UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FormN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number811-04550
THE MAINSTAY FUNDS
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
J. Kevin Gao, Esq.
30 Hudson Street
Jersey City, New Jersey 07302
(Name and address of agent for service)
Registrant’s telephone number, including area code: (212)576-7000
Date of fiscal year end: October 31
Date of reporting period: April 30, 2019
Item 1. | Reports to Stockholders. |
MainStay MacKay Emerging Markets Debt Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | 4.54 9.46 | %
| | 0.65 5.39 | %
| | 2.79 3.74 | %
| | 6.98 7.47 | %
| | 1.26 1.26 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 4.51 9.44 |
| | 0.55 5.29 | | | 2.59 3.54 | | | 6.81 7.30 | | | 1.49 1.49 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/1/1998 | | 3.98 8.98 |
| | –0.66 4.34 | | | 2.43 2.76 | | | 6.49 6.49 | | | 2.24 2.24 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 7.97 8.97 |
| | 3.44 4.44 | | | 2.77 2.77 | | | 6.51 6.51 | | | 2.24 2.24 |
| ||||||||||
Class I Shares | No Sales Charge | 8/31/2007 | 9.69 | 5.75 | 4.02 | 7.75 | 1.01 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
JPMorgan EMBI Global Diversified Index4 | 8.20 | % | 6.01 | % | 5.23 | % | 7.96 | % | ||||||||
Morningstar Emerging Markets Bond Category Average5 | 6.54 | 2.38 | 3.14 | 7.55 |
4. | The JPMorgan EMBI Global Diversified Index is the Fund’s primary broad-based securities market index for comparison purposes. The JPMorgan EMBI Global Diversified Index is a market-capitalization weighted, total return index tracking the traded market for U.S. dollar-denominated Brady Bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Emerging Markets Bond Category Average is representative of funds that invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East, and Asia make up the rest. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Emerging Markets Debt Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Emerging Markets Debt Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,094.60 | $ | 6.65 | $ | 1,018.45 | $ | 6.41 | 1.28% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,094.40 | $ | 8.05 | $ | 1,017.11 | $ | 7.75 | 1.55% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,089.80 | $ | 11.92 | $ | 1,013.39 | $ | 11.48 | 2.30% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,089.70 | $ | 11.92 | $ | 1,013.39 | $ | 11.48 | 2.30% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,096.90 | $ | 5.36 | $ | 1,019.69 | $ | 5.16 | 1.03% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Country Composition as of April 30, 2019 (Unaudited)
Mexico | 9.5 | % | ||
Indonesia | 8.2 | |||
Brazil | 6.7 | |||
United States | 5.5 | |||
Russia | 5.3 | |||
Kazakhstan | 4.4 | |||
India | 4.2 | |||
Croatia | 3.9 | |||
Dominican Republic | 3.5 | |||
Ecuador | 3.2 | |||
Ukraine | 3.2 | |||
Malaysia | 3.0 | |||
Turkey | 3.0 | |||
Peru | 2.9 | |||
Oman | 2.5 | |||
China | 2.3 | |||
Paraguay | 2.3 | |||
Guatemala | 2.0 | |||
Nigeria | 2.0 | |||
Venezuela | 1.9 | |||
Costa Rica | 1.6 |
Belarus | 1.4 | % | ||
Uruguay | 1.4 | |||
Uzbekistan | 1.4 | |||
Chile | 1.3 | |||
El Salvador | 1.3 | |||
Saudi Arabia | 1.3 | |||
Egypt | 1.2 | |||
Ghana | 1.2 | |||
Ivory Coast | 1.2 | |||
Netherlands | 1.1 | |||
Iraq | 1.0 | |||
Senegal | 0.9 | |||
Cameroon | 0.7 | |||
Hong Kong | 0.7 | |||
Kenya | 0.7 | |||
Macao | 0.7 | |||
Pakistan | 0.7 | |||
Vietnam | 0.7 | |||
Other Assets, Less Liabilities | 0.0 | ‡ | ||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s holdings are subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Issuers Held as of April 30, 2019(excluding short-term investment) (Unaudited)
1. | Pertamina Persero PT, 5.625%, due 5/20/43 |
2. | KazMunayGas National Co. JSC, 5.375%–6.375%, due 4/24/30–10/24/48 |
3. | Petroleos Mexicanos, 6.50%–6.75%, due 3/13/27–9/21/47 |
4. | Croatia Government International Bond, 6.00%–6.375%, due 3/24/21–1/26/24 |
5. | Dominican Republic International Bond, 5.95%, due 1/25/27 |
6. | Petrobras Global Finance B.V., 7.375%, due 1/17/27 |
7. | Ecuador Government International Bond, 7.875%, due 1/23/28 |
8. | Ukraine Government International Bond, 7.75%, due 9/1/20–9/1/26 |
9. | Turkey Government International Bond, 5.125%, due 2/17/28 |
10. | OmGrid Funding, Ltd., 5.196%, due 5/16/27 |
8 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, and Jakob Bak, PhD, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Emerging Markets Debt Fund perform relative to its benchmark and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Emerging Markets Debt Fund returned 9.69%, outperforming the 8.20% return of the Fund’s primary benchmark, the JPMorgan EMBI Global Diversified Index. Over the same period, Class I shares also outperformed the 6.54% return of the Morningstar Emerging Markets Bond Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The interest rate policy of the U.S. Federal Reserve (“Fed”) and various global central banks deeply influenced fixed-income markets during the reporting period. Specifically, in the fourth quarter of 2018, on fears that the Fed would continue to increase interest rates into 2019, Treasury yields shifted lower and credit spreads2 widened as investors speculated that tighter monetary policy might push the U.S. economy into a recession. However, at the beginning of the first quarter of 2019, the Fed concluded that its benchmark federal funds rate had risen to a level consistent with its policy objectives. More modest declines on the long end of the yield curve3 reflected restrained inflation, trade policy in flux and aggregate demand failing to pressure resource capacity. Stocks rallied on the Fed’s new stance, which reflected cautious optimism regarding the durability of the current business cycle. Swayed by similar effects, emerging-market debt spreads tightened, benefiting from renewed risk appetites sparked by dovish central banks.
In this environment, the Fund outperformed the JPMorgan EMBI Global Diversified Index due to its slightly longer duration4 versus the benchmark, coupled with the Fund’s lack of exposure to the Mexican and Argentinian debt markets. During the reporting period, the Fund further benefited from its currency exposures to the Indonesian Rupiah and Egyptian pound, which were accretive versus the all-dollar benchmark.
Were there any changes to the Fund during the reporting period?
At a March 2019 Board of Trustees meeting, the Board approved several proposals for changes to the Fund. Those
proposals included changing the Fund’s name to MainStay Candriam Emerging Markets Debt Fund; replacing MacKay Shields LLC as the Fund’s subadvisor with Candriam Luxembourg S.C.A.; and modifying the Fund’s investment objective, principal investment strategies/investment process and principal investment risks, among other changes. These proposals/changes are expected to become effective on or about June 21, 2019, pending shareholder approval. For more information about these changes refer to the supplement dated March 15, 2019.
What was the Fund’s duration strategy during the reporting period?
The Fund ended the reporting period with a longer duration than that of its benchmark. As of April 30, 2019, the Fund’s duration was 7 years, compared to the 6.5-year duration of the JPMorgan EMBI Global Diversified Index.
How was the Fund affected by shifting currency values during the reporting period?
The Fund’s long positions in Indonesian rupiahs, Mexican pesos and Egyptian pounds added significantly to the Fund’s performance relative to its benchmark during the reporting period.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Holdings in Central America, South America and Asia contributed positively to the Fund’s performance relative to the JPMorgan EMBI Global Diversified Index during the reporting period. (Contributions take weightings and total returns into account.) Within Central America, the sovereign bonds of El Salvador and Guatemala performed particularly well, while in Costa Rica, securities issued by Instituto Costarricense de Electricidad, the Costa Rican government-run electricity and telecommunications services provider, notably enhanced the Fund’s relative returns as well. The Fund’s top performers in South America included government bonds of Paraguay and Ecuador. Prominent detractors from the Fund’s relative performance included European holdings, such as Turkish government bonds, which generated positive absolute returns but underperformed the broader market.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. |
3. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
4. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
What were some of the Fund’s largest purchases and sales during the reporting period?
The Fund added to its holdings in Turkish bonds during the reporting period to take advantage of attractive spreads. Another significant purchase involved some of the first bonds issued by former Soviet republic Uzbekistan, which the Fund acquired to capture the excess spreads on credits from this new entrant into the market. In its largest sale, the Fund disposed of its U.S. dollar-denominated bonds issued by Mexican building materials producer Cemex. In their place, the Fund purchased similar Euro-denominated bonds, picking up almost 100 basis points on a currency-hedged basis. (A basis point is one one-hundredth of a percentage point.)
How did the Fund’s country and/or sector weightings change during the reporting period?
The Fund made no material change to sector weightings, which at the end of the reporting period stood at 44% in sovereign/
government bonds, 29% in quasi-sovereign instruments and the balance in corporate bonds. Regarding country weightings, the Fund moderately increased its positions in Indonesian bonds while opportunistically decreasing holdings in Brazil and Russia.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund held overweight positions relative to the JPMorgan EMBI Global Diversified Index in Asia and the United States. As of the same date, the Fund held slightly underweight positions in Africa, the Middle East and Europe.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 95.9%† Corporate Bonds 51.3% |
| |||||||
Brazil 6.7% |
| |||||||
Braskem Netherlands Finance B.V. | $ | 1,500,000 | $ | 1,470,000 | ||||
Minerva Luxembourg S.A. | 750,000 | 741,188 | ||||||
Petrobras Global Finance B.V. | 4,500,000 | 5,021,100 | ||||||
Rumo Luxembourg S.A R.L. | 1,500,000 | 1,518,765 | ||||||
Vale Overseas, Ltd. | 1,050,000 | 1,218,525 | ||||||
|
| |||||||
9,969,578 | ||||||||
|
| |||||||
Chile 1.3% |
| |||||||
Corp. Nacional del Cobre de Chile | 2,000,000 | 2,007,320 | ||||||
|
| |||||||
China 2.3% |
| |||||||
Alibaba Group Holding, Ltd. | 1,000,000 | 1,042,258 | ||||||
China Evergrande Group | 1,000,000 | 912,632 | ||||||
Tencent Holdings, Ltd. | 1,500,000 | 1,477,594 | ||||||
|
| |||||||
3,432,484 | ||||||||
|
| |||||||
Costa Rica 1.6% |
| |||||||
Instituto Costarricense de Electricidad | 3,000,000 | 2,400,000 | ||||||
|
| |||||||
Hong Kong 0.7% |
| |||||||
Melco Resorts Finance, Ltd. | 1,000,000 | 998,180 | ||||||
|
| |||||||
India 4.2% |
| |||||||
Abja Investment Co. | 1,000,000 | 934,018 | ||||||
Bharti Airtel, Ltd. | 2,000,000 | 1,981,477 | ||||||
Reliance Industries, Ltd. | 1,000,000 | 982,652 | ||||||
Tata Motors, Ltd. | 1,500,000 | 1,476,000 |
Principal Amount | Value | |||||||
India (continued) | ||||||||
Vedanta Resources, Ltd. | $ | 1,000,000 | $ | 903,617 | ||||
|
| |||||||
6,277,764 | ||||||||
|
| |||||||
Indonesia 6.3% |
| |||||||
Indika Energy Capital III Pte, Ltd. | 1,000,000 | 940,150 | ||||||
Listrindo Capital B.V. | 1,500,000 | 1,446,000 | ||||||
Pertamina Persero PT | 6,700,000 | 6,949,220 | ||||||
|
| |||||||
9,335,370 | ||||||||
|
| |||||||
Kazakhstan 4.4% |
| |||||||
KazMunayGas National Co. JSC (a) | ||||||||
5.375%, due 4/24/30 | 2,000,000 | 2,127,712 | ||||||
6.375%, due 10/24/48 | 4,000,000 | 4,428,560 | ||||||
|
| |||||||
6,556,272 | ||||||||
|
| |||||||
Macao 0.7% |
| |||||||
Sands China, Ltd. | ||||||||
4.60%, due 8/8/23 | 435,000 | 449,038 | ||||||
5.125%, due 8/8/25 | 565,000 | 596,057 | ||||||
|
| |||||||
1,045,095 | ||||||||
|
| |||||||
Malaysia 3.0% |
| |||||||
1MDB Global Investments, Ltd. | 2,000,000 | 1,874,660 | ||||||
Petroliam Nasional BHD | 2,000,000 | 2,541,380 | ||||||
|
| |||||||
4,416,040 | ||||||||
|
| |||||||
Mexico 7.9% |
| |||||||
Cemex S.A.B. de C.V. | EUR 2,000,000 | 2,293,224 | ||||||
Comision Federal de Electricidad | $ | 2,000,000 | 2,035,000 | |||||
Grupo Televisa S.A.B. | 1,250,000 | 1,280,670 | ||||||
Petroleos Mexicanos | ||||||||
6.50%, due 3/13/27 | 3,000,000 | 3,038,700 | ||||||
6.75%, due 9/21/47 | 3,385,000 | 3,120,970 | ||||||
|
| |||||||
11,768,564 | ||||||||
|
| |||||||
Netherlands 1.1% |
| |||||||
GTH Finance B.V. | 1,500,000 | 1,625,796 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Oman 2.5% |
| |||||||
OmGrid Funding, Ltd. | ||||||||
5.196%, due 5/16/27 (a) | $ | 2,000,000 | $ | 1,825,500 | ||||
Series Reg S | 2,000,000 | 1,825,500 | ||||||
|
| |||||||
3,651,000 | ||||||||
|
| |||||||
Peru 2.9% |
| |||||||
Banco de Credito del | 1,000,000 | 1,033,000 | ||||||
Corp. Financiera de Desarrollo S.A. | 2,000,000 | 2,102,020 | ||||||
Southern Copper Corp. | 1,000,000 | 1,124,054 | ||||||
|
| |||||||
4,259,074 | ||||||||
|
| |||||||
Russia 3.2% |
| |||||||
Evraz PLC | 1,000,000 | 1,011,780 | ||||||
Gazprom OAO Via Gaz Capital S.A. | 1,500,000 | 1,973,160 | ||||||
Metalloinvest Finance DAC | 1,000,000 | 998,144 | ||||||
MMC Norilsk Nickel OJSC via MMC Finance DAC | 750,000 | 809,213 | ||||||
|
| |||||||
4,792,297 | ||||||||
|
| |||||||
United States 1.4% |
| |||||||
JBS Investments II GmbH | 2,000,000 | 2,081,000 | ||||||
|
| |||||||
Venezuela 1.1% |
| |||||||
Petroleos de Venezuela | ||||||||
Series Reg S | 3,000,000 | 630,000 | ||||||
6.00%, due 5/16/24 | 2,500,000 | 537,500 | ||||||
6.00%, due 11/15/26 | 2,500,000 | 542,925 | ||||||
|
| |||||||
1,710,425 | ||||||||
|
| |||||||
Total Corporate Bonds | 76,326,259 | |||||||
|
| |||||||
Foreign Government Bonds 44.6% |
| |||||||
Belarus 1.4% |
| |||||||
Republic of Belarus International Bond | 2,000,000 | 2,152,840 | ||||||
|
|
Principal Amount | Value | |||||||
Cameroon, United Republic Of 0.7% |
| |||||||
Republic of Cameroon International Bond | $ | 1,000,000 | $ | 1,072,056 | ||||
|
| |||||||
Croatia 3.9% |
| |||||||
Croatia Government International Bond | ||||||||
Series Reg S | 3,250,000 | 3,637,491 | ||||||
6.375%, due 3/24/21 (a) | 2,000,000 | 2,117,600 | ||||||
|
| |||||||
5,755,091 | ||||||||
|
| |||||||
Dominican Republic 3.5% |
| |||||||
Dominican Republic International Bond | 5,000,000 | 5,268,750 | ||||||
|
| |||||||
Ecuador 3.2% |
| |||||||
Ecuador Government International Bond | 5,000,000 | 4,818,750 | ||||||
|
| |||||||
Egypt 1.2% |
| |||||||
Egypt Government Bond | EGP 31,000,000 | 1,779,765 | ||||||
|
| |||||||
El Salvador 1.3% |
| |||||||
El Salvador Government International Bond | $ | 2,000,000 | 1,957,500 | |||||
|
| |||||||
Ghana 1.2% |
| |||||||
Ghana Government International Bond | 1,500,000 | 1,846,320 | ||||||
|
| |||||||
Guatemala 2.0% |
| |||||||
Guatemala Government Bond | 3,000,000 | 2,970,000 | ||||||
|
| |||||||
Indonesia 1.9% |
| |||||||
Indonesia Government International Bond | 1,500,000 | 1,609,511 | ||||||
Indonesia Treasury Bond | IDR 20,000,000,000 | 1,259,649 | ||||||
|
| |||||||
2,869,160 | ||||||||
|
|
12 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Foreign Government Bonds (continued) |
| |||||||
Iraq 1.0% |
| |||||||
Iraq International Bond | $ | 1,500,000 | $ | 1,522,890 | ||||
|
| |||||||
Ivory Coast 1.2% |
| |||||||
Ivory Coast Government International Bond | 2,000,000 | 1,820,800 | ||||||
|
| |||||||
Kenya 0.7% |
| |||||||
Kenya Government International Bond | 1,000,000 | 991,450 | ||||||
|
| |||||||
Mexico 1.6% |
| |||||||
Mexican Bonos | MXN 47,500,000 | 2,317,929 | ||||||
|
| |||||||
Nigeria 2.0% |
| |||||||
Nigeria Government International Bond | $ | 3,000,000 | 2,949,780 | |||||
|
| |||||||
Pakistan 0.7% |
| |||||||
Pakistan Government International Bond | 1,000,000 | 1,082,500 | ||||||
|
| |||||||
Paraguay 2.3% |
| |||||||
Paraguay Government International Bond | 3,000,000 | 3,382,500 | ||||||
|
| |||||||
Russia 2.1% |
| |||||||
Russian Federal Bond-OFZ | RUB 80,000,000 | 1,190,802 | ||||||
Russian Foreign Bond | $ | 1,800,000 | 1,869,707 | |||||
|
| |||||||
3,060,509 | ||||||||
|
| |||||||
Saudi Arabia 1.3% |
| |||||||
Saudi Government International Bond | 2,000,000 | 1,972,400 | ||||||
|
|
Principal Amount | Value | |||||||
Senegal 0.9% |
| |||||||
Senegal Government International Bond | $ | 1,250,000 | $ | 1,304,750 | ||||
|
| |||||||
Turkey 3.0% |
| |||||||
Turkey Government International Bond | 5,225,000 | 4,417,006 | ||||||
|
| |||||||
Ukraine 3.2% |
| |||||||
Ukraine Government International Bond | ||||||||
7.75%, due 9/1/20 (a) | 1,000,000 | 1,000,720 | ||||||
Series Reg S | 4,000,000 | 3,723,200 | ||||||
|
| |||||||
4,723,920 | ||||||||
|
| |||||||
Uruguay 1.4% |
| |||||||
Uruguay Government International Bond | 1,500,000 | 2,040,000 | ||||||
|
| |||||||
Uzbekistan 1.4% |
| |||||||
Republic of Uzbekistan Bond | 2,000,000 | 2,024,364 | ||||||
|
| |||||||
Venezuela 0.8% |
| |||||||
Bollivarian Republic of Venezuela | 4,095,000 | 1,177,312 | ||||||
|
| |||||||
Vietnam 0.7% |
| |||||||
Vietnam Government International Bond | 1,000,000 | 1,048,835 | ||||||
|
| |||||||
Total Foreign Government Bonds | 66,327,177 | |||||||
|
| |||||||
TotalLong-Term Bonds | 142,653,436 | |||||||
|
| |||||||
Short-Term Investment 2.9% |
| |||||||
Affiliated Investment Company 2.9% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (f) | 4,371,753 | 4,371,753 | ||||||
|
| |||||||
TotalShort-Term Investment | 4,371,753 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Investment of Cash Collateral For Securities Loaned 1.2% |
| |||||||
Unaffiliated Investment Company 1.2% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (f) | $ | 1,833,227 | $ | 1,833,227 | ||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 1,833,227 | |||||||
|
| |||||||
Total Investments | 100.0 | % | 148,858,416 | |||||
Other Assets, Less Liabilities | 0.0 | ‡ | 12,179 | |||||
Net Assets | 100.0 | % | $ | 148,870,595 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Illiquid security—As of April 30, 2019, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $6,997,077, which represented 4.7% of the Fund’s net assets. |
(c) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $1,798,042 and the Fund received cash collateral with a value of $1,833,227 (See Note 2(K)). |
(d) | Issue in default. |
(e) | Issue in non-accrual status. |
(f) | Current yield as of April 30, 2019. |
Foreign Currency Forward Contracts
As of April 30, 2019, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||
EUR | 2,013,000 | USD | 2,251,822 | JPMorgan Chase Bank N.A. | 5/2/19 | $ | 5,960 | |||||||||||
USD | 2,287,345 | EUR | 2,013,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 29,563 | ||||||||||||
Total unrealized appreciation | 35,523 | |||||||||||||||||
USD | 2,315,484 | EUR | 2,054,000 | JPMorgan Chase Bank N.A. | 8/1/19 | $ | (6,137 | ) | ||||||||||
Total unrealized depreciation | (6,137 | ) | ||||||||||||||||
Net unrealized appreciation | $ | 29,386 |
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
The following abbreviations are used in the preceding pages:
EGP—Egyptian Pound
EUR—Euro
IDR—Indonesian Rupiah
MXN—Mexican Peso
RUB—New Russian Ruble
USD—United States Dollar
14 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets and liabilities:
Description | Quoted Active Assets | Significant Other Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Corporate Bonds | $ | — | $ | 76,326,259 | $ | — | $ | 76,326,259 | ||||||||
Foreign Government Bonds | — | 66,327,177 | — | 66,327,177 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds | — | 142,653,436 | — | 142,653,436 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 4,371,753 | — | — | 4,371,753 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 1,833,227 | — | — | 1,833,227 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 6,204,980 | 142,653,436 | — | 148,858,416 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (b) | — | 35,523 | — | 35,523 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 6,204,980 | $ | 142,688,959 | $ | — | $ | 148,893,939 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liability Valuation Inputs | ||||||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (b) | $ | — | $ | (6,137 | ) | $ | — | $ | (6,137 | ) | ||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 144,486,663 | ||
Investment in affiliated investment company, at value (identified cost $4,371,753) | 4,371,753 | |||
Due from custodian | 660,347 | |||
Cash denominated in foreign currencies | 50,092 | |||
Receivables: | ||||
Dividends and interest | 2,080,074 | |||
Fund shares sold | 81,607 | |||
Securities lending income | 435 | |||
Other assets | 54,072 | |||
Unrealized appreciation on foreign currency forward contracts | 35,523 | |||
|
| |||
Total assets | 151,820,566 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Collateral received for securities on loan | 1,833,227 | |||
Investment securities purchased | 660,347 | |||
Fund shares redeemed | 178,096 | |||
Manager (See Note 3) | 89,544 | |||
Transfer agent (See Note 3) | 47,925 | |||
NYLIFE Distributors (See Note 3) | 37,462 | |||
Professional fees | 36,977 | |||
Shareholder communication | 33,377 | |||
Custodian | 6,815 | |||
Trustees | 235 | |||
Accrued expenses | 616 | |||
Dividend payable | 19,213 | |||
Unrealized depreciation on foreign currency forward contracts | 6,137 | |||
|
| |||
Total liabilities | 2,949,971 | |||
|
| |||
Net assets | $ | 148,870,595 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 143,626 | ||
Additional paid-in capital | 162,097,403 | |||
|
| |||
162,241,029 | ||||
Total distributable earnings (loss) | (13,370,434 | ) | ||
|
| |||
Net assets | $ | 148,870,595 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 93,726,017 | ||
|
| |||
Shares of beneficial interest outstanding | 9,035,483 | |||
|
| |||
Net asset value per share outstanding | $ | 10.37 | ||
Maximum sales charge (4.50% of offering price) | 0.49 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.86 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 16,696,990 | ||
|
| |||
Shares of beneficial interest outstanding | 1,593,942 | |||
|
| |||
Net asset value per share outstanding | $ | 10.48 | ||
Maximum sales charge (4.50% of offering price) | 0.49 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.97 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 3,165,358 | ||
|
| |||
Shares of beneficial interest outstanding | 311,107 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.17 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 13,838,718 | ||
|
| |||
Shares of beneficial interest outstanding | 1,358,209 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.19 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 21,443,512 | ||
|
| |||
Shares of beneficial interest outstanding | 2,063,813 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.39 | ||
|
|
16 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) |
| |||
Income | ||||
Interest (a) | $ | 4,132,699 | ||
Dividends-affiliated | 40,713 | |||
Securities lending | 1,562 | |||
|
| |||
Total income | 4,174,974 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 504,718 | |||
Distribution/Service—Class A (See Note 3) | 108,827 | |||
Distribution/Service—Investor Class (See Note 3) | 20,041 | |||
Distribution/Service—Class B (See Note 3) | 16,664 | |||
Distribution/Service—Class C (See Note 3) | 87,821 | |||
Transfer agent (See Note 3) | 134,603 | |||
Registration | 44,963 | |||
Professional fees | 39,199 | |||
Shareholder communication | 19,515 | |||
Custodian | 15,979 | |||
Trustees | 1,703 | |||
Miscellaneous | 6,173 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,000,206 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (3,693 | ) | ||
|
| |||
Net expenses | 996,513 | |||
|
| |||
Net investment income (loss) | 3,178,461 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Unaffiliated investment transactions | (642,184 | ) | ||
Foreign currency transactions | (17,411 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | (659,595 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 9,867,287 | |||
Foreign currency forward contracts | 29,386 | |||
Translation of other assets and liabilities in foreign currencies | 8,226 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 9,904,899 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 9,245,304 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 12,423,765 | ||
|
|
(a) | Interest recorded net of foreign withholding taxes in the amount of $32,503. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,178,461 | $ | 6,836,483 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (659,595 | ) | (3,996,697 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 9,904,899 | (14,832,643 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 12,423,765 | (11,992,857 | ) | |||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (2,165,530 | ) | (4,090,630 | ) | ||||
Investor Class | (370,334 | ) | (669,061 | ) | ||||
Class B | (66,537 | ) | (150,872 | ) | ||||
Class C | (347,462 | ) | (772,754 | ) | ||||
Class I | (376,673 | ) | (718,293 | ) | ||||
|
| |||||||
Total distributions to shareholders | (3,326,536 | ) | (6,401,610 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 28,271,717 | 26,866,744 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 3,162,124 | 5,995,352 | ||||||
Cost of shares redeemed | (27,356,577 | ) | (64,621,234 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 4,077,264 | (31,759,138 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 13,174,493 | (50,153,605 | ) | |||||
Net Assets | ||||||||
Beginning of period | 135,696,102 | 185,849,707 | ||||||
|
| |||||||
End of period | $ | 148,870,595 | $ | 135,696,102 | ||||
|
|
18 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.71 | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | $ | 11.52 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.24 | 0.45 | 0.53 | 0.57 | 0.62 | 0.68 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.67 | (1.19 | ) | 0.31 | 0.87 | (1.51 | ) | (0.14 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.91 | (0.74 | ) | 0.83 | 1.45 | (0.87 | ) | 0.54 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.43 | ) | (0.36 | ) | (0.29 | ) | (0.63 | ) | (0.65 | ) | |||||||||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||||||||||||||||
Return of capital | — | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.25 | ) | (0.43 | ) | (0.47 | ) | (0.53 | ) | (0.91 | ) | (0.68 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 10.37 | $ | 9.71 | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.46 | % | (6.95 | %) | 8.18 | % | 15.63 | % | (7.54 | %) | 4.85 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 4.75 | %†† | 4.36 | % | 5.04 | % | 5.70 | %(c) | 6.18 | % | 5.88 | % | |||||||||||||||||||||||
Net expenses (d) | 1.28 | %†† | 1.26 | % | 1.22 | % | 1.22 | %(e) | 1.23 | % | 1.17 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 93,726 | $ | 86,452 | $ | 110,238 | $ | 109,657 | $ | 98,573 | $ | 132,654 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.69%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.23%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.80 | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | $ | 11.60 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.22 | 0.43 | 0.52 | 0.55 | 0.61 | 0.66 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.69 | (1.20 | ) | 0.31 | 0.88 | (1.52 | ) | (0.14 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.91 | (0.77 | ) | 0.82 | 1.44 | (0.89 | ) | 0.52 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.41 | ) | (0.35 | ) | (0.27 | ) | (0.61 | ) | (0.63 | ) | |||||||||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||||||||||||||||
Return of capital | — | — | (0.10 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.23 | ) | (0.41 | ) | (0.45 | ) | (0.51 | ) | (0.89 | ) | (0.66 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 10.48 | $ | 9.80 | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.44 | % | (7.18 | %) | 7.99 | % | 15.38 | % | (7.66 | %) | 4.64 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 4.49 | %†† | 4.15 | % | 4.86 | % | 5.50 | %(c) | 6.01 | % | 5.71 | % | |||||||||||||||||||||||
Net expenses (d) | 1.55 | %†† | 1.47 | % | 1.42 | % | 1.42 | %(e) | 1.41 | % | 1.34 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.57 | %†† | 1.49 | % | 1.42 | % | 1.42 | % | 1.41 | % | 1.34 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 16,697 | $ | 15,911 | $ | 18,613 | $ | 32,318 | $ | 25,130 | $ | 27,033 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.49%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.43%. |
20 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.52 | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | $ | 11.35 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.34 | 0.43 | 0.47 | 0.52 | 0.56 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.67 | (1.18 | ) | 0.30 | 0.86 | (1.48 | ) | (0.13 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.00 | ‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.85 | (0.84 | ) | 0.72 | 1.34 | (0.94 | ) | 0.43 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.33 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | |||||||||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||||||||||||||||
Return of capital | — | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.33 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 10.17 | $ | 9.52 | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 8.98 | % | (7.98 | %) | 7.20 | % | 14.60 | % | (8.36 | %) | 3.87 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 3.77 | %†† | 3.37 | % | 4.11 | % | 4.78 | %(c) | 5.24 | % | 4.97 | % | |||||||||||||||||||||||
Net expenses (d) | 2.30 | %†† | 2.22 | % | 2.17 | % | 2.17 | %(e) | 2.16 | % | 2.09 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.32 | %†† | 2.24 | % | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,165 | $ | 3,660 | $ | 6,012 | $ | 7,506 | $ | 8,111 | $ | 12,109 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.77%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.54 | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | $ | 11.37 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.35 | 0.43 | 0.47 | 0.52 | 0.56 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.67 | (1.18 | ) | 0.29 | 0.86 | (1.49 | ) | (0.13 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | 0.01 | 0.02 | (0.00 | )‡ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.85 | (0.83 | ) | 0.72 | 1.34 | (0.95 | ) | 0.43 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.33 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | |||||||||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||||||||||||||||
Return of capital | — | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.33 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 10.19 | $ | 9.54 | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 8.97 | % | (7.88 | %) | 7.19 | % | 14.58 | % | (8.43 | %) | 3.87 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 3.79 | %†† | 3.39 | % | 4.11 | % | 4.77 | %(c) | 5.24 | % | 4.97 | % | |||||||||||||||||||||||
Net expenses (d) | 2.30 | %†† | 2.22 | % | 2.17 | % | 2.17 | %(e) | 2.16 | % | 2.09 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.32 | %†† | 2.24 | % | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,839 | $ | 19,246 | $ | 28,270 | $ | 35,789 | $ | 37,808 | $ | 56,199 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.76%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
22 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.72 | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | $ | 11.53 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.24 | 0.48 | 0.56 | 0.59 | 0.65 | 0.71 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.69 | (1.20 | ) | 0.32 | 0.88 | (1.52 | ) | (0.14 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.93 | (0.72 | ) | 0.87 | 1.48 | (0.85 | ) | 0.57 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.26 | ) | (0.46 | ) | (0.39 | ) | (0.32 | ) | (0.65 | ) | (0.68 | ) | |||||||||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||||||||||||||||
Return of capital | — | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.26 | ) | (0.46 | ) | (0.50 | ) | (0.56 | ) | (0.93 | ) | (0.71 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 10.39 | $ | 9.72 | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.69 | % | (6.80 | %) | 8.54 | % | 15.90 | % | (7.30 | %) | 5.11 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 4.90 | %†† | 4.60 | % | 5.22 | % | 5.96 | %(c) | 6.38 | % | 6.13 | % | |||||||||||||||||||||||
Net expenses (d) | 1.03 | %†† | 1.01 | % | 0.97 | % | 0.97 | %(e) | 0.98 | % | 0.92 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 21,444 | $ | 10,428 | $ | 22,717 | $ | 13,759 | $ | 16,825 | $ | 41,174 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.95%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.98%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Emerging Markets Debt Fund (the “Fund”), a “diversified fund” as that term is defined in the 1940 Act as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has six classes of shares registered for sale. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on August 31, 2007. Investor Class shares commenced operations on February 28, 2008. Class R6 shares were registered for sale effective as of February 28, 2017. As of April 30, 2019, Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility,
Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A and Investor Class shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income. Capital appreciation is a secondary objective.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain
24 | MainStay MacKay Emerging Markets Debt Fund |
tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation
25 |
Notes to Financial Statements(Unaudited) (continued)
date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of
an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects
26 | MainStay MacKay Emerging Markets Debt Fund |
otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income frompayment-in-kind securities, to the extent the Fund held any such securities during the six-month period ended April 30, 2019, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be
collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(I) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not
27 |
Notes to Financial Statements(Unaudited) (continued)
engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of April 30, 2019, open foreign currency forward contracts are shown in the Portfolio of Investments.
(J) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(K) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk
of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $1,798,042 and the Fund received cash collateral with a value of $1,833,227.
(L) High Yield and General Debt Securities Risk. The Fund’s principal investments include high yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market economic or political conditions, these securities may experience higher than normal default rates.
