G Power LLC 6.875%, due 4/15/06 200,000 214,724 *Public Service Electric & Gas Co. Series WW 6.25%, due 1/1/07 1,065,000 1,144,000 ------------- 1,358,724 ------------- PHARMACEUTICALS (2.5%) Abbot Laboratories V 3.50%, due 2/17/09 1,250,000 1,225,098 5.125%, due 7/1/04 595,000 598,671 *Merck & Co., Inc. Series E 4.125%, due 1/18/05 1,000,000 1,018,236 ------------- 2,842,005 ------------- THRIFTS & MORTGAGE FINANCE (0.6%) Countrywide Home Loans, Inc. Series J 5.25%, due 6/15/04 350,000 351,535 Washington Mutual, Inc. 5.625%, due 1/15/07 285,000 301,883 ------------- 653,418 ------------- Total Corporate Bonds (Cost $16,709,596) 16,664,508 ------------- FOREIGN CORPORATE BONDS (1.4%) --------------------------------------------------------------------------------- COMMERCIAL BANKS (0.9%) *Landwirtschaftliche Rentenbank 4.50%, due 10/23/06 1,000,000 1,038,928 -------------
PRINCIPAL AMOUNT VALUE DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%) Telefonos de Mexico S.A. de C.V. 8.25%, due 1/26/06 $ 200,000 $ 216,452 ------------- TRANSPORTATION INFRASTRUCTURE (0.3%) PSA Corp. Ltd. 7.125%, due 8/1/05 (a) 300,000 318,028 ------------- Total Foreign Corporate Bonds (Cost $1,578,748) 1,573,408 ------------- U.S. GOVERNMENT & FEDERAL AGENCIES (72.6%) --------------------------------------------------------------------------------- FEDERAL FARM CREDIT BANK (2.2%) 2.125%, due 8/15/05 1,000,000 1,002,905 2.25%, due 9/1/06 500,000 494,874 3.875%, due 12/15/04 1,000,000 1,015,712 ------------- 2,513,491 ------------- FEDERAL HOME LOAN BANK (3.4%) Series 392 2.50%, due 3/15/06 750,000 751,820 Series 430 2.875%, due 9/15/06 1,275,000 1,279,083 Series 419 3.50%, due 4/22/08 500,000 493,726 Series 253 3.625%, due 10/15/04 500,000 505,529 Series 2704 4.125%, due 11/15/04 500,000 507,595 Series 7R04 4.625%, due 8/13/04 250,000 252,447 ------------- 3,790,200 ------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (7.3%) Series 3 2.15%, due 2/17/06 3,080,000 3,070,461 2.375%, due 2/15/07 (c) 3,105,000 3,052,842 2.50%, due 12/4/06 1,735,000 1,719,571 4.00%, due 8/2/06 350,000 352,236 ------------- 8,195,110 ------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (COLLATERALIZED MORTGAGE OBLIGATION) (0.2%) Series 1364 Class K 5.00%, due 9/15/07 203,535 207,265 ------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE PASS-THROUGH SECURITY) (0.1%) 5.00%, due 1/1/07 116,927 119,432 -------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 145 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED) --------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (13.7%) 1.75%, due 6/16/06 $ 4,726,000 $ 4,638,796 2.50%, due 6/15/06 (c) 3,110,000 3,102,418 3.15%, due 5/28/08 330,000 323,771 3.25%, due 11/15/07 400,000 397,996 4.00%, due 9/2/08 (c) 3,125,000 3,124,113 5.50%, due 5/2/06 3,720,000 3,922,513 ------------- 15,509,607 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (1.0%) 4.50%, due 11/1/18 889,141 876,314 7.50%, due 4/1/31 194,648 208,934 ------------- 1,085,248 ------------- OVERSEAS PRIVATE INVESTMENT CORPORATION (1.3%) 3.74%, due 4/15/15 1,532,723 1,503,524 ------------- STUDENT LOAN MORTGAGE ASSOCIATION (0.7%) 1.379%, due 8/27/04 (b) 800,000 801,003 ------------- UNITED STATES TREASURY NOTES (42.7%) 3.00%, due 11/15/07 (c) 1,875,000 1,870,386 3.50%, due 11/15/06 (c) 10,830,000 11,056,759 4.375%, due 5/15/07 300,000 312,832 4.625%, due 5/15/05 (c) 11,675,000 12,199,009 5.75%, due 11/15/05 (c) 11,835,000 12,498,872 6.75%, due 5/15/05 9,780,000 10,288,100 ------------- 48,225,958 ------------- Total U.S. Government & Federal Agencies (Cost $82,543,116) 81,950,838 ------------- Total Long-Term Bonds (Cost $104,471,078) 103,837,948 ------------- SHORT-TERM INVESTMENTS (40.0%) --------------------------------------------------------------------------------- COMMERCIAL PAPER (2.6%) UBS Finance Delaware LLC 1.02%, due 5/3/04 2,895,000 2,894,836 ------------- Total Commercial Paper (Cost $2,894,836) 2,894,836 ------------- SHARES VALUE INVESTMENT COMPANIES (5.0%) AIM Institutional Funds Group (d) 2,941,340 $ 2,941,340 Merrill Lynch Premier Institutional Fund 2,735,000 2,735,000 ------------- Total Investment Companies (Cost $5,676,340) 5,676,340 ------------- PRINCIPAL AMOUNT VALUE MASTER NOTE (4.4%) Banc of America Securities LLC 1.1874%, due 5/3/04 (d) $ 5,000,000 5,000,000 ------------- Total Master Note (Cost $5,000,000) 5,000,000 ------------- REPURCHASE AGREEMENTS (26.2%) Banc One Capital Markets, Inc. 1.180%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $4,500,148 (d) (Collateralized by Various Bonds with a Principal Amount of $4,905,216 and a Market Value of $4,590,023) 4,500,000 4,500,000 Countrywide Securities Corp. 1.1324%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,000,157 (d) (Collateralized by Various Bonds with a Principal Amount of $5,232,032 and a Market Value of $5,209,954) 5,000,000 5,000,000 Credit Suisse First Boston LLC 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,000,155 (d) (Collateralized by Various Bonds with a Principal Amount of $4,862,777 and a Market Value of $5,100,128) 5,000,000 5,000,000
146 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.
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) --------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (CONTINUED) xLehman Brothers, Inc. 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,000,155 (d) (Collateralized by Various Bonds with a Principal Amount of $6,570,316 and a Market Value of $5,248,394) $ 5,000,000 $ 5,000,000 Merrill Lynch Pierce Fenner & Smith, Inc. 1.1424%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,010,159 (d) (Collateralized by Various Bonds with a Principal Amount of $4,915,115 and a Market Value of $5,260,629) 5,010,000 5,010,000 Morgan Stanley & Co., Inc. 1.1124%, dated 4/30/04 due 5/3/04 Proceeds at Maturity $5,000,155 (d) (Collateralized by Various Bonds with a Principal Amount of $6,458,277 and a Market Value of $5,240,631) 5,000,000 5,000,000 ------------- Total Repurchase Agreements (Cost $29,510,000) 29,510,000 -------------
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT (1.8%) UNITED STATES TREASURY BILLS (1.8%) 0.96%, due 5/6/04 $ 1,000,000 $ 999,940 1.00%, due 5/20/04 1,000,000 999,624 ------------- Total U.S. Government (Cost $1,999,336) 1,999,564 ------------- Total Short-Term Investments (Cost $45,080,512) 45,080,740 ------------- Total Investments (Cost $149,551,590) (e) 132.0% 148,918,688(f) Liabilities in Excess of Cash and Other Assets (32.0) (36,067,226) -------- --------------- Net Assets 100.0% $ 112,851,462 ======== ===============
(a) May be sold to institutional investors only. (b) Floating rate. Rate shown is the rate in effect at April 30, 2004. (c) Represents securities out on loan or a portion which is out on loan. (d) Represents security or a portion thereof, purchased with cash collateral received for securities on loan. (e) The cost for federal income tax purposes is $149,554,951. (f) At April 30, 2004 net unrealized depreciation was $636,263, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $106,290 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $742,553.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 147 STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $149,551,590) including $35,885,614 market value of securities loaned $148,918,688 Cash 1,138 Receivables: Investment securities sold 2,110,000 Interest 1,633,744 Fund shares sold 829,440 Other assets 14,292 ------------ Total assets 153,507,302 ------------ LIABILITIES: Securities lending collateral 37,451,340 Payables: Investment securities purchased 2,894,754 Fund shares redeemed 43,013 Manager 40,169 Transfer agent 8,579 NYLIFE Distributors 2,199 Custodian 1,142 Accrued expenses 27,818 Dividend payable 186,826 ------------ Total liabilities 40,655,840 ------------ Net assets $112,851,462 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 500 million shares authorized Class A $ 1,077 Class I 11,115 Additional paid-in capital 115,845,653 Accumulated net investment loss (202,651) Accumulated net realized loss on investments (2,170,830) Net unrealized depreciation on investments (632,902) ------------ Net assets $112,851,462 ============ CLASS A Net assets applicable to outstanding shares $ 9,968,542 ============ Shares of capital stock outstanding 1,077,387 ============ Net asset value per share outstanding $ 9.25 Maximum sales charge (3.00% of offering price) 0.29 ------------ Maximum offering price per share outstanding $ 9.54 ============ CLASS I Net assets applicable to outstanding shares $102,882,920 ============ Shares of capital stock outstanding 11,114,950 ============ Net asset value and offering price per share outstanding $ 9.26 ============
148 MainStay Short Term Bond Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Interest $1,032,212 Income from securities loaned -- net 22,186 ---------- Total income 1,054,398 ---------- EXPENSES: Manager 291,267 Transfer agent 18,335 Professional 16,153 Registration 11,775 Custodian 8,665 Directors 7,781 Service -- Class A 7,176 Service -- Service Class 294 Shareholder communication 3,963 Portfolio pricing 3,438 Miscellaneous 7,905 ---------- Total expenses before reimbursement 376,752 Expense reimbursement from Manager (78,121) ---------- Net expenses 298,631 ---------- Net investment income 755,767 ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 164,185 Net change in unrealized appreciation on investments (714,361) ---------- Net realized and unrealized loss on investments (550,176) ---------- Net increase in net assets resulting from operations $ 205,591 ==========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 149 STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income $ 755,767 $ 749,725 Net realized gain on investments 164,185 502,623 Net change in unrealized appreciation (depreciation) on investments (714,361) (521,961) --------------------------- Net increase in net assets resulting from operations 205,591 730,387 --------------------------- Dividends to shareholders: From net investment income: Class A (52,670) -- Class I (903,951) (759,656) Service Class (1,708) (11,669) Taxable distributions in excess of net investment income: Class I -- (62,926) Service Class -- (967) --------------------------- Total dividends to shareholders (958,329) (835,218) --------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 18,820,634 -- Class I 13,873,192 16,685,453 Service Class 17,020 244,951 Net asset value of shares issued in connection with acquisition of Eclipse Ultra Short Duration Fund: Class I 74,520,760 -- Service Class 218,328 -- Net asset value of shares issued to shareholders in reinvestment of dividends: Class A 33,145 -- Class I 384,615 821,284 Service Class 1,608 12,636 --------------------------- 107,869,302 17,764,324 Cost of shares redeemed: Class A (8,794,360) -- Class I (20,763,849) (19,072,157) Service Class (780,868) (447,045) --------------------------- (30,339,077) (19,519,202) --------------------------- Increase (decrease) in net assets derived from capital share transactions 77,530,225 (1,754,878) --------------------------- Net increase (decrease) in net assets 76,777,487 (1,859,709) NET ASSETS: Beginning of period 36,073,975 37,933,684 --------------------------- End of period $112,851,462 $ 36,073,975 =========================== Accumulated net investment loss at end of period $ (202,651) $ (89) ===========================
150 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
CLASS A CLASS I ---------- ----------------------------------------------------------------------------------- JANUARY 1, JANUARY 1, 2004** SIX MONTHS 1999 THROUGH ENDED THROUGH YEAR ENDED APRIL 30, APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2004*** 2003 2002 2001 2000 1999* 1998 Net asset value at beginning of period $ 9.32 $ 9.31 $ 9.34 $ 9.57 $ 9.36 $ 9.63 $ 9.43 $ 9.39 ------ -------- ------- ------- ------- ------- ------- ------- Net investment income 0.02 0.07 0.19 0.29(a) 0.47(e) 0.57(a) 0.47 0.56 Net realized and unrealized gain (loss) on investments (0.04) (0.03) (0.01) 0.00(d) 0.48(e) (0.03) (0.27) 0.04 ------ -------- ------- ------- ------- ------- ------- ------- Total from investment operations (0.02) 0.04 0.18 0.29 0.95 0.54 0.20 0.60 ------ -------- ------- ------- ------- ------- ------- ------- Less dividends: From net investment income (0.05) (0.09) (0.21) (0.52) (0.74) (0.81) -- (0.56) ------ -------- ------- ------- ------- ------- ------- ------- Net asset value at end of period $ 9.25 $ 9.26 $ 9.31 $ 9.34 $ 9.57 $ 9.36 $ 9.63 $ 9.43 ====== ======== ======= ======= ======= ======= ======= ======= Total investment return (b) (0.18%) 0.45% 1.94% 3.21% 10.68% 6.05% 2.12% 6.37% Ratios (to average net assets)/Supplemental Data: Net investment income 1.29%+ 1.57%+ 2.02% 3.13% 4.93%(e) 6.20% 5.42%+ 5.95% Net expenses 0.88%+ 0.60%+ 0.60% 0.60% 0.60% 0.61%(c) 0.60%+ 0.60% Expenses (before reimbursement) 1.04%+ 0.76%+ 0.98% 0.96% 1.03% 0.99% 0.85%+ 0.89% Portfolio turnover rate 91% 91% 173% 228% 149% 165% 105% 125% Net assets at end of period (in 000's) $9,969 $102,883 $35,532 $37,201 $30,065 $31,146 $48,150 $42,219
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Per share data based on average shares outstanding during the period. (b) Total return is calculated exclusive of sales charges and is not annualized. (c) The effect of non-reimbursable interest expense on the expense ratio was 0.01%. (d) Less than one cent per share. (e) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended October 31, 2001 is shown below. Per share ratios and supplemental data for periods prior to November 1, 2000 have not been restated to reflect this change in presentation.
CLASS I ------- Decrease net investment income ($0.12) Increase net realized and unrealized gains and losses 0.12 Decrease ratio of net investment income (1.26%)
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 151 MAINSTAY ASSET MANAGER FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS ASSET MANAGER COMPOSITE INDEX(1) 4.21% 14.06% 1.26% 9.73% S&P 500(R) INDEX(2) 6.27 22.88 -2.26 11.36 CITIGROUP BROAD INVESTMENT GRADE (BIG) BOND INDEX(3) 1.32 1.88 6.65 7.35 AVERAGE LIPPER FLEXIBLE PORTFOLIO FUND(4) 4.29 17.01 1.36 8.77
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -1.19% 7.96% -0.23% 9.07% Excluding sales 4.56 14.24 0.90 9.69 charges
(In thousands, with sales charges)
MAINSTAY ASSET ASSET MANAGER MANAGER FUND S&P 500 INDEX COMPOSITE INDEX CITIGROUP BIG INDEX -------------- ------------- --------------- ------------------- 4/30/94 945 1000 1000 1000 1040 1175 1131 1073 1285 1530 1366 1164 1516 1914 1606 1248 1983 2700 2052 1385 2278 3289 2377 1472 2468 3622 2547 1490 2370 3152 2451 1674 2262 2754 2327 1805 2086 2388 2219 1994 4/30/04 2383 2934 2531 2032
-- MainStay Asset Manager Fund -- Asset Manager Composite Index -- S&P 500 Index -- Citigroup BIG Bond Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -0.77% 8.46% -0.10% 8.94% Excluding sales charges 4.23 13.46 0.21 8.94
(In thousands, with sales charges)
MAINSTAY ASSET ASSET MANAGER MANAGER FUND S&P 500 INDEX COMPOSITE INDEX CITIGROUP BIG INDEX -------------- ------------- --------------- ------------------- 4/30/94 1000 1000 1000 1000 1094 1175 1131 1073 1341 1530 1366 1164 1571 1914 1606 1248 2041 2700 2052 1385 2330 3289 2377 1472 2508 3622 2547 1490 2392 3152 2451 1674 2267 2754 2327 1805 2075 2388 2219 1994 4/30/04 2354 2934 2531 2032
-- MainStay Asset Manager Fund -- Asset Manager Composite Index -- S&P 500 Index -- Citigroup BIG Bond Index
CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 3.05% 12.32% 0.15% 8.89% Excluding sales charges 4.05 13.32 0.15 8.89
(In thousands, with sales charges)
MAINSTAY ASSET ASSET MANAGER MANAGER FUND S&P 500 INDEX COMPOSITE INDEX CITIGROUP BIG INDEX -------------- ------------- --------------- ------------------- 4/30/94 1000 1000 1000 1000 1093 1175 1131 1073 1340 1530 1366 1164 1570 1914 1606 1248 2038 2700 2052 1385 2326 3289 2377 1472 2502 3622 2547 1490 2385 3152 2451 1674 2261 2754 2327 1805 2068 2388 2219 1994 4/30/04 2343 2934 2531 2032
-- MainStay Asset Manager Fund -- Asset Manager Composite Index -- S&P 500 Index -- Citigroup BIG Bond Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A and B shares, first offered 1/1/04, includes the historical performance of Class I shares THE DISCLOSURE AND FOOTNOTES ON THE NEXT PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 152 MainStay Asset Manager Fund CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 4.69% 14.53% 1.12% 9.91%
(in thousands, with sales charges)
MAINSTAY ASSET ASSET MANAGER MANAGER FUND S&P 500 INDEX COMPOSITE INDEX CITIGROUP BIG INDEX -------------- ------------- --------------- ------------------- 4/30/94 1000 1000 1000 1000 1103 1175 1131 1073 1365 1530 1366 1164 1614 1914 1606 1248 2114 2700 2052 1385 2434 3289 2377 1472 2641 3622 2547 1490 2540 3152 2451 1674 2431 2754 2327 1805 2246 2388 2219 1994 4/30/04 2573 2934 2531 2032
-- MainStay Asset Manager Fund -- Asset Manager Composite Index -- S&P 500 Index -- Citigroup BIG Bond Index
from inception (1/2/91) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. Prior to 1/1/04, the Fund offered Class L shares, which were subject to a 1% sales charge and a 1% CDSC on redemptions within one year of purchase. Performance for Class L shares, first offered 12/30/02, includes the historical performance Class I shares from inception through 12/29/02 adjusted to reflect the applicable sales charge, CDSC, and fees and expenses for such shares. Effective 1/1/04, all outstanding Class L shares of the Fund were converted to and/or redesignated Class C shares. 1. The Asset Manager Composite Index is comprised of the S&P 500(R) Index, the Citigroup Broad Investment Grade (BIG) Bond Index, and the Citigroup 1-Month T-Bill Index weighted 60%/30%/10%, respectively. The S&P 500(R) Index is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock market performance. The Citigroup Broad Investment Grade (BIG) Bond Index--The Citigroup BIG Bond Index--is an unmanaged, capitalization-weighted index that contains approximately 5,500 individually priced fixed-income securities and is generally considered representative of the U.S. bond market. An investment cannot be made directly into an index. 2. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use. Standard & Poor's does not sponsor, endorse, sell, or promote the Fund or represent the advisability of investing in the Fund. The S&P 500(R) is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. The Citigroup Broad Investment Grade (BIG) Bond Index--the Citigroup BIG Bond Index--is an unmanaged index that is considered representative of the U.S. investment-grade bond market. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 4. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 153 $1,000 INVESTED IN MAINSTAY ASSET MANAGER FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $1,006 $3 $1,047 $4 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $1,003 $6 $1,044 $6 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(3) $1,000 $1,041 $9 $1,041 $9 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,047 $4 $1,046 $4 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares and Class B shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had Class A shares and Class B shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $5 and $9, respectively, and the ending account value would be $1,045 and $1,041, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). 154 MainStay Asset Manager Fund PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio managers Elias Belessakos, Ph.D. and Jefferson C. Boyce of New York Life Investment Management LLC MAINSTAY ASSET MANAGER FUND HOW DO YOU DECIDE HOW TO ALLOCATE THE FUND'S PORTFOLIO? We use a proprietary model to assess potential opportunities and allocate assets within the portfolio's percentage constraints. We use a disciplined methodology based on the model to estimate expected returns, volatilities, and correlations on domestic and foreign stock markets and on domestic fixed-income securities. HOW DID YOU POSITION THE FUND DURING THE SIX MONTHS ENDED APRIL 30, 2004? During the reporting period, the Fund had an average allocation of 53% to stocks, 37% to bonds, and 10% to cash. Within the equity allocation, U.S. equities were underweighted relative to the Fund's custom benchmark(1) at 42% of net assets and international equities and REITs were overweighted at 10% and 1%, respectively. HOW DID THE FUND'S INTERNATIONAL EQUITIES PERFORM? Within our menu of available assets, international equities had the highest positive return for the six-month period. The Fund invests in international equities through foreign futures. During the reporting period, the Japanese equity market, as measured by the Topix Index,(2) generated the best results, returning 14.36%. Unfortunately, the Fund's underweighted position in Japanese stocks reduced the amount of incremental return the portfolio achieved. Our decision to invest in Italian and Spanish equities, however, proved beneficial as these markets earned 8.35% and 13.75%, respectively, in local currency terms. These positions were funded in part by underweighting U.S. large-cap equities. The U.S. large-cap equity market (as measured by the S&P 500(R) Index),(3) returned 6.27% for the period, which made the Fund's underweighted position beneficial. The worst performing portion of the Fund's international allocation came in Hong Kong, where the Hang Seng Index fell 2.03%. The Fund's slightly overweighted position in Hong Kong stocks detracted from performance. HOW DID YOU ALLOCATE THE REST OF THE FUND'S U.S. EQUITY HOLDINGS? We held an overweighted position in domestic small-cap stocks (as measured by the S&P SmallCap 600(R) Index)(4) and in mid-cap stocks (as measured by the S&P MidCap 400(R) Index). This enhanced results, as these market sectors outperformed their large-cap counterparts, returning 8.47% and 6.93%, respectively. Real estate investment trusts (as measured by the Morgan Stanley REIT(R) Index)(5) returned only 2.78%, so the Fund's small but overweighted REIT position detracted from performance. HOW DID THE FUND'S BOND ALLOCATION AFFECT PERFORMANCE? Our decision to overweight bonds and underweight U.S. large-cap stocks detracted from the Fund's results. The Citigroup BIG Bond Index returned a relatively low 1.32% for the period versus the 6.27% return for the S&P 500(R) Index. HOW DID THE ACTIVELY MANAGED SEGMENTS OF THE FUND IMPACT RESULTS? The assets allocated by the model to large-cap equities in an actively managed enhanced-index-fund strategy made a positive contribution to returns by Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. Foreign securities may be subject to greater risks that U.S. investments, including currency fluctuations, less-liquid trading markets, greater price volatility, political and economic instability, less publicly available information, and changes in tax or currency laws or monetary policy. These risks are likely to be greater in emerging markets than in developed markets. The Fund may invest in derivatives, which may increase the volatility of the Fund's net asset value and may result in a loss to the Fund. 1. See footnote on page 152 for more information on the Asset Manager Composite Index. 2. Returns for individual sectors and markets reflect major unmanaged indices considered representative of the specific sectors or markets. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. "S&P 500(R) Index," "S&P MidCap 400(R) Index," and "S&P SmallCap 600(R) Index" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use. Each index is unmanaged and is considered generally representative of a different capitalization segment of the U.S. stock market. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 4. See footnote on page 152 for more information on the Citigroup BIG Bond Index. 5. The Morgan Stanley REIT(R) Index is an unmanaged, capitalization-weighted index of the most actively traded real estate investment trusts (REITs), and is designed to measure real estate equity performance. An investment cannot be made directly into an index. www.mainstayfunds.com 155 outperforming the S&P 500(R) Index during the reporting period. The allocations made to the actively managed mid-cap strategy, however, did not fare as well. Indeed, the mid-cap portion of the portfolio lagged the S&P MidCap 400(R) Index for the period. Similarly, the allocation made to the actively managed fixed-income strategy detracted from results when the portfolio underperformed the Citigroup BIG Bond 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 forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 60.40 U.S. Government and Federal Agencies 21.60 Short-Term Investments 10.20 Corporate Bonds 6.70 Foreign Bonds 1.20 Real Estate Investment Trusts 1.20 Asset-Backed Security 0.30 Yankee Bonds 0.10 Liabilities in Excess of Cash and Other Assets -1.70
156 MainStay Asset Manager Fund PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMOUNT VALUE LONG-TERM BONDS (29.9%)+ ASSET-BACKED SECURITY (0.3%) ----------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) Citibank Credit Card Issuance Trust Series 2003-A2 Class A2 2.70%, due 1/15/06 $1,000,000 $ 1,004,292 ------------ Total Asset-Backed Security (Cost $1,008,867) 1,004,292 ------------ CORPORATE BONDS (6.7%) ----------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.2%) Honeywell International, Inc. 7.50%, due 3/1/10 100,000 115,418 Lockheed Martin Corp. 8.20%, due 12/1/09 100,000 118,782 Northrop Grumman Corp. 7.125%, due 2/15/11 100,000 112,437 Raytheon Co. 6.75%, due 8/15/07 100,000 109,586 United Technologies Corp. 6.35%, due 3/1/11 250,000 274,275 ------------ 730,498 ------------ AUTOMOBILES (0.2%) DaimlerChrysler North America Holdings, Inc. 7.30%, due 1/15/12 250,000 276,488 General Motors Corp. 8.375%, due 7/15/33 250,000 270,379 ------------ 546,867 ------------ BEVERAGES (0.2%) Anheuser-Busch Cos., Inc. 5.75%, due 4/1/10 100,000 106,621 Coca-Cola Enterprises, Inc. 7.00%, due 5/15/98 250,000 271,256 Pepsi Bottling Holdings, Inc. 5.625%, due 2/17/09 (c) 100,000 107,229 ------------ 485,106 ------------ BUILDING PRODUCTS (0.0%) (B) Masco Corp. 6.75%, due 3/15/06 100,000 107,240 ------------ CAPITAL MARKETS (0.6%) Bear Stearns Cos., Inc. (The) 5.70%, due 1/15/07 250,000 265,509 Credit Suisse FirstBoston USA, Inc. 4.625%, due 1/15/08 250,000 257,350
PRINCIPAL AMOUNT VALUE CAPITAL MARKETS (CONTINUED) Goldman Sachs Group, Inc. (The) 5.70%, due 9/1/12 $ 150,000 $ 154,652 6.125%, due 2/15/33 100,000 96,190 J.P. Morgan Chase & Co. 5.75%, due 1/2/13 250,000 258,863 Lehman Brothers Holdings, Inc. 7.00%, due 2/1/08 250,000 278,464 Merrill Lynch & Co., Inc., Series B 4.00%, due 11/15/07 250,000 253,255 Morgan Stanley 6.60%, due 4/1/12 250,000 275,176 ------------ 1,839,459 ------------ CHEMICALS (0.1%) Dow Chemical Co. (The) 5.75%, due 11/15/09 100,000 105,680 E.I. du Pont de Nemours & Co. 6.875%, due 10/15/09 100,000 113,177 ------------ 218,857 ------------ COMMERCIAL BANKS (0.6%) Bank of America Corp. 3.875%, due 1/15/08 500,000 503,928 Bank One Corp., Series A 6.00%, due 2/17/09 250,000 270,032 FleetBoston Financial Corp. 3.85%, due 2/15/08 250,000 251,334 U.S. Bancorp, Series N 3.95%, due 8/23/07 250,000 254,393 Wachovia Bank National Association 4.85%, due 7/30/07 250,000 261,521 Wells Fargo Bank NA, San Francisco 6.45%, due 2/1/11 250,000 275,726 ------------ 1,816,934 ------------ COMMERCIAL SERVICES & SUPPLIES (0.1%) Cendant Corp. 6.25%, due 1/15/08 100,000 108,005 Waste Management, Inc. 7.375%, due 8/1/10 100,000 113,683 ------------ 221,688 ------------ COMMUNICATIONS EQUIPMENT (0.0%) (B) Motorola, Inc. 5.80%, due 10/15/08 100,000 102,893 ------------ + Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 157 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ----------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.1%) International Business Machines Corp. 4.25%, due 9/15/09 $ 250,000 $ 252,176 ------------ CONSUMER FINANCE (0.8%) American General Finance Corp. Series H 4.50%, due 11/15/07 250,000 257,495 Ford Motor Credit Co. 6.50%, due 1/25/07 500,000 530,222 7.375%, due 2/1/11 250,000 267,331 General Motors Acceptance Corp. 6.125%, due 8/28/07 350,000 369,848 Household Finance Corp. 5.75%, due 1/30/07 500,000 532,492 John Deere Capital Corp. 3.90%, due 1/15/08 250,000 251,139 MBNA Corp. 6.125%, due 3/1/13 100,000 105,313 SLM Corp. 5.625%, due 8/1/33 100,000 91,424 ------------ 2,405,264 ------------ DIVERSIFIED FINANCIAL SERVICES (0.6%) Boeing Capital Corp. 5.75%, due 2/15/07 250,000 265,756 CIT Group, Inc. 5.50%, due 11/30/07 250,000 264,152 Citigroup, Inc. 3.50%, due 2/1/08 500,000 496,789 5.875%, due 2/22/33 250,000 238,162 National Rural Utilities Cooperative Finance Corp. 5.75%, due 8/28/09 250,000 266,396 UFJ Finance Aruba AEC 6.75%, due 7/15/13 100,000 105,591 Verizon Global Funding Corp. 7.75%, due 12/1/30 100,000 114,424 ------------ 1,751,270 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%) Ameritech Capital Funding 6.55%, due 1/15/28 100,000 100,588 AT&T Corp. 8.05%, due 11/15/11 100,000 109,726 BellSouth Corp. 6.00%, due 10/15/11 250,000 266,636 Citizens Communications Co. 9.25%, due 5/15/11 100,000 105,243
PRINCIPAL AMOUNT VALUE DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) GTE South, Inc., Series C 6.00%, due 2/15/08 $ 300,000 $ 319,588 SBC Communications, Inc. 5.75%, due 5/2/06 150,000 158,723 Sprint Capital Corp. 6.125%, due 11/15/08 150,000 160,617 8.75%, due 3/15/32 100,000 119,451 ------------ 1,340,572 ------------ ELECTRIC UTILITIES (0.3%) American Electric Power Co., Inc. Series C 5.375%, due 3/15/10 100,000 103,407 Consumers Energy Co., Series B 5.375%, due 4/15/13 100,000 98,423 Dominion Resources, Inc. Series B 6.25%, due 6/30/12 100,000 106,685 DTE Energy Co., Series A 6.65%, due 4/15/09 100,000 108,906 FirstEnergy Corp., Series A 5.50%, due 11/15/06 100,000 104,344 Northern States Power Co. 6.875%, due 8/1/09 100,000 111,738 Oncor Electric Delivery Co. 7.00%, due 9/1/22 100,000 107,624 Peco Energy Co. 3.50%, due 5/1/08 100,000 98,921 Progress Energy, Inc. 7.10%, due 3/1/11 100,000 111,447 ------------ 951,495 ------------ FOOD & STAPLES RETAILING (0.2%) Albertson's, Inc. 7.50%, due 2/15/11 100,000 113,579 Kroger Co. (The) 8.05%, due 2/1/10 100,000 116,427 Safeway, Inc. 6.50%, due 3/1/11 100,000 107,644 Wal-Mart Stores, Inc. 4.55%, due 5/1/13 150,000 145,475 7.55%, due 2/15/30 100,000 119,892 ------------ 603,017 ------------ FOOD PRODUCTS (0.2%) Archer-Daniels-Midland Co. 8.125%, due 6/1/12 100,000 121,283 ConAgra Foods, Inc. 6.75%, due 9/15/11 100,000 110,455 General Mills, Inc. 3.875%, due 11/30/07 100,000 100,266
158 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ----------------------------------------------------------------------------- FOOD PRODUCTS (CONTINUED) Kellogg Co., Series B 6.00%, due 4/1/06 $ 100,000 $ 106,156 Kraft Foods, Inc. 5.25%, due 6/1/07 100,000 105,079 Unilever Capital Corp. 7.125%, due 11/1/10 100,000 114,436 ------------ 657,675 ------------ GAS UTILITIES (0.0%) (B) Kinder Morgan Energy Partners, L.P. 7.125%, due 3/15/12 100,000 112,106 ------------ HEALTH CARE PROVIDERS & SERVICES (0.0%) (B) HCA, Inc. 8.75%, due 9/1/10 100,000 114,744 ------------ HOUSEHOLD PRODUCTS (0.0%) (B) Procter & Gamble Co. (The) 4.75%, due 6/15/07 100,000 104,509 ------------ INSURANCE (0.1%) Allstate Corp. (The) 7.20%, due 12/1/09 100,000 115,003 Berkshire Hathaway, Inc. 4.625%, due 10/15/13 (c) 100,000 96,848 ------------ 211,851 ------------ MACHINERY (0.0%) (B) Caterpillar, Inc. 7.25%, due 9/15/09 100,000 114,257 ------------ MEDIA (0.5%) Clear Channel Communications, Inc. 4.25%, due 5/15/09 100,000 99,178 Comcast Cable Communications, Inc. 6.75%, due 1/30/11 250,000 273,973 Cox Enterprises, Inc. 7.875%, due 9/15/10 (c) 100,000 114,866 Liberty Media Corp. 7.875%, due 7/15/09 100,000 113,664 News America Holdings 9.25%, due 2/1/13 100,000 126,941 Time Warner, Inc. 7.625%, due 4/15/31 250,000 273,597