(M) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(N) Counterparty Credit Risk. In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains collateral posting terms and netting provisions. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels or if the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
28 | MainStay MacKay Emerging Markets Debt Fund |
(O) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(P) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into foreign currency forward contracts to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of April 30, 2019:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | $ | 35,523 | $ | 35,523 | |||||
|
| |||||||||
Total Fair Value | $ | 35,523 | $ | 35,523 | ||||||
|
|
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | $ | (6,137 | ) | $ | (6,137 | ) | |||
|
| |||||||||
Total Fair Value | $ | (6,137 | ) | $ | (6,137 | ) | ||||
|
|
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019:
Change in Unrealized Appreciation (Depreciation)
Statement of Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $ | 29,386 | $ | 29,386 | |||||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 29,386 | $ | 29,386 | ||||||
|
|
Average Notional Amount
Foreign Exchange Contracts Risk | Total | |||||||
Forward Contracts Long (a) | $ | 2,251,822 | $ | 2,251,822 | ||||
Forward Contracts Short (b) | $ | (3,445,087 | ) | $ | (3,445,087 | ) | ||
|
|
|
|
(a) | Positions were open one month during the reporting period. |
(b) | Positions were open two months during the reporting period. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.70% to $500 million and 0.65% in excess of $500 million, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in
29 |
Notes to Financial Statements(Unaudited) (continued)
excess of $100 million. During the six-month period ended April 30, 2019, the effective management fee rate was 0.73% inclusive of a fee for fund accounting services of 0.03% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $504,718 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $3,693.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and
Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $6,074 and $1,222, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $1,062, $33, $1,567 and $388, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 51,118 | ||
Investor Class | 32,653 | |||
Class B | 6,801 | |||
Class C | 35,858 | |||
Class I | 8,173 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 32,536 | $ | (28,164 | ) | $ | — | $ | — | $ | 4,372 | $ | 41 | $ | — | 4,372 |
30 | MainStay MacKay Emerging Markets Debt Fund |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 148,699,610 | $ | 5,235,314 | $ | (5,076,508 | ) | $ | 158,806 |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $12,648,347 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $ — | $12,648 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 6,401,610 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the
Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $20,272 and $14,839, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,491,538 | $ | 15,166,517 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 205,198 | 2,043,824 | ||||||
Shares redeemed | (1,651,730 | ) | (16,549,220 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 45,006 | 661,121 | ||||||
Shares converted into Class A (See Note 1) | 97,587 | 990,933 | ||||||
Shares converted from Class A (See Note 1) | (14,259 | ) | (147,720 | ) | ||||
|
| |||||||
Net increase (decrease) | 128,334 | $ | 1,504,334 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,033,435 | $ | 10,727,445 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 371,003 | 3,815,066 | ||||||
Shares redeemed | (2,685,777 | ) | (27,743,123 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,281,339 | ) | (13,200,612 | ) | ||||
Shares converted into Class A (See Note 1) | 120,973 | 1,265,379 | ||||||
Shares converted from Class A (See Note 1) | (62,221 | ) | (638,453 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,222,587 | ) | $ | (12,573,686 | ) | |||
|
|
31 |
Notes to Financial Statements(Unaudited) (continued)
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 31,967 | $ | 325,701 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,192 | 363,550 | ||||||
Shares redeemed | (120,450 | ) | (1,221,268 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (52,291 | ) | (532,017 | ) | ||||
Shares converted into Investor Class (See Note 1) | 76,194 | 779,952 | ||||||
Shares converted from Investor Class (See Note 1) | (53,616 | ) | (547,533 | ) | ||||
|
| |||||||
Net increase (decrease) | (29,713 | ) | $ | (299,598 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 107,694 | $ | 1,135,613 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 63,477 | 658,302 | ||||||
Shares redeemed | (246,848 | ) | (2,577,946 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (75,677 | ) | (784,031 | ) | ||||
Shares converted into Investor Class (See Note 1) | 107,684 | 1,120,234 | ||||||
Shares converted from Investor Class (See Note 1) | (103,096 | ) | (1,088,826 | ) | ||||
|
| |||||||
Net increase (decrease) | (71,089 | ) | $ | (752,623 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 7,701 | $ | 74,062 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,136 | 59,696 | ||||||
Shares redeemed | (59,854 | ) | (578,137 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (46,017 | ) | (444,379 | ) | ||||
Shares converted from Class B (See Note 1) | (27,158 | ) | (264,783 | ) | ||||
|
| |||||||
Net increase (decrease) | (73,175 | ) | $ | (709,162 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 11,487 | $ | 117,997 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13,374 | 135,164 | ||||||
Shares redeemed | (138,705 | ) | (1,411,323 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (113,844 | ) | (1,158,162 | ) | ||||
Shares converted from Class B (See Note 1) | (64,534 | ) | (658,334 | ) | ||||
|
| |||||||
Net increase (decrease) | (178,378 | ) | $ | (1,816,496 | ) | |||
|
|
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 17,587 | $ | 170,953 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 32,976 | 320,714 | ||||||
Shares redeemed | (629,455 | ) | (6,278,403 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (578,892 | ) | (5,786,736 | ) | ||||
Shares converted from Class C (See Note 1) | (80,963 | ) | (810,849 | ) | ||||
|
| |||||||
Net increase (decrease) | (659,855 | ) | $ | (6,597,585 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 147,944 | $ | 1,506,123 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,549 | 713,019 | ||||||
Shares redeemed | (841,462 | ) | (8,512,109 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (622,969 | ) | (6,292,967 | ) | ||||
Shares converted from Class C (See Note 1) | (1,151 | ) | (12,281 | ) | ||||
|
| |||||||
Net increase (decrease) | (624,120 | ) | $ | (6,305,248 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,225,122 | $ | 12,534,484 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 37,169 | 374,340 | ||||||
Shares redeemed | (271,255 | ) | (2,729,549 | ) | ||||
|
| |||||||
Net increase (decrease) | 991,036 | $ | 10,179,275 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,296,637 | $ | 13,379,566 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 65,366 | 673,801 | ||||||
Shares redeemed | (2,375,313 | ) | (24,376,733 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,013,310 | ) | (10,323,366 | ) | ||||
Shares converted into Class I (See Note 1) | 1,130 | 12,281 | ||||||
|
| |||||||
Net increase (decrease) | (1,012,180 | ) | $ | (10,311,085 | ) | |||
|
|
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
32 | MainStay MacKay Emerging Markets Debt Fund |
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified, other than the following:
At a meeting held on March 12-13, 2019, the Board of Trustees considered and approved submitting the following proposal (“Proposal”) to shareholders of the Fund at a special meeting held on May 24, 2019 (with any postponements or adjournments, “Special Meeting”):
1. | To approve a new subadvisory agreement between New York Life Investments, the Fund’s investment manager, and Candriam Luxembourg S.C.A. (“Candriam Luxembourg”) with respect to the Fund; |
2. | To permit New York Life Investments, under certain circumstances, to enter into and/or materially amend agreements with affiliated and unaffiliated subadvisors on behalf of the Fund without obtaining shareholder approval. |
On or about April 15, 2019, shareholders of record of the Fund as of the close of business on March 25, 2019 were sent a proxy statement containing further information regarding the Proposal. The proxy statement also included information about the Special Meeting, at which
shareholders of the Fund were asked to consider and approve the Proposal. In addition, the proxy statement included information about voting on the Proposal and options shareholders had to either attend the Special Meeting in person or by proxy to authorize and instruct New York Life Investment Management LLC how to vote their respective shares.
The results of the Proposal were as follows:
Proposal 1—To approve a new subadvisory agreement between New York Life Investments and Candriam Luxembourg:
Votes For | Votes Against | Abstentions | Total | |||
6,079,568 | 156,097 | 974,187 | 7,209,852 |
Proposal 2—To permit New York Life Investments, under certain circumstances, to enter into and/or materially amend agreements with affiliated and unaffiliated subadvisors on behalf of the Fund without obtaining shareholder approval:
Votes For | Votes Against | Abstentions | Total | |||
5,790,700 | 398,356 | 1,020,796 | 7,209,852 |
The Special Meeting was held on June 7, 2019, and the Proposals passed. Effective June 21, 2019, Candriam Luxembourg serves as the subadvisor to the Fund.
33 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
Board Consideration and Approval of Management Agreement and Subadvisory Agreement with MacKay Shields LLC
The continuation of the Management Agreement with respect to the MainStay MacKay Emerging Markets Debt Fund (now known as MainStay Candriam Emerging Markets Debt Fund) (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in
executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the
34 | MainStay MacKay Emerging Markets Debt Fund |
advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an
increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
35 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
36 | MainStay MacKay Emerging Markets Debt Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board considered its discussions with representatives from New York Life Investments regarding the management fee paid by the Fund.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role
that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
37 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
Board Consideration and Approval of Subadvisory Agreement with Candriam Luxembourg S.C.A.
The Subadvisory Agreement between New York Life Investment Management LLC (“New York Life Investments”) and Candriam Luxembourg S.C.A. (“Candriam Luxembourg”) with respect to the MainStay MacKay Emerging Markets Debt Fund (now known as the MainStay Candriam Emerging Markets Debt Fund) (“Fund”) (the “New Subadvisory Agreement”), is subject to review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its March12-13, 2019in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved the New Subadvisory Agreement for an initialtwo-year period, subject to shareholder approval (which was obtained at a shareholder meeting held on June 7, 2019).
In reaching the decisions to approve the repositioning of the Fund (“Repositioning”) and the New Subadvisory Agreement, the Trustees considered information furnished by New York Life Investments and Candriam Luxembourg in connection with meetings of the Board and its Contracts, Investment and Risk and Compliance Oversight Committees held on March 6 and12-13, 2019, as well as other information furnished to the Board throughout the year as deemed relevant to each Trustee. The Board also considered information provided by Candriam Luxembourg in response to requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees. In addition, the Board considered information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the New Subadvisory Agreement and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments at meetings held on March 6 and12-13, 2019. The Board also considered information provided on the fees charged to other investment advisory clients of Candriam Luxembourg that follow investment strategies similar to those proposed for the Fund, as repositioned, and the rationale for any differences in the Fund’s subadvisory fees and the fees charged to those other investment advisory clients. The Independent Trustees also met in executive session with their independent legal counsel and met with senior management of New York Life Investments without other representatives of New York Life Investments present to discuss and consider matters relating to the Repositioning and the New Subadvisory Agreement.
The Board noted that the material terms of the New Subadvisory Agreement are substantially identical to the terms of the then-current subadvisory agreement with MacKay Shields LLC (“MacKay Shields”) with respect to the Fund, including that the subadvisory fee schedule to be paid by New York Life Investments to Candriam Luxembourg under
the New Subadvisory Agreement is the same as the subadvisory fee schedule paid by New York Life Investments to MacKay Shields under the then-current subadvisory agreement. The Board also noted that both MacKay Shields and Candriam Luxembourg are subsidiaries of New York Life Insurance Company.
In considering the Repositioning and the New Subadvisory Agreement, the Trustees reviewed and evaluated the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below, and included, among other factors: (i) the nature, extent and quality of the services to be provided to the Fund by Candriam Luxembourg; (ii) the qualifications of the proposed portfolio managers of the Fund and the historical investment performance of a fund managed by Candriam Luxembourg that pursues strategies similar to those of the Fund, as repositioned; (iii) the costs and profitability relating to New York Life Investments’ and its affiliates’ relationships with the Fund; (iv) the extent to which economies of scale may be realized if the Fund grows and the extent to which economies of scale may benefit the Fund shareholders; and (v) the reasonableness of the Fund’s proposed fees, including the subadvisory fees to be paid by New York Life Investments to Candriam Luxembourg, particularly as compared to a similar fund managed by Candriam Luxembourg, and management fees compared to third-party “peer funds.” Although the Board recognized that the comparisons between the proposed subadvisory fees and estimated expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the proposed subadvisory fees and estimated overall total ordinary operating expenses as compared to these “peer funds.”
Although individual Trustees may have weighed certain factors or information differently, the Board’s decisions to approve the Repositioning and the New Subadvisory Agreement were based on a consideration of the information provided to the Board in connection with its consideration of the Repositioning and the New Subadvisory Agreement, as well as other information provided to the Trustees throughout the year, as deemed relevant to each Trustee. The Trustees noted that, throughout the year, the Trustees would be afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and Candriam Luxembourg. The Board took note of New York Life Investments’ belief that Candriam Luxembourg, with its resources and historical investment performance track record for strategies similar to those of the Fund, as repositioned, is well qualified to serve as the Fund’s subadvisor. The Board also considered information about the potential costs of the Repositioning and associated tax considerations. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available, and that these shareholders, having had the opportunity to consider other investment options, would have chosen to invest in or remain invested in the Fund. A summary of the factors that figured prominently in the Board’s decisions to approve the Repositioning and the New Subadvisory Agreement is provided immediately below.
Nature, Extent and Quality of Services to be Provided by Candriam Luxembourg
In considering the Repositioning and the New Subadvisory Agreement, the Board considered New York Life Investments’ responsibilities as
38 | MainStay MacKay Emerging Markets Debt Fund |
manager of the Fund, noting that New York Life Investments is responsible for supervising the Fund’s subadvisor. The Board examined the nature, extent and quality of the proposed investment advisory services that Candriam Luxembourg would provide to the Fund. Further, the Board evaluated the following with regard to Candriam Luxembourg:
• | experience in providing investment advisory services with respect to emerging markets debt strategies; |
• | experience in serving as advisor to anon-U.S. fund with similar strategies as those of the Fund, as repositioned (the “Candriam Luxembourg Portfolio”), and the performance track record of the Candriam Luxembourg Portfolio; |
• | experience of investment advisory, senior management and administrative personnel; |
• | overall legal and compliance environment, resources and history and policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Candriam Luxembourg; |
• | ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund; |
• | portfolio construction, risk management and overall processes; |
• | experience and qualifications of the Fund’s proposed portfolio managers, the number of accounts managed by the portfolio managers and Candriam Luxembourg’s compensation structure for the portfolio managers; and |
• | overall reputation, financial condition and assets under management. |
Although Candriam Luxembourg has not previously advised a fund registered under the 1940 Act, the Board noted that Candriam Luxembourg is affiliated with New York Life Investments and other subadvisors to funds registered under the 1940 Act and will have the opportunity to benefit from the legal, compliance and control infrastructure and other relevant capabilities of its affiliates. The Board also considered Candriam Luxembourg’s track record, experience, and reputation with respect to emerging market debt strategies. Based on these and other considerations deemed relevant to each Trustee, the Board concluded, within the context of its overall determinations regarding the Repositioning and the New Subadvisory Agreement, that the Fund is likely to benefit from the nature, extent and quality of investment advisory services to be provided by Candriam Luxembourg as a result of Candriam Luxembourg’s experience, personnel, operations and resources, particularly with respect to strategies similar to those pursued by the Fund, as repositioned.
Investment Performance
In connection with the Board’s consideration of the Repositioning and the New Subadvisory Agreement, the Board evaluated investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus, with a greater emphasis generally placed on longer-term performance. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports included, among other items, information on the Fund’s gross
and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered the performance of the Candriam Luxembourg Portfolio over various periods ending January 31, 2019, noting that the Candriam Luxembourg Portfolio performed in the fourth decile of its Morningstar peer group for theyear-to-date and3-year periods, seventh decile for the1-year period, and first decile for the5- and10-year periods.
The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance and other alternatives to the Repositioning and the New Subadvisory Agreement considered by New York Life Investments. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken to seek to enhance Fund investment performance and discussions between the Fund’s then-current portfolio management team and the Investment Committee of the Board. The Board further considered that shareholders may benefit from Candriam Luxembourg’s investment process, including its portfolio construction and risk management processes. The Board noted that the Repositioning had not yet been implemented so an investment performance track record for the Fund, as repositioned, was not available.
The Board evaluated the Fund’s proposed portfolio management team as well as the Fund’s proposed portfolio managers, investment process, strategies and risks. The Board noted that Candriam Luxembourg currently manages the Candriam Luxembourg Portfolio, which has investment strategies similar to those of the Fund, as repositioned, and other emerging markets debt strategies. The Board considered the historical performance of the Candriam Luxembourg Portfolio, which has been managed, in part, by the proposed portfolio managers for the Fund. Based on these considerations, the Board concluded that the Fund was likely to be managed responsibly and capably by Candriam Luxembourg.
Also based on these considerations, the Board concluded, within the context of its overall determinations regarding the Repositioning and the New Subadvisory Agreement, that the selection of Candriam Luxembourg as the subadvisor to the Fund is likely to benefit the Fund’s long-term investment performance.
Costs of the Services to be Provided, and Profits to be Realized, by Candriam Luxembourg
The Board considered the estimated costs of the services to be provided by Candriam Luxembourg under the New Subadvisory Agreement and the anticipated profitability of New York Life Investments and its affiliates due to their relationships with the Fund and with respect to the New Subadvisory Agreement. Because Candriam Luxembourg (like MacKay Shields) is an affiliate of New York Life Investments whose subadvisory fees would be paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and Candriam Luxembourg in the aggregate.
The Board also considered, among other factors, investments by Candriam Luxembourg and its affiliates in personnel, systems, equipment and other resources and infrastructure to support and manage the
39 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of Candriam Luxembourg and acknowledged that Candriam Luxembourg must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for Candriam Luxembourg to provide high-quality services to the Fund. The Board considered the impact that the engagement of Candriam Luxembourg might have on the overall profitability of the Fund to New York Life Investments and its affiliates, and noted that MacKay Shields is also affiliated with New York Life Investments.
The Board also considered certainfall-out benefits that may be realized by Candriam Luxembourg due to its relationship with the Fund, including reputational and other indirect benefits.
The Board took into account the fact that the Fund would undergo changes to its principal investment strategies in connection with the Repositioning. The Board noted estimates from New York Life Investments and Candriam Luxembourg that a portion of the holdings of the Fund would be sold to align the Fund’s holdings with the strategies that would be pursued by Candriam Luxembourg. Additionally, the Board considered New York Life Investments’ representation that Candriam Luxembourg would seek to minimize potential indirect costs, such as market impact and costs and tax considerations, associated with the Repositioning. The Board also considered that the Fund would bear the costs of the Repositioning, but that New York Life Investments will bear 100% of the direct expenses relating to the special shareholder meeting, including the preparation, distribution, solicitation, and tabulation of the proxy and costs related to the necessary prospectus supplements.
After evaluating the information deemed relevant by each Trustee, the Board concluded, within the context of its overall determinations regarding the Repositioning and the New Subadvisory Agreement, that any profits expected to be realized by New York Life Investments and its affiliates due to their relationships with the Fund, were not excessive.
Subadvisory Fees and Estimated Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the New Subadvisory Agreement and the Fund’s estimated total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to Candriam Luxembourg (like MacKay Shields) would be paid by New York Life Investments, not the Fund. The Board also considered the amount of the management fee expected to be retained by New York Life Investments.
In assessing the reasonableness of the Fund’s proposed fees and estimated expenses, the Board considered information provided by New York Life Investments on the fees and expenses of “peer funds” and information provided by Candriam Luxembourg concerning the fees charged to other investment advisory clients, including a fund with an investment objective similar to the Fund, as repositioned. The Board also considered the Fund’s contractual management and subadvisory fee schedules and noted that the subadvisory fee schedule to be paid by New York Life Investments to Candriam Luxembourg under the New Subadvisory Agreement is the same as the subadvisory fee
schedule paid by New York Life Investments to MacKay Shields under the then-current subadvisory agreement. In addition, the Board noted the proposed elimination of the fund accounting services fee from the management agreement and the proposed expense limitation agreement for the Fund, as repositioned.
After considering all of the factors outlined above, the Board concluded that the Fund’s overall fees were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Repositioning, support a conclusion that the estimated total ordinary operating expenses are reasonable.
Extent to Which Economies of Scale May be Realized if the Fund Grows
The Board considered whether the Fund’s proposed expense structure would permit economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing the Fund’s proposed management and subadvisory fee breakpoint schedules.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Repositioning and the New Subadvisory Agreement, that the Fund’s proposed expense structure would appropriately reflect economies of scale for the benefit of Fund shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the Repositioning and, subject to shareholder approval, the New Subadvisory Agreement.
40 | MainStay MacKay Emerging Markets Debt Fund |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
41 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1738550 MS065-19 | MSEMD10-06/19 (NYLIM) NL218 |
MainStay Income Builder Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | 1.38 7.28 | %
| | 0.73 6.59 | %
| | 3.39 4.57 | %
| | 9.09 9.71 | %
| | 1.01 1.01 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 1.36 7.26 |
| | 0.59 6.45 |
| | 3.25 4.42 |
| | 8.84 9.46 |
| | 1.14 1.14 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 12/29/1987 | | 1.81 6.81 |
| | 0.66 5.66 |
| | 3.30 3.64 |
| | 8.65 8.65 |
| | 1.89 1.89 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 5.82 6.82 |
| | 4.62 5.62 |
| | 3.64 3.64 |
| | 8.64 8.64 |
| | 1.89 1.89 |
| ||||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 7.45 | 6.85 | 4.84 | 9.99 | 0.76 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/27/2015 | 7.23 | 6.49 | 3.88 | N/A | 1.11 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 7.16 | 6.23 | 8.00 | N/A | 1.36 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | 7.51 | 6.96 | 5.84 | N/A | 0.66 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
MSCI World Index4 | 8.83 | % | 6.48 | % | 7.31 | % | 11.58 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index5 | 5.49 | 5.29 | 2.57 | 3.72 | ||||||||||||
Blended Benchmark Index6 | 7.36 | 6.17 | 5.09 | 7.84 | ||||||||||||
Morningstar World Allocation Category Average7 | 5.99 | 1.46 | 3.18 | 7.86 |
4. | The MSCI World Index is the Fund’s primarybroad-based securities market index for comparison purposes. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the Bloomberg Barclays U.S. Aggregate Bond Index as a secondary benchmark. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Blended Benchmark Index as an additional benchmark. The Blended Benchmark Index consists of the MSCI World Index and the Bloomberg Barclays U.S. Aggregate Bond Index weighted 50%/50%, respectively. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The Morningstar World Allocation Category Average is representative of funds that seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. While these portfolios do explore the whole world, most of them focus on the U.S., Canada, Japan, and the larger markets in Europe. It is rare for such portfolios to invest more than 10% of their assets in emerging markets. These portfolios typically have at least 10% of assets in bonds, less than 70% of assets in stocks, and at least 40% of assets in non-U.S. stocks or bonds. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Income Builder Fund |
Cost in Dollars of a $1,000 Investment in MainStay Income Builder Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
�� | ||||||||||||||||||||||
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,072.80 | $ | 5.24 | $ | 1,019.74 | $ | 5.11 | 1.02% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,072.60 | $ | 5.96 | $ | 1,019.04 | $ | 5.81 | 1.16% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,068.10 | $ | 9.79 | $ | 1,015.32 | $ | 9.54 | 1.91% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,068.20 | $ | 9.79 | $ | 1,015.32 | $ | 9.54 | 1.91% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,074.50 | $ | 3.96 | $ | 1,020.98 | $ | 3.86 | 0.77% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,072.30 | $ | 5.75 | $ | 1,019.24 | $ | 5.61 | 1.12% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,071.60 | $ | 7.04 | $ | 1,018.00 | $ | 6.85 | 1.37% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,075.10 | $ | 3.45 | $ | 1,021.47 | $ | 3.36 | 0.67% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
See Portfolio of Investments beginning on page 12 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings or Issuers as of April 30, 2019(excluding short-term investment) (Unaudited)
1. | Federal National Mortgage Association, 1.00%–5.00%, due 12/30/30–2/1/49 |
2. | Federal Home Loan Mortgage Corporation, 2.50%–5.00%, due 6/15/40–3/1/49 |
3. | United States Treasury Bonds, 3.00%–4.50%, |
4. | Bank of America Corp., 2.738%–8.57%, due 6/17/19–4/19/26 |
5. | Morgan Stanley, 3.125%–7.25%, due 7/15/19–4/1/32 |
6. | Government National Mortgage Association, 3.00%–6.50%, due 4/15/29–4/20/49 |
7. | AT&T, Inc. |
8. | Verizon Communications, Inc. |
9. | Altria Group, Inc. |
10. | United States Treasury Inflation–Indexed Notes, |
8 | MainStay Income Builder Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Jae S. Yoon and Jonathan Swaney of New York Life Investment Management LLC, the Fund’s Manager; Dan Roberts, PhD, Stephen R. Cianci, CFA, and Neil Moriarty, III, of MacKay Shields LLC, the Subadvisor for the fixed-income portion of the Fund; and William W. Priest, CFA, Michael A. Welhoelter, CFA, John Tobin, PhD, CFA, and Kera Van Valen, CFA, of Epoch Investment Partners, Inc., the Subadvisor for the equity portion of the Fund.
How did MainStay Income Builder Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay Income Builder Fund returned 7.45%, underperforming the 8.83% return of the Fund’s primary benchmark, the MSCI World Index. Over the same period, Class I shares outperformed the 5.49% return of the Bloomberg Barclays U.S. Aggregate Bond Index, which is the Fund’s secondary benchmark, and the 7.36% return of the Blended Benchmark Index, which is an additional benchmark of the Fund. For the six months ended April 30, 2019, Class I shares of the Fund outperformed the 5.99% return of the Morningstar World Allocation Category Average.1
Were there any changes to the Fund during the reporting period?
Effective December 31, 2018, Louis Cohen no longer served as a portfolio manager of the fixed-income portion of the Fund. Dan Roberts, Stephen Cianci and Neil Moriarty continue to manage the fixed-income portion of the Fund. For more information about this change refer to the supplement dated October 18, 2018.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
During the reporting period, the fixed-income portion of the Fund used equity futures to increase the Fund’s equity beta.2 This position enhanced returns. Over the same period, the fixed-income portion of the Fund also used currency forwards to hedge currency exposure, which also positively affected the Fund’s performance.
What factors affected the relative performance of the equity portion of the Fund during the reporting period?
The Fund provided a positive return for the six months ended April 30, 2019, but trailed the return of the MSCI World Index. In the equity portion of the Fund, relative performance was negatively affected by overweight exposure to the telecommunications industry, which lagged the broader communication services sector during the reporting period. Stock selection in consumer staples also detracted from relative
performance as the markets reacted to proposed regulatory changes and remained concerned over parts of the sector’s longer-term growth prospects.
During the reporting period, which sectors and countries were the strongest positive contributors to the relative performance of the equity portion of the Fund and which sectors and countries were particularly weak?
During the reporting period, the strongest positive sector contributors to the performance of the equity portion of the Fund relative to the MSCI World Index included financials, utilities and health care. (Contributions take weightings and total returns into account.) Favorable stock selection made financials the Fund’s strongest-contributing sector relative to the MSCI World Index. Over the same period, the communication services and consumer staples sectors were the largest detractors from the relative performance of the equity portion of the Fund, followed by industrials. Specifically, stock selection in communication services and consumer staples hindered relative performance. During the reporting period, the strongest positive country contributions to the performance of the equity portion of the Fund relative to the MSCI World Index came from holdings in Japan and Italy, while U.S. and U.K. holdings detracted.
During the reporting period, which individual stocks made the strongest positive contributions to absolute performance in the equity portion of the Fund and which stocks detracted the most?
Micro Focus and Cisco Systems topped the list of positive individual contributors to the absolute performance of the equity portion of the Fund during the reporting period. Micro Focus is a global provider of enterprise software solutions. Shares rose on strong full-year results, with sales displaying an improving cadence and showing signs that the company was rebuilding its product pipeline. In our opinion, management also provided a solid roadmap for its integration of Hewlett Packard Enterprises, which the company had earlier acquired. In our opinion, Micro Focus pays a well-covered dividend, is executing on its share repurchase program and has recommitted to returning proceeds from the pending divestiture of its Suse portfolio to shareholders. Cisco is the world’s largest supplier of routers and switches. Cisco’s return totop-line growth, facilitated by its strong product portfolio and adoption of a subscription service
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | Beta is a measure of volatility in relation to the market as a whole. A beta higher than 1 indicates that a security or portfolio will tend to exhibit higher volatility than the market. A beta lower than 1 indicates that a security or portfolio will tend to exhibit lower volatility than the market. |
9 |
model, pushed shares higher. The company’s subscription service, in tandem with its latest generation networking hardware, helped it capture market share. We believe the expanded penetration of its software services, along with the company’s success in broadening its product portfolio, drove Cisco’s recent results. The company has a policy of returning in excess of 50% of cash generation through a progressive dividend and share repurchases.
The most significant detractors from the absolute performance of the equity portion of the Fund included Altria and CenturyLink. Shares of domestic tobacco producer Altria declined as investors digested an announcement in late 2018 that the FDA intended to seek a nationwide ban on menthol cigarettes along with restrictions on the sale of flavored electronic cigarettes. However, the potential ban faced a lengthy rule-making process. We believe that the company continues to drive growth with strong cigarette pricing and a disciplined approach to cost controls, while consistently returning cash to shareholders through growing dividends. The Fund retained its position in Altria as of the end of the reporting period. CenturyLink is a provider of networking services, including fixed-line telephone, Internet, cable TV and IT data services. The company posted solid full-year results, achieving targeted synergy savings from its acquisition of competitor Level 3 faster than anticipated. Shares, however, were pressured by a change in capital management strategy that caused investors to reexamine CenturyLink’s longer-term growth projections. Specifically, company management decided to adjust their capital priorities, announcing that they would reduce the dividend paid to shareholders and concentrate on a three-year debt reduction plan. As a result, the Fund sold its position in CenturyLink.
What were some of the largest purchases and sales in the equity portion of the Fund during the reporting period?
During the reporting period, the equity portion of the Fund purchased new positions in Takeda Pharmaceutical and Samsung Electronics. Takeda is a Japan-based pharmaceutical company that develops, manufactures, markets and sells prescription drugs, as well as vaccines. The company recently completed its acquisition of Shire, a global biotech company specializing in rare diseases and plasma-derived therapies. The combined company generates approximately half of its revenues in the United States and more than three-quarters of its revenues outside of Japan. Therapeutic areas of focus include oncology, gastroenterology, neuroscience, rare diseases and plasma-derived therapies. Cash-flow growth drivers include marketed drugs, such as Ninlaro in oncology and Entyvio in gastroenterology, cost synergies from the integration of Shire, interest expense reduction, and potential contributions from pipeline drugs, such as Takeda’s dengue vaccine. We believe
that Takeda pays an attractive and well-covered dividend, and plans to aggressively repay debt related to the Shire acquisition over the next few years. Samsung Electronics is a leading manufacturer of mobile devices, display technology, DRAM and NAND memory, and consumer electronics. Along with developing and building its own semiconductors, the company also provides foundry services to third parties. Samsung’s cash flow growth is driven by the rising global demand for digital memory, the widespread adoption of ever-higher-quality screen technologies and the increasing penetration of semiconductor content into an expanding number of devices. The company has committed to returning 50% of free cash flow back to shareholders with roughly half returned through its dividend and the other half through share repurchases.
Significant positions sold from the equity portion of the Fund during the reporting period included Kraft Heinz and Qualcomm. While Kraft Heinz, a North American packaged food and beverage company continues to make progress in addressing industry challenges, we found it prudent to sell the Fund’s holdings when the company took a write-down on two key brands and abruptly reduced the dividend it pays to shareholders in favor of strengthening the balance sheet for further industry consolidation. In the case of Qualcomm, a market leader in 3G, 4G and next gen wireless technologies, we believed an antitrust lawsuit filed against the company by the Federal Trade Commission put Qualcomm’s business model at risk. We chose to sell the Fund’s holdings in advance of a ruling that could potentially undermine the company’s stock price.
How did sector and country weightings change in the equity portion of the Fund during the reporting period?
During the reporting period, the most substantial sector weighting increases in the equity portion of the Fund compared with the MSCI World Index were in industrials and information technology, while the most substantial sector weighting reductions were in consumer staples and utilities. Over the same period, the most substantial country weighting increases in the equity portion of the Fund were in the United States, Germany and Italy, while the most notable reductions were in the U.K. and Spain. Sector and country allocations in the equity portion of the Fund are a result of ourbottom-up fundamental investment process and reflect the companies and securities that we confidently believe can collect and distribute sustainable, growing shareholder yield.
How was the equity portion of the Fund positioned at the end of the reporting period?
At the end of the reporting period, the largest sectors within the equity portion of the Fund were financials and utilities, while the
10 | MainStay Income Builder Fund |
smallest sectors were materials and real estate. At the end of the same period, relative to the MSCI World Index, the equity portion of the Fund held its most overweight allocations to utilities, a defensive sector that is typically more heavily represented in the Fund, and its most significant underweight allocations to the information technology and consumer discretionary sectors.
What factors affected the relative performance of the fixed-income portion of the Fund during the reporting period?
In the fourth quarter of 2018, Treasury bond yields declined and credit spreads3 widened as investors speculated that further tightening by the Federal Reserve Board (Fed) in 2019 might push the economy into a recession. At the beginning of the first quarter of 2019, the Fed concluded the benchmark federal funds rate had risen to a level consistent with its policy objectives, noting that more modest declines on the long end of the yield curve4 reflected restrained inflation, trade policy in flux and aggregate demand failing to pressure resource capacity. Stocks rallied on the Fed’s revised stance, reflecting cautious optimism regarding the durability of the current business cycle. Swayed by similar effects, corporate bond spreads tightened during the remainder of the reporting period, as did spreads of credit-related securitized product (asset-backed and commercial mortgage-backed securities). In this environment, the fixed-income portion of the Fund underperformed relative to the Bloomberg Barclays U.S. Aggregate Bond Index.
What was the Fund’s duration5 strategy during the reporting period?
During the reporting period, the Fund’s strategy was to keep duration in line with the Bloomberg Barclays U.S. Aggregate Bond Index as a buffer to the equity exposure of the overall Fund. At the end of the same period, the Fund’s duration was about 5.7 years.
During the reporting period, which sectors were the strongest positive contributors to relative performance of the fixed-income portion of the Fund and which sectors were particularly weak?
Spread product, specifically high-yield and emerging-market debt, performed well during the reporting period and contributed
positively to the performance of the fixed-income portion of the Fund relative to the Bloomberg Barclays U.S. Aggregate Bond Index. Emerging markets benefited from renewed risk appetites sparked by dovish central banks. The Fund’s investment process favored a modest exposure to relatively conservative positions in state-backed businesses and higher-quality corporates. Securitized assets, including residential mortgage-backed securities (RMBS) and consumer-related asset-backed securities (ABS), though positive for the reporting period, lagged the overall return of the market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index. These securities are generally higher rated and shorter duration in nature.
What were some of the largest purchases and sales in the fixed-income portion of the Fund during the reporting period?
In general terms, as credit spreads narrowed during the reporting period and the compensation for “risk” compressed, we reduced the exposure of the fixed-income portion of the Fund to credit in the form of high-yield bonds and bank loans. At the same time, we methodically added securitized assets—such as ABS, RMBS and commercial mortgage-backed securities (CMBS) into the equity portion of the Fund, both to reduce volatility and for diversification purposes.
How did the sector weightings in the fixed-income portion of the Fund change during the reporting period?
During the reporting period, the fixed-income portion of the Fund trimmed its weightings to both high-yield bonds and bank loans while selectively adding securitized assets, such as ABS and CMBS. Additionally, as spreads narrowed, the fixed-income portion of the Fund shifted its investment-grade corporate positions to the front end of the yield curve to reduce volatility.
How was the fixed-income portion of the Fund positioned at the end of the reporting period?
Relative to the Bloomberg Barclays U.S. Aggregate Bond Index, the fixed-income portion of the Fund finished the reporting period with overweight exposure to high-yield credit, bank loans and investment-grade credit, and underweight exposure to U.S. Treasury bonds and agency mortgage-backed securities.
3. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. The term “spread product” refers to asset classes that typically trade at a spread to comparable U.S. Treasury securities. |
4. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
5. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
11 |
Portfolio of Investments April 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 52.7%† Asset-Backed Securities 1.4% |
| |||||||
Auto Floor Plan Asset-Backed Securities 0.4% |
| |||||||
Ford Credit Floorplan Master Owner Trust | $ | 2,395,000 | $ | 2,482,046 | ||||
Navistar Financial Dealer Note Master Owner Trust II | 2,895,000 | 2,901,105 | ||||||
|
| |||||||
5,383,151 | ||||||||
|
| |||||||
Automobile Asset-Backed Securities 0.3% |
| |||||||
Volkswagen Auto Loan Enhanced Trust | 2,450,000 | 2,487,015 | ||||||
World Omni Auto Receivables Trust | 1,695,000 | 1,711,344 | ||||||
|
| |||||||
4,198,359 | ||||||||
|
| |||||||
Credit Cards 0.1% |
| |||||||
Discover Card Execution Note Trust | 1,745,000 | 1,768,244 | ||||||
|
| |||||||
Home Equity 0.1% |
| |||||||
Chase Funding Trust | 69,016 | 69,926 | ||||||
Countrywide Asset-Backed CertificatesSeries 2003-5, Class AF5 | 392,231 | 392,821 | ||||||
Equity One Mortgage Pass-Through Trust | 138,647 | 139,332 | ||||||
JPMorgan Mortgage Acquisition Trust | 409,330 | 284,221 | ||||||
MASTR Asset-Backed Securities Trust | 599,441 | 278,063 | ||||||
Saxon Asset Securities Trust | 69,033 | 69,878 | ||||||
|
| |||||||
1,234,241 | ||||||||
|
|
Principal Amount | Value | |||||||
Other Asset-Backed Securities 0.5% |
| |||||||
American Tower Trust I | $ | 2,160,000 | $ | 2,153,411 | ||||
Daimler Trucks Retail Trust | 2,165,000 | 2,166,388 | ||||||
Verizon Owner Trust | ||||||||
Series 2018-1A, Class A1A | 1,895,000 | 1,900,541 | ||||||
Series 2019-A, Class A1A | 1,880,000 | 1,896,689 | ||||||
|
| |||||||
8,117,029 | ||||||||
|
| |||||||
Student Loans 0.0%‡ |
| |||||||
KeyCorp Student Loan Trust | 145,953 | 145,543 | ||||||
|
| |||||||
Total Asset-Backed Securities | 20,846,567 | |||||||
|
| |||||||
Corporate Bonds 31.2% |
| |||||||
Aerospace & Defense 0.2% |
| |||||||
Harris Corp. | 2,215,000 | 2,335,769 | ||||||
|
| |||||||
Agriculture 0.3% |
| |||||||
Altria Group, Inc. | 3,260,000 | 3,320,799 | ||||||
JBS Investments II GmbH | 1,170,000 | 1,217,385 | ||||||
Reynolds American, Inc. | 255,000 | 256,884 | ||||||
|
| |||||||
4,795,068 | ||||||||
|
| |||||||
Airlines 0.9% |
| |||||||
American Airlines Group, Inc. | 3,700,000 | 3,722,237 | ||||||
American Airlines, Inc. | ||||||||
Series 2016-2, Class AA, Pass Through Trust | 611,660 | 597,469 | ||||||
Series 2015-2, Class AA, Pass Through Trust | 857,922 | 861,182 | ||||||
Series 2016-2, Class AA, Pass Through Trust | 215,880 | 212,361 | ||||||
Continental Airlines, Inc. | 1,312,464 | 1,337,269 |
12 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Airlines (continued) |
| |||||||
Delta Air Lines, Inc. | $ | 2,355,000 | $ | 2,387,802 | ||||
U.S. Airways Group, Inc. | ||||||||
Series 2012-1, Class A | 1,521,086 | 1,653,117 | ||||||
Series 2010-1, Class A | 725,290 | 781,573 | ||||||
United Airlines, Inc. | 1,324,149 | 1,396,315 | ||||||
|
| |||||||
12,949,325 | ||||||||
|
| |||||||
Auto Manufacturers 0.9% |
| |||||||
Daimler Finance North America LLC | 2,400,000 | 2,400,974 | ||||||
Ford Motor Credit Co. LLC | 350,000 | 366,249 | ||||||
General Motors Financial Co., Inc. | ||||||||
3.15%, due 6/30/22 | 900,000 | 893,724 | ||||||
3.20%, due 7/13/20 | 1,800,000 | 1,805,808 | ||||||
3.45%, due 4/10/22 | 3,800,000 | 3,818,519 | ||||||
Toyota Motor Credit Corp. | 4,620,000 | 4,623,003 | ||||||
|
| |||||||
13,908,277 | ||||||||
|
| |||||||
Banks 8.2% |
| |||||||
Bank of America Corp. | ||||||||
2.738%, due 1/23/22 (d) | 3,260,000 | 3,249,239 | ||||||
3.004%, due 12/20/23 (d) | 1,794,000 | 1,786,677 | ||||||
3.458%, due 3/15/25 (d) | 1,700,000 | 1,717,007 | ||||||
3.499%, due 5/17/22 (d) | 4,490,000 | 4,540,416 | ||||||
3.50%, due 4/19/26 | 415,000 | 418,761 | ||||||
4.20%, due 8/26/24 | 2,615,000 | 2,713,251 | ||||||
5.125%, due 6/17/19 (d)(e) | 575,000 | 575,382 | ||||||
6.30%, due 3/10/26 (d)(e) | 2,085,000 | 2,277,863 | ||||||
8.57%, due 11/15/24 | 485,000 | 603,067 | ||||||
Barclays PLC | 936,000 | 934,230 | ||||||
BB&T Corp. | ||||||||
3.05%, due 6/20/22 | 1,670,000 | 1,680,471 | ||||||
5.25%, due 11/1/19 | 2,395,000 | 2,423,024 | ||||||
Citibank N.A. | ||||||||
2.125%, due 10/20/20 | 4,590,000 | 4,551,412 | ||||||
3.40%, due 7/23/21 | 3,585,000 | 3,637,397 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Citigroup, Inc. | ||||||||
3.352%, due 4/24/25 (d) | $ | 2,565,000 | $ | 2,578,058 | ||||
3.668%, due 7/24/28 (d) | 1,180,000 | 1,183,234 | ||||||
3.98%, due 3/20/30 (d) | 2,370,000 | 2,413,383 | ||||||
4.05%, due 7/30/22 | 105,000 | 108,405 | ||||||
5.30%, due 5/6/44 | 1,200,000 | 1,344,507 | ||||||
6.625%, due 6/15/32 | 770,000 | 954,765 | ||||||
6.875%, due 6/1/25 | 1,715,000 | 2,007,343 | ||||||
Citizens Financial Group, Inc. | 3,405,000 | 3,510,659 | ||||||
Discover Bank | 1,064,000 | 1,096,163 | ||||||
Goldman Sachs Group, Inc. | ||||||||
2.905%, due 7/24/23 (d) | 880,000 | 872,874 | ||||||
2.908%, due 6/5/23 (d) | 800,000 | 793,256 | ||||||
3.50%, due 11/16/26 | 1,085,000 | 1,069,716 | ||||||
3.854% (3 Month LIBOR + 1.17%), due 5/15/26 (a) | 2,245,000 | 2,225,671 | ||||||
5.25%, due 7/27/21 | 805,000 | 846,409 | ||||||
6.75%, due 10/1/37 | 829,000 | 1,023,094 | ||||||
Huntington Bancshares, Inc. | 3,535,000 | 3,557,092 | ||||||
JPMorgan Chase & Co. (d) | ||||||||
3.207%, due 4/1/23 | 3,915,000 | 3,940,487 | ||||||
3.54%, due 5/1/28 | 2,970,000 | 2,965,921 | ||||||
Lloyds Banking Group PLC (United Kingdom) | ||||||||
4.582%, due 12/10/25 | 1,633,000 | 1,675,232 | ||||||
4.65%, due 3/24/26 | 3,090,000 | 3,160,493 | ||||||
Morgan Stanley | ||||||||
3.125%, due 1/23/23 | 4,435,000 | 4,452,306 | ||||||
3.875%, due 1/27/26 | 465,000 | 476,537 | ||||||
4.875%, due 11/1/22 | 1,125,000 | 1,191,035 | ||||||
5.00%, due 11/24/25 | 2,855,000 | 3,085,889 | ||||||
5.45%, due 7/15/19 (d)(e) | 1,890,000 | 1,892,363 | ||||||
7.25%, due 4/1/32 | 3,490,000 | 4,680,798 | ||||||
PNC Bank N.A. | 2,185,000 | 2,179,741 | ||||||
PNC Financial Services Group, Inc. | ||||||||
3.45%, due 4/23/29 | 3,070,000 | 3,089,767 | ||||||
6.70%, due 6/10/19 | 1,195,000 | 1,199,943 | ||||||
Royal Bank of Scotland Group PLC (United Kingdom) | ||||||||
4.892%, due 5/18/29 (d) | 1,935,000 | 2,022,390 | ||||||
6.00%, due 12/19/23 | 190,000 | 204,182 | ||||||
Santander Holdings USA, Inc. | 3,875,000 | 3,864,977 | ||||||
Santander UK Group Holdings PLC (United Kingdom) | ||||||||
3.571%, due 1/10/23 | 2,230,000 | 2,237,663 | ||||||
3.823%, due 11/3/28 (d) | 1,640,000 | 1,610,429 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Banks (continued) |
| |||||||
State Street Corp. | $ | 2,605,000 | $ | 2,603,304 | ||||
Toronto-Dominion Bank | 4,255,000 | 4,285,946 | ||||||
U.S. Bank N.A. | 2,655,000 | 2,657,425 | ||||||
Wachovia Corp. | 315,000 | 357,482 | ||||||
Wells Fargo & Co. | 55,000 | 58,988 | ||||||
Wells Fargo Bank N.A. | ||||||||
2.40%, due 1/15/20 | 1,875,000 | 1,871,393 | ||||||
2.60%, due 1/15/21 | 2,595,000 | 2,589,539 | ||||||
3.55%, due 8/14/23 | 1,815,000 | 1,860,962 | ||||||
5.85%, due 2/1/37 | 140,000 | 170,440 | ||||||
Westpac Banking Corp. | 5,200,000 | 5,260,524 | ||||||
|
| |||||||
122,338,982 | ||||||||
|
| |||||||
Beverages 0.4% |
| |||||||
Anheuser-Busch InBev Worldwide, Inc. (Belgium) | ||||||||
4.15%, due 1/23/25 | 635,000 | 663,160 | ||||||
4.75%, due 1/23/29 | 1,275,000 | 1,365,153 | ||||||
Constellation Brands, Inc. | 2,000,000 | 1,991,460 | ||||||
Diageo Capital PLC | 2,420,000 | 2,422,299 | ||||||
|
| |||||||
6,442,072 | ||||||||
|
| |||||||
Biotechnology 0.5% |
| |||||||
Biogen, Inc. | 3,480,000 | 3,544,157 | ||||||
Celgene Corp. | 3,600,000 | 3,658,992 | ||||||
|
| |||||||
7,203,149 | ||||||||
|
| |||||||
Building Materials 0.5% |
| |||||||
Cemex S.A.B. de C.V. | EUR 4,255,000 | 4,878,835 | ||||||
Standard Industries, Inc. | $ 2,580,000 | 2,628,375 | ||||||
|
| |||||||
7,507,210 | ||||||||
|
| |||||||
Chemicals 0.6% |
| |||||||
Air Liquide Finance S.A. | 1,725,000 | 1,686,596 | ||||||
Braskem Netherlands Finance B.V. | 4,275,000 | 4,189,500 |
Principal Amount | Value | |||||||
Chemicals (continued) |
| |||||||
Huntsman International LLC | $ | 1,862,000 | $ | 1,872,541 | ||||
Mexichem S.A.B. de C.V. | 1,800,000 | 1,764,000 | ||||||
|
| |||||||
9,512,637 | ||||||||
|
| |||||||
Commercial Services 0.3% |
| |||||||
Herc Rentals, Inc. | 1,482,000 | 1,574,180 | ||||||
Service Corp. International | 3,600,000 | 3,631,500 | ||||||
|
| |||||||
5,205,680 | ||||||||
|
| |||||||
Computers 0.6% |
| |||||||
Apple, Inc. | 1,990,000 | 1,980,426 | ||||||
Dell International LLC | 2,145,000 | 2,211,066 | ||||||
Hewlett Packard Enterprise Co. | 1,910,000 | 1,904,196 | ||||||
International Business Machines Corp. | 2,050,000 | 2,524,490 | ||||||
|
| |||||||
8,620,178 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.2% |
| |||||||
Unilever Capital Corp. | 3,100,000 | 3,075,235 | ||||||
|
| |||||||
Diversified Financial Services 1.7% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust (Ireland) | ||||||||
4.45%, due 12/16/21 | 1,465,000 | 1,504,927 | ||||||
4.625%, due 10/30/20 | 4,265,000 | 4,360,745 | ||||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 | 1,950,000 | 1,940,107 | ||||||
2.75%, due 1/15/23 | 1,850,000 | 1,814,847 | ||||||
3.50%, due 1/15/22 | 890,000 | 899,065 | ||||||
4.25%, due 9/15/24 | 1,185,000 | 1,221,828 | ||||||
Ally Financial, Inc. | 230,000 | 294,400 | ||||||
Capital One Bank USA N.A. | 2,070,000 | 2,094,458 | ||||||
Capital One Financial Corp. | 435,000 | 447,818 | ||||||
Caterpillar Financial Services Corp. | ||||||||
2.864% (3 Month LIBOR + 0.18%), due 5/15/20 (a) | 2,275,000 | 2,277,758 | ||||||
2.90%, due 3/15/21 | 4,990,000 | 5,014,212 | ||||||
Discover Financial Services | 1,491,000 | 1,528,792 |
14 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Diversified Financial Services (continued) |
| |||||||
International Lease Finance Corp. | $ | 1,074,000 | $ | 1,075,230 | ||||
Peachtree Corners Funding Trust | 940,000 | 957,559 | ||||||
Springleaf Finance Corp. | 540,000 | 569,700 | ||||||
|
| |||||||
26,001,446 | ||||||||
|
| |||||||
Electric 1.4% |
| |||||||
AEP Transmission Co. LLC | 2,350,000 | 2,325,788 | ||||||
CMS Energy Corp. | ||||||||
3.875%, due 3/1/24 | 1,540,000 | 1,579,929 | ||||||
5.05%, due 3/15/22 | 1,220,000 | 1,288,277 | ||||||
Connecticut Light & Power Co. | 1,145,000 | 1,182,115 | ||||||
Consolidated Edison, Inc. | 1,205,000 | 1,197,341 | ||||||
Duquesne Light Holdings, Inc. (b) | ||||||||
3.616%, due 8/1/27 | 2,265,000 | 2,208,263 | ||||||
6.40%, due 9/15/20 | 2,590,000 | 2,699,292 | ||||||
Entergy Louisiana LLC | 2,200,000 | 2,297,273 | ||||||
Evergy, Inc. | 1,130,000 | 1,194,932 | ||||||
Public Service Electric & Gas Co. | 2,235,000 | 2,217,928 | ||||||
Puget Energy, Inc. | 815,000 | 869,212 | ||||||
Southern California Edison Co. | 870,000 | 882,719 | ||||||
WEC Energy Group, Inc. | 1,095,000 | 947,175 | ||||||
|
| |||||||
20,890,244 | ||||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Republic Services, Inc. | 1,615,000 | 1,721,226 | ||||||
Waste Management, Inc. | 2,275,000 | 2,237,890 | ||||||
|
| |||||||
3,959,116 | ||||||||
|
| |||||||
Food 1.2% |
| |||||||
Kerry Group Financial Services Unlimited Co. | 2,899,000 | 2,884,564 | ||||||
Kroger Co. | 4,100,000 | 4,079,358 | ||||||
Mondelez International Holdings Netherlands B.V. | 2,790,000 | 2,774,136 |
Principal Amount | Value | |||||||
Food (continued) |
| |||||||
Nestle Holdings, Inc. | $ | 2,975,000 | $ | 3,006,401 | ||||
Smithfield Foods, Inc. (b) | ||||||||
2.70%, due 1/31/20 | 1,690,000 | 1,691,684 | ||||||
3.35%, due 2/1/22 | 1,575,000 | 1,547,571 | ||||||
Tyson Foods, Inc. | 2,255,000 | 2,328,995 | ||||||
|
| |||||||
18,312,709 | ||||||||
|
| |||||||
Gas 0.1% |
| |||||||
Southern California Gas Co. | 845,000 | 894,510 | ||||||
|
| |||||||
Health Care—Products 0.5% |
| |||||||
Becton Dickinson & Co. | ||||||||
2.133%, due 6/6/19 | 2,700,000 | 2,697,712 | ||||||
3.70%, due 6/6/27 | 2,210,000 | 2,200,697 | ||||||
Stryker Corp. | 3,395,000 | 3,387,007 | ||||||
|
| |||||||
8,285,416 | ||||||||
|
| |||||||
Health Care—Services 0.0%‡ |
| |||||||
Cigna Holding Co. | 270,000 | 275,187 | ||||||
|
| |||||||
Holding Company—Diversified 0.2% |
| |||||||
CK Hutchison International (17) II, Ltd. | 2,620,000 | 2,558,927 | ||||||
|
| |||||||
Home Builders 0.6% |
| |||||||
Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 2,400,000 | 2,401,500 | ||||||
4.50%, due 11/15/19 | 750,000 | 751,406 | ||||||
5.875%, due 11/15/24 | 1,345,000 | 1,444,194 | ||||||
MDC Holdings, Inc. | 2,750,000 | 2,784,375 | ||||||
TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. | 1,000,000 | 998,280 | ||||||
|
| |||||||
8,379,755 | ||||||||
|
| |||||||
Insurance 2.2% |
| |||||||
Alterra Finance LLC | 200,000 | 208,671 | ||||||
AXA Equitable Holdings, Inc. | 2,305,000 | 2,286,137 | ||||||
Jackson National Life Global Funding (b) | ||||||||
2.20%, due 1/30/20 | 3,580,000 | 3,567,682 | ||||||
3.081% (3 Month LIBOR + 0.48%), due 6/11/21 (a) | 3,660,000 | 3,673,415 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Insurance (continued) |
| |||||||
Liberty Mutual Group, Inc. (b) | ||||||||
4.25%, due 6/15/23 | $ | 850,000 | $ | 883,033 | ||||
7.80%, due 3/15/37 | 255,000 | 304,725 | ||||||
Lincoln National Corp. | 3,400,000 | 3,449,301 | ||||||
MassMutual Global Funding II (b) | ||||||||
2.50%, due 10/17/22 | 3,347,000 | 3,322,441 | ||||||
2.95%, due 1/11/25 | 1,105,000 | 1,098,172 | ||||||
Metropolitan Life Global Funding I | 2,250,000 | 2,242,146 | ||||||
Oil Insurance, Ltd. | 1,320,000 | 1,282,472 | ||||||
Pricoa Global Funding I | 2,135,000 | 2,129,399 | ||||||
Principal Life Global Funding II | 4,070,000 | 4,020,471 | ||||||
Protective Life Corp. | 1,640,000 | 2,330,783 | ||||||
Prudential Financial, Inc. | 1,405,000 | 1,471,738 | ||||||
Voya Financial, Inc. | 690,000 | 688,769 | ||||||
|
| |||||||
32,959,355 | ||||||||
|
| |||||||
Internet 0.2% |
| |||||||
Expedia Group, Inc. | ||||||||
3.80%, due 2/15/28 | 440,000 | 433,301 | ||||||
5.00%, due 2/15/26 | 60,000 | 64,036 | ||||||
Tencent Holdings, Ltd. (China) (b) | ||||||||
3.595%, due 1/19/28 | 1,475,000 | 1,452,967 | ||||||
3.925%, due 1/19/38 | 1,910,000 | 1,831,003 | ||||||
|
| |||||||
3,781,307 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
ArcelorMittal | 2,040,000 | 2,113,569 | ||||||
Vale Overseas, Ltd. (Brazil) | ||||||||
6.25%, due 8/10/26 | 1,115,000 | 1,217,580 | ||||||
6.875%, due 11/21/36 | 864,000 | 1,002,672 | ||||||
|
| |||||||
4,333,821 | ||||||||
|
| |||||||
Lodging 0.4% |
| |||||||
Marriott International, Inc. | ||||||||
2.30%, due 1/15/22 | 2,450,000 | 2,410,167 | ||||||
7.15%, due 12/1/19 | 1,900,000 | 1,943,481 | ||||||
Sands China, Ltd. (Macao) | ||||||||
4.60%, due 8/8/23 | 810,000 | 836,140 | ||||||
5.125%, due 8/8/25 | 1,310,000 | 1,382,008 | ||||||
|
| |||||||
6,571,796 | ||||||||
|
|
Principal Amount | Value | |||||||
Machinery—Diversified 0.4% |
| |||||||
CNH Industrial Capital LLC | ||||||||
4.20%, due 1/15/24 | $ | 1,435,000 | $ | 1,466,518 | ||||
4.875%, due 4/1/21 | 3,945,000 | 4,064,928 | ||||||
John Deere Capital Corp. | 610,000 | 632,730 | ||||||
|
| |||||||
6,164,176 | ||||||||
|
| |||||||
Media 1.1% |
| |||||||
Comcast Corp. | ||||||||
3.45%, due 10/1/21 | 5,085,000 | 5,178,578 | ||||||
5.70%, due 7/1/19 | 4,250,000 | 4,270,867 | ||||||
Grupo Televisa S.A.B. | 1,500,000 | 1,741,560 | ||||||
NBC Universal Media LLC | 160,000 | 163,765 | ||||||
Sky, Ltd. | 950,000 | 982,879 | ||||||
Time Warner Entertainment Co., L.P. | 800,000 | 938,228 | ||||||
UPCB Finance IV, Ltd. | 2,050,000 | 2,095,510 | ||||||
Virgin Media Secured Finance PLC | 1,080,000 | 1,098,587 | ||||||
|
| |||||||
16,469,974 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 0.3% |
| |||||||
Precision Castparts Corp. | 4,040,000 | 4,126,328 | ||||||
|
| |||||||
Mining 0.1% |
| |||||||
Anglo American Capital PLC | 1,295,000 | 1,366,495 | ||||||
|
| |||||||
Miscellaneous—Manufacturing 0.2% |
| |||||||
Textron Financial Corp. | 3,540,000 | 2,867,400 | ||||||
|
| |||||||
Oil & Gas 0.7% |
| |||||||
Cenovus Energy, Inc. | 955,000 | 960,955 | ||||||
Gazprom Via Gaz Capital S.A. | 2,065,000 | 2,469,278 | ||||||
Marathon Petroleum Corp. | 1,260,000 | 1,361,666 |
16 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Oil & Gas (continued) |
| |||||||
Petrobras Global Finance B.V. | $ | 2,715,000 | $ | 3,029,397 | ||||
Valero Energy Corp. | ||||||||
4.00%, due 4/1/29 | 1,435,000 | 1,455,400 | ||||||
6.625%, due 6/15/37 | 1,290,000 | 1,581,263 | ||||||
|
| |||||||
10,857,959 | ||||||||
|
| |||||||
Packaging & Containers 0.3% |
| |||||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC (New Zealand) | ||||||||
5.125%, due 7/15/23 (b) | 2,700,000 | 2,739,177 | ||||||
5.75%, due 10/15/20 | 1,938,215 | 1,944,030 | ||||||
|
| |||||||
4,683,207 | ||||||||
|
| |||||||
Pharmaceuticals 0.5% |
| |||||||
Allergan Funding SCS | 2,715,000 | 2,728,755 | ||||||
Bausch Health Cos., Inc. | 1,075,000 | 1,120,150 | ||||||
GlaxoSmithKline Capital PLC | 3,465,000 | 3,472,439 | ||||||
|
| |||||||
7,321,344 | ||||||||
|
| |||||||
Pipelines 0.7% |
| |||||||
Andeavor Logistics, L.P. / Tesoro Logistics Finance Corp. | 1,845,000 | 1,861,004 | ||||||
Columbia Pipeline Group, Inc. | 2,995,000 | 3,008,115 | ||||||
MPLX, L.P. | 100,000 | 106,478 | ||||||
Southern Natural Gas Co. LLC | 880,000 | 869,083 | ||||||
Spectra Energy Partners, L.P. | 1,740,000 | 1,860,640 | ||||||
Transcontinental Gas Pipe Line Co. LLC | 2,340,000 | 2,364,621 | ||||||
|
| |||||||
10,069,941 | ||||||||
|
| |||||||
Real Estate Investment Trusts 1.0% |
| |||||||
American Tower Corp. | 2,945,000 | 2,904,832 | ||||||
Crown Castle International Corp. | ||||||||
3.40%, due 2/15/21 | 2,080,000 | 2,095,952 | ||||||
5.25%, due 1/15/23 | 3,510,000 | 3,768,442 | ||||||
Digital Realty Trust, L.P. | ||||||||
2.75%, due 2/1/23 | 140,000 | 137,388 | ||||||
3.70%, due 8/15/27 | 500,000 | 498,218 |
Principal Amount | Value | |||||||
Real Estate Investment Trusts (continued) |
| |||||||
GLP Capital, L.P. / GLP Financing II, Inc. | $ | 2,675,000 | $ | 2,725,825 | ||||
Kilroy Realty, L.P. | 2,060,000 | 2,053,039 | ||||||
Welltower, Inc. | 890,000 | 919,434 | ||||||
|
| |||||||
15,103,130 | ||||||||
|
| |||||||
Retail 0.7% |
| |||||||
Alimentation Couche-Tard, Inc. | 2,700,000 | 2,651,072 | ||||||
CVS Health Corp. | ||||||||
4.00%, due 12/5/23 | 3,725,000 | 3,814,223 | ||||||
4.78%, due 3/25/38 | 1,110,000 | 1,079,779 | ||||||
CVS Pass-Through Trust | 149,502 | 156,545 | ||||||
McDonald’s Corp. | 2,875,000 | 2,932,932 | ||||||
|
| |||||||
10,634,551 | ||||||||
|
| |||||||
Semiconductors 0.3% |
| |||||||
Broadcom, Inc. | 2,405,000 | 2,392,340 | ||||||
NXP B.V. / NXP Funding LLC | 1,610,000 | 1,672,629 | ||||||
|
| |||||||
4,064,969 | ||||||||
|
| |||||||
Software 0.2% |
| |||||||
salesforce.com, Inc. | ||||||||
3.25%, due 4/11/23 | 1,300,000 | 1,327,033 | ||||||
3.70%, due 4/11/28 | 1,915,000 | 2,005,585 | ||||||
|
| |||||||
3,332,618 | ||||||||
|
| |||||||
Telecommunications 1.7% |
| |||||||
AT&T, Inc. | ||||||||
3.777% (3 Month LIBOR + 1.18%), due 6/12/24 (a) | 2,005,000 | 2,013,662 | ||||||
4.35%, due 3/1/29 | 795,000 | 821,631 | ||||||
4.90%, due 8/15/37 | 1,840,000 | 1,897,796 | ||||||
CommScope Technologies LLC | 850,000 | 863,303 | ||||||
CommScope, Inc. | 3,090,000 | 3,090,000 | ||||||
Crown Castle Towers LLC | 2,680,000 | 2,791,637 | ||||||
Hughes Satellite Systems Corp. | 990,000 | 993,366 | ||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC | 4,170,000 | 4,248,187 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Telecommunications (continued) |
| |||||||
Telecom Italia Capital S.A. | $ | 1,930,000 | $ | 1,937,720 | ||||
Telecom Italia S.p.A. | 1,110,000 | 1,105,837 | ||||||
Telefonica Emisiones SAU (Spain) | ||||||||
5.134%, due 4/27/20 | 2,425,000 | 2,478,025 | ||||||
5.462%, due 2/16/21 | 395,000 | 412,578 | ||||||
Verizon Communications, Inc. | 2,705,000 | 2,726,829 | ||||||
|
| |||||||
25,380,571 | ||||||||
|
| |||||||
Textiles 0.2% |
| |||||||
Cintas Corp. No 2 | 2,740,000 | 2,806,856 | ||||||
|
| |||||||
Transportation 0.1% |
| |||||||
XPO Logistics, Inc. | 761,000 | 778,123 | ||||||
|
| |||||||
Total Corporate Bonds | 467,124,813 | |||||||
|
| |||||||
Foreign Bonds 0.1% |
| |||||||
Banks 0.1% |
| |||||||
Barclays Bank PLC | GBP 1,186,000 | 1,789,834 | ||||||
|
| |||||||
Total Foreign Bonds | 1,789,834 | |||||||
|
| |||||||
Loan Assignments 1.6% (a) |
| |||||||
Advertising 0.1% |
| |||||||
Outfront Media Capital LLC | $ | 2,200,000 | 2,195,050 | |||||
|
| |||||||
Commercial Services 0.1% |
| |||||||
Global Payments, Inc. | 1,313,200 | 1,311,011 | ||||||
|
| |||||||
Electronics 0.1% |
| |||||||
Worldpay, LLC | 765,812 | 765,238 |
Principal Amount | Value | |||||||
Electronics (continued) |
| |||||||
Worldpay, LLC (continued) | ||||||||
2018 1st Lien Term Loan B4 | $ | 1,451,788 | $ | 1,450,699 | ||||
|
| |||||||
2,215,937 | ||||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Advanced Disposal Services, Inc. Term Loan B3 | 4,245,711 | 4,254,024 | ||||||
|
| |||||||
Hotels, Motels, Inns & Gaming 0.3% |
| |||||||
Las Vegas Sands LLC | 3,752,100 | 3,746,824 | ||||||
|
| |||||||
Household Products & Wares 0.1% |
| |||||||
Prestige Brands, Inc. | 1,245,793 | 1,240,187 | ||||||
|
| |||||||
Media 0.1% |
| |||||||
Virgin Media Bristol LLC | 2,075,000 | 2,078,891 | ||||||
|
| |||||||
Software 0.2% |
| |||||||
First Data Corp. | 2,490,979 | 2,490,807 | ||||||
|
| |||||||
Telecommunications 0.2% |
| |||||||
Level 3 Financing, Inc. | 3,175,000 | 3,175,000 | ||||||
|
| |||||||
Transportation 0.1% |
| |||||||
XPO Logistics, Inc. | 1,575,000 | 1,566,775 | ||||||
|
| |||||||
Total Loan Assignments | 24,274,506 | |||||||
|
|
18 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Mortgage-Backed Securities 3.9% |
| |||||||
Agency (Collateralized Mortgage Obligations) 2.2% |
| |||||||
Federal Home Loan Mortgage Corporation | ||||||||
REMIC Series 4691, Class HA | $ | 2,473,912 | $ | 2,428,001 | ||||
REMIC Series 4877, Class AT | 2,380,000 | 2,444,260 | ||||||
REMIC Series 4877, Class BE | 3,168,000 | 3,238,538 | ||||||
Federal National Mortgage Association | ||||||||
REMICSeries 2019-25, Class PA | 2,000,000 | 2,002,600 | ||||||
REMICSeries 2013-77, Class CY | 1,902,000 | 1,882,621 | ||||||
REMICSeries 2019-13, Class PE | 2,548,100 | 2,557,056 | ||||||
REMICSeries 2019-13, Class CA | 3,919,170 | 3,992,059 | ||||||
Government National Mortgage Association | ||||||||
REMIC Series 2018-127, Class PB | 5,318,059 | 5,327,264 | ||||||
REMICSeries 2019-29, Class AP | 3,470,143 | 3,459,003 | ||||||
REMIC Series 2019-52, Class JL | 2,017,000 | 2,005,781 | ||||||
REMIC Series 2019-43, Class PL | 4,043,000 | 4,038,825 | ||||||
|
| |||||||
33,376,008 | ||||||||
|
| |||||||
Commercial Mortgage Loans |
| |||||||
Bayview Commercial Asset Trust | 92,827 | 89,901 | ||||||
BX Commercial Mortgage Trust | 2,075,605 | 2,074,953 | ||||||
Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates | ||||||||
Series K087, Class A2 | 1,485,000 | 1,576,541 | ||||||
Series K085, Class A2 | 2,445,000 | 2,650,620 | ||||||
Four Times Square Trust | 812,024 | 840,844 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 1,475,000 | 1,553,914 |
Principal Amount | Value | |||||||
Commercial Mortgage Loans |
| |||||||
JPMBB Commercial Mortgage Securities Trust | $ | 2,400,000 | $ | 2,422,892 | ||||
Wells Fargo Commercial Mortgage Trust (b)(i) | ||||||||
Series 2018-1745, Class A | 3,150,000 | 3,248,248 | ||||||
Series 2018-AUS, Class A | 3,000,000 | 3,157,557 | ||||||
|
| |||||||
17,615,470 | ||||||||
|
| |||||||
Residential Mortgage (Collateralized Mortgage Obligation) 0.0%‡ |
| |||||||
Mortgage Equity Conversion Asset Trust | 379,336 | 341,554 | ||||||
|
| |||||||
Whole Loan (Collateralized Mortgage Obligations) 0.5% |
| |||||||
Chase Home Lending Mortgage Trust | 2,830,000 | 2,881,993 | ||||||
JP Morgan Mortgage Trust (b)(h) | ||||||||
Series 2019-2, Class A4 | 2,148,468 | 2,180,779 | ||||||
Series 2019-3, Class A3 | 1,860,000 | 1,881,797 | ||||||
|
| |||||||
6,944,569 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 58,277,601 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 14.5% |
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
3.00%, due 12/1/47 | 6,313,277 | 6,244,037 | ||||||
3.50%, due 1/1/48 | 11,603,855 | 11,749,086 | ||||||
3.50%, due 2/1/48 | 11,676,056 | 11,816,586 | ||||||
4.00%, due 2/1/49 | 1,794,553 | 1,845,183 | ||||||
4.00%, due 3/1/49 | 6,051,148 | 6,220,938 | ||||||
4.50%, due 11/1/48 | 10,992,555 | 11,557,381 | ||||||
5.00%, due 12/1/44 | 4,379,948 | 4,702,866 | ||||||
5.00%, due 12/1/48 | 7,043,163 | 7,437,347 | ||||||
|
| |||||||
61,573,424 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
2.50%, due 12/1/37 | 3,259,973 | 3,165,047 | ||||||
3.00%, due 10/1/48 | 2,382,632 | 2,364,674 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) |
| |||||||
Federal National Mortgage Association |
| |||||||
3.50%, due 3/1/37 | $ | 5,350,033 | $ | 5,465,351 | ||||
3.50%, due 2/1/42 | 3,584,265 | 3,660,502 | ||||||
3.50%, due 8/1/46 | 7,909,624 | 8,036,403 | ||||||
4.00%, due 4/1/48 | 14,642,440 | 15,084,772 | ||||||
4.00%, due 5/1/48 | 5,271,057 | 5,425,977 | ||||||
4.00%, due 9/1/48 | 7,433,349 | 7,696,035 | ||||||
4.00%, due 1/1/49 | 1,850,071 | 1,921,445 | ||||||
4.00%, due 2/1/49 | 2,567,610 | 2,637,749 | ||||||
4.00%, due 2/1/49 | 1,517,614 | 1,559,072 | ||||||
4.50%, due 7/1/48 | 9,142,293 | 9,552,607 | ||||||
4.50%, due 1/1/49 | 10,341,214 | 10,791,610 | ||||||
5.00%, due 9/1/33 | 5,206,620 | 5,585,841 | ||||||
|
| |||||||
82,947,085 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
3.50%, due 8/20/47 | 8,340,622 | 8,488,119 | ||||||
6.50%, due 4/15/29 | 12 | 13 | ||||||
6.50%, due 8/15/29 | 8 | 9 | ||||||
|
| |||||||
8,488,141 | ||||||||
|
| |||||||
United States Treasury Bonds 3.2% |
| |||||||
3.00%, due 2/15/49 | 19,690,000 | 19,934,587 | ||||||
3.75%, due 11/15/43 | 5,715,000 | 6,563,097 | ||||||
4.375%, due 11/15/39 | 15,015,000 | 18,761,125 | ||||||
4.50%, due 2/15/36 | 1,550,000 | 1,933,020 | ||||||
|
| |||||||
47,191,829 | ||||||||
|
| |||||||
United States Treasury Notes 0.2% |
| |||||||
2.625%, due 2/15/29 | 2,565,000 | 2,591,151 | ||||||
|
| |||||||
United States Treasury Inflation—Indexed Notes 0.9% (l) |
| |||||||
0.75%, due 7/15/28 | 4,208,717 | 4,296,850 | ||||||
0.875%, due 1/15/29 | 8,608,084 | 8,868,091 | ||||||
|
| |||||||
13,164,941 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 215,956,571 | |||||||
|
| |||||||
TotalLong-Term Bonds | 788,269,892 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 44.0% |
| |||||||
Aerospace & Defense 0.8% |
| |||||||
BAE Systems PLC (United Kingdom) | 1,046,555 | 6,741,658 | ||||||
Lockheed Martin Corp. | 16,083 | 5,360,946 | ||||||
|
| |||||||
12,102,604 | ||||||||
|
|
Shares | Value | |||||||
Air Freight & Logistics 0.7% |
| |||||||
Deutsche Post A.G., Registered (Germany) | 166,045 | $ | 5,754,698 | |||||
United Parcel Service, Inc., Class B | 39,869 | 4,234,885 | ||||||
|
| |||||||
9,989,583 | ||||||||
|
| |||||||
Auto Components 0.4% |
| |||||||
Cie Generale des Etablissements Michelin SCA (France) | 50,659 | 6,542,727 | ||||||
|
| |||||||
Banks 2.3% |
| |||||||
BB&T Corp. | 74,754 | 3,827,405 | ||||||
Commonwealth Bank of Australia (Australia) | 69,091 | 3,629,550 | ||||||
Lloyds Banking Group PLC (United Kingdom) | 6,812,867 | 5,558,706 | ||||||
People’s United Financial, Inc. | 222,904 | 3,854,010 | ||||||
Royal Bank of Canada (Canada) | 60,630 | 4,832,026 | ||||||
Svenska Handelsbanken A.B., Class A (Sweden) | 367,655 | 4,012,513 | ||||||
Wells Fargo & Co. | 68,185 | 3,300,836 | ||||||
Westpac Banking Corp. (Australia) | 259,841 | 5,039,143 | ||||||
|
| |||||||
34,054,189 | ||||||||
|
| |||||||
Beverages 0.7% |
| |||||||
Coca-Cola Co. | 92,423 | 4,534,273 | ||||||
PepsiCo., Inc. | 41,907 | 5,366,191 | ||||||
|
| |||||||
9,900,464 | ||||||||
|
| |||||||
Biotechnology 0.3% |
| |||||||
AbbVie, Inc. | 61,389 | 4,873,673 | ||||||
|
| |||||||
Capital Markets 0.9% |
| |||||||
BlackRock, Inc. | 8,834 | 4,286,610 | ||||||
CME Group, Inc. | 20,614 | 3,687,845 | ||||||
Macquarie Group, Ltd. (Australia) | 42,134 | 4,000,909 | ||||||
Singapore Exchange, Ltd. (Singapore) | 343,219 | 1,862,331 | ||||||
|
| |||||||
13,837,695 | ||||||||
|
| |||||||
Chemicals 1.5% |
| |||||||
BASF S.E. (Germany) | 74,481 | 6,055,665 | ||||||
Dow, Inc. (m) | 64,765 | 3,674,118 | ||||||
DowDuPont, Inc. | 68,859 | 2,647,628 | ||||||
LyondellBasell Industries N.V., Class A | 50,708 | 4,473,967 | ||||||
Nutrien, Ltd. (Canada) | 102,617 | 5,559,789 | ||||||
|
| |||||||
22,411,167 | ||||||||
|
| |||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 10 | 122 | ||||||
|
| |||||||
Communications Equipment 0.5% |
| |||||||
Cisco Systems, Inc. | 145,733 | 8,153,761 | ||||||
|
|
20 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Construction & Engineering 0.4% |
| |||||||
Vinci S.A. (France) | 55,726 | $ | 5,626,458 | |||||
|
| |||||||
Diversified Telecommunication Services 3.5% |
| |||||||
AT&T, Inc. | 296,752 | 9,187,442 | ||||||
BCE, Inc. (Canada) | 257,546 | 11,522,959 | ||||||
Deutsche Telekom A.G., Registered (Germany) | 586,935 | 9,817,985 | ||||||
Singapore Telecommunications, Ltd. (Singapore) | 1,639,015 | 3,815,438 | ||||||
TELUS Corp. (Canada) | 178,412 | 6,569,429 | ||||||
Verizon Communications, Inc. | 191,643 | 10,960,063 | ||||||
|
| |||||||
51,873,316 | ||||||||
|
| |||||||
Electric Utilities 3.8% |
| |||||||
American Electric Power Co., Inc. | 68,638 | 5,871,981 | ||||||
Duke Energy Corp. | 126,629 | 11,538,435 | ||||||
Entergy Corp. | 105,788 | 10,250,857 | ||||||
FirstEnergy Corp. | 240,573 | 10,111,283 | ||||||
PPL Corp. | 223,583 | 6,978,025 | ||||||
SSE PLC (United Kingdom) | 274,779 | 4,100,880 | ||||||
Terna Rete Elettrica Nazionale S.p.A. (Italy) | 1,267,426 | 7,588,211 | ||||||
|
| |||||||
56,439,672 | ||||||||
|
| |||||||
Electrical Equipment 0.9% |
| |||||||
Eaton Corp. PLC | 98,766 | 8,179,800 | ||||||
Emerson Electric Co. | 81,097 | 5,757,076 | ||||||
|
| |||||||
13,936,876 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.9% |
| |||||||
Iron Mountain, Inc. | 205,687 | 6,680,714 | ||||||
Public Storage | 18,575 | 4,108,418 | ||||||
Unibail-Rodamco-Westfield (France) | 40,207 | 6,910,992 | ||||||
Welltower, Inc. | 140,447 | 10,467,515 | ||||||
|
| |||||||
28,167,639 | ||||||||
|
| |||||||
Food Products 0.7% |
| |||||||
Nestle S.A., Registered (Switzerland) | 53,687 | 5,166,112 | ||||||
Orkla ASA (Norway) (f) | 656,026 | 5,143,304 | ||||||
|
| |||||||
10,309,416 | ||||||||
|
| |||||||
Gas Utilities 0.3% |
| |||||||
Naturgy Energy Group S.A. (Spain) | 156,078 | 4,432,448 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure 0.9% |
| |||||||
Las Vegas Sands Corp. | 112,639 | 7,552,445 | ||||||
McDonald’s Corp. | 26,730 | 5,281,046 | ||||||
|
| |||||||
12,833,491 | ||||||||
|
| |||||||
Household Durables 0.3% |
| |||||||
Leggett & Platt, Inc. | 110,998 | 4,368,881 | ||||||
|
|
Shares | Value | |||||||
Household Products 0.7% |
| |||||||
Kimberly-Clark Corp. | 47,344 | $ | 6,078,023 | |||||
Procter & Gamble Co. | 48,930 | 5,210,066 | ||||||
|
| |||||||
11,288,089 | ||||||||
|
| |||||||
Industrial Conglomerates 0.5% |
| |||||||
3M Co. | 17,216 | 3,262,604 | ||||||
Siemens A.G., Registered (Germany) | 33,752 | 4,040,778 | ||||||
|
| |||||||
7,303,382 | ||||||||
|
| |||||||
Insurance 4.2% |
| |||||||
Allianz S.E., Registered (Germany) | 51,875 | 12,497,715 | ||||||
Arthur J. Gallagher & Co. | 44,626 | 3,731,626 | ||||||
Assicurazioni Generali S.p.A. (Italy) | 357,008 | 6,927,272 | ||||||
AXA S.A. (France) (f) | 487,322 | 12,978,557 | ||||||
MetLife, Inc. | 142,259 | 6,562,408 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G., Registered (Germany) | 49,156 | 12,294,748 | ||||||
SCOR S.E. (France) (f) | 89,705 | 3,658,295 | ||||||
Tokio Marine Holdings, Inc. (Japan) (n) | 76,100 | 3,838,945 | ||||||
|
| |||||||
62,489,566 | ||||||||
|
| |||||||
IT Services 0.3% |
| |||||||
International Business Machines Corp. | 32,846 | 4,607,308 | ||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. (g)(j)(k)(m)(o) | 12 | 7,431 | ||||||
|
| |||||||
Multi-Utilities 1.8% |
| |||||||
Ameren Corp. | 67,958 | 4,945,304 | ||||||
Dominion Energy, Inc. | 104,203 | 8,114,287 | ||||||
National Grid PLC (United Kingdom) | 776,992 | 8,471,347 | ||||||
WEC Energy Group, Inc. | 70,223 | 5,507,590 | ||||||
|
| |||||||
27,038,528 | ||||||||
|
| |||||||
Multiline Retail 0.3% |
| |||||||
Target Corp. | 49,609 | 3,840,729 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.6% |
| |||||||
Chevron Corp. | 41,001 | 4,922,580 | ||||||
Enterprise Products Partners, L.P. | 285,878 | 8,184,687 | ||||||
Exxon Mobil Corp. | 94,688 | 7,601,553 | ||||||
Magellan Midstream Partners, L.P. | 85,816 | 5,321,450 | ||||||
Occidental Petroleum Corp. | 109,413 | 6,442,237 | ||||||
Pembina Pipeline Corp. (Canada) | 191,472 | 6,845,942 | ||||||
Royal Dutch Shell PLC, Class A, Sponsored ADR (Netherlands) | 158,343 | 10,059,531 | ||||||
Snam S.p.A. (Italy) | 1,860,920 | 9,469,667 | ||||||
TOTAL S.A. (France) | 182,355 | 10,133,413 | ||||||
|
| |||||||
68,981,060 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Personal Products 0.5% |
| |||||||
Unilever PLC (United Kingdom) | 132,292 | $ | 8,034,598 | |||||
|
| |||||||
Pharmaceuticals 4.0% |
| |||||||
AstraZeneca PLC, Sponsored ADR (United Kingdom) | 189,405 | 7,132,992 | ||||||
GlaxoSmithKline PLC (United Kingdom) | 485,677 | 9,964,703 | ||||||
Johnson & Johnson | 33,526 | 4,733,871 | ||||||
Merck & Co., Inc. | 60,709 | 4,778,406 | ||||||
Novartis A.G., Registered (Switzerland) | 85,854 | 7,011,052 | ||||||
Pfizer, Inc. | 208,859 | 8,481,764 | ||||||
Roche Holding A.G. (Switzerland) | 28,769 | 7,583,643 | ||||||
Sanofi (France) (f) | 75,038 | 6,521,765 | ||||||
Takeda Pharmaceutical Co., Ltd. (Japan) (n) | 87,000 | 3,225,416 | ||||||
|
| |||||||
59,433,612 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 1.3% |
| |||||||
Broadcom, Inc. | 12,459 | 3,966,946 | ||||||
Intel Corp. | 78,626 | 4,013,071 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Taiwan) | 90,158 | 3,950,723 | ||||||
Texas Instruments, Inc. | 58,479 | 6,890,581 | ||||||
|
| |||||||
18,821,321 | ||||||||
|
| |||||||
Software 0.7% |
| |||||||
Micro Focus International PLC (United Kingdom) | 199,579 | 5,043,145 | ||||||
Microsoft Corp. | 48,024 | 6,271,935 | ||||||
|
| |||||||
11,315,080 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 0.3% |
| |||||||
Samsung Electronics Co., Ltd., GDR (Republic of Korea) (b) | 4,933 | 4,863,938 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 0.3% |
| |||||||
Hanesbrands, Inc. | 234,683 | 4,240,722 | ||||||
|
| |||||||
Tobacco 2.5% |
| |||||||
Altria Group, Inc. | 182,166 | 9,897,079 | ||||||
British American Tobacco PLC (United Kingdom) | 177,802 | 6,932,430 | ||||||
British American Tobacco PLC, Sponsored ADR (United Kingdom) | 63,881 | 2,504,135 | ||||||
Imperial Brands PLC (United Kingdom) | 307,762 | 9,776,197 | ||||||
Philip Morris International, Inc. | 101,808 | 8,812,501 | ||||||
|
| |||||||
37,922,342 | ||||||||
|
| |||||||
Trading Companies & Distributors 0.3% |
| |||||||
Watsco, Inc. | 26,286 | 4,165,542 | ||||||
|
|
Shares | Value | |||||||
Wireless Telecommunication Services 0.9% |
| |||||||
Rogers Communications, Inc., Class B (Canada) | 117,104 | $ | 5,895,846 | |||||
Vodafone Group PLC (United Kingdom) | 4,216,374 | 7,807,377 | ||||||
|
| |||||||
13,703,223 | ||||||||
|
| |||||||
Total Common Stocks | 657,910,653 | |||||||
|
| |||||||
Short-Term Investment 1.7% |
| |||||||
Affiliated Investment Company 1.7% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (p) | 24,722,589 | 24,722,589 | ||||||
|
| |||||||
TotalShort-Term Investment | 24,722,589 | |||||||
|
| |||||||
Investment of Cash Collateral For Securities Loaned 1.3% |
| |||||||
Unaffiliated Investment Company 1.3% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (p) | 20,131,775 | 20,131,775 | ||||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 20,131,775 | |||||||
|
| |||||||
Total Investments | 99.7 | % | 1,491,034,909 | |||||
Other Assets, Less Liabilities | 0.3 | 4,626,334 | ||||||
Net Assets | 100.0 | % | $ | 1,495,661,243 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Step coupon—Rate shown was the rate in effect as of April 30, 2019. |