PRINCIPAL AMOUNT VALUE MEDIA (CONTINUED) Viacom, Inc. 7.70%, due 7/30/10 $ 250,000 $ 289,789 Walt Disney Co., (The), Series B 6.75%, due 3/30/06 100,000 106,742 ------------ 1,398,750 ------------ METALS & MINING (0.1%) Alcoa, Inc. 4.25%, due 8/15/07 250,000 256,844 ------------ MULTILINE RETAIL (0.1%) Federated Department Stores, Inc. 7.00%, due 2/15/28 100,000 105,747 Target Corp. 7.00%, due 7/15/31 100,000 111,373 ------------ 217,120 ------------ MULTI-UTILITIES & UNREGULATED POWER (0.1%) Constellation Energy Group, Inc. 6.35%, due 4/1/07 100,000 107,458 Duke Energy Corp. 6.25%, due 1/15/12 100,000 105,923 PSE&G Power LLC 7.75%, due 4/15/11 100,000 115,134 ------------ 328,515 ------------ OIL & GAS (0.2%) Amerada Hess Corp. 7.30%, due 8/15/31 100,000 101,894 Anadarko Petroleum Corp. 7.20%, due 3/15/29 100,000 110,144 Devon Financing Corp. ULC 6.875%, due 9/30/11 100,000 111,024 Marathon Oil Corp. 6.85%, due 3/1/08 100,000 110,351 Occidental Petroleum Corp. 5.875%, due 1/15/07 100,000 106,643 Pemex Project Funding Master Trust 7.375%, due 12/15/14 100,000 104,500 Valero Energy Corp. 6.125%, due 4/15/07 100,000 107,448 ------------ 752,004 ------------ PAPER & FOREST PRODUCTS (0.1%) International Paper Co. 6.75%, due 9/1/11 100,000 109,871 Weyerhaeuser Co. 6.75%, due 3/15/12 100,000 109,626 ------------ 219,497 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 159 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ----------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Bristol-Myers Squibb Co. 4.00%, due 8/15/08 (c) $ 250,000 $ 250,671 Pharmacia Corp. 6.60%, due 12/1/28 100,000 109,016 Wyeth 5.50%, due 3/15/13 100,000 100,062 ------------ 459,749 ------------ REAL ESTATE (0.1%) EOP Operating LP 7.00%, due 7/15/11 100,000 110,980 Simon Property Group, L.P. 6.375%, due 11/15/07 100,000 109,372 ------------ 220,352 ------------ ROAD & RAIL (0.2%) Burlington Northern Santa Fe Corp. 7.125%, due 12/15/10 100,000 112,706 CSX Corp. 7.45%, due 5/1/07 100,000 111,026 Norfolk Southern Corp. 6.75%, due 2/15/11 100,000 111,032 Union Pacific Corp. 6.65%, due 1/15/11 100,000 110,285 ------------ 445,049 ------------ THRIFTS & MORTGAGE FINANCE (0.4%) Countrywide Home Loans, Inc. 5.625%, due 5/15/07 100,000 106,080 General Electric Capital Corp. 6.00%, due 6/15/12 500,000 533,142 6.75%, due 3/15/32 250,000 269,152 Washington Mutual, Inc. 7.50%, due 8/15/06 250,000 274,662 ------------ 1,183,036 ------------ TOBACCO (0.0%) (B) Altria Group, Inc. 7.20%, due 2/1/07 100,000 107,826 ------------ WIRELESS TELECOMMUNICATION SERVICES (0.0%) (B) AT&T Wireless Services, Inc. 7.875%, due 3/1/11 100,000 115,182 ------------ Total Corporate Bonds (Cost $20,353,814) 20,392,402 ------------
PRINCIPAL AMOUNT VALUE FOREIGN BONDS (1.2%) ----------------------------------------------------------------------------- BEVERAGES (0.0%) (B) Diageo Capital PLC 3.375%, due 3/20/08 $ 100,000 $ 98,613 ------------ CAPITAL MARKETS (0.1%) Kreditanstalt fuer Wiederaufbau 3.375%, due 1/23/08 250,000 250,517 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) British Telecommunications PLC 8.875%, due 12/15/30 100,000 126,503 Deutsche Telekom International Finance BV 8.50%, due 6/15/10 250,000 295,394 France Telecom S.A. 8.20%, due 3/1/06 150,000 163,147 9.75%, due 3/1/31 100,000 128,245 Koninklijke (Royal) KPN N.V. 8.00%, due 10/1/10 100,000 116,968 Telecom Italia Capital 6.375%, due 11/15/33 (c) 100,000 98,082 ------------ 928,339 ------------ FOREIGN GOVERNMENTS (0.6%) Malaysian Government 8.75%, due 6/1/09 100,000 118,940 Province of Ontario 5.50%, due 10/1/08 250,000 266,413 Province of Quebec 7.50%, due 9/15/29 250,000 305,217 Republic of Italy Series DTC 5.625%, due 6/15/12 500,000 533,959 United Mexican States 6.375%, due 1/16/13 500,000 506,250 ------------ 1,730,779 ------------ INSURANCE (0.1%) Axa 8.60%, due 12/15/30 100,000 124,286 ------------ OIL & GAS (0.1%) Conoco Funding Co. 6.35%, due 10/15/11 250,000 275,703 ------------ WIRELESS TELECOMMUNICATION SERVICES (0.0%) (B) Vodafone Group PLC 7.75%, due 2/15/10 100,000 115,802 ------------ Total Foreign Bonds (Cost $3,543,128) 3,524,039 ------------
160 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE U.S. GOVERNMENT & FEDERAL AGENCIES (21.6%) ----------------------------------------------------------------------------- FEDERAL HOME LOAN BANK (2.3%) *1.625%, due 4/15/05 $4,000,000 $ 4,000,180 2.75%, due 3/14/08 2,000,000 1,944,168 2.875%, due 9/15/06 1,000,000 1,003,202 ------------ 6,947,550 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION (1.8%) 2.75%, due 8/15/06 1,500,000 1,502,775 3.625%, due 9/15/08 1,000,000 993,189 4.875%, due 11/15/13 1,000,000 990,873 5.50%, due 9/15/11 1,000,000 1,053,552 6.25%, due 7/15/32 1,000,000 1,062,007 ------------ 5,602,396 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE PASS-THROUGH SECURITIES) (3.4%) 4.50%, due 7/1/18-8/1/33 972,853 936,744 4.50%, due 6/17/34 TBA (e) 500,000 490,625 5.00%, due 12/1/18-11/1/33 1,462,515 1,437,544 5.50%, due 12/1/17-10/1/33 1,309,009 1,333,517 5.50%, due 5/14/33-6/14/34 TBA (e) 2,000,000 1,995,001 6.00%, due 5/1/16-1/1/28 879,615 917,141 6.50%, due 11/1/16-6/1/32 1,918,120 2,002,685 7.00%, due 3/1/26-7/1/32 484,382 511,778 7.50%, due 7/1/11-5/1/32 509,624 547,003 7.75%, due 10/1/07 59,830 62,909 8.00%, due 10/1/11-11/1/11 80,704 86,739 ------------ 10,321,686 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (5.5%) 4.50%, due 5/1/18-11/1/18 2,416,214 2,381,358 5.00%, due 10/1/17-11/1/33 2,693,925 2,696,198 5.00%, due 5/13/34 TBA (e) 2,500,000 2,421,875 5.50%, due 6/1/33-7/1/33 3,618,461 3,612,843 5.50%, due 5/14/33 TBA (e) 500,000 498,750 6.00%, due 4/1/19-4/1/33 2,697,803 2,762,779 6.00%, due 5/15/34 TBA (e) 500,000 511,406 6.50%, due 7/1/29-8/1/32 845,144 880,096 7.00%, due 5/1/26-7/1/30 292,884 309,784 7.50%, due 7/1/11-10/1/15 317,559 340,340 8.00%, due 7/1/09-11/1/11 136,925 147,139 8.50%, due 8/1/26-10/1/26 16,647 18,160 9.00%, due 6/1/26-9/1/26 44,167 48,760 ------------ 16,629,488 ------------
PRINCIPAL AMOUNT VALUE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES) (1.5%) 5.00%, due 8/15/33 $ 474,346 $ 461,523 5.50%, due 8/15/33 910,850 912,027 6.00%, due 1/15/33 565,238 579,527 6.00%, due 5/21/33 TBA (e) 500,000 512,500 6.50%, due 4/15/29-7/15/32 722,471 754,894 7.00%, due 7/15/11-6/15/28 720,328 769,233 7.50%, due 3/15/26-10/15/30 414,743 445,772 8.00%, due 8/15/26-10/15/26 77,619 84,941 8.50%, due 11/15/26 28,069 30,881 9.00%, due 11/15/26 9,109 10,134 ------------ 4,561,432 ------------ UNITED STATES TREASURY BONDS (1.5%) 5.25%, due 2/15/29 2,650,000 2,606,111 5.375%, due 2/15/31 2,000,000 2,026,250 ------------ 4,632,361 ------------ UNITED STATES TREASURY NOTES (5.6%) 1.625%, due 2/28/06 2,000,000 1,978,750 *1.875%, due 11/30/05 5,000,000 4,986,135 *4.00%, due 2/15/14 4,750,000 4,562,969 *4.625%, due 5/15/06 3,000,000 3,134,649 7.00%, due 7/15/06 2,100,000 2,303,355 ------------ 16,965,858 ------------ Total U.S. Government & Federal Agencies (Cost $65,443,118) 65,660,771 ------------ YANKEE BONDS (0.1%) (D) ----------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.0%) (B) Tyco International Group S.A. 6.125%, due 1/15/09 100,000 105,545 ------------ OIL & GAS (0.1%) Burlington Resources, Inc. 6.50%, due 12/1/11 100,000 110,400 Norsk Hydro ASA 7.25%, due 9/23/27 100,000 113,782 ------------ 224,182 ------------ Total Yankee Bonds (Cost $319,659) 329,727 ------------ Total Long-Term Bonds (Cost $90,668,586) 90,911,231 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 161 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (60.4%) ----------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.6%) AAR Corp. 582 $ 5,907 Alliant Techsystems, Inc. (a) 658 39,013 Armor Holdings, Inc. (a) 506 16,718 Boeing Co. (The) 18,776 801,547 Cubic Corp. 488 11,517 Curtiss-Wright Corp. 353 16,626 DRS Technologies, Inc. (a) 479 13,532 EDO Corp. 360 8,172 Engineered Support Systems, Inc. 441 21,446 Esterline Technologies Corp. (a) 383 9,479 GenCorp, Inc. 799 8,477 Goodrich Corp. 5,553 159,871 Honeywell International, Inc. 4,970 171,863 InVision Technologies, Inc. (a) 289 14,358 Kaman Corp. Class A 413 5,134 Mercury Computer Systems, Inc. (a) 386 8,646 Moog, Inc. Class A (a) 441 14,553 Precision Castparts Corp. 3,063 137,866 Raytheon Co. 6,591 212,626 Teledyne Technologies, Inc. (a) 588 11,160 Triumph Group, Inc. (a) 290 9,323 United Technologies Corp. 314 27,086 ------------ 1,724,920 ------------ AIR FREIGHT & LOGISTICS (0.7%) CNF, Inc. 394 14,405 EGL, Inc. (a) 795 14,739 FedEx Corp. 7,509 539,972 Forward Air Corp. (a) 389 12,946 J.B. Hunt Transport Services, Inc. 8,880 281,141 Ryder System, Inc. 2,973 109,377 United Parcel Service, Inc. Class B 16,420 1,151,863 ------------ 2,124,443 ------------ AIRLINES (0.0%) (B) Alaska Air Group, Inc. (a) 1,517 33,571 Atlantic Coast Airlines Holdings, Inc. (a) 828 5,423 Delta Air Lines, Inc. 2,276 14,157 Frontier Airlines, Inc. (a) 607 5,512 JetBlue Airways Corp. (a) 810 22,421 Mesa Air Group, Inc. (a) 576 4,072 SkyWest, Inc. 970 17,654 ------------ 102,810 ------------ AUTO COMPONENTS (0.3%) ArvinMeritor, Inc. 3,696 76,470 Bandag, Inc. 1,970 85,793 BorgWarner, Inc. 786 64,405 Cooper Tire & Rubber Co. 1,164 24,898
SHARES VALUE AUTO COMPONENTS (CONTINUED) Dana Corp. 4,981 $ 100,417 Delphi Corp. 24,630 251,226 Goodyear Tire & Rubber Co. (The) 216 1,881 Intermet Corp. 458 1,855 Lear Corp. (a) 3,793 229,932 Midas, Inc. 270 4,930 Modine Manufacturing Co. 305 8,388 Standard Motor Products, Inc. 303 4,424 Tower Automotive, Inc. (a) 1,029 5,268 Visteon Corp. 5,500 59,730 ------------ 919,617 ------------ AUTOMOBILES (0.6%) Coachmen Industries, Inc. 271 4,317 Ford Motor Co. 86,526 1,329,039 General Motors Corp. 11,037 523,375 Monaco Coach Corp. (a) 531 13,843 Thor Industries, Inc. 976 27,191 Winnebago Industries, Inc. 576 16,606 ------------ 1,914,371 ------------ BEVERAGES (0.9%) Adolph Coors Co. Class B 1,719 112,956 Coca-Cola Co. (The) 20,565 1,039,972 Coca-Cola Enterprises, Inc. 21,541 581,607 Pepsi Bottling Group, Inc. (The) 10,749 314,623 PepsiAmericas, Inc. 14,044 281,301 PepsiCo, Inc. 5,633 306,942 ------------ 2,637,401 ------------ BIOTECHNOLOGY (0.3%) Amgen, Inc. (a) 2,947 165,828 ArQule, Inc. (a) 563 3,738 Biogen Idec, Inc. (a) 5,005 295,295 Enzo Biochem, Inc. (a) 546 7,944 Gilead Sciences, Inc. (a) 1,851 112,596 IDEXX Laboratories, Inc. (a) 594 36,389 Millennium Pharmaceuticals, Inc. (a) 7,991 119,785 Protein Design Labs, Inc. (a) 8,656 211,899 Regeneron Pharmaceuticals, Inc. (a) 952 11,929 Savient Pharmaceuticals, Inc. (a) 1,087 4,076 Techne Corp. (a) 699 27,233 ------------ 996,712 ------------ BUILDING PRODUCTS (0.3%) American Standard Cos., Inc. (a) 1,141 120,022 Apogee Enterprises, Inc. 502 5,592 ElkCorp 357 9,896 Griffon Corp. (a) 540 11,853 Lennox International, Inc. 987 16,493 Masco Corp. 15,680 439,197
162 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- BUILDING PRODUCTS (CONTINUED) Simpson Manufacturing Co., Inc. (a) 421 $ 21,959 Universal Forest Products, Inc. 324 8,777 York International Corp. 3,849 150,881 ------------ 784,670 ------------ CAPITAL MARKETS (1.5%) A.G. Edwards, Inc. 7,774 284,451 Bank of New York Co., Inc. (The) 7,919 230,760 Bear Stearns Cos., Inc. (The) 1,585 127,022 E*TRADE Financial Corp. (a) 31,803 361,282 Federated Investors, Inc. Class B 854 25,108 Investment Technology Group, Inc. (a) 785 11,249 Investors Financial Services Corp. 1,401 54,457 LaBranche & Co., Inc. 2,342 22,881 Legg Mason, Inc. 2,272 209,160 Lehman Brothers Holdings, Inc. 10,768 790,371 Merrill Lynch & Co., Inc. 31,715 1,719,904 Morgan Stanley 5,852 300,734 Raymond James Financial, Inc. 4,850 121,832 S&P 500 Index-SPDR Trust, Series 1 (h) 2,209 245,111 S&P MidCap 400 Index-MidCap SPDR Trust, Series 1 (h) 200 21,300 SWS Group, Inc. 310 5,034 Waddell & Reed Financial, Inc. Class A 3,470 77,138 ------------ 4,607,794 ------------ CHEMICALS (0.8%) Arch Chemicals, Inc. 410 11,976 Cabot Corp. 3,205 108,329 Cambrex Corp. 470 11,618 Crompton Corp. 4,716 29,334 Dow Chemical Co. (The) 24,009 952,917 Engelhard Corp. 4,254 123,536 FMC Corp. (a) 3,910 167,700 Georgia Gulf Corp. 593 18,893 H.B. Fuller Co. 519 14,221 Headwaters, Inc. (a) 561 12,897 IMC Global, Inc. (a) 4,278 53,774 International Flavors & Fragrances, Inc. 168 6,090 MacDermid, Inc. 516 16,708 Material Sciences Corp. (a) 253 2,454 Monsanto Co. 12,424 429,746 Olin Corp. 2,727 47,095 OM Group, Inc. 518 13,183 Omnova Solutions, Inc. 714 3,392
SHARES VALUE CHEMICALS (CONTINUED) Penford Corp. 153 $ 2,499 PolyOne Corp. 1,676 11,464 PPG Industries, Inc. 3,822 226,683 Quaker Chemical Corp. 169 4,269 Rohm & Haas Co. 296 11,479 Schulman (A.), Inc. 539 10,780 Valspar Corp. (The) 397 19,711 Wellman, Inc. 570 4,611 ------------ 2,315,359 ------------ COMMERCIAL BANKS (3.5%) Associated Banc-Corp. 1,514 61,998 Bank of America Corp. 28,232 2,272,394 Bank of Hawaii Corp. 1,261 55,131 Bank One Corp. 47,729 2,356,381 BB&T Corp. 12,932 446,025 Boston Private Financial Holdings, Inc. 415 9,670 Cathay Bancorp, Inc. 1 47 CCBT Financial Cos., Inc. 1,633 54,640 Charter One Financial, Inc. 1,751 58,431 Chittenden Corp. 622 18,921 Commerce Bancorp, Inc. 2,545 145,090 Community First Bankshares, Inc. 639 20,562 Compass Bancshares, Inc. 1,958 75,109 East West Bancorp, Inc. 408 22,983 First BanCorp 682 25,139 First Horizon National Corp. 3,289 144,584 First Midwest Bancorp, Inc. 793 26,764 First Republic Bank 266 10,135 Gold Banc Corp., Inc. 672 10,994 Greater Bay Bancorp 1,949 55,293 Hudson United Bancorp 763 27,262 Irwin Financial Corp. 511 12,085 KeyCorp 3,298 97,951 M&T Bank Corp. 3,495 297,075 Marshall & Ilsley Corp. 869 31,953 National City Corp. 14,080 488,154 PNC Financial Services Group, Inc. (The) 4,748 252,119 Provident Bankshares Corp. 450 12,677 Provident Financial Group, Inc. 10,840 426,878 Regions Financial Corp. 11,203 388,856 Republic Bancorp, Inc. 1,153 15,001 Riggs National Corp. 522 9,443 Silicon Valley Bancshares (a) 1,292 44,393 South Financial Group, Inc. (The) 1,003 27,783 Southwest Bancorporation of Texas, Inc. 582 23,670 Sterling Bancshares, Inc. 807 10,257 Susquehanna Bancshares, Inc. 668 15,631
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 163 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- COMMERCIAL BANKS (CONTINUED) TCF Financial Corp. 5,246 $ 259,939 Trust Company of New Jersey (The) 2,385 88,293 TrustCo Bank Corp. of NY 1,270 16,015 U.S. Bancorp 15,088 386,856 UCBH Holdings, Inc. 767 28,394 Umpqua Holdings Corp. 495 9,380 Union Planters Corp. 1,475 41,005 United Bankshares, Inc. 786 23,588 Unizan Financial Corp. 1,580 38,473 Wachovia Corp. 18,668 854,061 Wells Fargo & Co. 16,023 904,659 Whitney Holding Corp. 688 28,208 Wintrust Financial Corp. 341 16,194 Zions Bancorp 460 25,999 ------------ 10,772,543 ------------ COMMERCIAL SERVICES & SUPPLIES (1.3%) ABM Industries, Inc. 828 15,285 Administaff, Inc. (a) 487 8,523 Allied Waste Industries, Inc. (a) 11,729 147,668 Angelica Corp. 158 3,634 Arbitron, Inc. (a) 509 18,960 Banta Corp. 1,578 70,189 Bowne & Co., Inc. 616 10,429 Brady Corp. Class A 424 16,477 Brink's Co. (The) 5,146 142,699 Career Education Corp. (a) 3,825 244,800 CDI Corp. 355 11,452 Cendant Corp. (a) 47,790 1,131,667 Central Parking Corp. 660 12,599 Coinstar, Inc. (a) 393 6,779 Consolidated Graphics, Inc. (a) 245 9,143 Copart, Inc. (a) 4,498 85,282 CPI Corp. 145 2,224 Donnelley (R.R.) & Sons Co. 1,572 46,248 Dun & Bradstreet Corp. (The) (a) 952 49,742 G&K Services, Inc. Class A 379 14,364 H&R Block, Inc. 1,418 63,966 Heidrick & Struggles International, Inc. (a) 334 8,293 Herman Miller, Inc. 1,567 41,181 Imagistics International, Inc. (a) 310 12,552 Insurance Auto Auctions, Inc. (a) 206 3,240 Ionics, Inc. (a) 385 8,882 ITT Educational Services, Inc. (a) 75 3,025 John H. Harland Co. 473 14,573 Korn/Ferry International (a) 801 11,999 Kroll, Inc. (a) 701 20,778 Labor Ready, Inc. (a) 735 9,290