(d) | Fixed to floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(e) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(f) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $23,620,074; the total market value of collateral held by the Fund was $25,397,923. The market value of the collateral held includes non-cash collateral in the form of U.S. Treasury securities with a value of $5,266,148 (See Note 2(M)). |
(g) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, |
22 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
2019, the total market value of the fair valued securities was $10,196,709, which represented 0.7% of the Fund’s net assets. |
(h) | Coupon rate may change based on changes of the underlying collateral or prepayments of principal. The coupon rate shown represents the rate at period end. |
(i) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of April 30, 2019. |
(j) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(k) | Illiquid security—As of April 30, 2019, the total market value of these securities deemed illiquid under procedures approved by the Board of |
Trustees was $348,985, which represented less than one-tenth of a percent of the Fund’s net assets. |
(l) | Treasury Inflation Protected Security - Pays a fixed rate of interest on a principal amount that is continuously adjusted for inflation based on the Consumer Price Index-Urban Consumers. |
(m) | Non-income producing security. |
(n) | Temporarily deemed illiquid due to the extended closure of the Japanese market. |
(o) | Restricted security. |
(p) | Current yield as of April 30, 2019. |
Foreign Currency Forward Contracts
As of April 30, 2019, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation | ||||||||||||||
CAD | 24,110,000 | USD | 17,938,855 | JPMorgan Chase Bank N.A. | 5/2/19 | $ | 58,192 | |||||||||||
EUR | 58,730,000 | USD | 65,697,727 | JPMorgan Chase Bank N.A. | 5/2/19 | 173,874 | ||||||||||||
GBP | 34,260,000 | USD | 44,326,684 | JPMorgan Chase Bank N.A. | 5/2/19 | 348,365 | ||||||||||||
JPY | 5,988,000,000 | USD | 53,949,834 | JPMorgan Chase Bank N.A. | 8/1/19 | 199,269 | ||||||||||||
USD | 18,217,331 | CAD | 24,110,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 220,285 | ||||||||||||
USD | 69,954,511 | EUR | 60,830,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 1,727,549 | ||||||||||||
USD | 45,210,866 | GBP | 34,260,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 535,817 | ||||||||||||
|
| |||||||||||||||||
Total unrealized appreciation |
| 3,263,351 | ||||||||||||||||
|
| |||||||||||||||||
EUR | 2,100,000 | USD | 2,404,145 | JPMorgan Chase Bank N.A. | 5/2/19 | (48,784 | ) | |||||||||||
JPY | 5,988,000,000 | USD | 55,181,108 | JPMorgan Chase Bank N.A. | 5/7/19 | (1,404,141 | ) | |||||||||||
USD | 17,896,158 | CAD | 24,000,000 | JPMorgan Chase Bank N.A. | 8/1/19 | (58,775 | ) | |||||||||||
USD | 66,206,623 | EUR | 58,730,000 | JPMorgan Chase Bank N.A. | 8/1/19 | (175,467 | ) | |||||||||||
USD | 44,976,298 | GBP | 34,600,000 | JPMorgan Chase Bank N.A. | 8/1/19 | (354,430 | ) | |||||||||||
USD | 53,570,853 | JPY | 5,988,000,000 | JPMorgan Chase Bank N.A. | 5/7/19 | (206,114 | ) | |||||||||||
|
| |||||||||||||||||
Total unrealized depreciation |
| (2,247,711 | ) | |||||||||||||||
|
| |||||||||||||||||
Net unrealized appreciation |
| $ | 1,015,640 | |||||||||||||||
|
|
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Futures Contracts
As of April 30, 2019, the Fund held the following futures contracts1:
Type | Number of Contracts | Expiration Date | Value at Trade Date | Current Notional | Unrealized Appreciation | |||||||||||||||
Long Contracts | ||||||||||||||||||||
2-Year United States Treasury Note | 85 | June 2019 | $ | 18,105,563 | $ | 18,105,664 | $ | 101 | ||||||||||||
5-Year United States Treasury Note | 262 | June 2019 | 30,147,182 | 30,297,844 | 150,662 | |||||||||||||||
10-Year United States Treasury Note | 557 | June 2019 | 68,129,345 | 68,885,234 | 755,889 | |||||||||||||||
Nikkei 225 | 575 | June 2019 | 55,478,418 | 57,709,053 | 2,230,635 | |||||||||||||||
S&P 500 Index Mini | 1,125 | June 2019 | 153,882,902 | 165,853,125 | 11,970,223 | |||||||||||||||
United States Treasury Bond | 15 | June 2019 | 2,223,503 | 2,212,031 | (11,472 | ) | ||||||||||||||
United States Treasury Ultra Bond | 245 | June 2019 | 39,518,135 | 40,248,906 | 730,771 | |||||||||||||||
|
| |||||||||||||||||||
Total Long Contracts | 15,826,809 | |||||||||||||||||||
|
| |||||||||||||||||||
Short Contracts | ||||||||||||||||||||
10-Year United States Treasury Ultra Note | (130 | ) | June 2019 | (16,977,153 | ) | (17,131,563 | ) | (154,410 | ) | |||||||||||
|
| |||||||||||||||||||
Total Short Contracts | (154,410 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Net Unrealized Appreciation | $ | 15,672,399 | ||||||||||||||||||
|
|
1. | As of April 30, 2019, cash in the amount of $11,394,472 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2019. |
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
CAD—Canadian Dollar
EUR—Euro
GBP—British Pound Sterling
GDR—Global Depositary Receipt
JPY—Japanese Yen
LIBOR—London Interbank Offered Rate
REMIC—Real Estate Mortgage Investment Conduit
USD—United States Dollar
24 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets and liabilities:
Description | Quoted Active Assets | Significant Other Inputs | Significant Inputs | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 20,846,567 | $ | — | $ | 20,846,567 | ||||||||
Corporate Bonds | — | 467,124,813 | — | 467,124,813 | ||||||||||||
Foreign Bonds | — | 1,789,834 | — | 1,789,834 | ||||||||||||
Loan Assignments | — | 24,274,506 | — | 24,274,506 | ||||||||||||
Mortgage-Backed Securities (b) | — | 57,936,047 | 341,554 | 58,277,601 | ||||||||||||
U.S. Government & Federal Agencies | — | 215,956,571 | — | 215,956,571 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds | — | 787,928,338 | 341,554 | 788,269,892 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (c)(d) | 650,838,861 | 7,064,361 | 7,431 | 657,910,653 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 24,722,589 | — | — | 24,722,589 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 20,131,775 | — | — | 20,131,775 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 695,693,225 | 794,992,699 | 348,985 | 1,491,034,909 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | — | 3,263,351 | — | 3,263,351 | ||||||||||||
Futures Contracts (e) | 15,838,281 | — | — | 15,838,281 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 15,838,281 | 3,263,351 | — | 19,101,632 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 711,531,506 | $ | 798,256,050 | $ | 348,985 | $ | 1,510,136,541 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liability Valuation Inputs | ||||||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | $ | — | $ | (2,247,711 | ) | $ | — | $ | (2,247,711 | ) | ||||||
Futures Contracts (e) | (165,882 | ) | — | — | (165,882 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | $ | (165,882 | ) | $ | (2,247,711 | ) | $ | — | $ | (2,413,593 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $341,554 is held in Residential Mortgage (Collateralized Mortgage Obligation) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(c) | Level 2 securities valued at $7,064,361 are temporarily deemed illiquid due to the extended closure of the Japanese market. |
(d) | The Level 3 security valued at $7,431 is held in Media within the Common Stocks section of the Portfolio of Investments. |
(e) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2018 | Accrued Discounts | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2019 | Change in from | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Healthcare, Education | $ | 1,627,750 | $ | 1,070 | $ | (42,837 | ) | $ | 50,267 | $ | — | $ | (1,636,250 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | 370,209 | — | — | (10,814 | ) | — | (17,841 | ) | — | — | 341,554 | (12,025 | ) | |||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 7,431 | — | — | — | — | — | — | — | 7,431 | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 2,005,390 | $ | 1,070 | $ | (42,837 | ) | $ | 39,453 | $ | — | $ | (1,654,091 | ) | $ | — | $ | — | $ | 348,985 | $ | (12,025 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
26 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 1,466,312,320 | ||
Investment in affiliated investment company, at value (identified cost $24,722,589) | 24,722,589 | |||
Cash collateral on deposit at broker for futures contracts | 11,394,472 | |||
Cash | 5,311,228 | |||
Cash denominated in foreign currencies (identified cost $22,956) | 22,788 | |||
Receivables: | ||||
Dividends and interest | 9,868,143 | |||
Investment securities sold | 3,878,576 | |||
Fund shares sold | 1,943,347 | |||
Variation margin on futures contracts | 654,115 | |||
Securities lending income | 20,408 | |||
Unrealized appreciation on foreign currency forward contracts | 3,263,351 | |||
Other assets | 99,862 | |||
|
| |||
Total assets | 1,527,491,199 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Collateral received for securities on loan | 20,131,775 | |||
Investment securities purchased | 5,250,915 | |||
Fund shares redeemed | 2,194,535 | |||
Manager (See Note 3) | 757,167 | |||
NYLIFE Distributors (See Note 3) | 327,694 | |||
Transfer agent (See Note 3) | 324,077 | |||
Shareholder communication | 122,540 | |||
Professional fees | 54,705 | |||
Custodian | 41,652 | |||
Trustees | 2,604 | |||
Accrued expenses | 15,792 | |||
Unrealized depreciation on foreign currency forward contracts | 2,247,711 | |||
Dividend payable | 247,311 | |||
Interest expense and fees payable | 111,478 | |||
|
| |||
Total liabilities | 31,829,956 | |||
|
| |||
Net assets | $ | 1,495,661,243 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 774,489 | ||
Additional paid-in capital | 1,416,505,850 | |||
|
| |||
1,417,280,339 | ||||
Total distributable earnings (loss) | 78,380,904 | |||
|
| |||
Net assets | $ | 1,495,661,243 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 593,282,661 | ||
|
| |||
Shares of beneficial interest outstanding | 30,863,268 | |||
|
| |||
Net asset value per share outstanding | $ | 19.22 | ||
Maximum sales charge (5.50% of offering price) | 1.12 | |||
|
| |||
Maximum offering price per share outstanding | $ | 20.34 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 88,761,301 | ||
|
| |||
Shares of beneficial interest outstanding | 4,613,852 | |||
|
| |||
Net asset value per share outstanding | $ | 19.24 | ||
Maximum sales charge (5.50% of offering price) | 1.12 | |||
|
| |||
Maximum offering price per share outstanding | $ | 20.36 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 28,218,108 | ||
|
| |||
Shares of beneficial interest outstanding | 1,457,500 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.36 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 199,212,441 | ||
|
| |||
Shares of beneficial interest outstanding | 10,309,598 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.32 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 483,897,613 | ||
|
| |||
Shares of beneficial interest outstanding | 24,932,961 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.41 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 3,475,485 | ||
|
| |||
Shares of beneficial interest outstanding | 180,928 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.21 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 328,972 | ||
|
| |||
Shares of beneficial interest outstanding | 17,111 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.23 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 98,484,662 | ||
|
| |||
Shares of beneficial interest outstanding | 5,073,702 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.41 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest (a) | $ | 14,307,309 | ||
Dividends-unaffiliated (b) | 14,219,395 | |||
Dividends-affiliated | 492,512 | |||
Securities lending | 84,041 | |||
|
| |||
Total income | 29,103,257 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 4,482,671 | |||
Distribution/Service—Class A (See Note 3) | 708,379 | |||
Distribution/Service—Investor Class (See Note 3) | 106,646 | |||
Distribution/Service—Class B (See Note 3) | 142,896 | |||
Distribution/Service—Class C (See Note 3) | 1,008,368 | |||
Distribution/Service—Class R2 (See Note 3) | 4,327 | |||
Distribution/Service—Class R3 (See Note 3) | 458 | |||
Transfer agent (See Note 3) | 947,304 | |||
Shareholder communication | 86,194 | |||
Professional fees | 81,468 | |||
Registration | 74,060 | |||
Custodian | 56,554 | |||
Trustees | 18,402 | |||
Shareholder service (See Note 3) | 1,822 | |||
Miscellaneous | 39,213 | |||
|
| |||
Total expenses before waiver/reimbursement | 7,758,762 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (15,778 | ) | ||
|
| |||
Net expenses | 7,742,984 | |||
|
| |||
Net investment income (loss) | 21,360,273 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Unaffiliated investment transactions | 5,086,214 | |||
Futures transactions | (7,914,768 | ) | ||
Foreign currency forward transactions | 4,786,405 | |||
Foreign currency transactions | (308,528 | ) | ||
|
| |||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 1,649,323 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 51,819,945 | |||
Futures contracts | 30,545,875 | |||
Foreign currency forward contracts | (3,187,533 | ) | ||
Translation of other assets and liabilities in foreign currencies | 304,714 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | 79,483,001 | |||
|
| |||
Net realized and unrealized gain (loss) on investments, futures transactions and foreign currency transactions | 81,132,324 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 102,492,597 | ||
|
|
(a) | Interest recorded net of foreign withholding taxes in the amount of $855. |
(b) | Dividends recorded net of foreign withholding taxes in the amount of $607,069. |
28 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 21,360,273 | $ | 45,607,528 | ||||
Net realized gain (loss) on investments, futures contracts and foreign currency transactions | 1,649,323 | 55,605,154 | ||||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | 79,483,001 | (140,448,768 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 102,492,597 | (39,236,086 | ) | |||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (18,178,308 | ) | (32,796,558 | ) | ||||
Investor Class | (2,664,573 | ) | (4,533,690 | ) | ||||
Class B | (788,641 | ) | (1,563,809 | ) | ||||
Class C | (5,601,226 | ) | (10,983,845 | ) | ||||
Class I | (15,587,366 | ) | (38,245,609 | ) | ||||
Class R2 | (111,693 | ) | (211,253 | ) | ||||
Class R3 | (5,063 | ) | (7,874 | ) | ||||
Class R6 | (3,141,536 | ) | (1,115,473 | ) | ||||
|
| |||||||
Total distributions to shareholders | (46,078,406 | ) | (89,458,111 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 103,846,238 | 256,249,660 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 42,051,978 | 80,255,791 | ||||||
Cost of shares redeemed | (203,999,105 | ) | (533,526,985 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (58,100,889 | ) | (197,021,534 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (1,686,698 | ) | (325,715,731 | ) | ||||
Net Assets |
| |||||||
Beginning of period | 1,497,347,941 | 1,823,063,672 | ||||||
|
| |||||||
End of period | $ | 1,495,661,243 | $ | 1,497,347,941 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlightsselected per share data and ratios
Six months April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.51 | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | $ | 19.83 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.28 | 0.52 | 0.48 | 0.58 | 0.68 | 0.82 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.00 | (1.04 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.96 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.14 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.30 | (0.45 | ) | 2.22 | 0.71 | (0.15 | ) | 1.92 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.52 | ) | (0.55 | ) | (0.61 | ) | (0.70 | ) | (0.72 | ) | ||||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.59 | ) | (1.01 | ) | (0.55 | ) | (1.20 | ) | (1.57 | ) | (1.24 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.22 | $ | 18.51 | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 7.28 | % | (2.38 | %) | 12.30 | % | 4.08 | % | (0.81 | %) | 10.08 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.99 | %†† | 2.72 | % | 2.52 | % | 3.21 | % | 3.49 | % | 4.06 | % | ||||||||||||||||
Net expenses (c) | 1.02 | %†† | 1.01 | % | 1.01 | % | 1.02 | % | 1.02 | % | 1.01 | % | ||||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 593,283 | $ | 571,206 | $ | 652,333 | $ | 574,390 | $ | 581,920 | $ | 497,591 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.52 | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | $ | 19.84 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.26 | 0.50 | 0.47 | 0.56 | 0.65 | 0.78 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.02 | (1.05 | ) | 1.82 | (0.16 | ) | (0.99 | ) | 0.95 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.28 | 0.15 | 0.14 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.30 | (0.48 | ) | 2.20 | 0.68 | (0.19 | ) | 1.87 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.26 | ) | (0.50 | ) | (0.52 | ) | (0.58 | ) | (0.66 | ) | (0.67 | ) | ||||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.58 | ) | (0.99 | ) | (0.52 | ) | (1.17 | ) | (1.53 | ) | (1.19 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.24 | $ | 18.52 | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 7.26 | % | (2.56 | %) | 12.19 | % | 3.93 | % | (0.97 | %) | 9.83 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.85 | %†† | 2.59 | % | 2.45 | % | 3.09 | % | 3.34 | % | 3.89 | % | ||||||||||||||||
Net expenses (c) | 1.16 | %†† | 1.13 | % | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | ||||||||||||||||
Expenses (before waiver/ | 1.17 | %†† | 1.14 | % | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | ||||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 88,761 | $ | 85,132 | $ | 94,000 | $ | 153,137 | $ | 159,798 | $ | 165,088 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
30 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.64 | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | $ | 19.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.19 | 0.36 | 0.32 | 0.42 | 0.51 | 0.63 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.02 | (1.05 | ) | 1.83 | (0.17 | ) | (0.99 | ) | 0.96 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.14 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.23 | (0.62 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.35 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | ||||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.51 | ) | (0.84 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.36 | $ | 18.64 | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 6.81 | % | (3.22 | %) | 11.27 | % | 3.20 | % | (1.70 | %) | 8.99 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.09 | %†† | 1.85 | % | 1.67 | % | 2.34 | % | 2.60 | % | 3.14 | % | ||||||||||||||||
Net expenses (c) | 1.91 | %†† | 1.88 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||||||||
Expenses (before waiver/ | 1.92 | %†† | 1.89 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 28,218 | $ | 30,343 | $ | 39,475 | $ | 42,253 | $ | 44,441 | $ | 49,283 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.60 | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | $ | 19.90 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.19 | 0.36 | 0.32 | 0.42 | 0.50 | 0.60 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.02 | (1.06 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.98 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.15 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.23 | (0.63 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.35 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | ||||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.51 | ) | (0.84 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.32 | $ | 18.60 | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 6.82 | % | (3.28 | %) | 11.35 | % | 3.15 | % | (1.70 | %) | 9.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.09 | %†† | 1.85 | % | 1.65 | % | 2.32 | % | 2.58 | % | 3.00 | % | ||||||||||||||||
Net expenses (c) | 1.91 | %†† | 1.88 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||||||||
Expenses (before waiver/ | 1.92 | %†† | 1.89 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 199,212 | $ | 212,400 | $ | 266,592 | $ | 254,312 | $ | 235,811 | $ | 131,023 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.68 | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | $ | 19.97 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.30 | 0.58 | 0.54 | 0.63 | 0.73 | 0.87 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.02 | (1.06 | ) | 1.84 | (0.16 | ) | (0.98 | ) | 0.96 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.28 | 0.15 | 0.15 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.34 | (0.41 | ) | 2.29 | 0.75 | (0.10 | ) | 1.98 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.29 | ) | (0.57 | ) | (0.60 | ) | (0.65 | ) | (0.74 | ) | (0.77 | ) | ||||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.61 | ) | (1.06 | ) | (0.60 | ) | (1.24 | ) | (1.61 | ) | (1.29 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.41 | $ | 18.68 | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 7.45 | % | (2.17 | %) | 12.60 | % | 4.30 | % | (0.51 | %) | 10.33 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.24 | %†† | 3.03 | % | 2.77 | % | 3.44 | % | 3.75 | % | 4.29 | % | ||||||||||||||||
Net expenses (c) | 0.77 | %†† | 0.76 | % | 0.76 | % | 0.77 | % | 0.77 | % | 0.76 | % | ||||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 483,898 | $ | 499,675 | $ | 766,054 | $ | 542,330 | $ | 513,629 | $ | 430,408 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
Six months ended April 30, | Year ended October 31, | February 27, 2015** through October 31, | ||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value at beginning of period | $ | 18.50 | $ | 19.96 | $ | 18.29 | $ | 18.78 | $ | 20.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.26 | 0.50 | 0.46 | 0.55 | 0.36 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | (1.04 | ) | 1.83 | (0.19 | ) | (1.35 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.07 | (0.09 | ) | 0.33 | 0.20 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 1.29 | (0.47 | ) | 2.20 | 0.69 | (0.79 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.26 | ) | (0.50 | ) | (0.53 | ) | (0.59 | ) | (0.51 | ) | ||||||||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | (0.59 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.58 | ) | (0.99 | ) | (0.53 | ) | (1.18 | ) | (0.51 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 19.21 | $ | 18.50 | $ | 19.96 | $ | 18.29 | $ | 18.78 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | 7.23 | % | (2.48 | %) | 12.20 | % | 3.99 | % | (3.92 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 2.87 | %†† | 2.61 | % | 2.36 | % | 3.03 | % | 2.90 | %†† | ||||||||||||||
Net expenses (c) | 1.12 | %†† | 1.11 | % | 1.11 | % | 1.12 | % | 1.12 | %†† | ||||||||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | 30 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,475 | $ | 3,587 | $ | 4,409 | $ | 838 | $ | 190 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
32 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | February 29, 2016** through October 31, | ||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | ||||||||||||
Net asset value at beginning of period | $ | 18.51 | $ | 19.97 | $ | 18.30 | $ | 17.10 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.25 | 0.42 | 0.42 | 0.35 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | (1.00 | ) | 1.82 | (1.69 | ) | ||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.06 | (0.09 | ) | 2.95 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.28 | (0.52 | ) | 2.15 | 1.61 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less dividends and distributions: | ||||||||||||||||
From net investment income | (0.24 | ) | (0.45 | ) | (0.48 | ) | (0.41 | ) | ||||||||
From net realized gain on investments | (0.32 | ) | (0.49 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.56 | ) | (0.94 | ) | (0.48 | ) | (0.41 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value at end of period | $ | 19.23 | $ | 18.51 | $ | 19.97 | $ | 18.30 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment | 7.16 | % | (2.73 | %) | 11.89 | % | 9.42 | % | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 2.70 | %†† | 2.19 | % | 2.16 | % | 2.81 | %†† | ||||||||
Net expenses (c) | 1.37 | %†† | 1.35 | % | 1.36 | % | 1.36 | %†† | ||||||||
Portfolio turnover rate (d) | 34 | % | 44 | % | 29 | % | 27 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 329 | $ | 136 | $ | 201 | $ | 39 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 31% and 36% for the six months ended April 30, 2019 and for the year ended October 31, 2018, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Financial Highlightsselected per share data and ratios
Class R6 | Six months ended April 30, 2019* | February 28, 2018** through October 31, 2018 | ||||||
Net asset value at beginning of period | $ | 18.68 | $ | 19.19 | ||||
|
|
|
| |||||
Net investment income (loss) (a) | 0.31 | 0.33 | ||||||
Net realized and unrealized gain (loss) on investments | 1.00 | (0.47 | ) | |||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.02 | 0.03 | ||||||
|
|
|
| |||||
Total from investment operations | 1.33 | (0.11 | ) | |||||
|
|
|
| |||||
Less dividends and distributions: | ||||||||
From net investment income | (0.28 | ) | (0.40 | ) | ||||
From net realized gain on investments | (0.32 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions | (0.60 | ) | (0.40 | ) | ||||
|
|
|
| |||||
Net asset value at end of period | $ | 19.41 | $ | 18.68 | ||||
|
|
|
| |||||
Total investment return (b) | 7.51 | % | (0.61 | %) | ||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Net investment income (loss) | 3.34 | %†† | 2.55 | % †† | ||||
Net expenses (c) | 0.67 | %†† | 0.66 | % †† | ||||
Portfolio turnover rate (d) | 34 | % | 44 | % | ||||
Net assets at end of period (in 000’s) | $ | 98,485 | $ | 94,869 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 31% and 36% for the six months ended April 30, 2019 and for the period ended October 31, 2018, respectively. |
34 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Income Builder Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has eight classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on December 29, 1987. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 27, 2015. Class R3 shares commenced operations on February 29, 2016. Class R6 shares commenced operations on February 28, 2018.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition,
depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek current income consistent with reasonable opportunity for future growth of capital and income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)).
35 |
Notes to Financial Statements (Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the Subadvisors or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisors, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close
36 | MainStay Income Builder Fund |
and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2019, there were no foreign equity securities held by the Fund that were fair valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisors. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisors to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no loan assignments held by the Fund that were fair valued in such a manner.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisors might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisors determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisors may consider various factors, including: (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, securities deemed to be illiquid under
37 |
Notes to Financial Statements (Unaudited) (continued)
procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income frompayment-in-kind securities, to the extent the Fund held any such securities during the six-month period ended April 30, 2019, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
38 | MainStay Income Builder Fund |
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(I) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2019, the Fund did not hold any unfunded commitments.
(J) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission
merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund may invest in futures contracts in order to hedge against anticipated changes in interest rates that might otherwise have an adverse effect upon the value of the Fund’s securities. The Fund may also use equity index futures contracts to increase the equity sensitivity to the Fund. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2019, open futures contracts are shown in the Portfolio of Investments.
(K) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be
39 |
Notes to Financial Statements (Unaudited) (continued)
used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of April 30, 2019, open foreign currency forward contracts are shown in the Portfolio of Investments.
(L) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities— at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar
equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(M) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $23,620,074; the total market value of collateral held by the Fund was $25,397,923. The market value of the collateral held includesnon-cash collateral in the form of U.S. Treasury securities with a value of $5,266,148.
(N) Debt and Foreign Securities Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region. Debt securities are also subject to the risks associated with changes in interest rates.
The Fund may invest in high-yield debt securities (sometimes called “junk bonds”), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in
40 | MainStay Income Builder Fund |
developed markets. The ability of issuers of securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
The Fund may invest in loans which are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These investments pay investors a higher interest rate than investment grade debt securities because of the increased risk of loss. Although certain loans are collateralized, there is no guarantee that the value of the collateral will be sufficient to repay the loan. In a recession or serious credit event, the value of these investments could decline significantly. As a result, the Fund’s NAVs could go down and you could lose money.
In addition, loans generally are subject to extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(O) Counterparty Credit Risk. In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains collateral posting terms and netting provisions. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/ or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit
a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels or if the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
(P) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(Q) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into Treasury futures contracts in order to hedge against anticipated changes in interest rates that might otherwise have an adverse effect upon the value of the Fund’s securities. The Fund also entered into domestic and foreign equity index futures contracts to increase the equity sensitivity to the Fund. Foreign currency forward contracts were used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of April 30, 2019:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments and futures contracts (a) | $ | — | $ | 14,200,858 | $ | 1,637,423 | $ | 15,838,281 | |||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 3,263,351 | — | — | 3,263,351 | |||||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | 3,263,351 | $ | 14,200,858 | $ | 1,637,423 | $ | 19,101,632 | ||||||||||
|
|
41 |
Notes to Financial Statements (Unaudited) (continued)
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments and futures contracts (a) | $ | — | $ | — | $ | (165,882 | ) | $ | (165,882 | ) | |||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (2,247,711 | ) | — | — | (2,247,711 | ) | |||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | (2,247,711 | ) | $ | — | $ | (165,882 | ) | $ | (2,413,593 | ) | |||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | (9,677,914 | ) | $ | 1,763,146 | $ | (7,914,768 | ) | |||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | 4,786,405 | — | — | 4,786,405 | |||||||||||||
|
| |||||||||||||||||
Total Realized Gain (Loss) | $ | 4,786,405 | $ | (9,677,914 | ) | $ | 1,763,146 | $ | (3,128,363 | ) | ||||||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | 24,714,987 | $ | 5,830,888 | $ | 30,545,875 | |||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | (3,187,533 | ) | — | — | (3,187,533 | ) | |||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (3,187,533 | ) | $ | 24,714,987 | $ | 5,830,888 | $ | 27,358,342 | |||||||||
|
|
Average Notional Amount
Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | 210,388,609 | $ | 180,139,170 | $ | 390,527,779 | ||||||||
Futures Contracts Short | $ | — | $ | — | $ | (22,970,302 | ) | $ | (22,970,302 | ) | ||||||
Forward Contracts Long | $ | 128,491,031 | $ | — | $ | — | $ | 128,491,031 | ||||||||
Forward Contracts Short | $ | (208,740,494 | ) | $ | — | $ | — | $ | (208,740,494 | ) | ||||||
|
|
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management
Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses
42 | MainStay Income Builder Fund |
of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as a Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the fixed-income portion of the Fund, pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor” and, together with MacKay Shields, the “Subadvisors”), a registered investment adviser, also serves as a Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the equity portion of the Fund, pursuant to the terms of an Amended and Restated Subadvisory Agreement between New York Life Investments and Epoch. Asset allocation decisions for the Fund are made by a committee chaired by MacKay Shields in collaboration with New York Life Investments. New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.64% up to $500 million; 0.60% from $500 million to $1 billion; 0.575% from $1 billion to $5 billion; and 0.565% in excess of $5 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2019, the effective management fee rate was 0.62%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets (exclusive of any applicable waivers/reimbursements).
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $4,482,671 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $15,778.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 1,731 | ||
Class R3 | 91 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $52,027 and $18,738, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $11,908, $10, $18,820 and $8,169, respectively.
43 |
Notes to Financial Statements (Unaudited) (continued)
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 295,595 | ||
Investor Class | 109,031 | |||
Class B | 36,542 | |||
Class C | 257,864 | |||
Class I | 246,369 | |||
Class R2 | 1,809 | |||
Class R3 | 94 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R2 | $ | 29,307 | 0.8 | % | ||||
Class R3 | 31,903 | 9.7 | ||||||
Class R6 | 98,242,173 | 99.8 |
(G) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net (Loss) | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 47,219 | $ | 348,756 | $ | (371,252 | ) | $ | — | $ | — | $ | 24,723 | $ | 493 | $ | — | 24,723 |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,446,535,948 | $ | 85,886,912 | $ | (41,387,951 | ) | $ | 44,498,961 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 53,964,130 | ||
Long-Term Capital Gain | 35,493,981 | |||
Total | $ | 89,458,111 |
Note 5–Restricted Securities
Restricted securities, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
As of April 30, 2019, the Fund held the following restricted security.