SHARES VALUE COMMERCIAL SERVICES & SUPPLIES (CONTINUED) Manpower, Inc. 1,575 $ 73,868 MemberWorks, Inc. (a) 176 5,194 Mobile Mini, Inc. (a) 261 5,024 NCO Group, Inc. (a) 473 10,737 New England Business Service, Inc. (a) 237 8,226 On Assignment, Inc. (a) 450 2,295 Pitney Bowes, Inc. 6,940 303,625 Pre-Paid Legal Services, Inc. (a) 317 7,925 PRG-Schultz International, Inc. 1,125 5,288 Rollins, Inc. 969 23,014 Roto-Rooter, Inc. 180 8,712 School Specialty, Inc. (a) 343 12,221 Sotheby's Holdings, Inc. Class A (a) 3,426 44,504 SOURCECORP, Inc. (a) 295 7,579 Spherion Corp. (a) 1,089 10,727 Standard Register Co. (The) 517 7,621 Sylvan Learning Systems, Inc. (a) 2,205 77,726 Tetra Tech, Inc. (a) 912 15,148 United Rentals, Inc. (a) 8,530 146,716 United Stationers, Inc. 567 21,546 Viad Corp. 6,459 161,217 Volt Information Sciences, Inc. (a) 278 7,175 Waste Connections, Inc. (a) 478 19,249 Waste Management, Inc. 22,728 645,475 Watson Wyatt & Co. Holdings (a) 602 15,791 ------------ 3,892,546 ------------ COMMUNICATIONS EQUIPMENT (2.1%) 3Com Corp. (a) 15,681 96,595 Adaptec, Inc. (a) 1,826 14,279 ADC Telecommunications, Inc. (a) 2,740 6,850 ADTRAN, Inc. 25 613 Advanced Fibre Communications, Inc. (a) 346 5,778 Andrew Corp. (a) 2,635 44,663 Audiovox Corp. Class A (a) 419 6,327 Avaya, Inc. (a) 11,390 155,815 Bel Fuse, Inc. Class B 201 6,207 Black Box Corp. 301 15,336 Brooktrout, Inc. 220 2,231 Cable Design Technologies Corp. 746 6,363 C-COR.net Corp. 665 6,038 Cisco Systems, Inc. 103,862 2,167,600 CommScope, Inc. (a) 6,609 115,724 Corning, Inc. 37,640 415,169 Digi International, Inc. 361 3,509 Harmonic, Inc. 1,242 8,210 Harris Corp. 4,892 220,384 Inter-Tel, Inc. 457 10,941
164 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (CONTINUED) JDS Uniphase Corp. 4,185 $ 12,722 Lucent Technologies, Inc. 69,735 235,007 Motorola, Inc. 98,503 1,797,680 Network Equipment Technology, Inc. 411 3,514 PC-Tel, Inc. (a) 363 4,022 Plantronics, Inc. 4,684 177,758 Polycom, Inc. 7,168 136,765 Powerwave Technologies, Inc. 335 2,268 QUALCOMM, Inc. 10,897 680,627 Scientific-Atlanta, Inc. 1,176 38,091 SCM Microsystems, Inc. (a) 271 1,702 Symmertricom, Inc. (a) 770 6,168 Tellabs, Inc. (a) 192 1,676 Tollgrade Communications, Inc. (a) 243 2,960 ViaSat, Inc. (a) 479 10,528 ------------ 6,420,120 ------------ COMPUTERS & PERIPHERALS (1.4%) Avid Technology, Inc. (a) 516 24,753 Dell, Inc. (a) 9,372 325,302 EMC Corp. (a) 12,498 139,478 Gateway, Inc. (a) 483 2,328 Hewlett-Packard Co. 56,747 1,117,916 Hutchinson Technology, Inc. (a) 473 11,631 International Business Machines Corp. 22,768 2,007,455 Lexmark International, Inc. (a) 1,010 91,365 NCR Corp. (a) 4,455 199,094 Network Appliance, Inc. (a) 834 15,529 Pinnacle Systems, Inc. (a) 1,154 9,082 SanDisk Corp. (a) 3,874 89,528 SBS Technologies, Inc. (a) 261 3,889 Storage Technology Corp. (a) 9,743 255,949 Sun Microsystems, Inc. (a) 5,526 21,550 ------------ 4,314,849 ------------ CONSTRUCTION & ENGINEERING (0.1%) Dycom Industries, Inc. (a) 2,649 62,463 EMCOR Group, Inc. (a) 274 11,207 Granite Construction, Inc. (a) 118 2,342 Insituform Technologies, Inc. Class A (a) 483 7,844 Quanta Services, Inc. (a) 8,717 47,682 Shaw Group, Inc. (The) (a) 1,010 12,120 URS Corp. (a) 684 17,668 ------------ 161,326 ------------ CONSTRUCTION MATERIALS (0.1%) Florida Rock Industries, Inc. 733 29,166 Martin Marietta Materials, Inc. 3,615 156,349
SHARES VALUE CONSTRUCTION MATERIALS (CONTINUED) Texas Industries, Inc. 385 $ 12,978 Vulcan Materials Co. 4,804 222,137 ------------ 420,630 ------------ CONSUMER FINANCE (0.4%) American Express Co. 145 7,098 AmeriCredit Corp. (a) 17,393 281,941 Capital One Financial Corp. 8,998 589,639 Cash America International, Inc. 472 10,095 MBNA Corp. 7,550 184,069 Providian Financial Corp. 11,244 136,390 Rewards Network, Inc. (a) 415 4,071 ------------ 1,213,303 ------------ CONTAINERS & PACKAGING (0.2%) Aptargroup, Inc. 618 24,287 Ball Corp. 597 39,402 Caraustar Industries, Inc. 510 6,452 Chesapeake Corp. 281 6,382 Longview Fibre Co. 2,853 29,899 Myers Industries, Inc. 550 7,761 Pactiv Corp. (a) 1,235 28,343 Rock-Tenn Co. 637 9,490 Sealed Air Corp. (a) 2,886 141,645 Sonoco Products Co. 1,546 38,434 Temple-Inland, Inc. 2,567 158,564 ------------ 490,659 ------------ DISTRIBUTORS (0.0%) (B) Advanced Marketing Services, Inc. 341 3,386 ------------ DIVERSIFIED FINANCIAL SERVICES (1.2%) Citigroup, Inc. (f) 58,082 2,793,163 Financial Federal Corp. 338 10,579 GATX Corp. 5,433 127,676 Moody's Corp. 3,517 226,882 Piper Jaffray Cos., Inc. (a) 324 15,688 Principal Financial Group, Inc. 15,229 537,584 ------------ 3,711,572 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES (2.3%) ALLTEL Corp. 3,671 184,798 AT&T Corp. 5,932 101,734 BellSouth Corp. 57,567 1,485,804 Cincinnati Bell, Inc. 16,472 65,064 Citizens Communications Co. 5,050 65,852 Commonwealth Telephone Enterprises, Inc. 371 15,456 General Communication, Inc. Class A (a) 1,023 9,105 Qwest Communications International, Inc. 36,946 148,523
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 165 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) SBC Communications, Inc. 60,407 $ 1,504,134 Sprint Corp. (FON Group) 52,925 946,828 Verizon Communications, Inc. 67,701 2,555,036 ------------ 7,082,334 ------------ ELECTRIC UTILITIES (1.7%) Alliant Energy Corp. 2,324 57,775 Ameren Corp. 1,423 62,214 American Electric Power Co., Inc. 15,467 470,815 CenterPoint Energy, Inc. 14,466 156,088 Central Vermont Public Service Corp. 213 4,292 CH Energy Group, Inc. 288 13,334 Cleco Corp. 864 15,509 CMS Energy Corp. (a) 227 1,886 DPL, Inc. 14,039 247,367 DTE Energy Co. 226 8,819 Duquesne Light Holdings, Inc. 8,346 156,654 Edison International 15,415 360,711 El Paso Electric Co. (a) 881 12,466 Entergy Corp. 5,412 295,495 Exelon Corp. 780 52,213 FirstEnergy Corp. 2,066 80,781 Great Plains Energy, Inc. 6,366 198,683 Green Mountain Power Corp. 119 3,043 IDACORP, Inc. 3,968 117,651 Northeast Utilities 12,480 229,008 NSTAR 3,083 149,217 OGE Energy Corp. 3,039 73,088 Pepco Holdings, Inc. 12,468 236,144 PG&E Corp. 19,653 540,851 Pinnacle West Capital Corp. 3,130 122,258 PNM Resources, Inc. 1,426 41,611 PPL Corp. 5,593 239,660 Progress Energy, Inc. 7,730 330,612 Puget Energy, Inc. 1,289 28,306 Southern Co. (The) 6,647 191,168 TECO Energy, Inc. 2,973 37,846 TXU Corp. 15,290 522,001 UIL Holdings Corp. 264 11,925 UniSource Energy Corp. 615 15,024 Xcel Energy, Inc. 10,877 181,972 ------------ 5,266,487 ------------ ELECTRICAL EQUIPMENT (0.1%) A.O. Smith Corp. 532 15,906 Acuity Brands, Inc. 759 18,573 Baldor Electric Co. 599 13,525 Belden, Inc. 464 8,115 C&D Technologies, Inc. 467 7,239
SHARES VALUE ELECTRICAL EQUIPMENT (CONTINUED) Hubbell, Inc. Class A 70 $ 2,982 Class B 4,990 224,251 Intermagnetics General Corp. (a) 303 7,430 MagneTek, Inc. (a) 421 2,905 Regal-Beloit Corp. 457 9,145 Rockwell Automation, Inc. 963 31,480 Roper Industries, Inc. 611 29,664 Thomas & Betts Corp. (a) 461 11,082 Vicor Corp. (a) 764 10,620 Woodward Governor Co. 203 12,655 ------------ 405,572 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (0.8%) Aeroflex, Inc. 1,205 15,159 Agilent Technologies, Inc. (a) 18,677 504,466 Agilysys, Inc. 587 6,886 Anixter International, Inc. (a) 608 17,814 Arrow Electronics, Inc. (a) 7,599 192,103 Artesyn Technologies, Inc. (a) 707 6,511 Avnet, Inc. (a) 13,287 287,531 BEI Technologies, Inc. 260 5,481 Bell Microproducts, Inc. (a) 474 3,090 Benchmark Electronics, Inc. (a) 681 18,407 CDW Corp. 253 15,810 Checkpoint Systems, Inc. (a) 599 9,626 Cognex Corp. 735 23,358 Coherent, Inc. (a) 545 13,325 CTS Corp. 632 8,248 Daktronics, Inc. (a) 300 6,369 Electro Scientific Industries, Inc. (a) 509 10,404 FLIR Systems, Inc. (a) 560 26,270 Global Imaging Systems, Inc. (a) 392 13,571 Itron, Inc. (a) 374 7,996 Keithley Instruments, Inc. 271 5,650 KEMET Corp. (a) 1,800 22,284 Littelfuse, Inc. (a) 400 15,360 Methode Electronics, Inc. 651 7,382 Molex, Inc. 4,456 132,700 Park Electrochemical Corp. 361 8,509 Paxar Corp. (a) 713 11,750 PerkinElmer, Inc. 5,546 106,761 Photon Dynamics, Inc. (a) 295 9,145 Planar Systems, Inc. (a) 261 3,182 Plexus Corp. (a) 1,702 24,475 RadiSys Corp. (a) 326 6,086 Rogers Corp. (a) 295 17,612 Sanmina-SCI Corp. (a) 21,203 212,454 Solectron Corp. (a) 31,230 153,027 Tech Data Corp. (a) 1,668 56,712
166 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (CONTINUED) xTechnitrol, Inc. (a) 734 $ 15,612 Tektronix, Inc. 661 19,566 Thermo Electron Corp. (a) 1,282 37,434 Trimble Navigation Ltd. (a) 832 20,842 Varian, Inc. (a) 232 9,521 Veeco Instruments, Inc. (a) 535 12,171 Vishay Intertechnology, Inc. (a) 9,523 165,700 X-Rite, Inc. 367 4,947 ------------ 2,271,307 ------------ ENERGY EQUIPMENT & SERVICES (0.1%) Atwood Oceanics, Inc. (a) 253 9,272 Cal Dive International, Inc. (a) 688 18,604 CARBO Ceramics, Inc. 284 18,369 Dril-Quip, Inc. (a) 316 5,429 FMC Technologies, Inc. (a) 123 3,352 Hanover Compressor Co. (a) 4,232 52,054 Hydril (a) 416 10,591 Input/Output, Inc. (a) 916 7,227 Lone Star Technologies, Inc. (a) 520 10,660 Maverick Tube Corp. (a) 716 16,203 Oceaneering International, Inc. (a) 442 12,376 Offshore Logistics, Inc. (a) 411 9,021 Schlumberger Ltd. 3,044 178,165 SEACOR Holdings, Inc. (a) 343 14,228 TETRA Technologies, Inc. (a) 395 9,445 Unit Corp. (a) 731 20,651 Veritas DGC, Inc. (a) 612 12,503 W-H Energy Services, Inc. (a) 498 9,153 ------------ 417,303 ------------ FOOD & STAPLES RETAILING (1.9%) Albertson's, Inc. 14,352 335,263 BJ's Wholesale Club, Inc. (a) 4,653 112,742 Casey's General Stores, Inc. 910 15,070 Costco Wholesale Corp. (a) 14,723 551,376 CVS Corp. 3,328 128,561 Duane Reade, Inc. (a) 439 7,327 Great Atlantic & Pacific Tea Co., Inc. (The) (a) 704 5,631 Kroger Co. (The) (a) 28,984 507,220 Longs Drug Stores Corp. 1,742 34,143 Nash Finch Co. 214 4,423 Performance Food Group Co. (a) 781 27,437 Ruddick Corp. 1,192 24,317 Safeway, Inc. (a) 20,272 465,242 SUPERVALU, Inc. 6,307 194,193 United Natural Foods, Inc. (a) 712 17,836 *Wal-Mart Stores, Inc. (a)(f) 53,731 3,062,667
SHARES VALUE FOOD & STAPLES RETAILING (CONTINUED) Whole Foods Market, Inc. (a) 3,673 $ 293,803 Winn-Dixie Stores, Inc. 1,434 10,927 ------------ 5,798,178 ------------ FOOD PRODUCTS (1.2%) American Italian Pasta Co. Class A (a) 327 10,124 Archer-Daniels-Midland Co. 16,095 282,628 Campbell Soup Co. 3,097 85,570 ConAgra Foods, Inc. 21,090 609,290 Corn Products International, Inc. 615 26,137 Dean Foods Co. (a) 4,574 153,595 Delta and Pine Land Co. 650 15,769 Flowers Foods, Inc. 738 18,074 H.J. Heinz Co. 11,395 435,175 Hain Celestial Group, Inc. (a) 622 12,316 Hormel Foods Corp. 5,181 157,969 International Multifoods Corp. (a) 352 8,747 Interstate Bakeries Corp. 2,750 31,075 J&J Snack Foods Corp. (a) 159 6,079 J.M. Smucker Co. (The) 2,513 131,430 Lancaster Colony Corp. 252 10,408 Lance, Inc. 532 8,038 Ralcorp Holdings, Inc. (a) 528 18,380 Sara Lee Corp. 37,216 858,945 Smithfield Foods, Inc. (a) 4,113 109,406 Tootsie Roll Industries, Inc. 1,812 63,130 Tyson Foods, Inc. Class A 31,037 581,633 ------------ 3,633,918 ------------ GAS UTILITIES (0.2%) AGL Resources, Inc. 2,646 75,676 Atmos Energy Corp. 845 20,821 Cascade Natural Gas Corp. 199 4,085 Kinder Morgan, Inc. 4,823 290,393 Laclede Group, Inc. (The) 349 9,629 New Jersey Resources Corp. 459 17,492 Northwest Natural Gas Co. 470 13,818 NUI Corp. 293 4,881 Peoples Energy Corp. 292 12,206 Piedmont Natural Gas Co., Inc. 634 25,677 Sempra Energy 3,384 107,442 Southern Union Co. (a) 1,242 24,418 Southwest Gas Corp. 618 14,090 Southwestern Energy Co. (a) 650 16,347 UGI Corp. 860 27,090 WGL Holdings, Inc. 1,881 53,195 ------------ 717,260 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 167 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.1%) Advanced Medical Optics, Inc. (a) 531 $ 16,748 American Medical Systems Holdings, Inc. (a) 602 15,628 Analogic Corp. 245 11,601 Apogent Technologies, Inc. (a) 8,037 260,560 Applera Corp. Applied Biosystems Group (a) 4,326 80,334 ArthroCare Corp. (a) 377 8,863 Bausch & Lomb, Inc. 1,812 113,848 Beckman Coulter, Inc. 5,197 290,200 Becton, Dickinson & Co. 9,117 460,864 BioLase Technology, Inc. (a) 406 5,229 Biosite, Inc. (a) 283 11,212 C.R. Bard, Inc. 407 43,252 CONMED Corp. (a) 530 13,080 Cooper Cos., Inc. 536 28,944 Cyberonics, Inc. (a) 100 2,369 Cytyc Corp. (a) 9,017 192,964 Datascope Corp. 270 8,942 DENTSPLY International, Inc. 622 30,142 Diagnostic Products Corp. 491 20,946 Guidant Corp. 4,874 307,111 Haemonetics Corp. (a) 440 12,421 Hillenbrand Industries, Inc. 4,212 284,310 Hologic, Inc. (a) 362 7,258 ICU Medical, Inc. (a) 247 8,242 Immucor, Inc. (a) 331 8,159 INAMED Corp. (a) 588 34,598 Integra LifeSciences Holdings (a) 488 15,616 Invacare Corp. 529 21,070 Medtronic, Inc. 119 6,005 Mentor Corp. (a) 747 23,680 Merit Medical Systems, Inc. (a) 439 6,897 Osteotech, Inc. (a) 306 2,032 PolyMedica Corp. 454 12,639 Possis Medical, Inc. (a) 325 8,265 Resmed, Inc. (a) 570 28,090 Respironics, Inc. (a) 590 30,922 Sola International, Inc. (a) 545 11,183 Stryker Corp. 3,423 338,637 SurModics, Inc. (a) 319 7,139 Sybron Dental Specialties, Inc. (a) 642 18,779 Theragenics Corp. (a) 535 2,803 Varian Medical Systems, Inc. (a) 521 44,723 Viasys Healthcare, Inc. (a) 549 10,651 VISX, Inc. (a) 3,824 83,707 Vital Signs, Inc. 236 7,583
SHARES VALUE HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) Wilson Greatbatch Technologies, Inc. (a) 387 $ 13,352 Zimmer Holdings, Inc. (a) 5,719 456,662 ------------ 3,428,260 ------------ HEALTH CARE PROVIDERS & SERVICES (2.0%) Accredo Health, Inc. (a) 816 31,538 Aetna, Inc. 7,236 598,779 American Healthways, Inc. (a) 560 13,569 AMERIGROUP Corp. (a) 422 17,517 AmerisourceBergen Corp. 3,532 204,468 AmSurg Corp. (a) 546 13,197 Anthem, Inc. (a) 1,161 102,841 Apria Healthcare Group, Inc. (a) 2,547 73,456 Caremark Rx, Inc. (a) 8,795 297,711 Centene Corp. (a) 350 11,725 Cerner Corp. (a) 603 25,820 CIGNA Corp. 6,591 425,185 Community Health Systems, Inc. (a) 778 20,065 Covance, Inc. (a) 2,843 95,923 Coventry Health Care, Inc. (a) 5,530 231,375 Cross Country Healthcare, Inc. 588 9,696 Cryolife, Inc. (a) 472 2,700 Curative Health Services, Inc. (a) 227 2,633 Dendrite International, Inc. (a) 739 12,667 First Health Group Corp. (a) 4,353 72,695 Health Net, Inc. (a) 6,618 168,362 Hooper Holmes, Inc. 1,184 6,524 Humana, Inc. (a) 5,064 82,493 IMS Health, Inc. 2,500 63,125 LifePoint Hospitals, Inc. (a) 1,154 41,267 Lincare Holdings, Inc. (a) 329 11,426 Manor Care, Inc. 4,205 136,410 McKesson Corp. 1,262 41,469 Medco Health Solutions, Inc. (a) 7,394 261,748 NDC Health Corp. 638 14,591 Odyssey Healthcare, Inc. (a) 657 11,036 Omnicare, Inc. 801 33,226 Orthodontic Centers of America, Inc. (a) 918 6,582 Owens & Minor, Inc. 668 16,232 Oxford Health Plans, Inc. (a) 1,528 83,184 PacifiCare Health Systems, Inc. (a) 9,217 329,600 PAREXEL International Corp. (a) 469 9,164 Pediatrix Medical Group, Inc. (a) 395 28,243 Pharmaceutical Product Development, Inc. (a) 953 28,180 Priority Healthcare Corp. (a) 726 14,556 Province Healthcare Co. (a) 890 14,231 Quest Diagnostics, Inc. 815 68,745
168 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (CONTINUED) RehabCare Group, Inc. (a) 294 $ 6,012 Renal Care Group, Inc. (a) 775 38,347 Sierra Health Services, Inc. (a) 469 17,423 Sunrise Senior Living, Inc. (a) 345 10,902 Tenet Healthcare Corp. (a) 11,410 134,182 Triad Hospitals, Inc. (a) 5,108 173,723 United Surgical Partners International, Inc. (a) 467 16,915 UnitedHealth Group, Inc. 26,474 1,627,622 Universal Health Services, Inc. Class B (a) 2,366 103,867 US Oncology, Inc. (a) 1,413 21,054 WellPoint Health Networks, Inc. (a) 2,454 274,087 ------------ 6,158,088 ------------ HOTELS, RESTAURANTS & LEISURE (1.2%) Applebee's International, Inc. 1,967 76,280 Argosy Gaming Co. (a) 500 18,595 Aztar Corp. (a) 585 15,151 Bally Total Fitness Holding Corp. (a) 621 2,559 Boyd Gaming Corp. 3,290 77,315 Brinker International, Inc. (a) 6,612 254,298 Caesars Entertainment, Inc. (a) 25,264 334,748 CBRL Group, Inc. 4,083 153,317 CEC Entertainment, Inc. (a) 649 22,176 Extended Stay America, Inc. 668 12,993 GTECH Holdings Corp. 3,520 214,438 Harrah's Entertainment, Inc. 1,745 92,799 IHOP Corp. 395 14,674 International Game Technology 13,109 494,734 International Speedway Corp. Class A 2,701 113,793 Jack In The Box, Inc. (a) 658 17,819 Landry's Restaurants, Inc. 504 16,874 LoneStar Steakhouse & Saloon, Inc. 379 11,654 Mandalay Resort Group 5,434 312,183 Marcus Corp. (The) 539 8,732 McDonald's Corp. 28,652 780,194 Multimedia Games, Inc. (a) 100 2,228 O'Charley's, Inc. (a) 380 7,178 Outback Steakhouse, Inc. 1,427 62,688 P.F. Chang's China Bistro, Inc. (a) 434 21,205 Panera Bread Co. Class A (a) 503 20,558 Papa John's International, Inc. (a) 328 10,972 Pinnacle Entertainment, Inc. (a) 603 6,886 Prime Hospitality Corp. (a) 818 8,221 RARE Hospitality International, Inc. (a) 612 16,750