Security | Date(s) of Acquisition | Shares | Cost | 4/30/19 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | 3/11/14 | 12 | $ | 1 | $ | 7,431 | 0.0 | %‡ |
‡ | Less than one-tenth of a percent. |
44 | MainStay Income Builder Fund |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or LIBOR, whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of U.S. government securities were $320,037 and $222,548, respectively. Purchases and sales of securities, other than U.S. government securities andshort-term securities, were $158,402 and $321,026, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,654,475 | $ | 30,860,368 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 973,580 | 17,624,731 | ||||||
Shares redeemed | (2,906,216 | ) | (53,928,690 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (278,161 | ) | (5,443,591 | ) | ||||
Shares converted into Class A (See Note 1) | 338,743 | 6,384,270 | ||||||
Shares converted from Class A (See Note 1) | (58,837 | ) | (1,110,168 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,745 | $ | (169,489 | ) | ||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,277,142 | $ | 63,519,237 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,625,451 | 31,492,247 | ||||||
Shares redeemed | (7,071,027 | ) | (136,048,540 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,168,434 | ) | (41,037,056 | ) | ||||
Shares converted into Class A (See Note 1) | 535,852 | 10,454,119 | ||||||
Shares converted from Class A (See Note 1) | (166,671 | ) | (3,136,944 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,799,253 | ) | $ | (33,719,881 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 201,812 | $ | 3,768,891 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 146,511 | 2,652,708 | ||||||
Shares redeemed | (250,587 | ) | (4,676,253 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 97,736 | 1,745,346 | ||||||
Shares converted into Investor Class (See Note 1) | 117,021 | 2,202,739 | ||||||
Shares converted from Investor Class (See Note 1) | (197,001 | ) | (3,720,763 | ) | ||||
|
| |||||||
Net increase (decrease) | 17,756 | $ | 227,322 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 349,978 | $ | 6,743,482 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 232,814 | 4,514,249 | ||||||
Shares redeemed | (484,985 | ) | (9,337,314 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 97,807 | 1,920,417 | ||||||
Shares converted into Investor Class (See Note 1) | 238,043 | 4,518,940 | ||||||
Shares converted from Investor Class (See Note 1) | (442,741 | ) | (8,657,466 | ) | ||||
|
| |||||||
Net increase (decrease) | (106,891 | ) | $ | (2,218,109 | ) | |||
|
|
45 |
Notes to Financial Statements (Unaudited) (continued)
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 18,290 | $ | 334,320 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 37,565 | 681,596 | ||||||
Shares redeemed | (153,066 | ) | (2,847,694 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (97,211 | ) | (1,831,778 | ) | ||||
Shares converted from Class B (See Note 1) | (73,369 | ) | (1,374,973 | ) | ||||
|
| |||||||
Net increase (decrease) | (170,580 | ) | $ | (3,206,751 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 40,071 | $ | 780,294 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,580 | 1,380,721 | ||||||
Shares redeemed | (274,725 | ) | (5,316,357 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (164,074 | ) | (3,155,342 | ) | ||||
Shares converted from Class B (See Note 1) | (171,397 | ) | (3,331,374 | ) | ||||
|
| |||||||
Net increase (decrease) | (335,471 | ) | $ | (6,486,716 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 671,823 | $ | 12,395,465 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 276,368 | 5,005,654 | ||||||
Shares redeemed | (1,923,061 | ) | (35,766,529 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (974,870 | ) | (18,365,410 | ) | ||||
Shares converted from Class C (See Note 1) | (133,766 | ) | (2,533,784 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,108,636 | ) | $ | (20,899,194 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,454,490 | $ | 28,456,058 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 500,849 | 9,775,626 | ||||||
Shares redeemed | (3,821,801 | ) | (73,633,020 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,866,462 | ) | $ | (35,401,336 | ) | |||
|
|
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,736,651 | $ | 51,209,117 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 705,095 | 12,900,193 | ||||||
Shares redeemed | (5,265,354 | ) | (98,189,308 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,823,608 | ) | (34,079,998 | ) | ||||
Shares converted into Class I (See Note 1) | 8,380 | 152,679 | ||||||
|
| |||||||
Net increase (decrease) | (1,815,228 | ) | $ | (33,927,319 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 7,928,175 | $ | 155,016,664 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,629,572 | 31,887,809 | ||||||
Shares redeemed | (15,583,724 | ) | (302,323,889 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,025,977 | ) | (115,419,416 | ) | ||||
Shares converted into Class I (See Note 1) | 8,018 | 152,725 | ||||||
Shares converted from Class I (See Note 1) | (5,252,973 | ) | (99,476,079 | ) | ||||
|
| |||||||
Net increase (decrease) | (11,270,932 | ) | $ | (214,742,770 | ) | |||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 14,686 | $ | 274,222 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,540 | 45,822 | ||||||
Shares redeemed | (30,263 | ) | (560,273 | ) | ||||
|
| |||||||
Net increase (decrease) | (13,037 | ) | $ | (240,229 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 20,004 | $ | 384,300 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,394 | 85,139 | ||||||
Shares redeemed | (51,345 | ) | (991,089 | ) | ||||
|
| |||||||
Net increase (decrease) | (26,947 | ) | $ | (521,650 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 9,477 | $ | 179,731 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 270 | 4,934 | ||||||
|
| |||||||
Net increase (decrease) | 9,747 | $ | 184,665 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,121 | $ | 59,541 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 234 | 4,527 | ||||||
Shares redeemed | (6,078 | ) | (115,889 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,723 | ) | $ | (51,821 | ) | |||
|
|
46 | MainStay Income Builder Fund |
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 253,201 | $ | 4,824,124 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 171,328 | 3,136,340 | ||||||
Shares redeemed | (428,588 | ) | (8,030,358 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,059 | ) | $ | (69,894 | ) | |||
|
| |||||||
Period ended October 31, 2018 (a): | ||||||||
Shares sold | 67,172 | $ | 1,290,084 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 58,226 | 1,115,473 | ||||||
Shares redeemed | (299,556 | ) | (5,760,887 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (174,158 | ) | (3,355,330 | ) | ||||
Shares converted into Class R6 (See Note 1) | 5,251,919 | 99,476,079 | ||||||
|
| |||||||
Net increase (decrease) | 5,077,761 | $ | 96,120,749 | |||||
|
|
(a) | The inception date of the class was February 28, 2018. |
Note 11–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited)
The continuation of the Management Agreement with respect to the MainStay Income Builder Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and each of Epoch Investment Partners, Inc. (“Epoch”) and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund (collectively, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments, Epoch and MacKay Shields in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments, Epoch and/or MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments, Epoch and MacKay Shields in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments, Epoch and MacKay Shields personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior
management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments, Epoch and MacKay Shields; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments, Epoch and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments, Epoch and MacKay Shields from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments, Epoch and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments, Epoch and MacKay Shields. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments, Epoch and MacKay Shields resulting
48 | MainStay Income Builder Fund |
from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments, Epoch and MacKay Shields
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of Epoch and MacKay Shields and ongoing analysis of, and interactions with, Epoch and MacKay Shields with respect to, among other things, Fund investment performance and risk as well as Epoch’s and MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except
for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that Epoch and MacKay Shields provide to the Fund. The Board evaluated Epoch’s and MacKay Shields’ experience in serving as subadvisors to the Fund and managing other portfolios and Epoch’s and MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Epoch and MacKay Shields, and Epoch’s and MacKay Shields’ overall legal and compliance environments, resources and histories. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments, Epoch and MacKay Shields believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Epoch and MacKay Shields. The Board reviewed Epoch’s and MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’, Epoch’s and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary
49 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited) (continued)
on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments, Epoch and MacKay Shields had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments, Epoch and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments, Epoch and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments, Epoch and MacKay Shields under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, and Epoch due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate. The Board considered that Epoch’s subadvisory fees are negotiated atarm’s-length by New York Life Investments and that these fees are paid by New York Life Investments, not the Fund. On this basis, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments, Epoch and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, and Epoch, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the sub-
advisory fees for the Fund. The Board considered the financial resources of New York Life Investments, Epoch and MacKay Shields and acknowledged that New York Life Investments, Epoch and MacKay Shields must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments, Epoch and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments, MacKay Shields and their affiliates and Epoch due to their relationships with the Fund, including reputational and other indirect benefits. The Board recognized, for example, the benefits to Epoch from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Epoch in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments concerning other material business relationships between Epoch and its affiliates and New York Life Investments and its affiliates. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s
50 | MainStay Income Builder Fund |
transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund were not excessive. With respect to Epoch, the Board considered that any profits realized by Epoch due to its relationship with the Fund are the result ofarm’s-length negotiations between New York Life Investments and Epoch, acknowledging that any such profits are based on fees paid to Epoch by New York Life Investments, not the Fund.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to Epoch and MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments, Epoch and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
51 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited) (continued)
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
52 | MainStay Income Builder Fund |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
53 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1738551 MS065-19 | MSIB10-06/19 (NYLIM) NL216 |
MainStay Large Cap Growth Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class A shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call800-624-6782 or visit nylinvestments.com/funds.
(With sales charges)
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years or Since Inception | Gross Expense Ratio2 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 7/1/1995 | | 8.31 14.61 | %
| | 10.87 17.32 | %
| | 13.25 14.54 | %
| | 15.02 15.67 | %
| | 0.98 0.98 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 8.30 14.60 | | | 10.78 17.23 | | | 13.16 14.44 | | | 14.94 15.59 | | | 1.07 1.07 |
| ||||||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 9.48 13.97 | | | 11.64 16.21 | | | 13.38 13.58 | | | 14.71 14.71 | | | 1.82 1.82 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 13.23 14.12 | | | 15.46 16.38 | | | 13.60 13.60 | | | 14.73 14.73 | | | 1.82 1.82 |
| ||||||||
Class I Shares | No Sales Charge | 4/1/2005 | 14.72 | 17.69 | 14.82 | 15.99 | 0.73 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 4/1/2005 | 14.72 | 17.53 | 14.71 | 15.86 | 0.83 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 4/1/2005 | 14.43 | 17.15 | 14.41 | 15.56 | 1.08 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 14.34 | 16.82 | 14.13 | 15.26 | 1.33 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 14.83 | 17.78 | 14.94 | 15.58 | 0.64 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Russell 1000® Growth Index4 | 12.09 | % | 17.43 | % | 14.50 | % | 16.96 | % | ||||||||
S&P 500® Index5 | 9.76 | 13.49 | 11.63 | 15.32 | ||||||||||||
Morningstar Large Growth Category Average6 | 12.15 | 14.77 | 12.46 | 15.23 |
4. | The Russell 1000® Growth Index is the Fund’s primary broad-based securities market index for comparison purposes. The Russell 1000® Growth Index measures the performance of thelarge-cap growth segment of the U.S. equity universe. It includes those Russell 1000® Index companies with higherprice-to-book ratios and higher forecasted growth values. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuringlarge-cap U.S. stock- |
market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Growth Category Average is representative of funds that invest primarily in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth and high valuations. Most of these portfolios focus on companies in rapidly expanding industries. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Large Cap Growth Fund |
Cost in Dollars of a $1,000 Investment in MainStay Large Cap Growth Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,146.10 | $ | 5.27 | $ | 1,019.89 | $ | 4.96 | 0.99% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,146.00 | $ | 5.80 | $ | 1,019.39 | $ | 5.46 | 1.09% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,139.70 | $ | 9.76 | $ | 1,015.67 | $ | 9.20 | 1.84% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,141.20 | $ | 9.77 | $ | 1,015.67 | $ | 9.20 | 1.84% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,147.20 | $ | 3.94 | $ | 1,021.13 | $ | 3.71 | 0.74% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,147.20 | $ | 4.47 | $ | 1,020.63 | $ | 4.21 | 0.84% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,144.30 | $ | 5.80 | $ | 1,019.39 | $ | 5.46 | 1.09% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,143.40 | $ | 7.12 | $ | 1,018.15 | $ | 6.71 | 1.34% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,148.30 | $ | 3.41 | $ | 1,021.62 | $ | 3.21 | 0.64% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2019(Unaudited)
Software | 17.3 | % | ||
IT Services | 16.1 | |||
Internet & Direct Marketing Retail | 11.2 | |||
Interactive Media & Services | 9.9 | |||
Entertainment | 4.4 | |||
Health Care Equipment & Supplies | 4.4 | |||
Life Sciences Tools & Services | 4.1 | |||
Semiconductors & Semiconductor Equipment | 3.8 | |||
Textiles, Apparel & Luxury Goods | 3.8 | |||
Aerospace & Defense | 3.1 | |||
Pharmaceuticals | 3.1 | |||
Chemicals | 2.6 | |||
Specialty Retail | 2.5 | |||
Road & Rail | 1.8 |
Automobiles | 1.6 | % | ||
Capital Markets | 1.6 | |||
Industrial Conglomerates | 1.5 | |||
Health Care Providers & Services | 1.4 | |||
Biotechnology | 1.2 | |||
Professional Services | 1.2 | |||
Banks | 1.0 | |||
Health Care Technology | 1.0 | |||
Machinery | �� | 1.0 | ||
Short-Term Investment | 0.4 | |||
Investment of Cash Collateral For Securities Loaned | 0.1 | |||
Other Assets, Less Liabilities | –0.1 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings as of April 30, 2019(excludingshort-term investment) (Unaudited)
1. | Microsoft Corp. |
2. | Amazon.com, Inc. |
3. | Alphabet, Inc. |
4. | Visa, Inc., Class A |
5. | Facebook, Inc., Class A |
6. | salesforce.com, Inc. |
7. | Mastercard, Inc., Class A |
8. | Adobe, Inc. |
9. | NIKE, Inc., Class B |
10. | Lowe’s Cos., Inc. |
8 | MainStay Large Cap Growth Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Justin H. Kelly, CFA, and Patrick M. Burton, CFA, of Winslow Capital Management, LLC, the Fund’s Subadvisor.
How did MainStay Large Cap Growth Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay Large Cap Growth Fund returned 14.72%, outperforming the 12.09% return of the Fund’s primary benchmark, the Russell 1000® Growth Index. Over the same period, Class I shares outperformed the 9.76% return of the S&P 500® Index, which is the Fund’s secondary benchmark, and the 12.15% return of the Morningstar Large Growth Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Security selection most meaningfully drove the Fund’s outperformance of the Russell 1000® Growth Index during the reporting period. Security selection proved especially strong in the information technology sector, which led the market’s advance. Sector allocation mildly detracted from relative performance due to the Fund’s overweight position in the lagging health care sector. The Fund’s relative outperformance was broad-based, with seven of ten sectors positively contributing to relative performance compared to the benchmark during the reporting period. (Contributions take weightings and total returns into account.)
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The information technology and health care sectors contributed most strongly to the Fund’s relative performance during the reporting period, while the communication services sector detracted most. The consumer discretionary and materials sectors mildly detracted from relative performance as well.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The Fund’s absolute performance benefited most strongly from its lack of exposure to technology company Apple, which declined during the reporting period, and from its holdings of
semiconductor company Xilinx, which appreciated sharply. The two stocks that detracted the most from absolute performance included online social media company Facebook and health care provider UnitedHealth Group, both of which the Fund continued to hold throughout the reporting period.
What were some of the Fund’s largest purchases and sales during the reporting period?
The Fund’s largest purchases during the reporting period included online social media company Facebook and Chinese e-commerce leader Alibaba. The Fund’s largest sales during the reporting period included real estate investment trust company American Tower and leading manufacturer of commercial jetliners Boeing.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s allocation to the consumer discretionary sector increased the most during the reporting period, followed by increased exposure to the communication services sector. The Fund’s allocation to the industrials sector decreased the most during the reporting period, followed by real estate.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund’s exposure across Winslow Capital Management’s proprietary three types of growth was as follows: 34% consistent growth (companies that have greater earnings-per-share growth than the market and are demonstrably not cyclical), 41% dynamic growth (companies that have dynamic positions with superior competitive advantages and that generate revenue growth at or above 10%) and 24% cyclical growth (companies that have exposure to product, industry, regulatory or economic cycles and have prospects for superior earnings growth in the coming 24 months). At the sector level, the Fund held its largest overweight exposures to the consumer discretionary and information technology sectors. Its largest underweight exposures included the consumer staples and industrials sectors.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Shares | Value | |||||||
Common Stocks 99.6%† |
| |||||||
Aerospace & Defense 3.1% |
| |||||||
Boeing Co. | 465,750 | $ | 175,909,117 | |||||
Northrop Grumman Corp. | 679,880 | 197,104,011 | ||||||
|
| |||||||
373,013,128 | ||||||||
|
| |||||||
Automobiles 1.6% |
| |||||||
Ferrari N.V. | 1,433,960 | 195,061,579 | ||||||
|
| |||||||
Banks 1.0% |
| |||||||
JPMorgan Chase & Co. | 1,042,400 | 120,970,520 | ||||||
|
| |||||||
Biotechnology 1.2% |
| |||||||
Exact Sciences Corp. (a) | 1,485,100 | 146,564,519 | ||||||
|
| |||||||
Capital Markets 1.6% |
| |||||||
Moody’s Corp. | 1,001,750 | 196,964,085 | ||||||
|
| |||||||
Chemicals 2.6% |
| |||||||
Linde PLC | 965,030 | 173,956,308 | ||||||
Sherwin-Williams Co. | 308,515 | 140,321,877 | ||||||
|
| |||||||
314,278,185 | ||||||||
|
| |||||||
Entertainment 4.4% |
| |||||||
Netflix, Inc. (a) | 742,410 | 275,092,601 | ||||||
Walt Disney Co. | 1,834,100 | 251,216,677 | ||||||
|
| |||||||
526,309,278 | ||||||||
|
| |||||||
Health Care Equipment & Supplies 4.4% |
| |||||||
Abbott Laboratories | 1,522,420 | 121,123,735 | ||||||
Align Technology, Inc. (a) | 266,390 | 86,491,505 | ||||||
Intuitive Surgical, Inc. (a) | 310,810 | 158,708,910 | ||||||
Stryker Corp. | 872,970 | 164,912,763 | ||||||
|
| |||||||
531,236,913 | ||||||||
|
| |||||||
Health Care Providers & Services 1.4% |
| |||||||
UnitedHealth Group, Inc. | 717,800 | 167,297,646 | ||||||
|
| |||||||
Health Care Technology 1.0% |
| |||||||
Veeva Systems, Inc., Class A (a) | 881,350 | 123,274,425 | ||||||
|
| |||||||
Industrial Conglomerates 1.5% |
| |||||||
Honeywell International, Inc. | 1,004,390 | 174,392,236 | ||||||
|
| |||||||
Interactive Media & Services 9.9% |
| |||||||
Alphabet, Inc. (a) | ||||||||
Class A | 300,390 | 360,155,594 | ||||||
Class C | 304,241 | 361,584,344 | ||||||
Facebook, Inc., Class A (a) | 2,465,380 | 476,804,492 | ||||||
|
| |||||||
1,198,544,430 | ||||||||
|
|
Shares | Value | |||||||
Internet & Direct Marketing Retail 11.2% |
| |||||||
Alibaba Group Holding, Ltd., Sponsored ADR (a) | 1,615,070 | $ | 299,708,540 | |||||
Amazon.com, Inc. (a) | 419,990 | 809,119,135 | ||||||
Expedia Group, Inc. | 979,540 | 127,183,474 | ||||||
MercadoLibre, Inc. (a) | 233,780 | 113,182,249 | ||||||
|
| |||||||
1,349,193,398 | ||||||||
|
| |||||||
IT Services 16.1% |
| |||||||
Automatic Data Processing, Inc. | 1,180,250 | 194,021,298 | ||||||
Fiserv, Inc. (a) | 1,653,710 | 144,269,660 | ||||||
GoDaddy, Inc., Class A (a) | 2,473,150 | 201,561,725 | ||||||
Mastercard, Inc., Class A | 1,522,300 | 387,029,552 | ||||||
Pagseguro Digital, Ltd., Class A (a) | 5,047,170 | 131,529,250 | ||||||
PayPal Holdings, Inc. (a) | 2,455,130 | 276,865,010 | ||||||
Visa, Inc., Class A | 3,678,900 | 604,921,527 | ||||||
|
| |||||||
1,940,198,022 | ||||||||
|
| |||||||
Life Sciences Tools & Services 4.1% |
| |||||||
Agilent Technologies, Inc. | 1,766,970 | 138,707,145 | ||||||
Illumina, Inc. (a) | 584,910 | 182,491,920 | ||||||
Thermo Fisher Scientific, Inc. | 612,220 | 169,860,439 | ||||||
|
| |||||||
491,059,504 | ||||||||
|
| |||||||
Machinery 1.0% |
| |||||||
Fortive Corp. | 1,393,190 | 120,288,025 | ||||||
�� |
|
| ||||||
Pharmaceuticals 3.1% |
| |||||||
AstraZeneca PLC, Sponsored ADR | 4,047,200 | 152,417,552 | ||||||
Zoetis, Inc. | 2,174,740 | 221,475,522 | ||||||
|
| |||||||
373,893,074 | ||||||||
|
| |||||||
Professional Services 1.2% |
| |||||||
CoStar Group, Inc. (a) | 291,540 | 144,676,725 | ||||||
|
| |||||||
Road & Rail 1.8% |
| |||||||
Union Pacific Corp. | 1,214,110 | 214,946,034 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 3.8% |
| |||||||
Microchip Technology, Inc. (b) | 1,996,900 | 199,470,341 | ||||||
Texas Instruments, Inc. | 1,040,100 | 122,554,983 | ||||||
Xilinx, Inc. | 1,116,190 | 134,099,067 | ||||||
|
| |||||||
456,124,391 | ||||||||
|
| |||||||
Software 17.3% |
| |||||||
Adobe, Inc. (a) | 1,243,860 | 359,786,505 | ||||||
Autodesk, Inc. (a) | 660,200 | 117,654,242 | ||||||
Intuit, Inc. | 847,110 | 212,675,437 | ||||||
Microsoft Corp. | 7,018,030 | 916,554,718 | ||||||
salesforce.com, Inc. (a) | 2,419,390 | 400,046,136 | ||||||
Workday, Inc., Class A (a) | 407,770 | 83,849,745 | ||||||
|
| |||||||
2,090,566,783 | ||||||||
|
|
10 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Specialty Retail 2.5% |
| |||||||
Lowe’s Cos., Inc. | 2,709,340 | $ | 306,534,728 | |||||
|
| |||||||
Textiles, Apparel & Luxury Goods 3.8% |
| |||||||
NIKE, Inc., Class B | 3,683,440 | 323,516,535 | ||||||
VF Corp. | 1,456,400 | 137,498,724 | ||||||
|
| |||||||
461,015,259 | ||||||||
|
| |||||||
Total Common Stocks | 12,016,402,887 | |||||||
|
| |||||||
Short-Term Investment 0.4% |
| |||||||
Affiliated Investment Company 0.4% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (c)(d) | 48,485,832 | 48,485,832 | ||||||
|
| |||||||
TotalShort-Term Investment | 48,485,832 | |||||||
|
|
Shares | Value | |||||||
Investment of Cash Collateral For Securities Loaned 0.1% |
| |||||||
Unaffiliated Investment Company 0.1% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (c) | 10,455,331 | $ | 10,455,331 | |||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 10,455,331 | |||||||
|
| |||||||
Total Investments | 100.1 | % | 12,075,344,050 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (16,715,647 | ) | ||||
Net Assets | 100.0 | % | $ | 12,058,628,403 |
† | Percentages indicated are based on Fund net assets. |
(a) | Non-income producing security. |
(b) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $10,366,085 and the Fund received cash collateral with a value of $10,455,331. (See Note 2(H)) |
(c) | Current yield as of April 30, 2019. |
(d) | As of April 30, 2019, the Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. |
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Inputs (Level 2) | Significant Inputs | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 12,016,402,887 | $ | — | $ | — | $ | 12,016,402,887 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 48,485,832 | — | — | 48,485,832 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 10,455,331 | — | — | 10,455,331 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 12,075,344,050 | $ | — | $ | — | $ | 12,075,344,050 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 12,026,858,218 | ||
Investment in affiliated investment company, at value (identified cost $48,485,832) | 48,485,832 | |||
Receivables: | ||||
Fund shares sold | 10,598,232 | |||
Dividends | 4,289,661 | |||
Securities lending income | 126 | |||
Other assets | 219,584 | |||
|
| |||
Total assets | 12,090,451,653 | |||
|
| |||
Liabilities |
| |||
Payables: | ||||
Fund shares redeemed | 12,678,654 | |||
Collateral received for securities on loan | 10,455,331 | |||
Manager (See Note 3) | 6,135,039 | |||
Transfer agent (See Note 3) | 1,482,378 | |||
NYLIFE Distributors (See Note 3) | 444,725 | |||
Shareholder communication | 264,615 | |||
Professional fees | 160,414 | |||
Custodian | 101,899 | |||
Trustees | 13,493 | |||
Accrued expenses | 86,702 | |||
|
| |||
Total liabilities | 31,823,250 | |||
|
| |||
Net assets | $ | 12,058,628,403 | ||
|
| |||
Composition of Net Assets |
| |||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 11,965,822 | ||
Additional paid-in capital | 6,154,091,833 | |||
|
| |||
6,166,057,655 | ||||
Total distributable earnings (loss) | 5,892,570,748 | |||
|
| |||
Net assets | $ | 12,058,628,403 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 969,508,706 | ||
|
| |||
Shares of beneficial interest outstanding | 103,277,346 | |||
|
| |||
Net asset value per share outstanding | $ | 9.39 | ||
Maximum sales charge (5.50% of offering price) | 0.55 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.94 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 116,330,702 | ||
|
| |||
Shares of beneficial interest outstanding | 12,609,451 | |||
|
| |||
Net asset value per share outstanding | $ | 9.23 | ||
Maximum sales charge (5.50% of offering price) | 0.54 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.77 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 24,860,770 | ||
|
| |||
Shares of beneficial interest outstanding | 3,348,458 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.42 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 168,454,434 | ||
|
| |||
Shares of beneficial interest outstanding | 22,739,396 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.41 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 6,399,943,877 | ||
|
| |||
Shares of beneficial interest outstanding | 624,003,125 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.26 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 970,948,313 | ||
|
| |||
Shares of beneficial interest outstanding | 97,622,677 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.95 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 208,345,530 | ||
|
| |||
Shares of beneficial interest outstanding | 22,320,871 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.33 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 60,678,735 | ||
|
| |||
Shares of beneficial interest outstanding | 6,931,627 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.75 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 3,139,557,336 | ||
|
| |||
Shares of beneficial interest outstanding | 303,729,286 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.34 | ||
|
|
12 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) |
| |||
Income | ||||
Dividends-unaffiliated (a) | $ | 44,717,669 | ||
Dividends-affiliated | 951,677 | |||
Securities lending | 484,665 | |||
Interest | 2,359 | |||
|
| |||
Total income | 46,156,370 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 34,738,862 | |||
Transfer agent (See Note 3) | 4,331,396 | |||
Distribution/Service—Class A (See Note 3) | 1,144,447 | |||
Distribution/Service—Investor Class (See Note 3) | 133,224 | |||
Distribution/Service—Class B (See Note 3) | 121,077 | |||
Distribution/Service—Class C (See Note 3) | 879,205 | |||
Distribution/Service—Class R2 (See Note 3) | 266,783 | |||
Distribution/Service—Class R3 (See Note 3) | 148,499 | |||
Shareholder service (See Note 3) | 626,080 | |||
Professional fees | 342,625 | |||
Shareholder communication | 242,911 | |||
Trustees | 135,910 | |||
Registration | 116,698 | |||
Custodian | 84,928 | |||
Miscellaneous | 207,449 | |||
|
| |||
Total expenses before waiver/reimbursement | 43,520,094 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (65,123 | ) | ||
|
| |||
Net expenses | 43,454,971 | |||
|
| |||
Net investment income (loss) | 2,701,399 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on unaffiliated investments | 855,089,018 | |||
Net change in unrealized appreciation (depreciation) on unaffiliated investments | 690,877,382 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 1,545,966,400 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 1,548,667,799 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $250,369. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 2,701,399 | $ | (1,280,547 | ) | |||
Net realized gain (loss) on investments | 855,089,018 | 2,288,400,255 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 690,877,382 | (810,084,748 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 1,548,667,799 | 1,477,034,960 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (198,643,956 | ) | (129,538,086 | ) | ||||
Investor Class | (19,326,855 | ) | (16,387,495 | ) | ||||
Class B | (5,587,234 | ) | (5,472,548 | ) | ||||
Class C | (41,980,795 | ) | (38,578,584 | ) | ||||
Class I | (1,039,849,373 | ) | (948,232,853 | ) | ||||
Class R1 | (190,986,945 | ) | (224,360,524 | ) | ||||
Class R2 | (40,446,981 | ) | (45,003,587 | ) | ||||
Class R3 | (11,941,266 | ) | (12,069,586 | ) | ||||
Class R6 | (419,727,422 | ) | (294,234,482 | ) | ||||
|
| |||||||
Total distributions to shareholders | (1,968,490,827 | ) | (1,713,877,745 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,479,966,114 | 2,653,181,595 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,806,156,958 | 1,568,090,662 | ||||||
Cost of shares redeemed | (2,358,292,410 | ) | (4,616,519,806 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 927,830,662 | (395,247,549 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 508,007,634 | (632,090,334 | ) | |||||
Net Assets |
| |||||||
Beginning of period | 11,550,620,769 | 12,182,711,103 | ||||||
|
| |||||||
End of period | $ | 12,058,628,403 | $ | 11,550,620,769 | ||||
|
|
14 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.95 | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | $ | 9.98 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.27 | 1.12 | 2.31 | (0.23 | ) | 0.85 | 1.45 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.26 | 1.10 | 2.30 | (0.24 | ) | 0.83 | 1.43 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | — | — | — | — | ||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.39 | $ | 9.95 | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.61 | % | 12.36 | % | 28.54 | % | (2.44 | %) | 8.10 | % | 14.95 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.14 | %)†† | (0.21 | %) | (0.15 | %) | (0.13 | %) | (0.23 | %) | (0.22 | %) | ||||||||||||||||
Net expenses (c) | 0.99 | % †† | 0.97 | % | 1.00 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.99 | % †† | 0.98 | % | 1.00 | % | 1.00 | % | 0.99 | % | 0.99 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 969,509 | $ | 1,092,962 | $ | 960,123 | $ | 882,021 | $ | 1,202,852 | $ | 1,304,641 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.81 | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | $ | 9.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.25 | 1.10 | 2.29 | (0.23 | ) | 0.86 | 1.44 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.24 | 1.07 | 2.27 | (0.25 | ) | 0.83 | 1.41 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.23 | $ | 9.81 | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.60 | % | 12.19 | % | 28.45 | % | (2.57 | %) | 8.16 | % | 14.82 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.27 | %)†† | (0.30 | %) | (0.19 | %) | (0.19 | %) | (0.28 | %) | (0.28 | %) | ||||||||||||||||
Net expenses (c) | 1.09 | % †† | 1.06 | % | 1.07 | % | 1.05 | % | 1.04 | % | 1.04 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.11 | % †† | 1.07 | % | 1.07 | % | 1.06 | % | 1.04 | % | 1.04 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 116,331 | $ | 103,987 | $ | 108,078 | $ | 167,631 | $ | 180,154 | $ | 199,826 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.26 | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | $ | 9.29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.09 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.02 | 0.93 | 2.01 | (0.21 | ) | 0.79 | 1.35 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.98 | 0.84 | 1.93 | (0.29 | ) | 0.69 | 1.25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 7.42 | $ | 8.26 | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 13.97 | % | 11.28 | %(c) | 27.61 | % | (3.32 | %) | 7.34 | % | 14.08 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (1.01 | %)†† | (1.04 | %) | (0.96 | %) | (0.94 | %) | (1.03 | %) | (1.02 | %) | ||||||||||||||||
Net expenses (d) | 1.84 | % †† | 1.81 | % | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.86 | % †† | 1.82 | % | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 24,861 | $ | 25,685 | $ | 31,793 | $ | 36,549 | $ | 47,779 | $ | 52,737 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.25 | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | $ | 9.29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.09 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | 0.94 | 2.00 | (0.21 | ) | 0.79 | 1.34 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.98 | 0.85 | 1.92 | (0.29 | ) | 0.69 | 1.24 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 7.41 | $ | 8.25 | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.12 | % | 11.42 | % | 27.51 | % | (3.31 | %) | 7.35 | % | 13.96 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (1.00 | %)†† | (1.05 | %) | (0.96 | %) | (0.94 | %) | (1.04 | %) | (1.02 | %) | ||||||||||||||||
Net expenses (c) | 1.84 | % †† | 1.81 | % | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.86 | % †† | 1.82 | % | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 168,454 | $ | 197,231 | $ | 229,283 | $ | 306,409 | $ | 408,078 | $ | 402,714 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
16 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.69 | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | $ | 10.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | 0.00 | ‡ | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.39 | 1.20 | 2.46 | (0.24 | ) | 0.89 | 1.51 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.39 | 1.20 | 2.47 | (0.23 | ) | 0.89 | 1.51 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.01 | ) | — | — | — | — | |||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.82 | ) | (1.57 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.26 | $ | 10.69 | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.72 | % | 12.54 | %(c) | 28.92 | % | (2.23 | %) | 8.36 | % | 15.26 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.09 | %†† | 0.04 | % | 0.12 | % | 0.12 | % | 0.02 | % | 0.02 | % | ||||||||||||||||
Net expenses (d) | 0.74 | %†† | 0.72 | % | 0.75 | % | 0.74 | % | 0.74 | % | 0.74 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.74 | %†† | 0.73 | % | 0.75 | % | 0.75 | % | 0.74 | % | 0.74 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 6,399,944 | $ | 6,275,780 | $ | 6,752,754 | $ | 8,994,997 | $ | 12,150,253 | $ | 14,361,006 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.43 | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | $ | 10.19 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | (0.01 | ) | 0.00 | ‡ | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.34 | 1.17 | 2.41 | (0.24 | ) | 0.89 | 1.49 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.34 | 1.16 | 2.41 | (0.24 | ) | 0.88 | 1.48 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.95 | $ | 10.43 | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.72 | % | 12.46 | % | 28.79 | % | (2.37 | %) | 8.39 | % | 15.14 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.00 | %††(c) | (0.06 | %) | 0.01 | % | 0.02 | % | (0.08 | %) | (0.08 | %) | ||||||||||||||||
Net expenses (d) | 0.84 | %†† | 0.82 | % | 0.85 | % | 0.84 | % | 0.84 | % | 0.84 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.84 | %†† | 0.83 | % | 0.85 | % | 0.85 | % | 0.84 | % | 0.84 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 970,948 | $ | 1,102,423 | $ | 1,596,638 | $ | 1,636,560 | $ | 1,952,248 | $ | 2,225,940 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Less than one-hundredth of a percent. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.90 | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | $ | 9.99 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.26 | 1.11 | 2.31 | (0.24 | ) | 0.85 | 1.46 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.25 | 1.08 | 2.29 | (0.26 | ) | 0.82 | 1.43 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.33 | $ | 9.90 | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.43 | % | 12.17 | % (c) | 28.49 | % | (2.66 | %) | 8.00 | % | 14.93 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.26 | %)†† | (0.31 | %) | (0.24 | %) | (0.23 | %) | (0.32 | %) | (0.33 | %) | ||||||||||||||||
Net expenses (d) | 1.09 | % †† | 1.07 | % | 1.10 | % | 1.09 | % | 1.09 | % | 1.09 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.09 | % †† | 1.08 | % | 1.10 | % | 1.10 | % | 1.09 | % | 1.09 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 208,345 | $ | 227,298 | $ | 303,192 | $ | 391,535 | $ | 674,630 | $ | 984,295 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.41 | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | $ | 9.80 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.05 | ) | (0.04 | ) | (0.04 | ) | (0.06 | ) | (0.06 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.18 | 1.06 | 2.21 | (0.23 | ) | 0.84 | 1.43 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.16 | 1.01 | 2.17 | (0.27 | ) | 0.78 | 1.37 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.75 | $ | 9.41 | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.34 | % | 11.97 | % | 28.05 | % | (2.83 | %) | 7.79 | % | 14.59 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.51 | %)†† | (0.55 | %) | (0.49 | %) | (0.48 | %) | (0.57 | %) | (0.57 | %) | ||||||||||||||||
Net expenses (c) | 1.34 | % †† | 1.32 | % | 1.35 | % | 1.34 | % | 1.34 | % | 1.34 | % | ||||||||||||||||
Expenses (before reimbursement/waiver) (c) | 1.34 | % †† | 1.33 | % | 1.35 | % | 1.35 | % | 1.34 | % | 1.34 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 60,679 | $ | 61,850 | $ | 78,634 | $ | 87,060 | $ | 114,118 | $ | 158,222 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
18 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R6 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.76 | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | $ | 10.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.02 | 0.02 | 0.01 | 0.01 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.39 | 1.21 | 2.47 | (0.24 | ) | 0.90 | 1.51 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.40 | 1.22 | 2.49 | (0.22 | ) | 0.91 | 1.52 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.02 | ) | — | — | — | — | |||||||||||||||||||||
From net realized gain on investments | (1.82 | ) | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.82 | ) | (1.58 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.34 | $ | 10.76 | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 14.83 | % | 12.72 | % | 29.02 | % | (2.12 | %) | 8.55 | % | 15.36 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | %†† | 0.13 | % | 0.21 | % | 0.23 | % | 0.11 | % | 0.10 | % | ||||||||||||||||
Net expenses (c) | 0.64 | %†† | 0.63 | % | 0.63 | % | 0.62 | % | 0.62 | % | 0.62 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.64 | %†† | 0.64 | % | 0.63 | % | 0.63 | % | 0.62 | % | 0.62 | % | ||||||||||||||||
Portfolio turnover rate | 35 | % | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,139,557 | $ | 2,463,405 | $ | 2,122,217 | $ | 1,693,868 | $ | 1,311,034 | $ | 738,186 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Large Cap Growth Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A shares commenced operations on July 1, 1995. Class B, Class C, Class I, Class R1 and Class R2 shares commenced operations on April 1, 2005. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 shares commenced operations on June 17, 2013.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in
the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seeklong-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current
20 | MainStay Large Cap Growth Fund |
day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities, including exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using
21 |
Notes to Financial Statements(Unaudited) (continued)
valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost
method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
22 | MainStay Large Cap Growth Fund |
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $10,366,085 and the Fund received cash collateral with a value of $10,455,331.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance
Officer attributable to the Fund. Winslow Capital Management, LLC. (“Winslow” or the “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Winslow, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.75% up to $500 million; 0.725% from $500 million to $750 million; 0.71% from $750 million to $1 billion; 0.70% from $1 billion to $2 billion; 0.66% from $2 billion to $3 billion; 0.61% from $3 billion to $7 billion; 0.585% from $7 billion to $9 billion; and 0.575% in excess of $9 billion.