SHARES VALUE HOTELS, RESTAURANTS & LEISURE (CONTINUED) Ruby Tuesday, Inc. 4,136 $ 123,749 Ryan's Family Steak Houses, Inc. (a) 770 13,968 Shuffle Master, Inc. (a) 456 14,934 Six Flags, Inc. (a) 7,276 54,061 Sonic Corp. (a) 659 21,266 Starwood Hotels & Resorts Worldwide, Inc. 268 10,664 Steak n Shake Co. (The) (a) 494 9,312 Triarc Cos., Inc. Class B (a) 1,050 10,972 WMS Industries, Inc. (a) 493 13,922 Yum! Brands, Inc. (a) 7,786 302,019 ------------ 3,776,879 ------------ HOUSEHOLD DURABLES (1.0%) A.T. Cross Co. Class A (a) 368 2,164 American Greetings Corp. Class A (a) 1,077 22,078 Applica, Inc. (a) 423 4,746 Bassett Furniture Industries, Inc. 207 3,714 Black & Decker Corp. (The) 1,595 92,271 Centex Corp. 5,857 280,843 Champion Enterprises, Inc. (a) 1,188 12,937 D.R. Horton, Inc. 20,334 585,619 Department 56, Inc. (a) 234 3,760 Enesco Group, Inc. (a) 251 3,255 Ethan Allen Interiors, Inc. 634 26,355 Fedders Corp. 530 2,867 Fleetwood Enterprises, Inc. (a) 657 9,526 Fortune Brands, Inc. 3,432 261,690 Furniture Brands International, Inc. 875 24,622 Harman International Industries, Inc. 2,603 197,438 Hovnanian Enterprises, Inc. Class A (a) 2,482 89,278 Interface, Inc. Class A (a) 937 7,993 La-Z-Boy, Inc. 910 18,964 Lennar Corp. 8,932 418,464 Libbey, Inc. 248 6,490 M.D.C. Holdings, Inc. 551 34,046 Maytag Corp. 3,090 86,211 Mohawk Industries, Inc. (a) 1,533 118,256 National Presto Industries, Inc. 122 4,967 NVR, Inc. (a) 109 49,159 Pulte Homes, Inc. 3,923 192,894 Russ Berrie & Co., Inc. 377 10,756 Salton, Inc. (a) 200 1,810 Skyline Corp. 153 6,539 Snap-on, Inc. 611 20,640 Standard Pacific Corp. 559 28,196 Stanley Works (The) 1,923 81,747
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 169 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- HOUSEHOLD DURABLES (CONTINUED) xToll Brothers, Inc. (a) 4,787 $ 189,422 Toro Co. (The) 417 24,249 Tupperware Corp. 462 8,653 Whirlpool Corp. 2,731 178,908 ------------ 3,111,527 ------------ HOUSEHOLD PRODUCTS (1.0%) Clorox Co. (The) 1,712 88,647 Colgate-Palmolive Co. 14,628 846,669 Kimberly-Clark Corp. 13,915 910,737 Procter & Gamble Co. (The) 9,683 1,023,977 WD-40 Co. 304 9,226 ------------ 2,879,256 ------------ INDUSTRIAL CONGLOMERATES (2.2%) 3M Co. 779 67,368 ALLETE, Inc. 1,852 63,987 Carlisle Cos., Inc. 242 14,338 *General Electric Co. (f) 151,023 4,523,139 Standex International Corp. 219 5,891 Textron, Inc. 6,452 356,021 Tredegar Corp. 696 9,250 Tyco International Ltd. 57,896 1,589,245 ------------ 6,629,239 ------------ INSURANCE (5.0%) ACE, Ltd. 10,634 466,195 AFLAC, Inc. 24,248 1,023,993 Allmerica Financial Corp. (a) 4,760 165,458 Allstate Corp. (The) 13,260 608,634 Ambac Financial Group, Inc. 4,100 282,900 American Financial Group, Inc. 6,728 206,550 *American International Group, Inc. 54,813 3,927,351 AmerUs Group Co. 3,740 144,364 Aon Corp. 8,189 213,405 Arthur J. Gallagher & Co. (a) 101 3,255 Cincinnati Financial Corp. 4,596 188,384 Delphi Financial Group, Inc. Class A 519 20,843 Everest Re Group Ltd. 3,968 337,994 Fidelity National Financial, Inc. 13,730 502,518 First American Corp. 8,657 234,778 Hartford Financial Services Group, Inc. (The) 12,345 754,033 HCC Insurance Holdings, Inc. 5,391 172,620 Hilb, Rogal and Hamilton Co. 622 22,299 Horace Mann Educators Corp. 2,883 45,004 LandAmerica Financial Group, Inc. 340 14,011 Lincoln National Corp. 7,017 314,923 Loews Corp. 8,760 508,168 Marsh & McLennan Cos., Inc. 526 23,723
SHARES VALUE INSURANCE (CONTINUED) MBIA, Inc. 370 $ 21,789 MetLife, Inc. 32,265 1,113,142 MONY Group, Inc. (The) 327 10,121 Ohio Casualty Corp. (a) 3,705 72,692 Old Republic International Corp. 7,617 176,867 Philadelphia Consolidated Holding Corp. 369 21,306 Presidential Life Corp. 536 8,624 Progressive Corp. (The) 6,253 547,263 Protective Life Corp. 7,649 275,058 Prudential Financial, Inc. (a) 17,010 747,419 RLI Corp. 459 15,950 SAFECO Corp. 4,382 191,888 SCPIE Holdings, Inc. 237 1,955 Selective Insurance Group, Inc. 494 17,665 St. Paul Travelers Cos., Inc. (The) 19,717 801,890 StanCorp Financial Group, Inc. 1,089 67,376 Stewart Information Services Corp. (a) 327 11,609 Torchmark Corp. 3,730 194,109 UICI (a) 848 14,679 Unitrin, Inc. 7,523 298,287 UnumProvident Corp. 7,527 117,045 W. R. Berkley Corp. 9,163 371,101 XL Capital Ltd. Class A 123 9,391 Zenith National Insurance Corp. 343 14,790 ------------ 15,303,419 ------------ INTERNET & CATALOG RETAIL (0.0%) (B) Insight Enterprises, Inc. (a) 844 14,129 J. Jill Group, Inc. (a) 350 7,413 ------------ 21,542 ------------ INTERNET SOFTWARE & SERVICES (0.0%) (B) Internet Security Systems, Inc. (a) 410 5,449 j2 Global Communications, Inc. (a) 418 9,681 Netegrity, Inc. (a) 631 5,300 Retek, Inc. (a) 1,641 11,454 WebEx Communications, Inc. (a) 764 17,144 Websense, Inc. (a) 401 11,830 Yahoo!, Inc. (a) 934 47,130 Zix Corp. (a) 497 7,445 ------------ 115,433 ------------ IT SERVICES (0.5%) Acxiom Corp. (a) 9,482 219,413 Affiliated Computer Services, Inc. Class A (a) 1,064 51,604 American Management Systems, Inc. (a) 774 14,946 BISYS Group, Inc. (The) (a) 2,462 35,699 CACI International, Inc. Class A (a) 493 22,431
170 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- IT SERVICES (CONTINUED) Carreker Corp. (a) 421 $ 3,065 CheckFree Corp. (a) 2,331 70,023 CIBER, Inc. (a) 1,157 10,124 Cognizant Technology Solutions Corp. (a) 3,151 136,312 Convergys Corp. (a) 4,482 65,079 CSG Systems International, Inc. (a) 4,228 70,988 DST Systems, Inc. (a) 3,378 149,139 eFunds Corp. (a) 855 13,731 Electronic Data Systems Corp. 14,230 260,267 Gartner, Inc. Class A (a) 9,731 116,188 Global Payments, Inc. 636 30,515 Intrado, Inc. (a) 270 4,641 Keane, Inc. (a) 1,917 27,221 ManTech International Corp. Class A (a) 572 14,357 MAXIMUS, Inc. (a) 382 13,370 MPS Group, Inc. (a) 6,657 72,828 Pegasus Solutions, Inc. (a) 457 4,890 StarTek, Inc. 260 8,437 Titan Corp. (The) (a) 1,893 36,346 Unisys Corp. (a) 2,618 34,113 ------------ 1,485,727 ------------ LEISURE EQUIPMENT & PRODUCTS (0.3%) Action Performance Cos., Inc. 327 5,127 Arctic Cat, Inc. 399 9,476 Brunswick Corp. 2,914 119,794 Concord Camera Corp. (a) 511 2,581 Eastman Kodak Co. 10,846 279,718 Hasbro, Inc. 6,280 118,629 Huffy Corp. (a) 254 564 JAKKS Pacific, Inc. (a) 449 7,799 K2, Inc. (a) 495 7,257 Mattel, Inc. 13,192 223,736 Meade Instruments Corp. (a) 477 1,693 Nautilus Group, Inc. (The) 595 9,568 Polaris Industries, Inc. 742 31,832 SCP Pool Corp. (a) 594 23,885 Sturm, Ruger & Co., Inc. 492 5,368 ------------ 847,027 ------------ MACHINERY (0.8%) Albany International Corp. Class A 597 18,208 Astec Industries, Inc. (a) 352 6,280 Barnes Group, Inc. 412 11,227 Briggs & Stratton Corp. 372 26,040 Caterpillar, Inc. 1,513 117,605 CLARCOR, Inc. 432 19,017 Crane Co. 469 14,450
SHARES VALUE MACHINERY (CONTINUED) Cummins, Inc. 1,306 $ 78,112 CUNO, Inc. (a) 305 13,438 Deere & Co. 6,597 448,860 Dionex Corp. (a) 354 18,065 Donaldson Co., Inc. 598 16,403 Eaton Corp. 1,797 106,706 Flowserve Corp. (a) 4,629 98,922 Gardner Denver, Inc. (a) 294 7,709 Graco, Inc. 4,371 123,262 Harsco Corp. 1,651 71,868 IDEX Corp. 560 26,460 Ingersoll-Rand Co. Class A 166 10,715 ITT Industries, Inc. 271 21,488 JLG Industries, Inc. 786 11,625 Kaydon Corp. 512 14,321 Kennametal, Inc. 773 33,363 Lindsay Manufacturing Co. 205 4,848 Lydall, Inc. (a) 290 2,830 Manitowoc Co., Inc. (The) 483 14,688 Milacron, Inc. 814 3,199 Mueller Industries, Inc. (a) 575 19,291 Navistar International Corp. (a) 1,618 73,053 Nordson Corp. 3,062 105,823 Oshkosh Truck Corp. 596 30,515 PACCAR, Inc. 2,281 128,785 Parker-Hannifin Corp. 928 51,309 Pentair, Inc. 1,053 62,748 Reliance Steel & Aluminum Co. 547 18,062 Robbins & Myers, Inc. 263 5,749 SPX Corp. (a) 6,221 275,901 Stewart & Stevenson Services, Inc. 522 8,341 Tecumseh Products Co. Class A 394 15,315 Thomas Industries, Inc. 315 10,631 Timken Co. (The) 1,494 32,958 Trinity Industries, Inc. 3,872 117,283 Valmont Industries, Inc. 434 8,897 Wabash National Corp. (a) 543 13,798 Watts Water Technologies, Inc. Class A 498 12,196 Wolverine Tube, Inc. (a) 296 3,617 ------------ 2,333,981 ------------ MARINE (0.0%) (B) Kirby Corp. (a) 441 15,215 ------------ MEDIA (1.0%) 4Kids Entertainment, Inc. (a) 236 5,156 Advo, Inc. 549 17,223 Comcast Corp. Class A (a) 11,688 351,809 Information Holdings, Inc. (a) 381 9,468
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 171 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- MEDIA (CONTINUED) xMcGraw-Hill Cos., Inc. (The) 2,481 $ 195,652 Media General, Inc. Class A 502 36,084 Thomas Nelson, Inc. 257 6,723 Time Warner, Inc. (a) 99,755 1,677,879 Viacom, Inc. Class B 11,022 426,000 Washington Post Co. (The) Class B 172 158,240 ------------ 2,884,234 ------------ METALS & MINING (0.4%) Alcoa, Inc. 10,093 310,360 Allegheny Technologies, Inc. 998 10,200 Arch Coal, Inc. 3,512 107,502 Brush Engineered Materials, Inc. (a) 296 4,789 Carpenter Technology Corp. 1,323 36,131 Castle (A.M.) & Co. (a) 381 3,562 Century Aluminum Co. (a) 502 9,940 Cleveland-Cliffs, Inc. (a) 189 8,955 Commercial Metals Co. 511 13,388 Commonwealth Industries, Inc. 386 3,049 Freeport-McMoRan Copper & Gold, Inc. Class B 7,383 225,181 IMCO Recycling, Inc. (a) 365 3,234 Massey Energy Co. 1,283 30,048 Newmont Mining Corp. 404 15,110 Peabody Energy Corp. 482 22,601 Phelps Dodge Corp. (a) 4,272 281,226 Quanex Corp. 294 11,995 RTI International Metals, Inc. (a) 372 5,450 Ryerson Tull, Inc. 444 5,213 Steel Dynamics, Inc. (a) 807 19,424 Steel Technologies, Inc. 175 3,376 United States Steel Corp. 4,223 120,904 ------------ 1,251,638 ------------ MULTILINE RETAIL (0.8%) Big Lots, Inc. (a) 925 13,098 Dillard's, Inc. Class A 3,269 55,017 Dollar General Corp. 450 8,442 Dollar Tree Stores, Inc. (a) 18 485 Federated Department Stores, Inc. 8,586 420,714 Fred's, Inc. 656 12,182 J.C. Penney Co., Inc. Holding Co. 11,007 372,697 May Department Stores Co. (The) 13,628 419,743 Neiman Marcus Group Inc. (The) Class A (a) 2,769 134,684 Class B (a) 492 22,263 Nordstrom, Inc. 6,478 230,811 Saks, Inc. (a) 15,444 222,394
SHARES VALUE MULTILINE RETAIL (CONTINUED) Sears, Roebuck and Co. 11,505 $ 460,775 Shopko Stores, Inc. 532 7,054 ------------ 2,380,359 ------------ MULTI-UTILITIES & UNREGULATED POWER (0.4%) AES Corp. (The) (a) 29,414 255,019 Aquila, Inc. (a) 4,163 17,693 Avista Corp. 882 14,906 Duke Energy Corp. 7,134 150,242 Dynegy, Inc. Class A (a) 5,721 22,655 Energen Corp. 616 25,472 Energy East Corp. 571 13,447 MDU Resources Group, Inc. 2,337 52,349 National Fuel Gas Co. 4,588 112,360 Questar Corp. 7,888 279,787 Sierra Pacific Resources (a) 9,547 67,593 Vectren Corp. 472 11,399 Westar Energy, Inc. 6,984 142,543 Williams Cos., Inc. (The) 17,602 181,301 ------------ 1,346,766 ------------ OFFICE ELECTRONICS (0.2%) Gerber Scientific, Inc. (a) 396 2,376 Xerox Corp. (a) 37,502 503,652 ------------ 506,028 ------------ OIL & GAS (4.6%) Amerada Hess Corp. 4,247 302,089 Anadarko Petroleum Corp. 5,899 316,068 Ashland, Inc. 1,636 78,364 Burlington Resources, Inc. 2,125 142,949 Cabot Oil & Gas Corp. 588 20,992 ChevronTexaco Corp. 28,294 2,588,901 Cimarex Energy Co. (a) 699 19,285 ConocoPhillips 25,844 1,842,677 Devon Energy Corp. 4,590 280,908 Evergreen Resources, Inc. (a) 716 28,733 *ExxonMobil Corp. (f) 112,339 4,780,024 Forest Oil Corp. (a) 2,280 59,850 Frontier Oil Corp. 478 8,499 Marathon Oil Corp. 10,268 344,594 Murphy Oil Corp. 2,698 184,813 Newfield Exploration Co. (a) 1,667 87,818 Noble Energy, Inc. 4,502 207,542 Nuevo Energy Co. (a) 354 12,213 Occidental Petroleum Corp. 6,317 298,162 Overseas Shipholding Group, Inc. 4,126 135,209 Patina Oil & Gas Corp. 1,162 32,304 Pioneer Natural Resources Co. (a) 4,402 143,989 Plains Resources, Inc. (a) 431 7,767 Pogo Producing Co. 5,171 255,034 Prima Energy Corp. (a) 232 8,614
172 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- OIL & GAS (CONTINUED) xRemington Oil & Gas Corp. (a) 489 $ 10,709 Spinnaker Exploration Co. (a) 558 19,904 St. Mary Land & Exploration Co. 514 18,581 Stone Energy Corp. (a) 443 21,796 Sunoco, Inc. 2,435 153,162 Swift Energy Co. (a) 501 10,867 Tom Brown, Inc. (a) 797 38,160 Unocal Corp. 10,103 364,112 Valero Energy Corp. 9,088 579,451 Vintage Petroleum, Inc. 1,174 17,692 Western Gas Resources, Inc. 737 40,130 Westport Resources Corp. (a) 6,708 229,615 XTO Energy, Inc. 7,076 188,929 ------------ 13,880,506 ------------ PAPER & FOREST PRODUCTS (0.4%) Boise Cascade Corp. 1,547 52,181 Buckeye Technologies, Inc. (a) 676 7,098 Deltic Timber Corp. 217 7,380 Georgia-Pacific Corp. 12,002 421,270 Louisiana-Pacific Corp. (a) 4,995 117,832 Pope & Talbot, Inc. 280 4,648 Potlatch Corp. 3,179 120,421 Rayonier, Inc. 5,739 223,821 Schweitzer-Mauduit International, Inc. 270 8,367 Wausau-Mosinee Paper Corp. 866 12,150 Weyerhaeuser Co. 5,205 308,136 ------------ 1,283,304 ------------ PERSONAL PRODUCTS (0.4%) Alberto-Culver Co. 1,143 53,904 Avon Products, Inc. 1,862 156,408 Gillette Co. (The) 20,824 852,118 Nature's Sunshine Products, Inc. 238 3,451 NBTY, Inc. (a) 1,132 42,065 ------------ 1,107,946 ------------ PHARMACEUTICALS (3.5%) Abbott Laboratories 28,051 1,234,805 Alpharma, Inc. 871 18,927 CIMA Labs, Inc. (a) 265 8,385 IVAX Corp. (a) 4,683 99,748 Johnson & Johnson 25,872 1,397,864 King Pharmaceuticals, Inc. (a) 5,038 86,905 Lilly (Eli) & Co. 6,705 494,896 Medicis Pharmaceutical Corp. Class A 934 40,087 Merck & Co., Inc. 19,738 927,686 MGI Pharma, Inc. (a) 598 36,968 Mylan Laboratories, Inc. 1,310 30,012
SHARES VALUE PHARMACEUTICALS (CONTINUED) Noven Pharmaceuticals, Inc. (a) 411 $ 8,072 Perrigo Co. 3,376 72,820 *Pfizer, Inc. (f) 145,528 5,204,081 Sepracor, Inc. (a) 671 32,081 Valeant Pharmaceuticals International (a) 8,556 197,644 Wyeth 22,165 843,822 ------------ 10,734,803 ------------ ROAD & RAIL (0.3%) Arkansas Best Corp. 453 11,773 Burlington Northern Santa Fe Corp. 8,274 270,560 CSX Corp. 1,675 51,523 Heartland Express, Inc. 852 20,917 Kansas City Southern 1,128 15,623 Knight Transportation, Inc. (a) 683 17,593 Landstar System, Inc. (a) 508 22,840 Norfolk Southern Corp. 6,137 146,183 Swift Transportation Co., Inc. (a) 1,904 32,216 Union Pacific Corp. 1,656 97,588 USF Corp. 498 16,559 Werner Enterprises, Inc. 4,820 96,352 Yellow Roadway Corp. (a) 801 27,274 ------------ 827,001 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.1%) Actel Corp. (a) 456 9,084 Advanced Energy Industries, Inc. (a) 590 7,812 Advanced Micro Devices, Inc. (a) 9,215 131,037 Alliance Semiconductor Corp. (a) 612 3,543 Altera Corp. (a) 1,536 30,735 Applied Materials, Inc. (a) 5,824 106,172 Atmel Corp. (a) 48,367 282,463 ATMI, Inc. (a) 564 12,453 Axcelis Technologies, Inc. (a) 1,660 17,447 Broadcom Corp. Class A (a) 11,728 442,849 Brooks Automation, Inc. (a) 758 12,613 Cohu, Inc. 388 6,790 Credence Systems Corp. (a) 559 6,227 Cree, Inc. (a) 1,546 28,678 Cymer, Inc. (a) 605 19,348 Cypress Semiconductor Corp. (a) 11,418 159,510 DSP Group, Inc. (a) 518 12,836 DuPont Photomasks, Inc. (a) 330 6,824 ESS Technology, Inc. (a) 707 7,579 Exar Corp. (a) 740 11,292 Fairchild Semiconductor International, Inc. (a) 12,117 235,918 FEI Co. (a) 601 12,008 Helix Technology Corp. 477 8,395
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 173 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) Integrated Device Technology, Inc. (a) 5,291 $ 71,164 Intel Corp. 94,807 2,439,384 International Rectifier Corp. (a) 6,529 258,810 Kopin Corp. (a) 1,270 6,325 Kulicke & Soffa Industries, Inc. (a) 914 9,076 Lam Research Corp. (a) 3,034 67,173 Lattice Semiconductor Corp. (a) 1,560 11,107 LSI Logic Corp. (a) 3,960 29,462 LTX Corp. (a) 3,067 33,522 Micrel, Inc. (a) 2,644 32,310 Microchip Technology, Inc. 181 5,072 Micron Technology, Inc. (a) 1,559 21,234 Microsemi Corp. (a) 1,060 11,522 National Semiconductor Corp. (a) 4,492 183,229 Pericom Semiconductor Corp. (a) 469 4,948 Phototronics, Inc. (a) 586 8,726 PMC-Sierra, Inc. (a) 3,182 38,661 Power Integrations, Inc. (a) 541 13,325 Rudolph Technologies, Inc. (a) 299 4,805 Semtech Corp. (a) 4,688 98,542 Silicon Laboratories, Inc. (a) 1,582 74,591 Skyworks Solutions, Inc. (a) 2,531 21,665 Standard Microsystems Corp. (a) 307 7,319 Supertex, Inc. (a) 227 3,453 Teradyne, Inc. (a) 1,511 30,794 Texas Instruments, Inc. 47,620 1,195,262 Three-Five Systems, Inc. (a) 381 1,939 TriQuint Semiconductor, Inc. (a) 11,234 61,675 Ultratech, Inc. (a) 418 6,734 Varian Semiconductor Equipment Associates, Inc. (a) 629 20,480 ------------ 6,343,922 ------------ SOFTWARE (1.9%) Activision, Inc. (a) 8,873 133,627 ANSYS, Inc. (a) 275 10,189 Ascential Software Corp. (a) 2,962 50,354 Autodesk, Inc. 3,758 125,893 BARRA, Inc. (a) 352 14,379 BMC Software, Inc. (a) 9,484 164,073 Cadence Design Systems, Inc. (a) 4,837 62,010 Captaris, Inc. (a) 546 3,019 Catapult Communications Corp. (a) 230 4,326 Citrix Systems, Inc. (a) 1,081 20,593 Computer Associates International, Inc. (a) 11,623 311,613 Compuware Corp. (a) 6,043 46,229 Concord Communications, Inc. (a) 311 3,810 EPIQ Systems, Inc. (a) 324 4,617
SHARES VALUE SOFTWARE (CONTINUED) FactSet Research Systems, Inc. 567 $ 22,544 FileNET Corp. (a) 667 18,316 Hyperion Solutions Corp. (a) 651 24,985 Jack Henry & Associates, Inc. 2,670 48,567 JDA Software Group, Inc. (a) 522 6,854 Kronos, Inc. (a) 516 18,824 Manhattan Associates, Inc. (a) 543 14,590 MapInfo Corp. (a) 275 3,039 MICROS Systems, Inc. (a) 317 13,907 *Microsoft Corp. (f) 130,882 3,399,006 Midway Games, Inc. (a) 1,121 9,282 MRO Software, Inc. (a) 448 5,972 Novell, Inc. (a) 5,808 55,989 NYFIX, Inc. (a) 559 2,795 Oracle Corp. (a) 6,204 69,609 Phoenix Technologies Ltd. (a) 434 2,465 Progress Software Corp. (a) 632 12,956 QRS Corp. (a) 283 1,480 Radiant Systems, Inc. (a) 495 2,203 Reynolds & Reynolds Co. (The) Class A 3,044 86,937 Roxio, Inc. (a) 563 2,196 RSA Security, Inc. (a) 6,014 96,344 SERENA Software, Inc. (a) 659 11,710 SPSS, Inc. (a) 316 4,494 Sybase, Inc. (a) 4,623 79,053 Symantec Corp. (a) 9,556 430,498 Take-Two Interactive Software, Inc. (a) 762 22,014 TALX Corp. 247 5,738 THQ, Inc. (a) 704 13,052 Transaction Systems Architects, Inc. Class A (a) 4,031 85,578 VERITAS Software Corp. (a) 4,279 114,121 Verity, Inc. (a) 683 8,469 ------------ 5,648,319 ------------ SPECIALTY RETAIL (1.5%) Aaron Rents, Inc. 598 17,318 Abercrombie & Fitch Co. Class A (a) 3,034 95,419 American Eagle Outfitters, Inc. (a) 2,074 53,281 AnnTaylor Stores Corp. (a) 2,057 83,370 AutoNation, Inc. (a) 6,854 116,655 AutoZone, Inc. (a) 4,169 365,079 Barnes & Noble, Inc. (a) 5,972 178,384 Best Buy Co., Inc. 3,534 191,720 Borders Group, Inc. (a) 8,575 205,543 Building Materials Holding Corp. 238 3,913 Burlington Coat Factory Warehouse Corp. 814 15,433
174 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- SPECIALTY RETAIL (CONTINUED) Cato Corp. (The) Class A 371 $ 7,427 Chico's FAS, Inc. (a) 3,427 139,582 Children's Place Retail Stores, Inc. (The) (a) 486 12,801 Christopher & Banks Corp. 683 12,219 Circuit City Stores, Inc. 3,290 38,427 Claire's Stores, Inc. 8,528 173,801 Cost Plus, Inc. (a) 391 14,154 Dress Barn, Inc. (The) (a) 533 8,965 Electronics Boutique Holdings Corp. (a) 454 12,281 Gap, Inc. (The) 27,837 612,692 Genesco, Inc. (a) 397 8,833 Goody's Family Clothing, Inc. 595 7,432 Group 1 Automotive, Inc. (a) 413 14,273 Guitar Center, Inc. (a) 415 17,231 Gymboree Corp. (The) (a) 538 9,496 Hancock Fabrics, Inc. 337 5,008 Haverty Furniture Cos., Inc. 401 7,246 Hibbett Sporting Goods, Inc. (a) 100 2,428 Home Depot, Inc. (The) 14,825 521,692 Hot Topic, Inc. (a) 803 17,875 Jo-Ann Stores, Inc. Class A (a) 387 10,940 Limited Brands 13,284 274,182 Linens 'n Things, Inc. (a) 751 24,362 Men's Wearhouse, Inc. (The) (a) 623 15,880 Michaels Stores, Inc. 1,810 90,554 Movie Gallery, Inc. (a) 594 11,535 Pacific Sunwear of California, Inc. (a) 1,333 28,620 Payless ShoeSource, Inc. (a) 2,615 37,002 Pep Boys-Manny, Moe & Jack (The) 1,010 27,745 PETsMART, Inc. 2,706 74,956 Pier 1 Imports, Inc. 1,927 39,812 RadioShack Corp. 7,732 237,836 Regis Corp. 945 41,032 Rent-A-Center, Inc. (a) 1,249 36,558 Ross Stores, Inc. 375 11,437 Select Comfort Corp. (a) 600 14,544 Sherwin-Williams Co. (The) 1,258 47,867 Staples, Inc. (a) 9,138 235,395 Stein Mart, Inc. (a) 728 9,260 TBC Corp. (a) 397 11,092 Too, Inc. (a) 627 10,998 Toys "R" Us, Inc. (a) 8,599 132,855 Tractor Supply Co. (a) 635 24,803 Ultimate Electronics, Inc. (a) 262 1,114 Urban Outfitters, Inc. (a) 681 31,442
SHARES VALUE SPECIALTY RETAIL (CONTINUED) Wet Seal, Inc. (The) Class A (a) 541 $ 2,981 Zale Corp. (a) 443 24,773 ------------ 4,479,553 ------------ TEXTILES, APPAREL & LUXURY GOODS (0.3%) Ashworth, Inc. (a) 312 2,652 Brown Shoe Co., Inc. 326 11,925 Coach, Inc. (a) 8,377 356,860 Fossil, Inc. (a) 1,190 29,131 Haggar Corp. 155 3,044 Jones Apparel Group, Inc. 995 36,417 Kellwood Co. 448 17,674 K-Swiss, Inc. Class A 644 12,564 NIKE, Inc. Class B 3,384 243,479 Oshkosh B' Gosh, Inc. Class A 217 5,017 Oxford Industries, Inc. 294 11,460 Phillips-Van Heusen Corp. 554 10,011 Quiksilver, Inc. (a) 950 20,549 Reebok International Ltd. 462 16,808 Russell Corp. 593 9,862 Stride Rite Corp. (The) 721 7,736 Timberland Co. (The) Class A (a) 1,569 98,408 Unifi, Inc. (a) 1,313 3,282 Wolverine World Wide, Inc. 672 18,063 ------------ 914,942 ------------ THRIFTS & MORTGAGE FINANCE (1.3%) Anchor BanCorp Wisconsin, Inc. 429 10,416 Astoria Financial Corp. 2,901 99,852 BankUnited Financial Corp. (a) 541 14,299 Brookline Bancorp, Inc. 1,053 14,910 Commercial Federal Corp. 718 18,424 Countrywide Financial Corp. 6,636 393,515 Dime Community Bancshares 696 11,902 Downey Financial Corp. 476 22,967 Fannie Mae 20,173 1,386,289 FirstFed Financial Corp. (a) 311 12,571 Flagstar Bancorp, Inc. 1,030 21,043 Freddie Mac 9,426 550,478 Fremont General Corp. 1,293 27,864 Golden West Financial Corp. 3,586 376,924 GreenPoint Financial Corp. 4,537 176,943 Independence Community Bank Corp. 1,133 41,275 IndyMac Bancorp, Inc. 885 28,462 MAF Bancorp, Inc. 562 22,958 New Century Financial Corp. 591 25,076 New York Community Bancorp, Inc. 4,023 100,857 Seacoast Financial Services Corp. 432 13,971 Sovereign Bancorp, Inc. 10,836 216,503 Sterling Financial Corp. (a) 343 11,322
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 175 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (CONTINUED) Washington Federal, Inc. 1,233 $ 28,803 Washington Mutual, Inc. 5,934 233,740 Waypoint Financial Corp. 574 14,855 Webster Financial Corp. 1,310 56,985 ------------ 3,933,204 ------------ TOBACCO (0.9%) Altria Group, Inc. 46,720 2,587,354 DIMON, Inc. 818 5,669 R.J. Reynolds Tobacco Holdings, Inc. 3,998 258,950 Universal Corp. 178 8,943 ------------ 2,860,916 ------------ TRADING COMPANIES & DISTRIBUTORS (0.0%) (B) Applied Industrial Technologies, Inc. 347 9,119 Hughes Supply, Inc. 497 27,777 Lawson Products, Inc. 173 6,029 Watsco, Inc. 476 13,876 ------------ 56,801 ------------ WATER UTILITIES (0.0%) (B) American States Water Co. 278 6,436 Aqua America, Inc. 1,874 38,323 ------------ 44,759 ------------ WIRELESS TELECOMMUNICATION SERVICES (0.7%) AT&T Wireless Services, Inc. (a) 81,340 1,123,306 Boston Communications Group, Inc. (a) 325 3,497 Metro One Telecommunications, Inc. (a) 220 387 Nextel Communications, Inc. Class A (a) 34,800 830,328 Telephone & Data Systems, Inc. 4,051 267,204 ------------ 2,224,722 ------------ Total Common Stocks (Cost $142,717,684) 183,936,706(i) ------------ REAL ESTATE INVESTMENT TRUSTS (1.2%) ----------------------------------------------------------------------------- Acadia Realty Trust 406 5,099 Alexandria Real Estate Equities, Inc. 299 16,989 AMB Property Corp. 1,223 37,057 American Financial Realty Trust 1,577 23,340 American Land Lease, Inc. 111 2,148 Amli Residential Properties Trust 300 7,590 Apartment Investment & Management Co. Class A 1,376 38,762
SHARES VALUE Archstone-Smith Trust 3,044 $ 83,497 Arden Realty, Inc. 938 26,470 Associated Estates Realty Corp. 305 2,486 Avalonbay Communities, Inc. 1,112 55,189 Bedford Property Investors, Inc. 263 7,125 Boston Properties, Inc. 1,642 77,174 Boykin Lodging Co. 273 2,154 Brandywine Realty Trust 644 16,319 BRE Properties, Inc. Class A 773 24,504 Camden Property Trust 578 24,461 Capital Automotive REIT 1,075 30,240 CarrAmerica Realty Corp. 767 21,867 Catellus Development Corp. 1,609 34,674 CBL & Associates Properties, Inc. 442 22,210 Cedar Shopping Centers, Inc. 257 2,994 Centerpoint Properties Corp. 336 24,226 Chelsea Property Group, Inc. 635 32,385 Colonial Properties Trust 880 31,045 Commercial Net Lease Realty 1,580 26,212 Cornerstone Realty Income Trust, Inc. 868 6,536 Corporate Office Properties Trust 460 9,361 Correctional Properties Trust 173 4,526 Cousins Properties, Inc. 709 19,937 Crescent Real Estate Equity Co. 1,449 22,416 Developers Diversified Realty Corp. 1,357 44,442 Duke Realty Corp. 2,160 62,986 EastGroup Properties, Inc. 283 8,193 Entertainment Properties Trust 311 10,406 Equity Inns, Inc. 638 5,232 Equity Office Properties Trust 20,211 508,711 Equity One, Inc. 999 16,384 Equity Residential 4,365 119,863 Essex Property Trust, Inc. 761 46,383 Federal Realty Investment Trust 802 29,738 FelCor Lodging Trust, Inc. 925 9,250 First Industrial Realty Trust, Inc. 578 19,450 Gables Residential Trust 929 29,542 General Growth Properties, Inc. 3,432 93,042 Getty Realty Corp. 402 8,647 Glenborough Realty Trust, Inc. 943 17,719 Glimcher Realty Trust 548 11,590 Health Care Property Investors, Inc. 2,066 49,377 Health Care REIT, Inc. 719 22,965 Healthcare Realty Trust, Inc. 589 21,116 Heritage Property Investment Trust 658 16,700 Highwoods Properties, Inc. 3,016 68,011 Home Properties, Inc. 440 16,430 Hospitality Properties Trust 1,592 62,215 Host Marriot Corp. 5,100 60,690
176 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
SHARES VALUE REAL ESTATE INVESTMENT TRUSTS (CONTINUED) ----------------------------------------------------------------------------- HRPT Properties Trust 2,515 $ 24,018 Innkeepers USA Trust 593 4,536 Investors Real Estate Trust 562 5,395 Keystone Property Trust 420 8,543 Kilroy Realty Corp. 938 29,406 Kimco Realty Corp. 1,730 73,940 Koger Equity, Inc. 338 7,081 Kramont Realty Trust 376 5,945 LaSalle Hotel Properties 330 7,260 Lexington Corporate Properties Trust 1,463 27,051 Liberty Property Trust 1,319 48,209 Macerich Co. (The) 917 38,395 Mack-Cali Realty Corp. 1,871 69,882 Maguire Properties, Inc. 623 14,198 Manufactured Home Communities 351 10,986 Mid-America Apartment Communities, Inc. 282 9,095 Mills Corp. (The) 783 31,790 Mission West Properties, Inc. 282 3,330 Monmouth Real Estate Investment Corp. Class A 229 1,839 Nationwide Health Properties, Inc. 922 16,716 New Plan Excel Realty Trust 2,776 62,293 OMEGA Healthcare Investors, Inc. 543 5,023 One Liberty Properties, Inc. 139 2,558 Pan Pacific Retail Properties, Inc. 588 25,831 Parkway Properties, Inc. 162 6,431 Pennsylvania Real Estate Investment Trust 535 17,307 Post Properties, Inc. 590 15,865 Prentiss Properties Trust 650 20,826 Price Legacy Corp. 565 10,565 ProLogis 2,844 83,670 PS Business Parks, Inc. 338 12,827 Public Storage, Inc. 1,999 83,538 Ramco-Gershenson Properties Trust 228 5,399 Realty Income Corp. 554 21,191 Reckson Associates Realty Corp. 914 21,726 Regency Centers Corp. 872 33,058 Rouse Co. (The) 1,597 69,150 Saul Centers, Inc. 245 6,125 Senior Housing Properties Trust 917 13,709 Shurgard Storage Centers, Inc. Class A 1,490 49,617
SHARES VALUE Simon Property Group, Inc. 3,177 $ 153,163 Sizeler Property Investors, Inc. 207 2,064 SL Green Realty Corp. 550 22,440 Sovran Self Storage, Inc. 204 6,889 Summit Properties, Inc. 462 10,455 Sun Communities, Inc. 287 10,031 Tanger Factory Outlet Centers, Inc. 167 6,379 Taubman Centers, Inc. 779 15,190 Town & Country Trust 258 6,032 Trizec Properties, Inc. 2,204 31,561 U.S. Restaurant Properties, Inc. 312 4,980 United Dominion Realty Trust, Inc. 1,854 33,279 United Mobile Homes, Inc. 127 1,831 Universal Health Realty Income Trust 186 4,849 Urstadt Biddle Properties Class A 292 4,053 Ventas, Inc. 1,306 28,850 Vornado Realty Trust 1,864 94,039 Washington Real Estate Investment Trust 615 16,728 Weingarten Realty Investors 1,327 38,364 Winston Hotels, Inc. 410 3,776 ------------ Total Real Estate Investment Trusts (Cost $3,058,282) 3,597,352 ------------
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (10.2%) ------------------------------------------------------------------------------ COMMERCIAL PAPER (2.1%) Coca-Cola Co., (The) 1.02%, due 6/10/04 $ 1,500,000 1,498,333 Dealers Capital Access Trust 1.03%, due 6/16/04 300,000 299,594 Hitachi Credit America Corp. 1.00%, due 5/13/04 500,000 499,832 International Lease Finance Corp. 0.98%, due 5/17/04 700,000 699,679 Three Rivers Funding Corp. 1.04%, due 5/17/04 600,000 599,725 UBS Finance Delaware LLC 1.02%, due 5/3/04 2,750,000 2,749,844 ------------ Total Commercial Paper (Cost $6,347,007) 6,347,007 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 177 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS (CONTINUED) ------------------------------------------------------------------------------ U.S. GOVERNMENT & FEDERAL AGENCIES (8.1%) Freddie Mac Discount Notes 0.97%, due 5/18/04 (f) $ 500,000 $ 499,771 0.97%, due 5/20/04 (f) 585,000 584,700 1.00%, due 5/4/04 (f) 1,600,000 1,599,867 United States Treasury Bills 0.90%, due 5/13/04 (f) 2,000,000 1,999,400 0.91%, due 7/15/04 (f) 8,500,000 8,483,799 0.92%, due 7/8/04 (f) 11,600,000 11,580,071 ------------ Total U.S. Government & Federal Agencies (Cost $24,747,914) 24,747,608 ------------ Total Short-Term Investments (Cost $31,094,921) 31,094,615 ------------ Total Investments (Cost $267,539,473) (j) 101.7% 309,539,904(k) Liabilities in Excess of Cash and Other Assets (1.7) (5,086,846) ----------- ------------ Net Assets 100.0% $304,453,058 =========== ============
UNREALIZED CONTRACTS APPRECIATION/ LONG (DEPRECIATION)(L) FUTURES CONTRACTS (-0.1%) -------------------------------------------------------------------------------------- CANADA (-0.1%) Standard & Poor's Toronto Stock Exchange 60 Index June 2004 129 $ (376,330) ------------------ ITALY (0.2%) Milan MIB 30 Index June 2004 92 552,549 ------------------ SPAIN (-0.1%) IBEX 35 Index May 2004 154 (430,911) ------------------ UNITED STATES (-0.3%) United States Treasury Note June 2004 (10 Year) 226 (715,355) ------------------ Total Contracts Long (Settlement Value $63,659,286) (970,047) ------------------
UNREALIZED CONTRACTS APPRECIATION/ SHORT (DEPRECIATION)(L) UNITED STATES (0.2%) Standard & Poor's 500 Index June 2004 226 $ 490,194 Standard & Poor's MidCap 400 Index June 2004 41 263,804 ------------------ Total Contracts Short (Settlement Value $74,450,250) 753,998 ------------------ Total Futures Contracts (Settlement Value $10,790,964) (g)(i) $ (216,049) ==================
(a) Non-income producing security. (b) Less than one tenth of a percent. (c) May be sold to institutional investors only. (d) Yankee bond -- dollar-denominated bond issued in the United States by foreign banks and corporations. (e) TBA: Securities purchased on a forward commitment basis with an approximate principal amount and maturity date. The actual principal amount and maturity date will be determined upon settlement. The market value of these securities at April 30, 2004 is $6,430,157. (f) Segregated, partially segregated or designated as collateral for futures contracts and TBAs. (g) The combined market value of U.S. Government & Federal Agencies investments and settlement value of U.S. Treasury Note futures contracts represents 29.7% of net assets. (h) Exchange Traded Fund -- represents a basket of securities that are traded on an exchange. (i) The combined market value of common stocks and settle- ment value of Index futures contracts represents 36.0% of net assets. (j) The cost for federal income tax purposes is $267,989,792. (k) At April 30, 2004 net unrealized appreciation was $41,550,112, based on cost for federal income tax purposes. This consisted of aggregate gross unrealized appreciation for all investments on which there was an excess of market value over cost of $44,686,853 and aggregate gross unrealized depreciation for all investments on which there was an excess of cost over market value of $3,136,741. (l) Represents the difference between the value of the con- tracts at the time they were opened and the value at April 30, 2004.