New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed 0.55% of the Fund’s average daily net assets from $11 billion to $13 billion; and 0.525% of the Fund’s average daily net assets over $13 billion. This agreement will remain in effect until February 28, 2020 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class I shares do not exceed 0.88% of the Fund’s average daily net assets. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
Additionally, New York Life Investments has agreed to further voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R1 shares do not exceed 0.95% of its average daily net assets. This voluntary waiver or reimbursement may be discontinued at any time without notice.
During the six-month period ended April 30, 2019, the effective management fee rate was 0.62%, exclusive of any applicable waivers/reimbursements.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $34,738,862 and waived its fees and/or reimbursed expenses in the amount of $65,123.
23 |
Notes to Financial Statements(Unaudited) (continued)
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 489,667 | ||
Class R2 | 106,713 | |||
Class R3 | 29,700 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $74,393 and $29,472, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $1,546, $5,297 and $5,606, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 449,552 | ||
Investor Class | 113,161 | |||
Class B | 25,713 | |||
Class C | 186,705 | |||
Class I | 2,939,449 | |||
Class R1 | 482,486 | |||
Class R2 | 105,081 | |||
Class R3 | 29,249 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
24 | MainStay Large Cap Growth Fund |
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 199,452 | $ | 1,700,039 | $ | (1,851,005 | ) | $ | — | $ | — | $ | 48,486 | $ | 952 | $ | — | 48,486 |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Invest- | $ | 7,040,548,088 | $ | 5,083,429,294 | $ | (48,633,332 | ) | $ | 5,034,795,962 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 205,327,756 | ||
Long-Term Capital Gain | 1,508,549,989 | |||
Total | $ | 1,713,877,745 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the
Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $3,971,587 and $4,968,629, respectively.
25 |
Notes to Financial Statements(Unaudited) (continued)
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 12,777,340 | $ | 111,743,013 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 20,331,243 | 172,408,937 | ||||||
Shares redeemed | (40,261,828 | ) | (327,904,438 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,153,245 | ) | (43,752,488 | ) | ||||
Shares converted into Class A (See Note 1) | 831,269 | 7,278,913 | ||||||
Shares converted from Class A (See Note 1) | (286,177 | ) | (2,472,137 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,608,153 | ) | $ | (38,945,712 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 42,230,349 | $ | 436,720,943 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,586,881 | 111,645,636 | ||||||
Shares redeemed | (33,979,838 | ) | (341,156,596 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 20,837,392 | 207,209,983 | ||||||
Shares converted into Class A (See Note 1) | 2,993,726 | 30,439,439 | ||||||
Shares converted from Class A (See Note 1) | (6,170,055 | ) | (60,392,537 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 17,661,063 | $ | 177,256,885 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,079,368 | $ | 9,260,863 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,314,746 | 19,304,979 | ||||||
Shares redeemed | (1,363,871 | ) | (11,884,313 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,030,243 | 16,681,529 | ||||||
Shares converted into Investor Class (See Note 1) | 326,358 | 2,801,005 | ||||||
Shares converted from Investor Class (See Note 1) | (347,797 | ) | (2,979,620 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,008,804 | $ | 16,502,914 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 2,315,575 | $ | 23,413,077 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,870,663 | 16,368,293 | ||||||
Shares redeemed | (1,711,588 | ) | (16,884,001 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,474,650 | 22,897,369 | ||||||
Shares converted into Investor Class (See Note 1) | 383,765 | 3,862,501 | ||||||
Shares converted from Investor Class (See Note 1) | (2,753,111 | ) | (27,624,467 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 105,304 | $ | (864,597 | ) | ||||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 105,222 | $ | 722,440 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 790,046 | 5,317,008 | ||||||
Shares redeemed | (377,376 | ) | (2,622,930 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 517,892 | 3,416,518 | ||||||
Shares converted from Class B (See Note 1) | (277,891 | ) | (1,851,043 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 240,001 | $ | 1,565,475 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 241,914 | $ | 2,022,860 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 692,472 | 5,138,144 | ||||||
Shares redeemed | (791,214 | ) | (6,631,504 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 143,172 | 529,500 | ||||||
Shares converted from Class B (See Note 1) | (576,581 | ) | (4,863,880 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (433,409 | ) | $ | (4,334,380 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 4,010,706 | $ | 26,897,834 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,192,160 | 28,171,313 | ||||||
Shares redeemed | (8,784,561 | ) | (60,092,595 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (581,695 | ) | (5,023,448 | ) | ||||
Shares converted from Class C (See Note 1) | (594,511 | ) | (4,163,899 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,176,206 | ) | $ | (9,187,347 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,673,084 | $ | 29,233,083 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,165,875 | 23,459,136 | ||||||
Shares redeemed | (8,509,547 | ) | (70,998,343 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,670,588 | ) | $ | (18,306,124 | ) | |||
|
|
|
| |||||
26 | MainStay Large Cap Growth Fund |
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 66,913,421 | $ | 630,657,347 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 101,104,248 | 936,225,333 | ||||||
Shares redeemed | (126,092,134 | ) | (1,185,512,395 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 41,925,535 | 381,370,285 | ||||||
Shares converted into Class I (See Note 1) | 151,612 | 1,386,781 | ||||||
Shares converted from Class I (See Note 1) | (5,018,712 | ) | (47,690,432 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 37,058,435 | $ | 335,066,634 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 112,191,066 | $ | 1,206,894,936 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 90,493,251 | 860,590,813 | ||||||
Shares redeemed | (223,290,202 | ) | (2,402,653,084 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (20,605,885 | ) | (335,167,335 | ) | ||||
Shares converted into Class I (See Note 1) | 5,585,360 | 58,612,453 | ||||||
Shares converted from Class I (See Note 1) | (8,691,745 | ) | (91,176,410 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (23,712,270 | ) | $ | (367,731,292 | ) | |||
|
|
|
| |||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 7,429,578 | $ | 68,239,802 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,267,138 | 190,978,900 | ||||||
Shares redeemed | (36,797,928 | ) | (324,455,690 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (8,101,212 | ) | $ | (65,236,988 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,515,552 | $ | 185,633,941 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,175,895 | 224,352,308 | ||||||
Shares redeemed | (83,439,927 | ) | (890,472,249 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (41,748,480 | ) | (480,486,000 | ) | ||||
Shares converted from Class R1 (See Note 1) | (3,154 | ) | (32,750 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (41,751,634 | ) | $ | (480,518,750 | ) | |||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 3,999,974 | $ | 34,447,787 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,133,404 | 26,445,932 | ||||||
Shares redeemed | (7,764,921 | ) | (68,770,900 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (631,543 | ) | $ | (7,877,181 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,634,712 | $ | 64,592,751 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,351,675 | 29,628,809 | ||||||
Shares redeemed | (16,238,968 | ) | (161,651,454 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (6,252,581 | ) | (67,429,894 | ) | ||||
Shares converted from Class R2 (See Note 1) | (69 | ) | (759 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,252,650 | ) | $ | (67,430,653 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 831,150 | $ | 7,038,989 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,368,016 | 10,834,685 | ||||||
Shares redeemed | (1,842,082 | ) | (15,069,377 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 357,084 | $ | 2,804,297 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,306,683 | $ | 12,397,991 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,273,708 | 10,711,886 | ||||||
Shares redeemed | (3,899,378 | ) | (36,048,817 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,318,987 | ) | $ | (12,938,940 | ) | |||
|
|
|
| |||||
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 64,558,851 | $ | 590,958,039 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 44,637,714 | 416,469,871 | ||||||
Shares redeemed | (39,417,897 | ) | (361,979,772 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 69,778,668 | 645,448,138 | ||||||
Shares converted into Class R6 (See Note 1) | 4,982,451 | 47,690,432 | ||||||
|
|
|
| |||||
Net increase (decrease) | 74,761,119 | $ | 693,138,570 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 64,001,645 | $ | 692,272,013 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | �� | 29,936,782 | 286,195,637 | |||||
Shares redeemed | (64,420,735 | ) | (690,023,758 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 29,517,692 | 288,443,892 | ||||||
Shares converted into Class R6 (See Note 1) | 8,642,314 | 91,176,410 | ||||||
|
|
|
| |||||
Net increase (decrease) | 38,160,006 | $ | 379,620,302 | |||||
|
|
|
|
27 |
Notes to Financial Statements(Unaudited) (continued)
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective
immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 | MainStay Large Cap Growth Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay Large Cap Growth Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and Winslow Capital Management, LLC (“Winslow Capital”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and Winslow Capital in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or Winslow Capital (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and Winslow Capital in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and Winslow Capital personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of
New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and Winslow Capital; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and Winslow Capital; (iii) the costs of the services provided, and profits realized, by New York Life Investments and Winslow Capital from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or Winslow Capital. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and Winslow Capital. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and Winslow Capital resulting from, among other things, the Board’s consideration of the Advisory Agreements in
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and Winslow Capital
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of Winslow Capital and ongoing analysis of, and interactions with, Winslow Capital with respect to, among other things, Fund investment performance and risk as well as Winslow Capital’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The
Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that Winslow Capital provides to the Fund. The Board evaluated Winslow Capital’s experience in serving as subadvisor to the Fund and managing other portfolios and Winslow Capital’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Winslow Capital, and Winslow Capital’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and Winslow Capital believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Winslow Capital. The Board reviewed Winslow Capital’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and Winslow Capital’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
30 | MainStay Large Cap Growth Fund |
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or Winslow Capital had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and Winslow Capital to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and Winslow Capital
The Board considered the costs of the services provided by New York Life Investments and Winslow Capital under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates and Winslow Capital, due to their relationships with the Fund. Although the Board did not receive specific profitability information from Winslow Capital, the Board considered that the subadvisory fee paid by New York Life Investments to Winslow Capital for services provided to the Fund was the result ofarm’s-length negotiations by New York Life Investments. The Board considered that Winslow Capital’s subadvisory fees are negotiated atarm’s-length by New York Life Investments and that these fees are paid by New York Life Investments, not the Fund. On this basis, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and Winslow Capital and profits realized by New York Life Investments and its affiliates and Winslow Capital, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and Winslow Capital and acknowledged that New York Life Investments and Winslow Capital must be in a position to
attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and Winslow Capital to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates and Winslow Capital due to their relationships with the Fund, including reputational and other indirect benefits. The Board recognized, for example, the benefits to Winslow Capital from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Winslow Capital in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments concerning other material business relationships between Winslow Capital and its affiliates and New York Life Investments and its affiliates. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates due to their relationships with the Fund were not excessive. With respect to Winslow Capital, the Board considered that any profits realized by Winslow Capital due to its relationship with the Fund are the result ofarm’s-length negotiations between New York Life Investments and Winslow Capital, acknowledging that any such profits are based on fees paid to Winslow Capital by New York Life Investments, not the Fund.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to Winslow Capital are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and Winslow Capital on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are
transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously
32 | MainStay Large Cap Growth Fund |
prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
33 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
34 | MainStay Large Cap Growth Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737112 MS065-19 | MSLG10-06/19 (NYLIM) NL221 |
MainStay MacKay Common Stock Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | –0.69 5.09 | %
| | 2.62 8.60 | %
| | 8.64 9.87 | %
| | 13.25 13.89 | %
| | 0.97 0.97 | %
| ||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –0.85 4.93 |
| | 2.35 8.30 | | | 8.36 9.60 | | | 12.83 13.47 | | | 1.23 1.23 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 6/1/1998 | | | –0.09 4.54 |
| | 2.73 7.49 | | | 8.50 8.78 | | | 12.63 12.63 | | | 1.98 1.98 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | 3.62 4.54 |
| | 6.55 7.50 | | | 8.78 8.78 | | | 12.62 12.62 | | | 1.98 1.98 |
| ||||||||
Class I Shares | No Sales Charge | 12/28/2004 | 5.22 | 8.89 | 10.15 | 14.18 | 0.71 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 4.91 | 8.22 | 13.98 | N/A | 1.32 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
S&P 500® Index4 | 9.76 | % | 13.49 | % | 11.63 | % | 15.32 | % | ||||||||
Russell 1000® Index5 | 10.00 | 13.33 | 11.41 | 15.39 | ||||||||||||
Morningstar Large Blend Category Average6 | 9.02 | 10.88 | 9.71 | 13.89 |
4. | The S&P 500® Index is the Fund’s primary broad-based securities market index for comparison purposes. “S&P 500®” is a trademark of the McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuringlarge-cap U.S. stock market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Russell 1000® Index is the Fund’s secondary benchmark. The Russell 1000® Index measures the performance of thelarge-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest companies based on a combination of their market cap and current index membership. Results assume |
reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall U.S. stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of U.S. industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Common Stock Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Common Stock Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,050.90 | $ | 4.93 | $ | 1,019.98 | $ | 4.86 | 0.97% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,049.30 | $ | 6.25 | $ | 1,018.70 | $ | 6.16 | 1.23% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,045.40 | $ | 10.04 | $ | 1,014.98 | $ | 9.89 | 1.98% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,045.40 | $ | 10.04 | $ | 1,014.98 | $ | 9.89 | 1.98% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,052.20 | $ | 3.66 | $ | 1,021.22 | $ | 3.61 | 0.72% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,049.10 | $ | 6.71 | $ | 1,018.25 | $ | 6.61 | 1.32% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2019(Unaudited)
Software | 7.8 | % | ||
IT Services | 5.7 | |||
Banks | 5.5 | |||
Interactive Media & Services | 5.2 | |||
Semiconductors & Semiconductor Equipment | 4.9 | |||
Oil, Gas & Consumable Fuels | 4.8 | |||
Technology Hardware, Storage & Peripherals | 4.4 | |||
Internet & Direct Marketing Retail | 4.1 | |||
Insurance | 3.8 | |||
Pharmaceuticals | 3.6 | |||
Specialty Retail | 3.4 | |||
Health Care Providers & Services | 3.0 | |||
Media | 2.8 | |||
Equity Real Estate Investment Trusts | 2.7 | |||
Biotechnology | 2.6 | |||
Entertainment | 2.5 | |||
Hotels, Restaurants & Leisure | 2.3 | |||
Diversified Telecommunication Services | 1.9 | |||
Textiles, Apparel & Luxury Goods | 1.8 | |||
Chemicals | 1.7 | |||
Aerospace & Defense | 1.6 | |||
Exchange-Traded Funds | 1.6 | |||
Household Products | 1.5 | |||
Diversified Financial Services | 1.4 | |||
Food & Staples Retailing | 1.4 | |||
Life Sciences Tools & Services | 1.4 | |||
Health Care Equipment & Supplies | 1.3 | |||
Machinery | 1.3 | |||
Beverages | 1.2 |
Capital Markets | 1.2 | % | ||
Electric Utilities | 1.2 | |||
Commercial Services & Supplies | 1.0 | |||
Communications Equipment | 0.9 | |||
Independent Power & Renewable Electricity Producers | 0.8 | |||
Tobacco | 0.8 | |||
Food Products | 0.7 | |||
Multi-Utilities | 0.7 | |||
Multiline Retail | 0.7 | |||
Consumer Finance | 0.6 | |||
Industrial Conglomerates | 0.6 | |||
Professional Services | 0.6 | |||
Containers & Packaging | 0.5 | |||
Household Durables | 0.5 | |||
Road & Rail | 0.4 | |||
Air Freight & Logistics | 0.3 | |||
Electronic Equipment, Instruments & Components | 0.3 | |||
Trading Companies & Distributors | 0.3 | |||
Airlines | 0.2 | |||
Building Products | 0.2 | |||
Metals & Mining | 0.2 | |||
Diversified Consumer Services | 0.1 | |||
Electrical Equipment | 0.0 | ‡ | ||
Gas Utilities | 0.0 | ‡ | ||
Thrifts & Mortgage Finance | 0.0 | ‡ | ||
Short-Term Investment | 0.1 | |||
Other Assets, Less Liabilities | –0.1 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s holdings are subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of April 30, 2019(excluding short-term investment) (Unaudited)
1. | Microsoft Corp. |
2. | Apple, Inc. |
3. | Alphabet, Inc. |
4. | Amazon.com, Inc. |
5. | JPMorgan Chase & Co. |
6. | Facebook, Inc., Class A |
7. | Exxon Mobil Corp. |
8. | SPDR S&P 500 ETF Trust |
9. | Bank of America Corp. |
10. | Chevron Corp. |
8 | MainStay MacKay Common Stock Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by Migene Kim, CFA and Mona Patni of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Common Stock Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Common Stock Fund returned 5.22%, underperforming the 9.76% return of the Fund’s primary benchmark, the S&P 500® Index, and the 10.00% return of the Fund’s secondary benchmark, the Russell 1000® Index. Over the same period, Class I shares also underperformed the 9.02% return of the Morningstar Large Blend Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Despite posting positive returns, the U.S. equity market experienced elevated levels of volatility during the reporting period. After a choppy November 2018, markets plunged in December, driven by strong risk-off sentiment. Stock markets strongly rebounded in 2019 led by a rally in risky assets. In this investment climate, the efficacy of the Fund’s stock selection model proved broadly negative relative to the S&P 500® Index, particularly in the consumer discretionary, health care and information technology sectors.
Were there any changes to the Fund during the reporting period?
Effective December 18, 2018, Andrew Ver Planck no longer served as a portfolio manager of the Fund. Migene Kim and Mona Patni continue to serve as portfolio managers of the Fund. For more information about this change refer to the supplement dated December 18, 2018.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance, and which sectors were particularly weak?
During the reporting period, the strongest positive contributors to the Fund’s performance relative to the S&P 500® Index included the financials and industrials sectors. (Contributions take weightings and total returns into account.) During the same period, the weakest contributors to relative performance included the consumer discretionary, health care and information technology sectors.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The individual stocks that made the strongest positive contributions to the Fund’s absolute performance during the reporting period included systems software developer Microsoft, online retailer Amazon, and interactive media & services platform Facebook. The stocks that detracted the most from the Fund’s absolute performance included technology company Apple, drug retailer Walgreens Boots Alliance and department store retailer Nordstrom.
What were some of the Fund’s largest purchases and sales during the reporting period?
During the reporting period, the Fund’s largest initial purchase was in equity real estate investment trust (REIT) American Tower, while its largest increased purchase was in semiconductor maker Broadcom. During the same period, the Fund sold its full position in health care plan provider Cigna, while its most significantly reduced position size was in Apple, mentioned above.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s largest increases in sector exposures relative to the S&P 500® Index were in the communication services and real estate sectors. Conversely, the Fund’s largest decreases in benchmark-relative sector exposures were in the energy and health care sectors.
How was the Fund positioned at the end of the reporting period?
Relative to the S&P 500® Index, the Fund ended the reporting period with the largest overweight exposures to the information technology and consumer discretionary sectors, and most underweight exposures to the industrials and consumer staples sectors.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Shares | Value | |||||||
Common Stocks 98.4%† |
| |||||||
Aerospace & Defense 1.6% |
| |||||||
Boeing Co. | 6,848 | $ | 2,586,421 | |||||
Huntington Ingalls Industries, Inc. | 510 | 113,516 | ||||||
Northrop Grumman Corp. | 965 | 279,763 | ||||||
Raytheon Co. | 1,610 | 285,920 | ||||||
Textron, Inc. | 708 | 37,524 | ||||||
United Technologies Corp. | 683 | 97,403 | ||||||
|
| |||||||
3,400,547 | ||||||||
|
| |||||||
Air Freight & Logistics 0.3% |
| |||||||
United Parcel Service, Inc., Class B | 6,225 | 661,219 | ||||||
|
| |||||||
Airlines 0.2% |
| |||||||
Southwest Airlines Co. | 4,295 | 232,918 | ||||||
United Continental Holdings, Inc. (a) | 3,476 | 308,877 | ||||||
|
| |||||||
541,795 | ||||||||
|
| |||||||
Banks 5.5% |
| |||||||
Bank of America Corp. | 107,910 | 3,299,888 | ||||||
Citigroup, Inc. | 33,528 | 2,370,430 | ||||||
Comerica, Inc. | 3,379 | 265,556 | ||||||
Fifth Third Bancorp | 4,120 | 118,738 | ||||||
JPMorgan Chase & Co. | 34,842 | 4,043,414 | ||||||
Wells Fargo & Co. | 37,108 | 1,796,398 | ||||||
|
| |||||||
11,894,424 | ||||||||
|
| |||||||
Beverages 1.2% |
| |||||||
Coca-Cola Co. | 15,537 | 762,245 | ||||||
Molson Coors Brewing Co., Class B | 2,547 | 163,492 | ||||||
PepsiCo., Inc. | 12,758 | 1,633,662 | ||||||
|
| |||||||
2,559,399 | ||||||||
|
| |||||||
Biotechnology 2.6% |
| |||||||
AbbVie, Inc. | 23,635 | 1,876,383 | ||||||
Amgen, Inc. | 5,721 | 1,025,890 | ||||||
Biogen, Inc. (a) | 3,920 | 898,621 | ||||||
Celgene Corp. (a) | 6,104 | 577,804 | ||||||
Gilead Sciences, Inc. | 17,640 | 1,147,305 | ||||||
United Therapeutics Corp. (a) | 1,419 | 145,547 | ||||||
|
| |||||||
5,671,550 | ||||||||
|
| |||||||
Building Products 0.2% |
| |||||||
Masco Corp. | 12,061 | 471,103 | ||||||
|
| |||||||
Capital Markets 1.2% |
| |||||||
Ameriprise Financial, Inc. | 5,653 | 829,691 | ||||||
Bank of New York Mellon Corp. | 7,818 | 388,242 | ||||||
Charles Schwab Corp. | 8,555 | 391,648 | ||||||
E*TRADE Financial Corp. | 4,216 | 213,582 | ||||||
Morgan Stanley | 10,864 | 524,188 | ||||||
Raymond James Financial, Inc. | 3,502 | 320,678 | ||||||
|
| |||||||
2,668,029 | ||||||||
|
|
Shares | Value | |||||||
Chemicals 1.7% |
| |||||||
CF Industries Holdings, Inc. | 20,783 | $ | 930,663 | |||||
Chemours Co. | 7,410 | 266,834 | ||||||
Dow, Inc. (a) | 4,011 | 227,544 | ||||||
DowDuPont, Inc. | 12,059 | 463,668 | ||||||
Linde PLC | 117 | 21,090 | ||||||
LyondellBasell Industries N.V., Class A | 9,655 | 851,861 | ||||||
Mosaic Co. | 32,728 | 854,528 | ||||||
Sherwin-Williams Co. | 71 | 32,293 | ||||||
|
| |||||||
3,648,481 | ||||||||
|
| |||||||
Commercial Services & Supplies 1.0% |
| |||||||
Brink’s Co. | 2,465 | 197,028 | ||||||
Republic Services, Inc. | 11,934 | 988,374 | ||||||
Waste Management, Inc. | 10,089 | 1,082,953 | ||||||
|
| |||||||
2,268,355 | ||||||||
|
| |||||||
Communications Equipment 0.9% |
| |||||||
Arista Networks, Inc. (a) | 457 | 142,717 | ||||||
Cisco Systems, Inc. | 26,973 | 1,509,139 | ||||||
F5 Networks, Inc. (a) | 108 | 16,945 | ||||||
Lumentum Holdings, Inc. (a) | 5,851 | 362,587 | ||||||
|
| |||||||
2,031,388 | ||||||||
|
| |||||||
Consumer Finance 0.6% |
| |||||||
American Express Co. | 1,361 | 159,550 | ||||||
Discover Financial Services | 878 | 71,548 | ||||||
Synchrony Financial | 31,040 | 1,076,157 | ||||||
|
| |||||||
1,307,255 | ||||||||
|
| |||||||
Containers & Packaging 0.5% |
| |||||||
Ball Corp. | 16,904 | 1,013,226 | ||||||
International Paper Co. | 2,351 | 110,050 | ||||||
Packaging Corp. of America | 122 | 12,098 | ||||||
|
| |||||||
1,135,374 | ||||||||
|
| |||||||
Diversified Consumer Services 0.1% |
| |||||||
H&R Block, Inc. | 4,173 | 113,547 | ||||||
|
| |||||||
Diversified Financial Services 1.4% |
| |||||||
Berkshire Hathaway, Inc., Class B (a) | 13,029 | 2,823,515 | ||||||
Jefferies Financial Group, Inc. | 6,121 | 125,909 | ||||||
|
| |||||||
2,949,424 | ||||||||
|
| |||||||
Diversified Telecommunication Services 1.9% |
| |||||||
AT&T, Inc. | 42,605 | 1,319,051 | ||||||
Verizon Communications, Inc. | 48,142 | 2,753,241 | ||||||
|
| |||||||
4,072,292 | ||||||||
|
| |||||||
Electric Utilities 1.2% |
| |||||||
American Electric Power Co., Inc. | 4,657 | 398,406 | ||||||
Duke Energy Corp. | 3,285 | 299,329 | ||||||
Exelon Corp. | 22,792 | 1,161,253 | ||||||
NextEra Energy, Inc. | 1,539 | 299,243 | ||||||
Southern Co. | 5,534 | 294,520 | ||||||
Xcel Energy, Inc. | 1,734 | 97,971 | ||||||
|
| |||||||
2,550,722 | ||||||||
|
|
10 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Electrical Equipment 0.0%‡ |
| |||||||
Acuity Brands, Inc. | 43 | $ | 6,292 | |||||
Eaton Corp. PLC | 44 | 3,644 | ||||||
|
| |||||||
9,936 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.3% |
| |||||||
Corning, Inc. | 4,531 | 144,312 | ||||||
Jabil, Inc. | 8,846 | 267,238 | ||||||
Zebra Technologies Corp., Class A (a) | 1,353 | 285,672 | ||||||
|
| |||||||
697,222 | ||||||||
|
| |||||||
Entertainment 2.5% |
| |||||||
Cinemark Holdings, Inc. | 19,991 | 840,621 | ||||||
Live Nation Entertainment, Inc. (a) | 13,140 | 858,568 | ||||||
Netflix, Inc. (a) | 3,832 | 1,419,909 | ||||||
Viacom, Inc., Class B | 31,956 | 923,848 | ||||||
Walt Disney Co. | 10,344 | 1,416,818 | ||||||
|
| |||||||
5,459,764 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 2.7% |
| |||||||
American Tower Corp. | 6,898 | 1,347,179 | ||||||
AvalonBay Communities, Inc. | 78 | 15,672 | ||||||
Equity Residential | 2,233 | 170,646 | ||||||
HCP, Inc. | 3,114 | 92,735 | ||||||
Host Hotels & Resorts, Inc. | 50,791 | 977,219 | ||||||
Iron Mountain, Inc. | 6,851 | 222,520 | ||||||
Lamar Advertising Co., Class A | 2,454 | 202,872 | ||||||
Medical Properties Trust, Inc. | 2,411 | 42,096 | ||||||
Mid-America Apartment Communities, Inc. | 756 | 82,714 | ||||||
Omega Healthcare Investors, Inc. | 6,459 | 228,584 | ||||||
Pebblebrook Hotel Trust | 9,461 | 308,050 | ||||||
Public Storage | 4,381 | 968,990 | ||||||
SBA Communications Corp. (a) | 745 | 151,779 | ||||||
Simon Property Group, Inc. | 2,383 | 413,927 | ||||||
Ventas, Inc. | 8,469 | 517,541 | ||||||
Welltower, Inc. | 2,771 | 206,523 | ||||||
|
| |||||||
5,949,047 | ||||||||
|
| |||||||
Food & Staples Retailing 1.4% |
| |||||||
Costco Wholesale Corp. | 2,295 | 563,491 | ||||||
Kroger Co. | 11,469 | 295,671 | ||||||
Sysco Corp. | 1,636 | 115,125 | ||||||
Walgreens Boots Alliance, Inc. | 8,401 | 450,042 | ||||||
Walmart, Inc. | 15,597 | 1,603,995 | ||||||
|
| |||||||
3,028,324 | ||||||||
|
| |||||||
Food Products 0.7% |
| |||||||
Campbell Soup Co. | 10,888 | 421,257 | ||||||
General Mills, Inc. | 3,700 | 190,439 | ||||||
Post Holdings, Inc. (a) | 3,560 | 401,497 | ||||||
Tyson Foods, Inc., Class A | 6,629 | 497,241 | ||||||
|
| |||||||
1,510,434 | ||||||||
|
|
Shares | Value | |||||||
Gas Utilities 0.0%‡ |
| |||||||
UGI Corp. | 32 | $ | 1,744 | |||||
|
| |||||||
Health Care Equipment & Supplies 1.3% |
| |||||||
Abbott Laboratories | 14,897 | 1,185,205 | ||||||
ABIOMED, Inc. (a) | 394 | 109,300 | ||||||
Hill-Rom Holdings, Inc. | 137 | 13,895 | ||||||
Hologic, Inc. (a) | 5,084 | 235,796 | ||||||
Intuitive Surgical, Inc. (a) | 1,004 | 512,672 | ||||||
Medtronic PLC | 9,161 | 813,588 | ||||||
Stryker Corp. | 37 | 6,990 | ||||||
|
| |||||||
2,877,446 | ||||||||
|
| |||||||
Health Care Providers & Services 3.0% |
| |||||||
AmerisourceBergen Corp. | 2,802 | 209,478 | ||||||
Anthem, Inc. | 4,086 | 1,074,741 | ||||||
Cardinal Health, Inc. | 4,626 | 225,332 | ||||||
CVS Health Corp. | 795 | 43,232 | ||||||
DaVita, Inc. (a) | 1,583 | 87,445 | ||||||
Encompass Health Corp. | 1,340 | 86,363 | ||||||
HCA Healthcare, Inc. | 9,136 | 1,162,373 | ||||||
McKesson Corp. | 7,880 | 939,690 | ||||||
UnitedHealth Group, Inc. | 8,863 | 2,065,699 | ||||||
Universal Health Services, Inc., Class B | 4,814 | 610,752 | ||||||
|
| |||||||
6,505,105 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 2.3% |
| |||||||
Carnival Corp. | 2,199 | 120,637 | ||||||
Darden Restaurants, Inc. | 8,167 | 960,439 | ||||||
McDonald’s Corp. | 2,285 | 451,448 | ||||||
MGM Resorts International | 2,284 | 60,823 | ||||||
Norwegian Cruise Line Holdings, Ltd. (a) | 16,479 | 929,251 | ||||||
Starbucks Corp. | 22,244 | 1,727,914 | ||||||
Texas Roadhouse, Inc. | 13,838 | 747,390 | ||||||
|
| |||||||
4,997,902 | ||||||||
|
| |||||||
Household Durables 0.5% |
| |||||||
PulteGroup, Inc. | 23,268 | 732,011 | ||||||
Toll Brothers, Inc. | 3,929 | 149,695 | ||||||
Whirlpool Corp. | 1,349 | 187,268 | ||||||
|
| |||||||
1,068,974 | ||||||||
|
| |||||||
Household Products 1.5% |
| |||||||
Kimberly-Clark Corp. | 5,627 | 722,394 | ||||||
Procter & Gamble Co. | 22,931 | 2,441,693 | ||||||
|
| |||||||
3,164,087 | ||||||||
|
| |||||||
Independent Power��& Renewable Electricity Producers 0.8% |
| |||||||
AES Corp. | 51,622 | 883,769 | ||||||
NRG Energy, Inc. | 22,330 | 919,326 | ||||||
|
| |||||||
1,803,095 | ||||||||
|
| |||||||
Industrial Conglomerates 0.6% |
| |||||||
3M Co. | 1,769 | 335,243 | ||||||
Honeywell International, Inc. | 5,572 | 967,467 | ||||||
|
| |||||||
1,302,710 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Insurance 3.8% |
| |||||||
Aflac, Inc. | 12,687 | $ | 639,171 | |||||
Allstate Corp. | 4,193 | 415,358 | ||||||
American International Group, Inc. | 4,244 | 201,887 | ||||||
Brighthouse Financial, Inc. (a) | 16,930 | 707,505 | ||||||
Chubb, Ltd. | 1,896 | 275,299 | ||||||
First American Financial Corp. | 13,064 | 745,432 | ||||||
Kemper Corp. | 5,526 | 496,677 | ||||||
Lincoln National Corp. | 4,928 | 328,796 | ||||||
MetLife, Inc. | 26,998 | 1,245,418 | ||||||
Progressive Corp. | 16,132 | 1,260,716 | ||||||
Prudential Financial, Inc. | 5,790 | 612,061 | ||||||
Reinsurance Group of America, Inc. | 2,313 | 350,443 | ||||||
Travelers Cos., Inc. | 6,445 | 926,469 | ||||||
Willis Towers Watson PLC | 504 | 92,907 | ||||||
|
| |||||||
8,298,139 | ||||||||
|
| |||||||
Interactive Media & Services 5.2% |
| |||||||
Alphabet, Inc. (a) | ||||||||
Class A | 2,989 | 3,583,691 | ||||||
Class C | 3,039 | 3,611,791 | ||||||
Facebook, Inc., Class A (a) | 20,611 | 3,986,167 | ||||||
TripAdvisor, Inc. (a) | 3,125 | 166,344 | ||||||
|
| |||||||
11,347,993 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 4.1% |
| |||||||
Amazon.com, Inc. (a) | 3,614 | 6,962,443 | ||||||
Booking Holdings, Inc. (a) | 291 | 539,802 | ||||||
eBay, Inc. | 13,117 | 508,284 | ||||||
Expedia Group, Inc. | 7,727 | 1,003,274 | ||||||
|
| |||||||
9,013,803 | ||||||||
|
| |||||||
IT Services 5.7% |
| |||||||
Accenture PLC, Class A | 7,278 | 1,329,472 | ||||||
Akamai Technologies, Inc. (a) | 12,542 | 1,004,113 | ||||||
Alliance Data Systems Corp. | 131 | 20,973 | ||||||
Automatic Data Processing, Inc. | 1,201 | 197,432 | ||||||
CACI International, Inc., Class A (a) | 2,443 | 476,239 | ||||||
Cognizant Technology Solutions Corp., Class A | 2,245 | 163,795 | ||||||
International Business Machines Corp. | 13,940 | 1,955,364 | ||||||
Leidos Holdings, Inc. | 1,127 | 82,812 | ||||||
Mastercard, Inc., Class A | 7,954 | 2,022,225 | ||||||
MAXIMUS, Inc. | 11,615 | 855,445 | ||||||
PayPal Holdings, Inc. (a) | 10,329 | 1,164,801 | ||||||
Sabre Corp. | 13,015 | 270,191 | ||||||
Visa, Inc., Class A | 15,402 | 2,532,551 | ||||||
Western Union Co. | 17,678 | 343,660 | ||||||
|
| |||||||
12,419,073 | ||||||||
|
| |||||||
Life Sciences Tools & Services 1.4% |
| |||||||
Agilent Technologies, Inc. | 4,079 | 320,201 | ||||||
Charles River Laboratories International, Inc. (a) | 2,439 | 342,606 | ||||||
Illumina, Inc. (a) | 1,290 | 402,480 |
Shares | Value | |||||||
Life Sciences Tools & Services (continued) |
| |||||||
IQVIA Holdings, Inc. (a) | 6,485 | $ | 900,766 | |||||
PRA Health Sciences, Inc. (a) | 3,797 | 367,626 | ||||||
Thermo Fisher Scientific, Inc. | 2,897 | 803,773 | ||||||
|
| |||||||
3,137,452 | ||||||||
|
| |||||||
Machinery 1.3% |
| |||||||
AGCO Corp. | 11,883 | 841,079 | ||||||
Caterpillar, Inc. | 1,830 | 255,139 | ||||||
Cummins, Inc. | 6,384 | 1,061,595 | ||||||
Oshkosh Corp. | 961 | 79,369 | ||||||
PACCAR, Inc. | 9,660 | 692,332 | ||||||
|
| |||||||
2,929,514 | ||||||||
|
| |||||||
Media 2.8% |
| |||||||
Charter Communications, Inc., Class A (a) | 3,308 | 1,227,896 | ||||||
Comcast Corp., Class A | 53,247 | 2,317,842 | ||||||
Discovery, Inc. (a) | ||||||||
Class A | 22,734 | 702,481 | ||||||
Class C | 17,419 | 500,970 | ||||||
DISH Network Corp., Class A (a) | 5,946 | 208,824 | ||||||
News Corp. | ||||||||
Class A | 12,939 | 160,702 | ||||||
Class B | 6,516 | 81,385 | ||||||
Omnicom Group, Inc. | 12,352 | 988,531 | ||||||
|
| |||||||
6,188,631 | ||||||||
|
| |||||||
Metals & Mining 0.2% |
| |||||||
Freeport-McMoRan, Inc. | 526 | 6,475 | ||||||
Steel Dynamics, Inc. | 10,239 | 324,372 | ||||||
|
| |||||||
330,847 | ||||||||
|
| |||||||
Multi-Utilities 0.7% |
| |||||||
Ameren Corp. | 2,745 | 199,754 | ||||||
CenterPoint Energy, Inc. | 31,474 | 975,694 | ||||||
DTE Energy Co. | 2,488 | 312,766 | ||||||
WEC Energy Group, Inc. | 1,039 | 81,489 | ||||||
|
| |||||||
1,569,703 | ||||||||
|
| |||||||
Multiline Retail 0.7% |
| |||||||
Kohl’s Corp. | 9,332 | 663,505 | ||||||
Target Corp. | 10,175 | 787,749 | ||||||
|
| |||||||
1,451,254 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.8% |
| |||||||
Apache Corp. | 1,264 | 41,598 | ||||||
Chevron Corp. | 23,583 | 2,831,375 | ||||||
ConocoPhillips | 22,395 | 1,413,572 | ||||||
Devon Energy Corp. | 7,575 | 243,461 | ||||||
EOG Resources, Inc. | 79 | 7,588 | ||||||
Exxon Mobil Corp. | 46,636 | 3,743,938 | ||||||
HollyFrontier Corp. | 2,693 | 128,537 | ||||||
Marathon Petroleum Corp. | 2,738 | 166,662 | ||||||
Murphy Oil Corp. | 405 | 11,032 | ||||||
Occidental Petroleum Corp. | 6,848 | 403,210 |
12 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Oil, Gas & Consumable Fuels (continued) |
| |||||||
Phillips 66 | 6,396 | $ | 602,951 | |||||
Valero Energy Corp. | 9,686 | 878,133 | ||||||
|
| |||||||
10,472,057 | ||||||||
|
| |||||||
Pharmaceuticals 3.6% |
| |||||||
Allergan PLC | 1,720 | 252,840 | ||||||
Bristol-Myers Squibb Co. | 40 | 1,857 | ||||||
Eli Lilly & Co. | 4,498 | 526,446 | ||||||
Johnson & Johnson | 19,627 | 2,771,332 | ||||||
Merck & Co., Inc. | 22,630 | 1,781,207 | ||||||
Mylan N.V. (a) | 31,116 | 839,821 | ||||||
Pfizer, Inc. | 41,224 | 1,674,107 | ||||||
|
| |||||||
7,847,610 | ||||||||
|
| |||||||
Professional Services 0.6% |
| |||||||
ManpowerGroup, Inc. | 39 | 3,746 | ||||||
Nielsen Holdings PLC | 26,723 | 682,238 | ||||||
Robert Half International, Inc. | 8,666 | 538,072 | ||||||
|
| |||||||
1,224,056 | ||||||||
|
| |||||||
Road & Rail 0.4% |
| |||||||
Norfolk Southern Corp. | 315 | 64,266 | ||||||
Union Pacific Corp. | 4,794 | 848,730 | ||||||
|
| |||||||
912,996 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 4.9% |
| |||||||
Applied Materials, Inc. | 16,993 | 748,882 | ||||||
Broadcom, Inc. | 6,320 | 2,012,288 | ||||||
Cypress Semiconductor Corp. | 3,479 | 59,769 | ||||||
Intel Corp. | 54,445 | 2,778,873 | ||||||
KLA-Tencor Corp. | 3,939 | 502,144 | ||||||
Lam Research Corp. | 5,710 | 1,184,425 | ||||||
Micron Technology, Inc. (a) | 30,250 | 1,272,315 | ||||||
NVIDIA Corp. | 2,978 | 539,018 | ||||||
Qorvo, Inc. (a) | 11,766 | 889,627 | ||||||
Skyworks Solutions, Inc. | 2,249 | 198,317 | ||||||
Texas Instruments, Inc. | 3,429 | 404,039 | ||||||
|
| |||||||
10,589,697 | ||||||||
|
| |||||||
Software 7.8% |
| |||||||
Adobe, Inc. (a) | 2,685 | 776,636 | ||||||
CDK Global, Inc. | 12,808 | 772,578 | ||||||
Citrix Systems, Inc. | 4,135 | 417,470 | ||||||
Fortinet, Inc. (a) | 2,918 | 272,600 | ||||||
j2 Global, Inc. | 6,681 | 585,389 | ||||||
LogMeIn, Inc. | 10,298 | 848,555 | ||||||
Microsoft Corp. | 64,238 | 8,389,483 | ||||||
Oracle Corp. | 37,745 | 2,088,431 | ||||||
Salesforce.com, Inc. (a) | 6,718 | 1,110,821 | ||||||
Symantec Corp. | 40,395 | 977,963 | ||||||
Teradata Corp. (a) | 17,834 | 810,912 | ||||||
|
| |||||||
17,050,838 | ||||||||
|
|
Shares | Value | |||||||
Specialty Retail 3.4% |
| |||||||
Advance Auto Parts, Inc. | 4,428 | $ | 736,465 | |||||
AutoZone, Inc. (a) | 1,057 | 1,086,924 | ||||||
Best Buy Co., Inc. | 13,833 | 1,029,313 | ||||||
Foot Locker, Inc. | 14,565 | 833,264 | ||||||
Home Depot, Inc. | 6,096 | 1,241,755 | ||||||
L Brands, Inc. | 16,598 | 425,573 | ||||||
Lowe’s Cos., Inc. | 10,088 | 1,141,356 | ||||||
TJX Cos., Inc. | 87 | 4,775 | ||||||
Tractor Supply Co. | 44 | 4,554 | ||||||
Ulta Beauty, Inc. (a) | 153 | 53,394 | ||||||
Williams-Sonoma, Inc. (b) | 14,500 | 828,965 | ||||||
|
| |||||||
7,386,338 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 4.4% |
| |||||||
Apple, Inc. | 38,834 | 7,792,819 | ||||||
Seagate Technology PLC | 19,445 | 939,582 | ||||||
Xerox Corp. | 26,773 | 893,147 | ||||||
|
| |||||||
9,625,548 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 1.8% |
| |||||||
Capri Holdings, Ltd. (a) | 1,991 | 87,763 | ||||||
Carter’s, Inc. | 2,598 | 275,154 | ||||||
Deckers Outdoor Corp. (a) | 5,610 | 887,558 | ||||||
NIKE, Inc., Class B | 6,180 | 542,790 | ||||||
Ralph Lauren Corp. | 3,752 | 493,688 | ||||||
Skechers U.S.A., Inc., Class A (a) | 21,724 | 687,782 | ||||||
Under Armour, Inc., Class A (a) | 39,743 | 917,666 | ||||||
|
| |||||||
3,892,401 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance 0.0%‡ |
| |||||||
New York Community Bancorp, Inc. | 1,643 | 19,108 | ||||||
|
| |||||||
Tobacco 0.8% |
| |||||||
Altria Group, Inc. | 18,165 | 986,904 | ||||||
Philip Morris International, Inc. | 9,792 | 847,596 | ||||||
|
| |||||||
1,834,500 | ||||||||
|
| |||||||
Trading Companies & Distributors 0.3% |
| |||||||
United Rentals, Inc. (a) | 4,705 | 663,029 | ||||||
|
| |||||||
Total Common Stocks | 214,525,281 | |||||||
|
| |||||||
Exchange-Traded Funds 1.6% |
| |||||||
SPDR S&P 500 ETF Trust | 11,595 | 3,409,162 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 3,409,162 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Shares | Value | |||||||
Short-Term Investment 0.1% |
| |||||||
Affiliated Investment Company 0.1% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (c) | 142,171 | $ | 142,171 | |||||
|
| |||||||
TotalShort-Term Investment | 142,171 | |||||||
|
| |||||||
Total Investments | 100.1 | % | 218,076,614 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (294,123 | ) | ||||
Net Assets | 100.0 | % | $ | 217,782,491 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Non-income producing security. |
(b) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $814,646 and the Fund received non-cash collateral in the form of U.S. Treasury securities with a value of $831,047 (See Note 2(H)). |
(c) | Current yield as of April 30, 2019. |
The following abbreviations are used in the preceding pages:
ETF—Exchange-Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 214,525,281 | $ | — | $ | — | $ | 214,525,281 | ||||||||
Exchange-Traded Funds | 3,409,162 | — | — | 3,409,162 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 142,171 | — | — | 142,171 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 218,076,614 | $ | — | $ | — | $ | 218,076,614 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
14 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 217,934,443 | ||
Investment in affiliated investment company, at value (identified cost $142,171) | 142,171 | |||
Cash | 506 | |||
Receivables: | ||||
Dividends | 161,609 | |||
Fund shares sold | 73,888 | |||
Securities lending income | 183 | |||
Other assets | 68,549 | |||
|
| |||
Total assets | 218,381,349 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 378,962 | |||
Manager (See Note 3) | 97,835 | |||
NYLIFE Distributors (See Note 3) | 32,004 | |||
Transfer agent (See Note 3) | 30,448 | |||
Shareholder communication | 29,032 | |||
Professional fees | 27,890 | |||
Custodian | 2,603 | |||
Trustees | 40 | |||
Accrued expenses | 44 | |||
|
| |||
Total liabilities | 598,858 | |||
|
| |||
Net assets | $ | 217,782,491 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 89,367 | ||
Additional paid-in capital | 188,177,605 | |||
|
| |||
188,266,972 | ||||
Total distributable earnings (loss) | 29,515,519 | |||
|
| |||
Net assets | $ | 217,782,491 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 65,813,152 | ||
|
| |||
Shares of beneficial interest outstanding | 2,683,922 | |||
|
| |||
Net asset value per share outstanding | $ | 24.52 | ||
Maximum sales charge (5.50% of offering price) | 1.43 | |||
|
| |||
Maximum offering price per share outstanding | $ | 25.95 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 17,551,250 | ||
|
| |||
Shares of beneficial interest outstanding | 715,366 | |||
|
| |||
Net asset value per share outstanding | $ | 24.53 | ||
Maximum sales charge (5.50% of offering price) | 1.43 | |||
|
| |||
Maximum offering price per share outstanding | $ | 25.96 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 5,409,795 | ||
|
| |||
Shares of beneficial interest outstanding | 243,093 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 22.25 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 12,398,383 | ||
|
| |||
Shares of beneficial interest outstanding | 557,626 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 22.23 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 116,443,051 | ||
|
| |||
Shares of beneficial interest outstanding | 4,729,818 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 24.62 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 166,860 | ||
|
| |||
Shares of beneficial interest outstanding | 6,833 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 24.42 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends-unaffiliated | $ | 2,122,666 | ||
Securities lending | 4,760 | |||
Dividends-affiliated | 2,436 | |||
|
| |||
Total income | 2,129,862 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 548,779 | |||
Distribution/Service—Class A (See Note 3) | 77,012 | |||
Distribution/Service—Investor Class (See Note 3) | 20,286 | |||
Distribution/Service—Class B (See Note 3) | 26,761 | |||
Distribution/Service—Class C (See Note 3) | 67,093 | �� | ||
Distribution/Service—Class R3 (See Note 3) | 360 | |||
Transfer agent (See Note 3) | 94,785 | |||
Registration | 55,619 | |||
Professional fees | 31,725 | |||
Shareholder communication | 14,845 | |||
Custodian | 9,980 | |||
Trustees | 2,293 | |||
Shareholder service (See Note 3) | 72 | |||
Miscellaneous | 7,651 | |||
|
| |||
Total expenses before waiver/reimbursement | 957,261 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (6,870 | ) | ||
|
| |||
Net expenses | 950,391 | |||
|
| |||
Net investment income (loss) | 1,179,471 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on unaffiliated investments | 4,280,029 | |||
Net change in unrealized appreciation (depreciation) on unaffiliated investments | 5,351,214 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 9,631,243 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 10,810,714 | ||
|
|
16 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,179,471 | $ | 1,661,304 | ||||
Net realized gain (loss) on investments | 4,280,029 | 22,973,916 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 5,351,214 | (10,553,207 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 10,810,714 | 14,082,013 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (7,174,046 | ) | (504,518 | ) | ||||
Investor Class | (1,810,860 | ) | (109,255 | ) | ||||
Class B | (659,612 | ) | — | |||||
Class C | (1,668,996 | ) | — | |||||
Class I | (11,081,969 | ) | (1,062,640 | ) | ||||
Class R3 | (14,964 | ) | (647 | ) | ||||
|
| |||||||
Total distributions to shareholders | (22,410,447 | ) | (1,677,060 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 32,177,722 | 59,074,323 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 21,959,520 | 1,632,738 | ||||||
Cost of shares redeemed | (24,640,761 | ) | (62,972,216 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 29,496,481 | (2,265,155 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 17,896,748 | 10,139,798 | ||||||
Net Assets | ||||||||
Beginning of period | 199,885,743 | 189,745,945 | ||||||
|
| |||||||
End of period | $ | 217,782,491 | $ | 199,885,743 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 26.31 | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | $ | 16.59 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.24 | 0.23 | 0.25 | 0.20 | 0.18 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.00 | 1.74 | 4.63 | (0.28 | ) | 0.76 | 2.83 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.14 | 1.98 | 4.86 | (0.03 | ) | 0.96 | 3.01 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.22 | ) | (0.23 | ) | (0.25 | ) | (0.22 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (2.93 | ) | (0.23 | ) | (0.25 | ) | (0.22 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 24.52 | $ | 26.31 | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 5.09 | % | 8.07 | % | 24.59 | % | (0.13 | %) | 4.95 | % | 18.30 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.17 | %†† | 0.90 | % | 1.05 | % | 1.29 | % (c) | 1.01 | % | 0.98 | % | ||||||||||||||||
Net expenses (d) | 0.97 | %†† | 0.97 | % | 0.96 | % | 0.95 | % (e) | 0.96 | % | 1.00 | % | ||||||||||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 65,813 | $ | 63,956 | $ | 53,909 | $ | 42,928 | $ | 52,985 | $ | 34,139 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.28%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.96%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 26.29 | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | $ | 16.58 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.18 | 0.18 | 0.21 | 0.16 | 0.13 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.99 | 1.74 | 4.62 | (0.29 | ) | 0.76 | 2.82 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.10 | 1.92 | 4.80 | (0.08 | ) | 0.92 | 2.95 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.16 | ) | (0.20 | ) | (0.18 | ) | (0.11 | ) | (0.15 | ) | ||||||||||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (2.86 | ) | (0.16 | ) | (0.20 | ) | (0.18 | ) | (0.11 | ) | (0.15 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 24.53 | $ | 26.29 | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.93 | % | 7.82 | % | 24.25 | % | (0.39 | %) | 4.77 | % | 17.94 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.91 | %†† | 0.68 | % | 0.83 | % | 1.05 | % (c) | 0.82 | % | 0.71 | % | ||||||||||||||||
Net expenses (d) | 1.23 | %†† | 1.21 | % | 1.22 | % | 1.20 | % (e) | 1.17 | % | 1.28 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.26 | %†† | 1.23 | % | 1.22 | % | 1.20 | % (e) | 1.17 | % | 1.28 | % | ||||||||||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 17,551 | $ | 16,580 | $ | 17,216 | $ | 21,880 | $ | 22,939 | $ | 20,856 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.04%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.21%. |
18 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 24.04 | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | $ | 15.27 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.02 | (0.02 | ) | 0.01 | 0.05 | 0.02 | (0.00 | )‡ | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | 1.60 | 4.24 | (0.26 | ) | 0.69 | 2.59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.92 | 1.58 | 4.25 | (0.21 | ) | 0.71 | 2.59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (2.71 | ) | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 22.25 | $ | 24.04 | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.54 | % | 7.03 | % | 23.31 | % | (1.12 | %) | 4.01 | % | 17.00 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.18 | %†† | (0.07 | %) | 0.06 | % | 0.30 | % (c) | 0.09 | % | (0.03 | %) | ||||||||||||||||
Net expenses (d) | 1.98 | %†† | 1.96 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.01 | %†† | 1.98 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 5,410 | $ | 5,855 | $ | 6,635 | $ | 6,604 | $ | 6,816 | $ | 7,240 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.29%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 24.02 | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | $ | 15.26 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.02 | (0.02 | ) | 0.01 | 0.06 | 0.01 | (0.02 | ) | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | 1.59 | 4.24 | (0.27 | ) | 0.70 | 2.61 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.92 | 1.57 | 4.25 | (0.21 | ) | 0.71 | 2.59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (2.71 | ) | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 22.23 | $ | 24.02 | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.54 | % | 6.99 | % | 23.33 | % | (1.12 | %) | 4.01 | % | 17.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.19 | %†† | (0.08 | %) | 0.06 | % | 0.34 | % (c) | 0.06 | % | (0.10 | %) | ||||||||||||||||
Net expenses (d) | 1.98 | %†† | 1.96 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.01 | %†† | 1.98 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 12,398 | $ | 14,964 | $ | 15,459 | $ | 16,509 | $ | 25,775 | $ | 16,536 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.33%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 26.44 | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | $ | 16.64 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.31 | 0.29 | 0.31 | 0.26 | 0.22 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.00 | 1.74 | 4.65 | (0.29 | ) | 0.76 | 2.83 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.17 | 2.05 | 4.94 | 0.02 | 1.02 | 3.05 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.28 | ) | (0.28 | ) | (0.31 | ) | (0.27 | ) | (0.18 | ) | (0.24 | ) | ||||||||||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (2.99 | ) | (0.28 | ) | (0.31 | ) | (0.27 | ) | (0.18 | ) | (0.24 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 24.62 | $ | 26.44 | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 5.22 | % | 8.36 | % | 24.89 | % | 0.12 | % | 5.26 | % | 18.55 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.41 | %†† | 1.16 | % | 1.31 | % | 1.55 | %(c) | 1.30 | % | 1.24 | % | ||||||||||||||||
Net expenses (d) | 0.72 | %†† | 0.71 | % | 0.71 | % | 0.70 | %(e) | 0.71 | % | 0.75 | % | ||||||||||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 116,443 | $ | 98,395 | $ | 96,441 | $ | 87,774 | $ | 91,561 | $ | 108,343 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.54%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.71%. |
Six months ended April 30, | Year ended October 31, | February 29, 2016** through October 31, | ||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | ||||||||||||
Net asset value at beginning of period | $ | 26.17 | $ | 24.48 | $ | 19.90 | $ | 18.44 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.09 | 0.14 | 0.13 | 0.10 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | 1.73 | 4.65 | 1.36 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 1.10 | 1.87 | 4.78 | 1.46 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less dividends and distributions: | ||||||||||||||||
From net investment income | (0.14 | ) | (0.18 | ) | (0.20 | ) | — | |||||||||
From net realized gain on investments | (2.71 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (2.85 | ) | (0.18 | ) | (0.20 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value at end of period | $ | 24.42 | $ | 26.17 | $ | 24.48 | $ | 19.90 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment return (b) | 4.91 | % | 7.66 | % | 24.17 | % | 7.92 | %(c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 0.81 | %†† | 0.52 | % | 0.60 | % | 0.74 | %††(d) | ||||||||
Net expenses (e) | 1.32 | %†† | 1.32 | % | 1.31 | % | 1.31 | %††(f) | ||||||||
Portfolio turnover rate | 73 | % | 137 | % | 134 | % | 164 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 167 | $ | 137 | $ | 86 | $ | 29 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been 0.73%. |
(e) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(f) | Without the custody fee reimbursement, net expenses would have been 1.32%. |
20 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Common Stock Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has eight classes of shares registered for sale. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on December 28, 2004. Investor Class shares commenced operations on February 28, 2008. Class R3 shares commenced operations on February 29, 2016. Class R2 and Class R6 shares were registered for sale effective as of December 14, 2007 (for Class R2 shares) and February 28, 2017 (for Class R6 shares). As of April 30, 2019, Class R2 and Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I and Class R3 shares are offered at NAV without a sales charge. Class R2 and Class R6 shares are currently expected to be offered at
NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Funds’ prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seeklong-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
21 |
Notes to Financial Statements(Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities, including exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and
22 | MainStay MacKay Common Stock Fund |
ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and
distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may cause the costs of investing in ETFs and mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may
23 |
Notes to Financial Statements(Unaudited) (continued)
also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $814,646 and receivednon-cash collateral in the form of U.S. Treasury securities with a value of $831,047.
(H) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(I) Large Transaction Risks. From time to time, the Fund may receive large purchase or redemption orders from affiliated or unaffiliated mutual funds or other investors. Such large transactions could have adverse effects on the Fund’s performance if the Fund were required to sell securities or invest cash at times when it otherwise would not do so. This activity could also accelerate the realization of capital gains and increase the Fund’s transaction costs. The Fund has adopted procedures designed to mitigate the negative impacts of such large transactions, but there can be no assurance that these procedures will be effective.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings LLC, the former subadvisor, transitioned to MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life. MacKay Shields serves as Subadvisor to the Fund and is responsible for the
day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.55% up to $500 million; 0.525% from $500 million to $1 billion; and 0.50% on assets in excess of $1 billion. During the six-month period ended April 30, 2019, the effective management fee rate was 0.55%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments has agreed to voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time without notice.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $548,779 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $6,870.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
24 | MainStay MacKay Common Stock Fund |
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R3 | $ | 72 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $6,766 and $5,181, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $274, $2,672 and $232, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 13,125 | ||
Investor Class | 27,740 | |||
Class B | 9,149 | |||
Class C | 22,948 | |||
Class I | 21,792 | |||
Class R3 | 31 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 67 | $ | 24,621 | $ | (24,546 | ) | $ | — | $ | — | $ | 142 | $ | 2 | $ | — | 142 |
(G) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R3 | $ | 37,838 | 22.7 | % |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative con-
tracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 193,836,765 | $ | 28,686,963 | $ | (4,447,114 | ) | $ | 24,239,849 |
25 |
Notes to Financial Statements(Unaudited) (continued)
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 1,677,060 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $156,605 and $148,005, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 188,791 | $ | 4,485,218 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 308,961 | 7,090,652 | ||||||
Shares redeemed | (276,616 | ) | (6,362,926 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 221,136 | 5,212,944 | ||||||
Shares converted into Class A (See Note 1) | 46,824 | 1,089,066 | ||||||
Shares converted from Class A (See Note 1) | (14,446 | ) | (339,229 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 253,514 | $ | 5,962,781 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 567,715 | $ | 14,915,276 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,112 | 488,895 | ||||||
Shares redeemed | (490,183 | ) | (12,797,701 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 96,644 | 2,606,470 | ||||||
Shares converted into Class A (See Note 1) | 152,900 | 4,063,461 | ||||||
Shares converted from Class A (See Note 1) | (14,162 | ) | (374,984 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 235,382 | $ | 6,294,947 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 53,905 | $ | 1,268,158 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 78,678 | 1,808,804 | ||||||
Shares redeemed | (45,856 | ) | (1,069,856 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 86,727 | 2,007,106 | ||||||
Shares converted into Investor Class (See Note 1) | 30,765 | 714,877 | ||||||
Shares converted from Investor Class (See Note 1) | (32,758 | ) | (764,039 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 84,734 | $ | 1,957,944 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 103,313 | $ | 2,733,830 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,927 | 100,577 | ||||||
Shares redeemed | (66,844 | ) | (1,765,739 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 40,396 | 1,068,668 | ||||||
Shares converted into Investor Class (See Note 1) | 29,664 | 788,176 | ||||||
Shares converted from Investor Class (See Note 1) | (141,244 | ) | (3,754,085 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (71,184 | ) | $ | (1,897,241 | ) | |||
|
|
|
| |||||
26 | MainStay MacKay Common Stock Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 4,219 | $ | 90,317 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,000 | 627,606 | ||||||
Shares redeemed | (19,203 | ) | (395,750 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 15,016 | 322,173 | ||||||
Shares converted from Class B (See Note 1) | (15,479 | ) | (320,431 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (463 | ) | $ | 1,742 | ||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,385 | $ | 425,028 | |||||
Shares redeemed | (39,619 | ) | (950,724 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (22,234 | ) | (525,696 | ) | ||||
Shares converted from Class B (See Note 1) | (29,591 | ) | (722,568 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (51,825 | ) | $ | (1,248,264 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 56,066 | $ | 1,155,613 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 65,052 | 1,359,589 | ||||||
Shares redeemed | (168,450 | ) | (3,568,336 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (47,332 | ) | (1,053,134 | ) | ||||
Shares converted from Class C (See Note 1) | (17,953 | ) | (380,244 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (65,285 | ) | $ | (1,433,378 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 87,450 | $ | 2,084,523 | |||||
Shares redeemed | (153,217 | ) | (3,697,525 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (65,767 | ) | $ | (1,613,002 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,071,422 | $ | 25,147,535 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 480,594 | 11,063,276 | ||||||
Shares redeemed | (543,468 | ) | (13,239,810 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,008,548 | $ | 22,971,001 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,421,800 | $ | 38,823,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 40,660 | 1,042,924 | ||||||
Shares redeemed | (1,650,017 | ) | (43,712,786 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (187,557 | ) | $ | (3,846,244 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,374 | $ | 30,881 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 419 | 9,593 | ||||||
Shares redeemed | (183 | ) | (4,083 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,610 | $ | 36,391 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,394 | $ | 92,048 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13 | 342 | ||||||
Shares redeemed | (1,694 | ) | (47,741 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,713 | $ | 44,649 | |||||
|
|
|
|
Note 10–Litigation
The Fund has been named as a defendant in the case entitledKirschner v. FitzSimons,No.12-2652 (S.D.N.Y.) (the “FitzSimonsaction”) as a result of its ownership of shares in the Tribune Company (“Tribune”) in 2007 when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the plaintiff asserts claims against certain insiders, shareholders, professional advisers, and others involved in the LBO. Separately, the complaint also seeks to obtain from former Tribune shareholders, including the Fund, any proceeds they received in connection with the LBO. The sole claim and cause of action brought against the Fund is for fraudulent conveyance pursuant to United States Bankruptcy Code Section 548(a)(1)(A).
In June 2011, certain Tribune creditors filed numerous additional actions asserting state law constructive fraudulent conveyance claims (the “SLCFC actions”) against specifically-named former Tribune shareholders and, in some cases, putative defendant classes comprised of former Tribune shareholders. One of the SLCFC actions, entitledDeutsche Bank Trust Co. Americas v. Blackrock Institutional Trust Co., No.11-9319 (S.D.N.Y.)(the “Deutsche Bank action”), named the Fund as a defendant.
TheFitzSimonsaction andDeutsche Bankaction have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding entitledIn re Tribune Co. Fraudulent Conveyance Litig.,No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ motion to dismiss the SLCFC actions, including the Deutsche Bank action, on the basis that the plaintiffs did not have standing to pursue their claims. On September 30, 2013, the plaintiffs in the SLCFC actions filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On November 5, 2014, the Second Circuit Court of Appeals held an oral argument on appeal. On March 29, 2016, the United States Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the plaintiffs in the SLCFC actions filed a petition seeking rehearingen banc
27 |
Notes to Financial Statements(Unaudited) (continued)
before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. Certain shareholder defendants filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The plaintiffs filed a reply in support of the petition on November 4, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision inMerit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, the plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent withMerit Management. On April 20, 2018, the shareholder defendants filed a response to the plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
On August 2, 2013, the plaintiff in the FitzSimons action filed a Fifth Amended Complaint. On May 23, 2014, the defendants filed motions to dismiss theFitzSimonsaction, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The Court’s order is not immediately appealable, but the plaintiff has asked the Court to direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, plaintiff renewed the request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling inMerit Management.The shareholder defendants opposed that request. On June 18, 2018, the District Court ordered that the request would be stayed pending further action by the Second Circuit in the still-pending appeal, discussed above. On December 18, 2018, the plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit. The court stated that it would allow the plaintiff to file a
motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation. On March 27, 2019, the court held a telephone conference and decided to allow the plaintiff to file a motion for leave to amend. On April 4, 2019, the plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholders’ defendants filed a brief in opposition to the plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. The court has not yet ruled on the motion.
The value of the proceeds received by the Fund in connection with the LBO and the Fund’s cost basis in shares of Tribune was as follows:
Fund | Proceeds | Cost Basis | ||||||
MainStay MacKay Common Stock Fund | $ | 751,774 | $ | 729,369 |
At this stage of the proceedings, it would be difficult to assess with any reasonable certainty the probable outcome of the pending litigation or the effect, if any, on the Fund’s net asset value.
Note 11–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 | MainStay MacKay Common Stock Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay Common Stock Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay Shields in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of
New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the Advisory Agreements in
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay Shields and ongoing analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The
Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios and MacKay Shields’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay Shields believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
30 | MainStay MacKay Common Stock Fund |
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay Shields and acknowledged that New York Life Investments and MacKay Shields must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other
expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. The Board recognized, for example, the benefits to MacKay Shields from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to MacKay Shields in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
32 | MainStay MacKay Common Stock Fund |
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
33 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
34 | MainStay MacKay Common Stock Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737426 MS065-19 | MSCS10-06/19 (NYLIM) NL219 |
MainStay MacKay Convertible Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six | One | Five | Ten | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | 3.76 9.80 | %
| | 3.20 9.21 | %
| | 6.44 7.65 | %
| | 10.61 11.24 | %
| | 0.98 0.98 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 3.67 9.70 |
| | 3.09 9.09 |
| | 6.26 7.47 |
| | 10.40 11.02 |
| | 1.14 1.14 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | 4.32 9.32 |
| | 3.23 8.23 |
| | 6.36 6.67 |
| | 10.20 10.20 |
| | 1.89 1.89 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 8.33 9.33 |
| | 7.24 8.24 |
| | 6.68 6.68 |
| | 10.20 10.20 |
| | 1.89 1.89 |
| ||||||||||
Class I Shares | No Sales Charge | 11/28/2008 | 9.98 | 9.64 | 7.97 | 11.54 | 0.73 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six | One | Five | Ten | ||||||||||||
ICE BofAML U.S. Convertible Index4 | 9.29 | % | 10.96 | % | 7.72 | % | 12.30 | % | ||||||||
Morningstar Convertibles Category Average5 | 8.90 | 8.99 | 6.49 | 10.62 |
4. | The ICE BofAML U.S. Convertible Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofAML U.S. Convertible Index is a market-capitalization weighted index of domestic corporate convertible securities. In order to be included in this Index, bonds and preferred stocks must be convertible only to common stock. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Convertibles Category Average is representative of funds that are designed to offer some of the capital-appreciation potential of stock portfolios while also supplying some of the safety and yield of bond portfolios. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Convertible Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Convertible Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,098.00 | $ | 5.10 | $ | 1,019.94 | $ | 4.91 | 0.98% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,097.00 | $ | 5.98 | $ | 1,019.09 | $ | 5.76 | 1.15% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,093.20 | $ | 9.86 | $ | 1,015.37 | $ | 9.49 | 1.90% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,093.30 | $ | 9.86 | $ | 1,015.37 | $ | 9.49 | 1.90% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,099.80 | $ | 3.18 | $ | 1,021.77 | $ | 3.06 | 0.61% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings or Issuers as of April 30, 2019(excludingshort-term investment) (Unaudited)
1. | Microchip Technology, Inc., 1.625%, due 2/15/25–2/15/27 |
2. | Danaher Corp., (zero coupon), due 1/22/21 |
3. | NICE Systems, Inc., 1.25%, due 1/15/24 |
4. | Anthem, Inc., 2.75%, due 10/15/42 |
5. | Bank of America Corp. |
6. | BioMarin Pharmaceutical, Inc., 0.599%, due 8/1/24 |
7. | DISH Network Corp., 3.375%, due 8/15/26 |
8. | Liberty Media Corp., 1.00%–1.375%, due 1/30/23–10/15/23 |
9. | Chart Industries, Inc., 1.00%, due 11/15/24 |
10. | Workday, Inc., 0.25%, due 10/1/22 |
8 | MainStay MacKay Convertible Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio manager Edward Silverstein, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Convertible Fund perform relative to its benchmark and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Convertible Fund returned 9.98%, outperforming the 9.29% return of the Fund’s primary benchmark, the ICE BofAML U.S. Convertible Index. Over the same period, Class I shares outperformed the 8.90% return of the Morningstar Convertibles Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The advances in the Fund and the benchmark during the period resulted almost entirely from gains in equity markets, which largely determine the performance of equity-sensitive convertible bonds. The Fund’s outperformance relative to the ICE BofAML U.S. Convertible Index derived from owning several strong-performing positions that have very small weightings in the benchmark. Top holdings included Internet retailer, Etsy; health care equipment manufacturer, Danaher; Latin American Internet retailer, Mercadolibre; and industrial manufacturer, Chart Industries. The Fund’s relative performance also benefited from avoiding the convertible bonds of automobile manufacturer Tesla, a poor performer with a large weighting in the Index.
What was the Fund’s duration2 strategy during the reporting period?
Convertible bond prices tend to vary with changes in the price of the underlying equity security rather than with changes in interest rates. For this reason, duration does not guide our investment decisions regarding the Fund’s convertible security holdings. At the end of the reporting period, the effective duration of the Fund was 4.06 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Within the information technology sector, the Fund’s investments in software companies provided the strongest contributions to relative performance. (Contributions take weightings and total returns into account.) Top software holdings included NICE, Workday and ServiceNow, all three of which reported better than expected quarterly earnings and raised guidance for the coming quarters. In the consumer cyclical sector, Internet retailers Etsy and Mercadolibre significantly outperformed the Index after both companies reported earnings above analyst expectations.
The weakest sector contributors to the Fund’s relative performance included energy and health care. Energy fell in sync with the price of crude oil, which declined sharply from the highs of autumn 2018 and remained subdued through the end of the reporting period. The Fund’s holdings of the convertible bonds of Oasis Petroleum, Ensco, Transocean Offshore, and the convertible preferred shares of Hess, detracted from relative performance. The health care sector in general was weighed down by fears that a “Medicare for All” plan proposed by several Presidential candidates would negatively impact the industry if companies were forced to negotiate pricing with a single monopoly payor, the U.S. Government. Several of the Fund’s health care holdings such as Ligand Pharmaceuticals, BioMarin Pharmaceutical, and Novavax, detracted from the Fund’s performance relative to the benchmark.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The individual holdings making the strongest positive contributions to the Fund’s absolute performance included Microchip Technology, Danaher and NICE Systems. The convertible bonds of Microchip, a semiconductor manufacturer, advanced as many investors concluded that the cyclical downturn for the semiconductor industry would likely be relatively brief and shallow given existing semiconductors inventory levels in a prevailing environment of continued economic growth. The convertible bonds of Danaher, mentioned earlier, rose as the company continued to exceed quarterly earnings estimates. In addition, in February, the company announced that it would be acquiring General Electric’s biosciences unit for $20.6 billion and that this acquisition would be highly accretive to earnings. NICE Systems, also mentioned above, rose as the company continued to consistently beat earnings estimates and generate free cash flow.
The securities detracting most from the Fund’s absolute performance included the convertible bonds of Oasis Petroleum and the common shares of XPO Logistics. Oasis, an oil and gas exploration and production company, fell largely in sync with the decline in the price of crude oil during the period. The common shares of shipping and logistics company XPO, which the Fund received after the company’s convertible bonds matured and were converted, declined after the company missed fourth quarter earnings estimates due to a loss of business from its largest customer, presumed to be Amazon.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
What were some of the Fund’s largest purchases and sales during the reporting period?
Notable purchases included a new offering of convertible bonds from medical device manufacturer CONMED; convertible bonds of biotechnology company Sarepta Therapeutics, developing a potentially profitable treatment for a form of muscular dystrophy; and convertible bonds issued by Exact Science, maker of the Cologuard colon cancer test, a product well-positioned to experience rapid adoption from patients who do not wish to undergo a colonoscopy procedure. Notable sales included several large Fund holdings which matured during the period and were converted into common shares. These included securities of software developer Citrix Systems, packaged goods maker Post Holdings, oil and gas exploration and production company Hess and aircraft leasing company Air Lease. The Fund also sold its holdings in convertible bonds of biotechnology developer Ligand Pharmaceutical as new information related to the company’s management and history reduced our level of confidence in the investment.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its weighting to the information technology sector and decreased its weighting to the energy sector. All other sector weightings remained relatively unchanged.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund sectors most substantially overweight relative to the ICE BofAML U.S. Convertible Index included energy, health care, information technology and industrials. As of the same date, the Fund sectors most substantially underweight relative to the benchmark were financials, real estate and utilities.