178 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF ASSETS AND LIABILITIES AS OF APRIL 30, 2004 UNAUDITED ASSETS: Investment in securities, at value (identified cost $267,539,473) $309,539,904 Cash 98,386 Receivable due from broker for futures contracts 587,468 Receivables: Investment securities sold 14,614,531 Dividends and interest 1,042,759 Fund shares sold 785,747 Variation margin on futures contracts 211,379 Other assets 41,927 ------------ Total assets 326,922,101 ------------ LIABILITIES: Payables: Investment securities purchased 21,746,832 Fund shares redeemed 311,994 Transfer agent 194,115 Manager 101,213 Custodian 25,070 NYLIFE Distributors 15,947 Directors 594 Accrued expenses 73,278 ------------ Total liabilities 22,469,043 ------------ Net assets $304,453,058 ============ COMPOSITION OF NET ASSETS: Capital stock (par value of $.001 per share) 1 billion shares authorized Class A $ 3,710 Class B 715 Class C 117 Class I 20,244 Additional paid-in capital 324,874,393 Accumulated undistributed net investment income 2,144,423 Accumulated net realized loss on investments, futures contracts and foreign currency transactions (64,381,315) Net unrealized appreciation on investments and futures contracts 41,784,382 Net unrealized appreciation on foreign currency transactions 6,389 ------------ Net assets $304,453,058 ============ CLASS A Net assets applicable to outstanding shares $ 45,406,444 ============ Shares of capital stock outstanding 3,709,559 ============ Net asset value per share outstanding $ 12.24 Maximum sales charge (5.50% of offering price) 0.71 ------------ Maximum offering price per share outstanding $ 12.95 ============ CLASS B Net assets applicable to outstanding shares $ 8,695,542 ============ Shares of capital stock outstanding 715,204 ============ Net asset value and offering price per share outstanding $ 12.16 ============ CLASS C Net assets applicable to outstanding shares $ 1,425,366 ============ Shares of capital stock outstanding 117,332 ============ Net asset value and offering price per share outstanding $ 12.15 ============ CLASS I Net assets applicable to outstanding shares $248,925,706 ============ Shares of capital stock outstanding 20,244,124 ============ Net asset value and offering price per share outstanding $ 12.30 ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 179 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED INVESTMENT INCOME: INCOME: Interest $ 1,987,257 Dividends 1,625,415 ----------- Total income 3,612,672 ----------- EXPENSES: Manager 983,034 Transfer agent 346,941 Custodian 83,996 Professional 50,942 Service -- Class A 32,619 Service -- Class B 2,892 Service -- Class C 480 Service -- Service Class 16,452 Interest 24,448 Shareholder communication 22,782 Registration 19,760 Directors 14,506 Distribution -- Class B 8,677 Distribution -- Class C 1,439 Miscellaneous 55,294 ----------- Total expenses before reimbursement 1,664,262 Expense reimbursement from Manager (346,444) ----------- Net expenses 1,317,818 ----------- Net investment income 2,294,854 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Security transactions 21,075,273 Futures transactions (1,779,495) Foreign currency transactions 25,506 ----------- Net realized gain on investments and foreign currency transactions 19,321,284 ----------- Net change in unrealized appreciation (depreciation) on investments: Security transactions (9,388,160) Futures transactions 1,342,636 Foreign currency transactions 5,945 ----------- Net unrealized loss on investments and foreign currency transactions (8,039,579) ----------- Net realized and unrealized gain on investments and foreign currency transactions 11,281,705 ----------- Net increase in net assets resulting from operations $13,576,559 ===========
180 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED APRIL 30, 2004 UNAUDITED AND THE YEAR ENDED OCTOBER 31, 2003
2004 2003 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income $ 2,294,854 $ 5,894,252 Net realized gain (loss) on investments, futures contracts and foreign currency transactions 19,321,284 (40,206,427) Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions (8,039,579) 76,291,934 ---------------------------- Net increase in net assets resulting from operations 13,576,559 41,979,759 ---------------------------- Dividends to shareholders: From net investment income: Class C (757) -- Class I (5,321,732) (7,843,185) Service Class (680,408) (396,933) ---------------------------- Total dividends to shareholders (6,002,897) (8,240,118) ---------------------------- Capital share transactions: Net proceeds from sale of shares: Class A 48,989,988 -- Class B 8,975,948 -- Class C 1,457,015 41,320 Class I 20,734,460 41,070,189 Service Class 869,829 14,487,283 Net asset value of shares issued to shareholders in reinvestment of dividends: Class C 757 -- Class I 5,295,326 5,250,193 Service Class 634,600 396,273 ---------------------------- 86,957,923 61,245,258 Cost of shares redeemed: Class A (3,621,058) -- Class B (113,795) -- Class C (52,935) (90) Class I (46,556,820) (214,366,458) Service Class (38,107,319) (4,423,693) ---------------------------- (88,451,927) (218,790,241) ---------------------------- Decrease in net assets derived from capital share transactions (1,494,004) (157,544,983) ---------------------------- Net increase (decrease) in net assets 6,079,658 (123,805,342)
2004 2003 NET ASSETS: Beginning of period $298,373,400 $ 422,178,742 ---------------------------- End of period $304,453,058 $ 298,373,400 ============================ Accumulated undistributed net investment income at end of period $ 2,144,423 $ 5,852,466 ============================
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 181 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS A CLASS B CLASS C ------------ ------------ ------------------------- JANUARY 1, JANUARY 1, DECEMBER 30, 2004** 2004** SIX MONTHS 2002** THROUGH THROUGH ENDED THROUGH APRIL 30, APRIL 30, APRIL 30, OCTOBER 31, 2004*** 2004*** 2004*** 2003 Net asset value at beginning of period $ 12.17 $12.12 $11.86 $10.64 ------- --------- -------- ------ Net investment income 0.08 0.02 0.03 0.06(d) Net realized and unrealized gain (loss) on investments (0.01) 0.02 0.45 1.16 Net realized and unrealized gain (loss) on foreign currency transactions (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) ------- --------- -------- ------ Total from investment operations 0.07 0.04 0.48 1.22 ------- --------- -------- ------ Less dividends and distributions: From net investment income -- -- (0.19) -- From net realized gain on investments -- -- -- -- ------- --------- -------- ------ Total dividends and distributions -- -- (0.19) -- ------- --------- -------- ------ Net asset value at end of period $ 12.24 $12.16 $12.15 $11.86 ======= ========= ======== ====== Total investment return (b) 0.58% 0.33% 4.05% 11.47% Ratios (to average net assets)/Supplemental Data: Net investment income 1.35%+ 0.60%+ 0.60%+ 0.65%+ Net expenses 1.04%+ 1.79%+ 1.79%+ 1.83%+ Expenses (before reimbursement) 1.27%+ 2.02%+ 2.02%+ 2.06%+ Portfolio turnover rate 49% 49% 49% 113% Net assets at end of period (in 000's) $45,406 $8,696 $1,425 $ 46
* The Fund changed its fiscal year end from December 31 to October 31. ** Commencement of Operations. *** Unaudited. + Annualized. (a) Less than one cent per share. (b) Total return is calculated exclusive of sales charges and is not annualized. (c) As required, effective November 1, 2000, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended October 31, 2001 is shown below. Per share ratios and supplemental data for periods prior to November 1, 2000, have not been restated to reflect this change in presentation.
CLASS I -------- Decrease net investment income ($0.01) Increase net realized and unrealized gains and losses 0.01 Decrease ratio of net investment income (0.06%)
(d) Per share data based on average shares outstanding during the period.
182 MainStay Asset Manager Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
CLASS I ------------------------------------------------------------------------------------------------------ JANUARY 1, SIX MONTHS 1999 ENDED THROUGH YEAR ENDED APRIL 30, YEAR ENDED OCTOBER 31, OCTOBER 31, DECEMBER 31, 2004*** 2003 2002 2001 2000 1999* 1998 $ 11.99 $ 10.81 $ 12.11 $ 15.21 $ 14.57 $ 15.36 $ 14.83 -------- -------- -------- -------- -------- -------- -------- 0.10 0.18(d) 0.22 0.37(c) 0.51 0.41 0.43 0.46 1.22 (1.25) (2.09)(c) 1.08 0.41 2.70 (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.01) (0.03) 0.02 -------- -------- -------- -------- -------- -------- -------- 0.56 1.40 (1.03) (1.72) 1.58 0.79 3.15 -------- -------- -------- -------- -------- -------- -------- (0.25) (0.22) (0.27) (0.50) (0.50) (0.01) (0.43) -- -- -- (0.88) (0.44) (1.57) (2.19) -------- -------- -------- -------- -------- -------- -------- (0.25) (0.22) (0.27) (1.38) (0.94) (1.58) (2.62) -------- -------- -------- -------- -------- -------- -------- $ 12.30 $ 11.99 $ 10.81 $ 12.11 $ 15.21 $ 14.57 $ 15.36 ======== ======== ======== ======== ======== ======== ======== 4.69% 13.17% (8.78%) (12.12%) 11.18% 5.58% 21.31% 1.56%+ 1.65% 1.84% 2.66%(c) 3.45% 3.40%+ 2.64% 0.83%+ 0.83% 0.83% 0.83% 0.83% 0.78%+ 0.80% 1.06%+ 1.06% 0.94% 0.87% 0.83% 0.78%+ 0.80% 49% 113% 4% 15% 49% 18% 55% $248,926 $262,438 $399,199 $452,246 $561,329 $513,860 $500,449
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 183 MAINSTAY BALANCED FUND INVESTMENT AND PERFORMANCE COMPARISON PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE LESS OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT UPON REDEMPTION, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR CURRENT TO THE MOST RECENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT 1-800-MAINSTAY (1-800-624-6782) OR VISIT WWW.MAINSTAYFUNDS.COM.
SIX ONE FIVE TEN BENCHMARKS MONTHS YEAR YEARS YEARS BALANCED COMPOSITE INDEX(1) 5.38% 20.93% 7.57% 11.00% MERRILL LYNCH CORPORATE AND GOVERNMENT 1-10 YEARS BOND INDEX(2) 1.07 2.03 6.59 6.92 RUSSELL MIDCAP INDEX(3) 7.25 35.45 6.09 12.58 S&P 500(R)INDEX(4) 6.27 22.88 -2.26 11.36 LIPPER BALANCED FUNDS INDEX(5) 4.74 16.18 2.01 8.61 AVERAGE LIPPER BALANCED FUND(6) 4.13 15.15 1.44 8.32
CLASS A SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -2.09% 12.94% 5.09% 9.27% Excluding sales charges 3.61 19.52 6.28 9.89
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 945 1000 1000 1000 1000 1014 1096 1066 1123 1175 1187 1310 1150 1469 1530 1336 1484 1224 1630 1914 1743 1891 1334 2298 2700 1789 1972 1419 2434 3289 1653 1936 1442 2824 3622 1925 2260 1615 2832 3152 2102 2447 1731 2812 2754 2030 2348 1914 2414 2388 4/30/04 2426 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
CLASS B SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges -1.71% 13.68% 5.17% 9.08% Excluding sales charges 3.29 18.68 5.50 9.08
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 1000 1000 1000 1000 1000 1065 1096 1066 1123 1175 1237 1310 1150 1469 1530 1383 1484 1224 1630 1914 1791 1891 1334 2298 2700 1826 1972 1419 2434 3289 1673 1936 1442 2824 3622 1934 2260 1615 2832 3152 2097 2447 1731 2812 2754 2010 2348 1914 2414 2388 4/30/04 2386 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
CLASS C SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges 2.26% 17.70% 5.50% 9.09% Excluding sales charges 3.26 18.70 5.50 9.09
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 1000 1000 1000 1000 1000 1065 1096 1066 1123 1175 1237 1310 1150 1469 1530 1383 1484 1224 1630 1914 1791 1891 1334 2298 2700 1826 1972 1419 2434 3289 1674 1936 1442 2824 3622 1935 2260 1615 2832 3152 2098 2447 1731 2812 2754 2011 2348 1914 2414 2388 4/30/04 2387 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
THE DISCLOSURE AND FOOTNOTES ON THE NEXT TWO PAGES ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 184 MainStay Balanced Fund CLASS I SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 3.75% 19.82% 6.54% 10.16%
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 1000 1000 1000 1000 1000 1076 1096 1066 1123 1175 1262 1310 1150 1469 1530 1425 1484 1224 1630 1914 1863 1891 1334 2298 2700 1917 1972 1419 2434 3289 1775 1936 1442 2824 3622 2072 2260 1615 2832 3152 2269 2447 1731 2812 2754 2196 2348 1914 2414 2388 4/30/04 2632 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
CLASS R1 SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 3.67% 19.66% 6.43% 10.04%
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 1000 1000 1000 1000 1000 1075 1096 1066 1123 1175 1260 1310 1150 1469 1530 1420 1484 1224 1630 1914 1856 1891 1334 2298 2700 1908 1972 1419 2434 3289 1764 1936 1442 2824 3622 2058 2260 1615 2832 3152 2251 2447 1731 2812 2754 2177 2348 1914 2414 2388 4/30/04 2604 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
CLASS R2 SHARES --------------------------------------------------------------------------------
SIX ONE FIVE TEN TOTAL RETURNS MONTHS YEAR YEARS YEARS --------------------------------------------------------- With sales charges N/A N/A N/A N/A Excluding sales charges 3.58% 19.42% 6.18% 9.78%
(in thousands, with sales charges)
BALANCED ML CORP & MAINSTAY COMPOSITE GOV'T 1-10 YR RUSSELL BALANCED FUND INDEX BOND INDEX MIDCAP INDEX S&P 500 INDEX ------------- --------- ------------- ------------ ------------- 4/30/94 1000 1000 1000 1000 1000 1072 1096 1066 1123 1175 1254 1310 1150 1469 1530 1410 1484 1224 1630 1914 1838 1891 1334 2298 2700 1884 1972 1419 2434 3289 1739 1936 1442 2824 3622 2023 2260 1615 2832 3152 2207 2447 1731 2812 2754 2129 2348 1914 2414 2388 4/30/04 2543 2840 1953 3270 2934 AVERAGE LIPPER BALANCED FUND ------------- 4/30/94 1000 1089 1296 1473 1861 2068 2171 2176 2089 1966 4/30/04 2284
-- MainStay Balanced -- S&P 500 Index -- Russell Midcap Fund Index -- Lipper Balanced -- ML Corp & Gov't -- Balanced Composite Fund Index 1-10 Yr Bond Index Index
Performance tables and graphs do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect change in share price, reinvestment of dividend and capital-gain distributions, and maximum applicable sales charges explained in this paragraph. The graphs assume an initial investment of $1,000 and reflect the deduction of all sales charges that would have applied for the period of investment. Class A shares are sold with a maximum initial sales charge of 5.5% and an annual 12b-1 fee of .25%. Class B shares are sold with no initial sales charge, are subject to a contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase, and have an annual 12b-1 fee of 1.00%. Class C shares are sold with no initial sales charge, are subject to a CDSC of 1% if redeemed within one year of purchase, and have an annual 12b-1 fee of 1.00%. Class I shares are sold with no initial sales charge or CDSC, have no annual 12b-1 fee, and are generally available to corporate and institutional investors with a minimum initial investment of $5 million. Class R1 shares are sold with no initial sales charge or CDSC and have no annual 12b-1 fee. Class R2 shares are sold with no initial sales charge or CDSC and have an annual 12b-1 fee of .25%. Class R1 and R2 shares are available only through corporate-sponsored retirement programs, which include certain minimum program requirements. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. The fee waivers and/or expense limitations are voluntary and may be discontinued at any time. Performance for Class A, B, R1, and R2 shares, first offered 1/2/04, includes the historical performance of Class I shares from inception (5/1/89) through 12/31/03 adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. Prior to 1/1/04, the Fund offered Class L shares, which were subject to a 1% sales charge and a 1% CDSC on redemptions within one year of purchase. Performance for Class L shares, first offered 12/30/02, includes the historical performance of Class I shares from inception through 12/29/02 adjusted to reflect the applicable sales charge, CDSC, and fees and expenses for such shares. Effective 1/1/04, all outstanding Class L shares of the Fund were converted to and/or redesignated Class C shares. THE DISCLOSURE AND FOOTNOTES ON THE FOLLOWING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. www.mainstayfunds.com 185 1. The Fund's Balanced Composite Index is comprised of the Russell Midcap(R) Value Index and the Merrill Lynch Corporate and Government 1-10 Years Bond Index weighted 60%/40%. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index or a composite. 2. The Merrill Lynch Corporate & Government 1-10 Years Bond Index is a market-capitalization-weighted index including U.S. government and fixed-coupon domestic investment-grade corporate bonds. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 3. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 4. "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500(R) is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock-market performance. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 5. The Lipper Balanced Funds Index tracks the performance of the 30 largest balanced funds, with adjustments for the reinvestment of capital gain and income distribution. An investment cannot be made directly into an index. 6. Lipper Inc. is an independent fund performance monitor. Results are based on total returns with all dividend and capital-gain distributions reinvested. THE DISCLOSURE AND FOOTNOTES ON THE PRECEDING PAGE ARE AN INTEGRAL PART OF THESE GRAPHS AND SHOULD BE CAREFULLY READ IN CONJUNCTION WITH THEM. 186 MainStay Balanced Fund $1,000 INVESTED IN MAINSTAY BALANCED FUND -------------------------------------------------------------------------------- Expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the third column of the table is 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 had been included, your costs would have been higher.
ENDING ACCOUNT ENDING ACCOUNT VALUE VALUE (BASED (BASED ON BEGINNING ON ACTUAL EXPENSES HYPOTHETICAL EXPENSES ACCOUNT RETURNS AND PAID 5% RETURN PAID VALUE EXPENSES) DURING AND ACTUAL DURING SHARE CLASS 11/1/03 4/30/04 PERIOD EXPENSES) PERIOD ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES(1,2) $1,000 $1,004 $ 4 $1,046 $ 4 ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES(1,2) $1,000 $1,002 $ 7 $1,043 $ 7 ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES(3) $1,000 $1,033 $10 $1,040 $10 ------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES(3) $1,000 $1,038 $ 5 $1,045 $ 5 ------------------------------------------------------------------------------------------------------------------------ CLASS R1 SHARES(1,2) $1,000 $1,004 $ 3 $1,047 $ 3 ------------------------------------------------------------------------------------------------------------------------ CLASS R2 SHARES(1,2) $1,000 $1,004 $ 4 $1,046 $ 4 ------------------------------------------------------------------------------------------------------------------------
1. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 121 (to reflect the four-month period). 2. Class A shares, Class B shares, Class R1 shares and Class R2 shares were first offered on January 1, 2004. Expenses paid during the period reflect ongoing costs for the four-month period ending April 30, 2004. Had these shares been offered for the six months ended April 30, 2004, based on a hypothetical 5% return, expenses paid during the period would be $6, $10, $5 and $7, respectively, and the ending account value would be $1,044, $1,040, $1,045 and $1,044, respectively. 3. Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, divided by 366, multiplied by 182 (to reflect the one-half year period). www.mainstayfunds.com 187 PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS Questions answered by portfolio manager Joan M. Sabella of New York Life Investment Management LLC MAINSTAY BALANCED FUND WHAT MAJOR FACTORS INFLUENCED THE STOCK AND BOND MARKETS DURING THE SIX MONTHS ENDED APRIL 30, 2004? Stocks generally advanced as signs of a rebounding economy fueled investor optimism. Mid-caps and small-caps tended to outperform and large-capitalization issues. With weak job growth and low inflation, the Federal Reserve tried to help the economy by leaving the targeted federal funds rate unchanged from its 45-year low set in June 2003. In March 2004, successes were recorded in job growth, retail sales, and durable-goods orders, and Treasury notes dropped significantly. By the end of April 2004, rising inflation had pushed the 10-year Treasury yield to 4.51%, its highest level since September 2003. HOW DID THE FUND INVEST DURING THE REPORTING PERIOD? The Fund continued to invest approximately 60% of its assets in stocks and 40% in fixed-income securities and cash equivalents. Equity investments included dividend-paying mid-cap stocks that our proprietary quantitative model found to be relatively undervalued and to have strong or improving operating characteristics. WHAT ABOUT THE FUND'S BOND INVESTMENTS? We continued to select fixed-income securities based on their credit quality and duration. The fixed-income portion of the portfolio maintained an intermediate-term duration and a laddered maturity schedule. WHAT WERE SOME OF THE FUND'S STRONG PERFORMERS DURING THE REPORTING PERIOD? Software company Autodesk (+73.8%)(1) provided outstanding results. Other strong performers included Mandalay Resort Group (+47.4%), Activision (+46.6%), MGIC Investment (+43.6%), and Kmart Holding (+42.5%). WHICH STOCKS UNDERPERFORMED? Maxtor (-52.4%), which operates in the computers & peripherals industry, was the Fund's worst-performing stock during the reporting period. Other poor performers included Quanta Services (-33.1%), Citrix Systems (-24.3%), Ascential Software (-23.7%), and Sears, Roebuck (-23.0%). WERE THERE ANY SIGNIFICANT PURCHASES DURING THE REPORTING PERIOD? The Fund purchases stocks that have relatively improving operating characteristics and are relatively undervalued based on our proprietary model. Among the securities that fit the Fund's purchase criteria during the reporting period were Activision, Apogent Technologies, and Bausch & Lomb. WHAT STOCKS DID THE FUND SELL? The Fund sells stocks that exhibit deteriorating operating results and/or are relatively overvalued. During the reporting period, AdvancePCS was acquired by Caremark Rx in a stock and cash transaction. The Fund sold its entire position in American Eagle Outfitters when weakening sales hampered earnings. The Fund's position in JDS Uniphase was sold when declining demand caused operating results to deteriorate. DID THE FUND CHANGE ITS INDUSTRY GROUP WEIGHTINGS? Weighting changes in the Fund result from a combination of security performance, industry performance, and the Fund's proprietary security selection process. From the end of October 2003 to the end of April 2004, the Fund increased its weighting in the banks industry group from 7.23% to 9.98%. The shift reflected new purchases and improved performance among banks relative to other industry groups. Over the same period, the Fund decreased its technology hardware & equipment industry group weighting from 7.39% to 4.32%. The decline reflected the sale of selected positions and weaker relative performance. CAN YOU TELL US MORE ABOUT THE FUND'S INDUSTRY GROUP WEIGHTINGS? As of April 30, 2004, the Fund was overweighted relative to the Russell Midcap(R) Value Index(2) in the health care equipment & services, consumer Past performance is no guarantee of future results. Investment objectives may not be met, as the underlying investment options are subject to market risk and fluctuations in value. 1. Percentages reflect total returns of Fund holdings in the securities mentioned, including purchases and sales, for the six months ended 4/30/04, or for the portion of the reporting period such securities were held in the Fund, if shorter. 2. The Russell Midcap(R) Value Index is an unmanaged index that measures the performance of those Russell Midcap(R) companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap(R) Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000(R) Index, which, in turn, is an unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly into an index. 188 MainStay Balanced Fund durables & apparel, and software & services industry groups. The overweighted position in software & services helped Fund performance, while the other overweighted positions underperformed relative to related securities in the benchmark index. At the end of the reporting period, the Fund was underweighted relative to the Russell Midcap(R) Value Index in the utilities, insurance, and real estate industry groups. The Fund benefited from its relative underweighted position in real estate. While the Fund's holdings in the utilities and insurance industry groups had positive returns, they underperformed relative to securities in the benchmark. WHAT DO YOU ANTICIPATE GOING FORWARD? The Fund will continue to focus on securities that fit its stated objective and its valuation, quality, duration, and maturity parameters. 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. PORTFOLIO COMPOSITION AS OF APRIL 30, 2004 (PORTFOLIO COMPOSITION PIE CHART) Common Stocks 57.70 Corporate Bonds 32.70 Federal Agencies 7.30 Short-Term Investments 1.30 Cash and Other Assets (less liabilities) 1.00
www.mainstayfunds.com 189 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED
PRINCIPAL AMOUNT VALUE LONG-TERM BONDS (40.0%)+ CORPORATE BONDS (32.7%) ----------------------------------------------------------------------------- AEROSPACE & DEFENSE (2.2%) General Dynamics Corp. 4.50%, due 8/15/10 $1,000,000 $ 999,556 Honeywell, Inc. 7.00%, due 3/15/07 1,272,000 1,402,309 7.125%, due 4/15/08 150,000 167,180 Rockwell International Corp. 6.625%, due 6/1/05 200,000 208,897 *United Technology Corp. 6.50%, due 6/1/09 2,550,000 2,819,545 ------------ 5,597,487 ------------ BEVERAGES (2.1%) Anheuser-Busch Cos., Inc. 5.375%, due 9/15/08 1,030,000 1,084,845 5.65%, due 9/15/08 520,000 552,286 5.75%, due 4/1/10 750,000 799,655 Coca-Cola Co. (The) 4.00%, due 6/1/05 500,000 510,252 Coca-Cola Enterprises, Inc. 6.625%, due 8/1/04 100,000 101,203 PepsiCo, Inc. 5.75%, due 1/15/08 2,000,000 2,163,182 ------------ 5,211,423 ------------ CAPITAL MARKETS (2.8%) Bear Stearns Cos., Inc. (The) 4.00%, due 1/31/08 1,250,000 1,260,441 Goldman Sachs Group, Inc. (The) 5.70%, due 9/1/12 1,000,000 1,031,009 J.P. Morgan & Co., Inc. 6.25%, due 2/15/11 300,000 324,161 J.P. Morgan Chase & Co. 5.35%, due 3/1/07 500,000 528,762 Lehman Brothers Holdings, Inc. 6.625%, due 2/5/06 573,000 612,086 Lehman Brothers, Inc. 7.625%, due 6/1/06 350,000 385,381 Merrill Lynch & Co., Inc. Series CPI 3.086%, due 3/2/09 (c) 500,000 492,890 Merrill Lynch & Co., Inc. 6.00%, due 2/17/09 500,000 538,638 7.00%, due 1/15/07 700,000 762,294 Morgan Stanley 5.80%, due 4/1/07 1,000,000 1,068,164 ------------ 7,003,826 ------------
PRINCIPAL AMOUNT VALUE CHEMICALS (0.4%) E.I. Du Pont de Nemours & Co. 3.375%, due 11/15/07 $ 921,000 $ 922,269 ------------ COMMERCIAL BANKS (3.0%) BankAmerica Corp. 7.125%, due 3/1/09 1,900,000 2,138,805 First Bank National Association 5.70%, due 12/15/08 500,000 534,629 Mellon Bank NA 7.625%, due 9/15/07 1,500,000 1,711,068 U.S. Bancorp 3.125%, due 3/15/08 500,000 490,315 Wachovia Corp. 4.95%, due 11/1/06 500,000 523,301 6.375%, due 1/15/09 1,500,000 1,639,982 Wells Fargo & Co. 3.50%, due 4/4/08 500,000 496,166 ------------ 7,534,266 ------------ COMMERCIAL SERVICES & SUPPLIES (0.6%) Pitney Bowes, Inc. 5.875%, due 5/1/06 1,295,000 1,374,854 ------------ COMPUTERS & PERIPHERALS (1.2%) Hewlett-Packard Co. 5.75%, due 12/15/06 750,000 799,887 International Business Machines Corp. 4.875%, due 10/1/06 500,000 524,078 5.375%, due 2/1/09 1,096,000 1,161,369 5.50%, due 1/15/09 535,000 568,402 ------------ 3,053,736 ------------ CONSUMER FINANCE (3.2%) American Express Credit Corp. 3.00%, due 5/16/08 1,000,000 971,983 Caterpillar Financial Services Corp. 4.875%, due 6/15/07 830,000 870,220 Household Finance Corp. 5.875%, due 2/1/09 500,000 535,278 6.375%, due 8/1/10 500,000 544,335
+ Percentages indicated are based on Fund net assets. * Fund's 10 largest holdings. May be subject to change daily. 190 MainStay Balanced Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ----------------------------------------------------------------------------- CONSUMER FINANCE (CONTINUED) John Deere Capital Corp. 3.125%, due 12/15/05 $ 500,000 $ 506,768 3.90%, due 1/5/08 250,000 251,139 4.50%, due 8/22/07 500,000 515,989 SLM Corp. 3.625%, due 3/17/08 500,000 497,485 4.00%, due 1/15/09 500,000 496,782 4.046%, due 1/31/14 (c) 1,000,000 986,370 Toyota Motor Credit Corp. 5.50%, due 12/15/08 1,690,000 1,815,596 ------------ 7,991,945 ------------ DIVERSIFIED FINANCIAL SERVICES (1.7%) Boeing Capital Corp. 5.75%, due 2/15/07 983,000 1,044,952 CIT Group, Inc. 4.75%, due 12/15/10 750,000 743,399 Citigroup, Inc. 5.00%, due 3/6/07 750,000 786,994 Heller Financial, Inc. 6.375%, due 3/15/06 250,000 269,395 Pitney Bowes Credit Corp. 5.75%, due 8/15/08 1,000,000 1,075,250 Wells Fargo Financial, Inc. 5.45%, due 5/3/04 350,000 350,000 6.85%, due 7/15/09 125,000 139,498 ------------ 4,409,488 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES (1.0%) Bell Atlantic West Virginia, Inc. 7.00%, due 8/15/04 100,000 101,587 BellSouth Telecommunications, Inc. 5.875%, due 1/15/09 300,000 320,344 GTE North, Inc., Series F 6.375%, due 2/15/10 500,000 539,751 New York Telephone Co. 6.125%, due 1/15/10 1,000,000 1,050,564 Pacific Bell 6.875%, due 8/15/06 500,000 541,205 Southwestern Bell Telephone Co. 6.375%, due 11/15/07 100,000 108,515 ------------ 2,661,966 ------------ ELECTRIC EQUIPMENT (0.8%) Emerson Electric Co. 5.00%, due 10/15/08 300,000 311,850 5.85%, due 3/15/09 1,586,000 1,712,187 ------------ 2,024,037 ------------
PRINCIPAL AMOUNT VALUE ELECTRIC UTILITIES (0.0%) (B) Potomac Electric Power Co. 6.50%, due 3/15/08 $ 100,000 $ 108,804 ------------ FOOD & STAPLES RETAILING (1.1%) Sysco Corp. 6.50%, due 6/15/05 500,000 523,385 Wal-Mart Stores, Inc. 6.875%, due 8/10/09 1,500,000 1,693,403 7.25%, due 6/1/13 400,000 465,738 ------------ 2,682,526 ------------ FOOD PRODUCTS (2.0%) Campbell Soup Co. 5.50%, due 3/15/07 750,000 796,961 ConAgra Foods, Inc. 7.40%, due 9/15/04 650,000 662,639 General Mills, Inc. 5.125%, due 2/15/07 500,000 524,604 Kellogg Co. 4.875%, due 10/15/05 645,000 669,084 Sara Lee Corp., Series C 6.00%, due 1/15/08 1,200,000 1,293,650 Unilever Capital Corp. 6.875%, due 11/1/05 1,100,000 1,174,514 ------------ 5,121,452 ------------ HEALTH CARE PROVIDERS & SERVICES (0.4%) Cardinal Health, Inc. 4.45%, due 6/30/05 580,000 593,958 6.00%, due 1/15/06 450,000 476,200 ------------ 1,070,158 ------------ HOTELS, RESTAURANTS, & LEISURE (0.1%) McDonald's Corp., Series G 4.15%, due 2/15/05 250,000 254,787 ------------ HOUSEHOLD PRODUCTS (0.5%) Colgate-Palmolive Co., Series E 3.98%, due 4/29/05 500,000 510,690 Procter & Gamble Co. (The) 4.00%, due 4/30/05 500,000 510,312 4.75%, due 6/15/07 250,000 261,272 ------------ 1,282,274 ------------ INDUSTRIAL CONGLOMERATES (0.2%) 3M Co., Series C 4.15%, due 6/30/05 500,000 512,817 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 191 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
PRINCIPAL AMOUNT VALUE CORPORATE BONDS (CONTINUED) ----------------------------------------------------------------------------- INSURANCE (0.6%) Loews Corp. 6.75%, due 12/15/06 $ 500,000 $ 532,749 Marsh & McLennan Cos., Inc. 6.625%, due 6/15/04 1,000,000 1,005,899 ------------ 1,538,648 ------------ IT SERVICES (0.7%) Computer Sciences Corp. 6.25%, due 3/15/09 335,000 365,353 First Data Corp. 5.625%, due 11/1/11 756,000 798,210 Series D 5.80%, due 12/15/08 525,000 566,013 ------------ 1,729,576 ------------ MACHINERY (0.3%) Illinois Tool Works, Inc. 5.75%, due 3/1/09 820,000 882,317 ------------ MEDIA (0.4%) Gannett Co., Inc. 4.95%, due 4/1/05 500,000 513,104 5.50%, due 4/1/07 500,000 532,615 ------------ 1,045,719 ------------ MULTILINE RETAIL (1.2%) Kohl's Corp. 6.30%, due 3/1/11 700,000 758,648 Target Corp. 5.375%, due 6/15/09 350,000 368,867 5.50%, due 4/1/07 1,350,000 1,437,001 5.95%, due 5/15/06 350,000 372,940 ------------ 2,937,456 ------------ MULTI-UTILITIES & UNREGULATED POWER (0.6%) IES Utilities, Inc., Series A 6.625%, due 8/1/09 1,500,000 1,643,421 ------------ OIL & GAS (0.3%) ChevronTexaco Capital Co. 3.50%, due 9/17/07 808,000 815,181 ------------ PERSONAL PRODUCTS (0.8%) Gillette Co. (The) 2.875%, due 3/15/08 500,000 486,961 3.50%, due 10/15/07 1,500,000 1,506,906 ------------ 1,993,867 ------------
PRINCIPAL AMOUNT VALUE PHARMACEUTICALS (2.8%) Abbott Laboratories 5.125%, due 7/1/04 $ 500,000 $ 503,085 5.625%, due 7/1/06 1,000,000 1,062,019 Bristol-Myers Squibb Co. 4.75%, due 10/1/06 500,000 520,974 Johnson & Johnson 6.625%, due 9/1/09 1,500,000 1,687,896 Lilly (Eli) & Co. 5.50%, due 7/15/06 750,000 795,714 Merck & Co., Inc., Series E 4.125%, due 1/18/05 750,000 763,677 Pfizer, Inc. 3.625%, due 11/1/04 1,000,000 1,011,114 Pharmacia Corp. 5.875%, due 12/1/08 500,000 539,886 Warner-Lambert Co. 6.00%, due 1/15/08 250,000 273,920 ------------ 7,158,285 ------------ SPECIALTY RETAIL (0.6%) Home Depot, Inc. (The) 5.375%, due 4/1/06 1,280,000 1,348,193 Sherwin-Williams Co. (The) 6.85%, due 2/1/07 200,000 218,129 ------------ 1,566,322 ------------ THRIFTS & MORTGAGE FINANCE (0.6%) General Electric Capital Corp. Series A 4.25%, due 1/15/08 500,000 510,100 5.375%, due 3/15/07 1,000,000 1,059,524 ------------ 1,569,624 ------------ TRANSPORTATION INFRASTRUCTURE (0.5%) International Lease Finance Corp. 4.50%, due 5/1/08 500,000 510,217 5.625%, due 6/1/07 750,000 797,944 ------------ 1,308,161 ------------ Total Corporate Bonds (Cost $82,772,715) 83,006,692 ------------ FEDERAL AGENCIES (7.3%) ----------------------------------------------------------------------------- FEDERAL FARM CREDIT BANK (0.9%) 2.25%, due 9/1/06 500,000 494,874 3.47%, due 10/3/07 500,000 501,775 3.80%, due 9/4/07 500,000 507,421 3.875%, due 5/7/10 750,000 731,130 ------------ 2,235,200 ------------ FEDERAL HOME LOAN BANK (2.3%) 2.50%, due 3/15/06 1,000,000 1,002,426 3.00%, due 10/30/08 1,000,000 1,002,536
192 MainStay Balanced Fund The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.
PRINCIPAL AMOUNT VALUE FEDERAL AGENCIES (CONTINUED) ----------------------------------------------------------------------------- FEDERAL HOME LOAN BANK (CONTINUED) 3.375%, due 2/15/08 $ 500,000 $ 496,072 3.50%, due 2/11/08 1,000,000 992,208 3.625%, due 11/14/06 750,000 750,486 3.75%, due 4/1/10 750,000 727,789 3.875%, due 2/12/10 250,000 244,882 6.21%, due 12/3/07 500,000 546,709 ------------ 5,763,108 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION (0.2%) 3.25%, due 3/14/08 500,000 492,103 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION (COLLATERALIZED MORTGAGE OBLIGATIONS) (1.9%) Series 2734 Class JC 3.50%, due 11/15/23 1,500,000 1,492,670 Series 2579 Class PG 4.00%, due 3/15/27 500,000 496,336 Series 2719 Class WB 4.50%, due 8/15/21 1,179,211 1,152,800 Series 2589 Class GD 5.00%, due 9/15/28 500,000 494,695 Series 2600 Class MJ 5.00%, due 9/15/29 500,000 487,608 Series 1982 Class VC 6.50%, due 1/15/12 750,000 770,466 ------------ 4,894,575 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.8%) 3.066%, due 2/17/09 (c) 1,000,000 990,260 5.75%, due 6/15/05 1,000,000 1,043,904 ------------ 2,034,164 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (COLLATERALIZED MORTGAGE OBLIGATIONS) (0.6%) Series 2003-17 Class QT 5.00%, due 8/25/27 1,180,000 1,176,703 Series 2003-32 Class PG 5.00%, due 10/25/27 500,000 509,445 ------------ 1,686,148 ------------
PRINCIPAL AMOUNT VALUE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (COLLATERALIZED MORTGAGE OBLIGATIONS) (0.6%) Series 2003-19 Class BE 4.50%, due 11/20/28 $ 500,000 $ 488,786 Series 2003-50 Class PC 5.50%, due 3/16/32 1,000,000 1,000,473 ------------ 1,489,259 ------------ Total Federal Agencies (Cost $18,787,900) 18,594,557 ------------ Total Long-Term Bonds (Cost $101,560,615) 101,601,249 ------------ SHARES VALUE COMMON STOCKS (57.7%) ----------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.9%) J.B. Hunt Transport Services, Inc. (a) 70,900 2,244,694 ------------ AUTO COMPONENTS (0.9%) Dana Corp. 107,300 2,163,168 ------------ CAPITAL MARKETS (0.4%) Bear Stearns Cos., Inc. (The) 2,702 216,538 Lehman Brothers Holdings, Inc. 10,800 792,720 ------------ 1,009,258 ------------ COMMERCIAL BANKS (1.4%) International Bancshares Corp. 32,100 1,710,930 Silicon Valley Bancshares (a) 56,000 1,924,160 ------------ 3,635,090 ------------ COMMERCIAL SERVICES & SUPPLIES (2.3%) *Cendant Corp. 101,600 2,405,888 Deluxe Corp. 32,800 1,354,968 Kelly Services, Inc. Class A 66,600 1,979,352 ------------ 5,740,208 ------------ COMPUTERS & PERIPHERALS (1.6%) Dell, Inc. (a) 25,700 892,047 InFocus Corp. (a) 185,800 1,517,986 Maxtor Corp. (a) 154,100 1,003,191 Sun Microsystems, Inc. (a) 152,800 595,920 ------------ 4,009,144 ------------ CONSTRUCTION & ENGINEERING (0.6%) Quanta Services, Inc. (a) 256,900 1,405,243 ------------
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. www.mainstayfunds.com 193 PORTFOLIO OF INVESTMENTS APRIL 30, 2004 UNAUDITED (CONTINUED)
SHARES VALUE COMMON STOCKS (CONTINUED) ----------------------------------------------------------------------------- CONSUMER FINANCE (1.6%) AmeriCredit Corp. (a) 61,100 $ 990,431 Student Loan Corp. (The) 4,100 580,560 WFS Financial, Inc. (a) 53,200 2,369,528 ------------ 3,940,519 ------------ DIVERSIFIED FINANCIAL SERVICES (0.9%) CIT Group, Inc. 63,200 2,172,184 ------------ ELECTRIC UTILITIES (0.4%) Edison International 48,300 1,130,220 ------------ ELECTRICAL EQUIPMENT (0.2%) American Power Conversion Corp. 24,300 453,438 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS (2.5%) Avnet, Inc. (a) 39,800 861,272 *Sanmina-SCI Corp. (a) 275,100 2,756,502 Solectron Corp. (a) 222,800 1,091,720 Tektronix, Inc. 58,700 1,737,520 ------------ 6,447,014 ------------ FOOD & STAPLES RETAILING (0.9%) Albertson's, Inc. 50,200 1,172,672 SUPERVALU, Inc. 39,600 1,219,284 ------------ 2,391,956 ------------ FOOD PRODUCTS (2.2%) Hershey Foods Corp. 19,900 1,768,911 Hormel Foods Corp. 42,500 1,295,825 Tyson Foods, Inc. Class A 127,600 2,391,224 ------------ 5,455,960 ------------ HEALTH CARE EQUIPMENT & SUPPLIES (1.3%) Apogent Technologies, Inc. (a) 34,300 1,112,006 Bausch & Lomb, Inc. 36,500 2,293,295 ------------ 3,405,301 ------------ HEALTH CARE PROVIDERS & SERVICES (3.9%) Caremark Rx, Inc. (a) 37,152 1,257,595 Coventry Health Care, Inc. (a) 16,950 709,188 Health Net, Inc. (a) 37,000 941,280 HEALTHSOUTH Corp. (a) 117,500 511,125 *Humana, Inc. (a) 156,900 2,555,901 Manor Care, Inc. 53,400 1,732,296 PacifiCare Health Systems, Inc. (a) 59,200 2,116,992 ------------ 9,824,377 ------------ HOTELS, RESTAURANTS & LEISURE (1.9%) Bob Evans Farms, Inc. 55,400 1,698,564 CBRL Group, Inc. 21,500 807,325
SHARES VALUE HOTELS, RESTAURANTS & LEISURE (CONTINUED) Mandalay Resort Group 16,000 $ 919,200 Outback Steakhouse, Inc. 33,500 1,471,655 ------------ 4,896,744 ------------ HOUSEHOLD DURABLES (5.1%) Centex Corp. 15,800 757,610 Fortune Brands, Inc. 30,300 2,310,375 Hovnanian Enterprises, Inc. Class A (a) 18,000 647,460 KB HOME 7,200 496,296 La-Z-Boy, Inc. 59,600 1,242,064 M.D.C. Holdings, Inc. 38,610 2,385,712 NVR, Inc. (a) 2,800 1,262,800 Ryland Group, Inc. (The) 8,500 671,075 Stanley Works (The) 51,500 2,189,265 Toll Brothers, Inc. (a) 26,500 1,048,605 ------------ 13,011,262 ------------ HOUSEHOLD PRODUCTS (0.6%) Energizer Holdings, Inc. (a) 37,600 1,628,080 ------------ INDUSTRIAL CONGLOMERATES (0.6%) Alleghany Corp. (a) 5,916 1,552,714 ------------ INSURANCE (0.9%) MBIA, Inc. 25,800 1,519,362 Torchmark Corp. 13,600 707,744 ------------ 2,227,106 ------------ LEISURE EQUIPMENT & PRODUCTS (1.1%) Callaway Golf Co. 83,700 1,420,389 Hasbro, Inc. 67,500 1,275,075 ------------ 2,695,464 ------------ MACHINERY (1.0%) *Terex Corp. (a) 77,600 2,549,160 ------------ METALS & MINING (1.0%) *United States Steel Corp. 88,100 2,522,303 ------------ MULTILINE RETAIL (1.7%) Federated Department Stores, Inc. 15,700 769,300 Kmart Holding Corp. (a) 24,700 1,105,078 Neiman Marcus Group, Inc. (The) Class A 10,800 525,312 Saks, Inc. (a) 84,100 1,211,040 Sears, Roebuck and Co. 16,700 668,835