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Convertible Fund |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Convertible Securities 90.3%† Convertible Bonds 84.1% | ||||||||
Advertising 0.6% |
| |||||||
Quotient Technology, Inc. | $ | 8,787,000 | $ | 8,195,618 | ||||
|
| |||||||
Aerospace & Defense 1.0% |
| |||||||
Aerojet Rocketdyne Holdings, Inc. | 9,436,000 | 13,529,865 | ||||||
|
| |||||||
Biotechnology 7.2% |
| |||||||
BioMarin Pharmaceutical, Inc. | 26,166,000 | 26,964,669 | ||||||
Exact Sciences Corp. | 9,763,000 | 14,737,991 | ||||||
Illumina, Inc. | ||||||||
(zero coupon), due 6/15/19 | 4,300,000 | 5,295,886 | ||||||
(zero coupon), due 8/15/23 (a)(b) | 2,862,000 | 3,099,261 | ||||||
0.50%, due 6/15/21 | 9,998,000 | 13,722,255 | ||||||
Intercept Pharmaceuticals, Inc. | 6,683,000 | 6,253,392 | ||||||
Ionis Pharmaceuticals, Inc. | 14,497,000 | 18,672,513 | ||||||
Medicines Co. | 10,023,000 | 9,217,136 | ||||||
Novavax, Inc. | 4,500,000 | 1,803,232 | ||||||
Radius Health, Inc. | 660,000 | 573,866 | ||||||
|
| |||||||
100,340,201 | ||||||||
|
| |||||||
Building Materials 0.9% |
| |||||||
Patrick Industries, Inc. | 14,099,000 | 12,964,031 | ||||||
|
| |||||||
Commercial Services 3.7% |
| |||||||
Chegg, Inc. | 10,530,000 | 10,121,962 | ||||||
Euronet Worldwide, Inc. | 11,900,000 | 13,311,352 | ||||||
Macquarie Infrastructure Corp. | 20,595,000 | 20,582,494 | ||||||
Square, Inc. | 6,031,000 | 7,215,908 | ||||||
|
| |||||||
51,231,716 | ||||||||
|
| |||||||
Computers 2.5% |
| |||||||
Lumentum Holdings, Inc. | 17,615,000 | 21,967,122 | ||||||
Nutanix, Inc. | 2,727,000 | 3,119,554 |
Principal Amount | Value | |||||||
Computers (continued) |
| |||||||
Pure Storage, Inc. | $ | 3,879,000 | $ | 4,301,581 | ||||
Western Digital Corp. | 6,616,000 | 5,918,811 | ||||||
|
| |||||||
35,307,068 | ||||||||
|
| |||||||
Diversified Financial Services 0.6% |
| |||||||
LendingTree, Inc. | 4,144,000 | 7,961,660 | ||||||
|
| |||||||
Electric 1.0% |
| |||||||
NRG Energy, Inc. | 12,699,000 | 14,324,010 | ||||||
|
| |||||||
Entertainment 0.2% |
| |||||||
Live Nation Entertainment, Inc. | 2,074,000 | 2,443,297 | ||||||
|
| |||||||
Health Care—Products 4.9% |
| |||||||
CONMED Corp. | 5,397,000 | 5,918,006 | ||||||
Danaher Corp. | 8,558,000 | 43,292,783 | ||||||
NuVasive, Inc. | 7,139,000 | 8,218,974 | ||||||
Wright Medical Group, Inc. | 9,180,000 | 10,005,282 | ||||||
|
| |||||||
67,435,045 | ||||||||
|
| |||||||
Health Care—Services 4.7% |
| |||||||
Anthem, Inc. | 8,340,000 | 30,378,450 | ||||||
Molina Healthcare, Inc. | 3,805,000 | 12,143,954 | ||||||
Teladoc Health, Inc. | 17,196,000 | 22,767,903 | ||||||
|
| |||||||
65,290,307 | ||||||||
|
| |||||||
Internet 13.3% |
| |||||||
At Home Corp. | 10,340,000 | 134,420 | ||||||
Boingo Wireless, Inc. | 7,786,000 | 6,998,505 | ||||||
Booking Holdings, Inc. | 19,156,000 | 21,871,925 | ||||||
Etsy, Inc. | 11,022,000 | 21,499,789 | ||||||
FireEye, Inc. | 5,405,000 | 5,444,772 | ||||||
IAC FinanceCo, Inc. | 14,542,000 | 22,621,899 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Convertible Bonds (continued) |
| |||||||
Internet (continued) |
| |||||||
Liberty Expedia Holdings, Inc. | $ | 11,074,000 | $ | 11,099,651 | ||||
MercadoLibre, Inc. | 10,118,000 | 13,090,163 | ||||||
Okta, Inc. | 6,056,000 | 13,431,073 | ||||||
Palo Alto Networks, Inc. | 13,659,000 | 15,550,221 | ||||||
RingCentral, Inc. | 11,103,000 | 16,824,276 | ||||||
Twitter, Inc. | 9,161,000 | 9,068,446 | ||||||
Wix.com, Ltd. | 13,442,000 | 15,842,242 | ||||||
Zendesk, Inc. | 2,074,000 | 3,129,687 | ||||||
Zillow Group, Inc. | 8,726,000 | 7,996,510 | ||||||
|
| |||||||
184,603,579 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
Cleveland-Cliffs, Inc. | 2,878,000 | 3,968,312 | ||||||
|
| |||||||
Lodging 0.4% |
| |||||||
Caesars Entertainment Corp. | 3,741,000 | 5,546,295 | ||||||
|
| |||||||
Machinery—Diversified 1.8% |
| |||||||
Chart Industries, Inc. | 15,248,000 | 24,421,315 | ||||||
|
| |||||||
Media 3.7% |
| |||||||
DISH Network Corp. | 28,598,000 | 26,304,801 | ||||||
Liberty Media Corp-Liberty Formula One | 9,441,000 | 11,314,694 | ||||||
Liberty Media Corp. | 11,345,000 | 13,278,188 | ||||||
|
| |||||||
50,897,683 | ||||||||
|
| |||||||
Oil & Gas 3.2% |
| |||||||
Ensco Jersey Finance, Ltd. | 20,143,000 | 17,071,193 | ||||||
Oasis Petroleum, Inc. | 17,949,000 | 17,206,506 | ||||||
Transocean, Inc. | 9,294,000 | 9,973,743 | ||||||
|
| |||||||
44,251,442 | ||||||||
|
|
Principal Amount | Value | |||||||
Oil & Gas Services 4.7% |
| |||||||
Helix Energy Solutions Group, Inc. | ||||||||
4.125%, due 9/15/23 | $ | 5,763,000 | $ | 6,440,153 | ||||
4.25%, due 5/1/22 | 10,326,000 | 10,150,665 | ||||||
Newpark Resources, Inc. | 7,687,000 | 8,490,119 | ||||||
Oil States International, Inc. | 19,999,000 | 18,011,599 | ||||||
Weatherford International, Ltd. | 29,206,000 | 22,068,269 | ||||||
|
| |||||||
65,160,805 | ||||||||
|
| |||||||
Pharmaceuticals 3.4% |
| |||||||
DexCom, Inc. | 6,307,000 | 6,582,937 | ||||||
Herbalife Nutrition, Ltd. | 9,443,000 | 9,932,200 | ||||||
Neurocrine Biosciences, Inc. | 8,164,000 | 9,873,021 | ||||||
Pacira BioSciences, Inc. | 8,745,000 | 8,750,466 | ||||||
Sarepta Therapeutics, Inc. | 3,387,000 | 6,054,263 | ||||||
Supernus Pharmaceuticals, Inc. | 6,269,000 | 6,351,926 | ||||||
|
| |||||||
47,544,813 | ||||||||
|
| |||||||
Semiconductors 10.3% |
| |||||||
Cypress Semiconductor Corp. | 6,094,000 | 6,632,375 | ||||||
Inphi Corp. | 14,512,000 | 18,285,120 | ||||||
Intel Corp. | 5,613,000 | 14,031,209 | ||||||
Microchip Technology, Inc. | ||||||||
1.625%, due 2/15/25 | 17,553,000 | 34,904,305 | ||||||
1.625%, due 2/15/27 | 7,129,000 | 9,266,708 | ||||||
Micron Technology, Inc. | 2,308,000 | 9,734,178 | ||||||
Novellus Systems, Inc. | 1,076,000 | 6,779,984 | ||||||
ON Semiconductor Corp. | 12,331,000 | 16,505,728 | ||||||
Rambus, Inc. | 9,996,000 | 9,515,192 | ||||||
Silicon Laboratories, Inc. | 13,815,000 | 17,634,292 | ||||||
|
| |||||||
143,289,091 | ||||||||
|
| |||||||
Software 11.8% |
| |||||||
Atlassian, Inc. | 7,719,000 | 11,434,016 | ||||||
Coupa Software, Inc. | 3,586,000 | 8,442,174 |
12 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Convertible Bonds (continued) |
| |||||||
Software (continued) |
| |||||||
NICE Systems, Inc. | $ | 23,525,000 | $ | 40,175,951 | ||||
Nuance Communications, Inc. | 11,278,000 | 11,217,668 | ||||||
Red Hat, Inc. | 4,231,000 | 10,504,878 | ||||||
ServiceNow, Inc. | 8,807,000 | 17,845,080 | ||||||
Splunk, Inc. | 12,775,000 | 14,579,631 | ||||||
Twilio, Inc. | 3,269,000 | 6,554,012 | ||||||
Verint Systems, Inc. | 17,084,000 | 19,212,973 | ||||||
Workday, Inc. | 15,957,000 | 23,763,656 | ||||||
|
| |||||||
163,730,039 | ||||||||
|
| |||||||
Telecommunications 1.9% |
| |||||||
Finisar Corp. | 9,521,000 | 9,369,177 | ||||||
Viavi Solutions Inc. | 14,679,000 | 17,175,634 | ||||||
|
| |||||||
26,544,811 | ||||||||
|
| |||||||
Transportation 2.0% |
| |||||||
Atlas Air Worldwide Holdings, Inc. | 16,161,000 | 16,780,637 | ||||||
Echo Global Logistics, Inc. | 11,612,000 | 11,424,711 | ||||||
|
| |||||||
28,205,348 | ||||||||
|
| |||||||
Total Convertible Bonds | 1,167,186,351 | |||||||
|
| |||||||
Shares | ||||||||
Convertible Preferred Stocks 6.2% |
| |||||||
Banks 2.3% |
| |||||||
Bank of America Corp. | 12,072 | 15,941,197 | ||||||
Wells Fargo & Co. | 11,552 | 15,103,547 | ||||||
|
| |||||||
31,044,744 | ||||||||
|
| |||||||
Chemicals 0.4% |
| |||||||
A. Schulman, Inc. | 5,832 | 5,934,060 | ||||||
|
|
Shares | Value | |||||||
Equity Real Estate Investment Trusts 0.7% |
| |||||||
Crown Castle International Corp. | 8,856 | $ | 10,219,735 | |||||
|
| |||||||
Health Care Equipment & Supplies 1.4% |
| |||||||
Becton Dickinson & Co. | 314,669 | 18,725,952 | ||||||
|
| |||||||
Machinery 1.4% |
| |||||||
Rexnord Corp. | 108,438 | 6,359,889 | ||||||
Stanley Black & Decker, Inc. | 131,861 | 13,503,885 | ||||||
|
| |||||||
19,863,774 | ||||||||
|
| |||||||
Total Convertible Preferred Stocks | 85,788,265 | |||||||
|
| |||||||
Total Convertible Securities | 1,252,974,616 | |||||||
|
| |||||||
Common Stocks 4.0% | ||||||||
Aerospace & Defense 0.5% |
| |||||||
United Technologies Corp. | 53,105 | 7,573,304 | ||||||
|
| |||||||
Air Freight & Logistics 0.6% |
| |||||||
XPO Logistics, Inc. (a)(i) | 122,563 | 8,344,089 | ||||||
|
| |||||||
Airlines 1.0% |
| |||||||
Delta Air Lines, Inc. | 227,309 | 13,249,841 | ||||||
|
| |||||||
Banks 0.9% |
| |||||||
Bank of America Corp. | 398,621 | 12,189,830 | ||||||
|
| |||||||
Energy Equipment & Services 0.3% |
| |||||||
Baker Hughes, a GE Co. | 51,357 | 1,233,595 | ||||||
Halliburton Co. | 113,326 | 3,210,526 | ||||||
|
| |||||||
4,444,121 | ||||||||
|
| |||||||
Health Care Equipment & Supplies 0.7% |
| |||||||
Teleflex, Inc. | 33,226 | 9,508,617 | ||||||
|
| |||||||
Total Common Stocks | 55,309,802 | |||||||
|
| |||||||
Short-Term Investment 5.2% | ||||||||
Affiliated Investment Company 5.2% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (j)(k) | 72,181,491 | 72,181,491 | ||||||
|
| |||||||
TotalShort-Term Investment | 72,181,491 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Shares | Value | |||||||
Investment of Cash Collateral For Securities Loaned 6.0% |
| |||||||
Unaffiliated Investment Company 6.0% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (j)(k) | 83,774,088 | $ | 83,774,088 | |||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 83,774,088 | |||||||
|
| |||||||
Total Investments | 105.5 | % | 1,464,239,997 | |||||
Other Assets, Less Liabilities | (5.5 | ) | (76,556,918 | ) | ||||
Net Assets | 100.0 | % | $ | 1,387,683,079 |
† | Percentages indicated are based on Fund net assets. |
(a) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $89,658,983; the total market value of collateral held by the Fund was $91,719,146. The market value of the collateral held includes non-cash collateral in the form of U.S. Treasury securities with a value of $7,945,058 (See Note 2(H)). |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Illiquid security—As of April 30, 2019, the total market value of the security deemed illiquid under procedures approved by the Board of Trustees was $134,420, which represented less than one-tenth of a percent of the Fund’s net assets. |
(d) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2019, the total market value of the fair valued security was $134,420, which represented less than one-tenth of a percent of the Fund’s net assets. |
(e) | Issue in non-accrual status. |
(f) | Restricted security (See Note 5). |
(g) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(h) | Issue in default. |
(i) | Non-income producing security. |
(j) | Current yield as of April 30, 2019. |
(k) | As of April 30, 2019, the Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Active Assets (Level 1) | Significant Other Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Convertible Securities | ||||||||||||||||
Convertible Bonds (b) | $ | — | $ | 1,167,051,931 | $ | 134,420 | $ | 1,167,186,351 | ||||||||
Convertible Preferred Stocks (c) | 79,854,205 | 5,934,060 | — | 85,788,265 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Convertible Securities | 79,854,205 | 1,172,985,991 | 134,420 | 1,252,974,616 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks | 55,309,802 | — | — | 55,309,802 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 72,181,491 | — | — | 72,181,491 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 83,774,088 | — | — | 83,774,088 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 291,119,586 | $ | 1,172,985,991 | $ | 134,420 | $ | 1,464,239,997 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $134,420 is held in Internet within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The level 2 security valued at $5,934,060 is held in Chemicals within the Convertible Preferred Stocks section of the Portfolio of Investments. |
14 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2018 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2019 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at April 30, 2019 (a) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||
Internet | $ | — | $ | — | $ | — | $ | 134,420 | $ | — | $ | — | $ | — | $ | — | $ | 134,420 | $ | 134,420 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets |
| |||
Investment in unaffiliated securities, at value | $ | 1,392,058,506 | ||
Investment in affiliated investment company, at value (identified cost $72,181,491) | 72,181,491 | |||
Cash | 55,575 | |||
Receivables: | ||||
Dividends and interest | 5,003,809 | |||
Fund shares sold | 4,576,317 | |||
Investment securities sold | 2,479,477 | |||
Securities lending income | 54,202 | |||
Other assets | 81,175 | |||
|
| |||
Total assets | 1,476,490,552 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Collateral received for securities on loan | 83,774,088 | |||
Investment securities purchased | 2,761,895 | |||
Fund shares redeemed | 1,087,557 | |||
Manager (See Note 3) | 573,350 | |||
Transfer agent (See Note 3) | 285,191 | |||
NYLIFE Distributors (See Note 3) | 188,742 | |||
Shareholder communication | 65,636 | |||
Professional fees | 48,896 | |||
Custodian | 3,623 | |||
Trustees | 555 | |||
Accrued expenses | 17,782 | |||
Dividend payable | 158 | |||
|
| |||
Total liabilities | 88,807,473 | |||
|
| |||
Net assets | $ | 1,387,683,079 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 783,417 | ||
Additional paid-in capital | 1,216,925,695 | |||
|
| |||
1,217,709,112 | ||||
Total distributable earnings (loss) | 169,973,967 | |||
|
| |||
Net assets | $ | 1,387,683,079 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 545,403,241 | ||
|
| |||
Shares of beneficial interest outstanding | 30,813,286 | |||
|
| |||
Net asset value per share outstanding | $ | 17.70 | ||
Maximum sales charge (5.50% of offering price) | 1.03 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.73 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 59,921,464 | ||
|
| |||
Shares of beneficial interest outstanding | 3,386,298 | |||
|
| |||
Net asset value per share outstanding | $ | 17.70 | ||
Maximum sales charge (5.50% of offering price) | 1.03 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.73 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 13,714,486 | ||
|
| |||
Shares of beneficial interest outstanding | 778,855 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.61 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 66,469,507 | ||
|
| |||
Shares of beneficial interest outstanding | 3,779,648 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.59 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 702,174,381 | ||
|
| |||
Shares of beneficial interest outstanding | 39,583,638 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.74 | ||
|
|
16 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) |
| |||
Income | ||||
Interest | $ | 7,899,891 | ||
Dividends—unaffiliated | 3,279,439 | |||
Dividends—affiliated | 657,444 | |||
Securities lending | 300,032 | |||
|
| |||
Total income | 12,136,806 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,700,611 | |||
Distribution/Service—Class A (See Note 3) | 631,802 | |||
Distribution/Service—Investor Class (See Note 3) | 67,845 | |||
Distribution/Service—Class B (See Note 3) | 69,921 | |||
Distribution/Service—Class C (See Note 3) | 369,551 | |||
Transfer agent (See Note 3) | 915,286 | |||
Professional fees | 71,019 | |||
Registration | 65,947 | |||
Shareholder communication | 58,734 | |||
Trustees | 15,039 | |||
Custodian | 13,477 | |||
Miscellaneous | 29,723 | |||
|
| |||
Total expenses before waiver/reimbursement | 6,008,955 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (400,878 | ) | ||
|
| |||
Net expenses | 5,608,077 | |||
|
| |||
Net investment income (loss) | 6,528,729 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on unaffiliated investments | 9,789,111 | |||
Net change in unrealized appreciation (depreciation) on unaffiliated investments | 103,919,402 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 113,708,513 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 120,237,242 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 6,528,729 | $ | 11,856,657 | ||||
Net realized gain (loss) on investments | 9,789,111 | 67,397,976 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 103,919,402 | (52,678,146 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 120,237,242 | 26,576,487 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (27,869,130 | ) | (33,491,767 | ) | ||||
Investor Class | (2,880,511 | ) | (3,812,652 | ) | ||||
Class B | (744,978 | ) | (1,145,593 | ) | ||||
Class C | (3,984,633 | ) | (4,937,399 | ) | ||||
Class I | (37,240,897 | ) | (37,074,520 | ) | ||||
|
| |||||||
Total distributions to shareholders | (72,720,149 | ) | (80,461,931 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 255,451,478 | 527,717,872 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 63,375,853 | 70,639,748 | ||||||
Cost of shares redeemed | (329,240,666 | ) | (396,673,712 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (10,413,335 | ) | 201,683,908 | |||||
|
| |||||||
Net increase (decrease) in net assets | 37,103,758 | 147,798,464 | ||||||
Net Assets |
| |||||||
Beginning of period | 1,350,579,321 | 1,202,780,857 | ||||||
|
| |||||||
End of period | $ | 1,387,683,079 | $ | 1,350,579,321 | ||||
|
|
18 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||
Net asset value at beginning of period | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | $ | 17.33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.07 | 0.15 | 0.19 | 0.20 | 0.11 | 0.15 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.50 | 0.40 | 2.34 | 0.35 | (0.00 | )‡ | 1.59 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.57 | 0.55 | 2.53 | 0.55 | 0.11 | 1.74 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.22 | ) | (0.24 | ) | (0.64 | ) | (0.47 | ) | (0.51 | ) | ||||||||||||
From net realized gain on investments | (0.83 | ) | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.94 | ) | (1.23 | ) | (0.50 | ) | (1.34 | ) | (1.93 | ) | (0.74 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 17.70 | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 9.80 | % | 3.28 | % | 16.30 | % | 3.71 | % | 0.58 | % | 10.42 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.89 | %†† | 0.87 | % | 1.12 | % | 1.31 | % | 0.62 | % | 0.86 | % | ||||||||||||
Net expenses (c) | 0.98 | %†† | 0.98 | % | 0.98 | % | 1.01 | % | 0.99 | % | 0.97 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.98 | %†† | 0.98 | % | 0.99 | % | 1.01 | % | 0.99 | % | 0.97 | % | ||||||||||||
Portfolio turnover rate | 8 | % | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s)
| $ | 545,403 | $ | 518,381 | $ | 482,341 | $ | 368,583 | $ | 408,067 | $ | 384,987 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||
Net asset value at beginning of period | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | $ | 17.32 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.06 | 0.13 | 0.16 | 0.18 | 0.08 | 0.12 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.49 | 0.39 | 2.34 | 0.36 | (0.01 | ) | 1.60 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.55 | 0.52 | 2.50 | 0.54 | 0.07 | 1.72 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.19 | ) | (0.21 | ) | (0.62 | ) | (0.44 | ) | (0.48 | ) | ||||||||||||
From net realized gain on investments | (0.83 | ) | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.92 | ) | (1.20 | ) | (0.47 | ) | (1.32 | ) | (1.90 | ) | (0.71 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 17.70 | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 9.70 | % | 3.12 | % | 16.11 | % | 3.60 | % | 0.40 | % | 10.21 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.72 | %†† | 0.72 | % | 0.95 | % | 1.14 | % | 0.45 | % | 0.67 | % | ||||||||||||
Net expenses (c) | 1.15 | %†† | 1.13 | % | 1.14 | % | 1.18 | % | 1.15 | % | 1.16 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.17 | %†† | 1.14 | % | 1.15 | % | 1.18 | % | 1.15 | % | 1.16 | % | ||||||||||||
Portfolio turnover rate | 8 | % | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 59,921 | $ | 52,723 | $ | 56,289 | $ | 79,430 | $ | 82,052 | $ | 85,850 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.98 | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | $ | 17.37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | (0.01 | ) | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.49 | 0.39 | 2.32 | 0.35 | 0.01 | 1.59 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.49 | 0.38 | 2.36 | 0.41 | (0.04 | ) | 1.58 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | ||||||||||||
From net realized gain on investments | (0.83 | ) | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.86 | ) | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 17.61 | $ | 16.98 | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 9.32 | % | 2.35 | % | 15.21 | % | 2.83 | % | (0.36 | %) | 9.41 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.03 | %)†† | (0.03 | %) | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | ||||||||||||
Net expenses (c) | 1.90 | % †† | 1.88 | % | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.92 | % †† | 1.89 | % | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||||
Portfolio turnover rate | 8 | % | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 13,715 | $ | 15,051 | $ | 19,290 | $ | 21,436 | $ | 26,537 | $ | 29,765 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.96 | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | $ | 17.36 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | (0.00 | )‡ | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.49 | 0.38 | 2.32 | 0.35 | (0.00 | )‡ | 1.59 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.49 | 0.38 | 2.36 | 0.41 | (0.05 | ) | 1.58 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | ||||||||||||
From net realized gain on investments | (0.83 | ) | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.86 | ) | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 17.59 | $ | 16.96 | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 9.33 | % | 2.35 | % | 15.23 | % | 2.77 | % | (0.30 | %) | 9.35 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.03 | %)†† | (0.03 | %) | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | ||||||||||||
Net expenses (c) | 1.90 | % †† | 1.88 | % | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.92 | % †† | 1.89 | % | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||||
Portfolio turnover rate | 8 | % | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 66,470 | $ | 80,830 | $ | 82,335 | $ | 76,501 | $ | 91,833 | $ | 92,118 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
20 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||
Net asset value at beginning of period | $ | 17.11 | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | $ | 17.35 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.10 | 0.22 | 0.25 | 0.24 | 0.15 | 0.20 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.50 | 0.39 | 2.34 | 0.35 | (0.00 | )‡ | 1.60 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.60 | 0.61 | 2.59 | 0.59 | 0.15 | 1.80 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.28 | ) | (0.29 | ) | (0.68 | ) | (0.51 | ) | (0.56 | ) | ||||||||||||
From net realized gain on investments | (0.83 | ) | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.97 | ) | (1.29 | ) | (0.55 | ) | (1.38 | ) | (1.97 | ) | (0.79 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 17.74 | $ | 17.11 | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 9.98 | % | 3.65 | % | 16.69 | % | 3.96 | % | 0.84 | % | 10.74 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.26 | %†† | 1.25 | % | 1.45 | % | 1.56 | % | 0.87 | % | 1.11 | % | ||||||||||||
Net expenses (c) | 0.61 | %†† | 0.61 | % | 0.64 | % | 0.76 | % | 0.74 | % | 0.72 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.73 | %†† | 0.73 | % | 0.74 | % | 0.76 | % | 0.74 | % | 0.72 | % | ||||||||||||
Portfolio turnover rate | 8 | % | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 702,174 | $ | 683,594 | $ | 562,526 | $ | 252,852 | $ | 298,015 | $ | 313,955 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Convertible Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has six classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on November 28, 2008. Class R6 shares were registered for sale effective as of February 28, 2017. As of April 30, 2019, Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility,
Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A and Investor Class shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek capital appreciation together with current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current
22 | MainStay MacKay Convertible Fund |
day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation
23 |
Notes to Financial Statements(Unaudited) (continued)
date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor
might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including: (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least quarterly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
24 | MainStay MacKay Convertible Fund |
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the
repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $89,658,983; the total market value of collateral held by the Fund was $91,719,146. The market value of the collateral held includesnon-cash collateral in the form of U.S. Treasury securities with a value of $7,945,058.
(I) Convertible Securities Risk. Convertible securities may be subordinate to other securities. In part, the total return for a convertible security depends upon the performance of the underlying stock into which it can be converted. Also, issuers of convertible securities are often not as strong financially as those issuing securities with higher credit ratings, are more likely to encounter financial difficulties and typically are more vulnerable to changes in the economy, such as a recession or a sustained period of rising interest rates, which could affect their ability to make interest and principal payments.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in
25 |
Notes to Financial Statements(Unaudited) (continued)
the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Effective February 28, 2019, under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million to $1 billion; 0.50% from $1 billion to $2 billion; and 0.49% in excess of $2 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During thesix-month period ended April 30, 2019, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.57%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
Prior to February 28, 2019, under the Management Agreement, the Fund paid the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million to $1 billion; and 0.50% in excess of $1 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) of Class I shares so that Total Annual Fund Operating Expenses of Class I shares do not exceed 0.61% of the Fund’s average daily net assets. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $3,700,611 and waived fees/reimbursed expenses in the amount of $400,878.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
26 | MainStay MacKay Convertible Fund |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $58,570 and $19,157, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $4,192, $8,224 and $4,061, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period
ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 304,128 | ||
Investor Class | 83,602 | |||
Class B | 21,528 | |||
Class C | 113,737 | |||
Class I | 392,291 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 126,303 | $ | 164,453 | $ | (218,575 | ) | $ | — | $ | — | $ | 72,181 | $ | 657 | $ | — | 72,181 |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,305,356,631 | $ | 225,669,114 | $ | (66,785,748 | ) | $ | 158,883,366 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 19,372,404 | ||
Long-Term Capital Gain | 61,089,527 | |||
Total | $ | 80,461,931 |
Note 5–Restricted Securities
Restricted securities, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
As of April 30, 2019, the Fund held the following restricted securities:
Security | Date of Acquisition | Shares/ Principal Amount | Cost | 4/30/19 Value | Percent of Net Assets | |||||||||||||||
At Home Corp | 5/4/01 | 10,340,000 | $ | — | $ | 134,420 | 0.0 | %‡ |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any
27 |
Notes to Financial Statements(Unaudited) (continued)
revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $97,852 and $115,098, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 3,090,247 | $ | 52,203,859 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,708,303 | 27,251,450 | ||||||
Shares redeemed | (4,595,404 | ) | (75,913,384 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 203,146 | 3,541,925 | ||||||
Shares converted into Class A (See Note 1) | 312,903 | 5,308,900 | ||||||
Shares converted from Class A (See Note 1) | (68,623 | ) | (1,171,119 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 447,426 | $ | 7,679,706 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,951,046 | $ | 123,130,438 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,951,305 | 32,664,323 | ||||||
Shares redeemed | (6,160,505 | ) | (107,832,361 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,741,846 | 47,962,400 | ||||||
Shares converted into Class A (See Note 1) | 677,884 | 11,958,226 | ||||||
Shares converted from Class A (See Note 1) | (224,823 | ) | (4,036,018 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 3,194,907 | $ | 55,884,608 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 298,299 | $ | 5,032,152 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 179,770 | 2,866,391 | ||||||
Shares redeemed | (158,319 | ) | (2,656,143 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 319,750 | 5,242,400 | ||||||
Shares converted into Investor Class (See Note 1) | 121,891 | 2,062,219 | ||||||
Shares converted from Investor Class (See Note 1) | (144,745 | ) | (2,434,649 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 296,896 | $ | 4,869,970 | |||||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 477,345 | $ | 8,402,387 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 227,114 | 3,796,070 | ||||||
Shares redeemed | (316,976 | ) | (5,549,168 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 387,483 | 6,649,289 | ||||||
Shares converted into Investor Class (See Note 1) | 145,958 | 2,599,355 | ||||||
Shares converted from Investor Class (See Note 1) | (615,915 | ) | (10,852,240 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (82,474 | ) | $ | (1,603,596 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 18,927 | $ | 315,149 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 43,185 | 683,895 | ||||||
Shares redeemed | (114,330 | ) | (1,899,840 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (52,218 | ) | (900,796 | ) | ||||
Shares converted from Class B (See Note 1) | (55,187 | ) | (907,315 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (107,405 | ) | $ | (1,808,111 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 54,400 | $ | 953,788 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 62,726 | 1,040,344 | ||||||
Shares redeemed | (190,681 | ) | (3,325,606 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (73,555 | ) | (1,331,474 | ) | ||||
Shares converted from Class B (See Note 1) | (131,697 | ) | (2,330,239 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (205,252 | ) | $ | (3,661,713 | ) | |||
|
|
|
| |||||
28 | MainStay MacKay Convertible Fund |
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 364,527 | $ | 6,053,555 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 214,580 | 3,393,739 | ||||||
Shares redeemed | (1,383,917 | ) | (23,106,132 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (804,810 | ) | (13,658,838 | ) | ||||
Shares converted from Class C (See Note 1) | (180,985 | ) | (3,079,454 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (985,795 | ) | $ | (16,738,292 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 943,151 | $ | 16,541,245 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 251,595 | 4,167,959 | ||||||
Shares redeemed | (1,093,646 | ) | (19,054,723 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 101,100 | $ | 1,654,481 | |||||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 11,526,815 | $ | 191,846,763 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,823,136 | 29,180,378 | ||||||
Shares redeemed | (13,740,558 | ) | (225,665,167 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (390,607 | ) | (4,638,026 | ) | ||||
Shares converted into Class I (See Note 1) | 13,056 | 221,418 | ||||||
|
|
|
| |||||
Net increase (decrease) | (377,551 | ) | $ | (4,416,608 | ) | |||
|
|
|
| |||||
Year ended October 31, 2018: | ||||||||
Shares sold | 21,352,015 | $ | 378,690,014 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,723,558 | 28,971,052 | ||||||
Shares redeemed | (14,889,150 | ) | (260,911,854 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 8,186,423 | 146,749,212 | ||||||
Shares converted into Class I (See Note 1) | 147,369 | 2,660,916 | ||||||
|
|
|
| |||||
Net increase (decrease) | 8,333,792 | $ | 149,410,128 | |||||
|
|
|
|
Note 11–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay Convertible Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio manager of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the
30 | MainStay MacKay Convertible Fund |
performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group
of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager and the method for compensating the portfolio manager.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio manager and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
32 | MainStay MacKay Convertible Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board noted that New York Life Investments proposed an additional management fee breakpoint for the Fund, effective February 28, 2019.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the
share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the
33 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
34 | MainStay MacKay Convertible Fund |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
35 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737258 MS065-19 | MSC10-06/19 (NYLIM) NL210 |
MainStay MacKay High Yield Corporate Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception | Six Months | One | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –0.12 4.59 | %
| | 0.74 5.48 | %
| | 3.60 4.56 | %
| | 8.18 8.68 | %
| | 0.99 0.99 | %
| ||||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –0.16 4.55 |
| | 0.69 5.44 | | | 3.56 4.51 | | | 8.13 8.63 | | | 1.03 1.03 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | –0.83 4.17 |
| | –0.36 4.62 | | | 3.42 3.74 | | | 7.83 7.83 | | | 1.78 1.78 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 3.16 4.16 |
| | 3.62 4.62 | | | 3.70 3.70 | | | 7.83 7.83 | | | 1.78 1.78 |
| ||||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 4.73 | 5.77 | 4.82 | 8.97 | 0.74 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 6/29/2012 | 4.68 | 5.67 | 4.72 | 5.87 | 0.84 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 5/1/2008 | 4.54 | 5.39 | 4.42 | 8.56 | 1.09 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 4.41 | 5.13 | 8.60 | 8.60 | 1.34 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 4.62 | 5.73 | 4.93 | 5.39 | 0.58 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have been |
lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
ICE BofAML U.S. High Yield Constrained Index4 | 5.55 | % | 6.71 | % | 4.85 | % | 10.18 | % | ||||||||
Morningstar High Yield Bond Category Average5 | 4.69 | 5.20 | 3.60 | 8.69 |
4. | The ICE BofAML U.S. High Yield Constrained Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofAML U.S. High Yield Constrained Index is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds andpayment-in-kind securities. Issuers included in the Index have maturities of one year or more and have a credit rating lower thanBBB-/Baa3, but are not in default. No single issuer may constitute greater than 2% of the Index. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar High Yield Bond Category Average is representative of funds that concentrate on lower-quality bonds, which are riskier than those of higher-quality companies. These portfolios primarily invest in U.S. high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BB and below. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay High Yield Corporate Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay High Yield Corporate Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,045.90 | $ | 4.97 | $ | 1,019.94 | $ | 4.91 | 0.98% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,045.50 | $ | 5.33 | $ | 1,019.59 | $ | 5.26 | 1.05% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,041.70 | $ | 9.11 | $ | 1,015.87 | $ | 9.00 | 1.80% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,041.60 | $ | 9.11 | $ | 1,015.87 | $ | 9.00 | 1.80% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,047.30 | $ | 3.71 | $ | 1,021.18 | $ | 3.66 | 0.73% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,046.80 | $ | 4.21 | $ | 1,020.68 | $ | 4.16 | 0.83% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,045.40 | $ | 5.48 | $ | 1,019.44 | $ | 5.41 | 1.08% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,044.10 | $ | 6.74 | $ | 1,018.20 | $ | 6.66 | 1.33% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,046.20 | $ | 2.99 | $ | 1,021.87 | $ | 2.96 | 0.59% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings or Issuers as of April 30, 2019(excluding short-term investment) (Unaudited)
1. | T-Mobile USA, Inc., 4.00%–6.50%, due 4/15/22–2/1/28 |
2. | HCA, Inc., 5.25%–8.36%, due 2/15/22–11/6/33 |
3. | Equinix, Inc., 5.375%–5.875%, due 1/1/22–5/15/27 |
4. | CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%–5.875%, due 2/15/23–2/1/28 |
5. | Exide Technologies |
6. | TransDigm, Inc., 6.00%–6.50%, due 7/15/22–3/15/26 |
7. | Carlson Travel, Inc., 6.75%–9.50%, due 12/15/23–12/15/24 |
8. | Netflix, Inc., 4.875%–5.875%, due 2/15/22–11/15/29 |
9. | MSCI, Inc., 4.75%–5.75%, due 11/15/24–5/15/27 |
10. | Sprint Capital Corp., 6.875%–8.75%, due 11/15/28–3/15/32 |
8 | MainStay MacKay High Yield Corporate Bond Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio manager Andrew Susser of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay High Yield Corporate Bond Fund perform relative to its benchmark and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay High Yield Corporate Bond Fund returned 4.73%, underperforming the 5.55% return of the Fund’s primary benchmark, the ICE BofAML U.S. High Yield Constrained Index. Over the same period, Class I shares outperformed the 4.69% return of the Morningstar High Yield Bond Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
High-yield spreads2 widened in the fourth quarter of 2018 alongside thesell-off in U.S. equities, increased interest-rate volatility and outflows from U.S. high-yield mutual funds and ETFs. The first four months of 2019 saw a reversal of these drivers as U.S. Treasury yields declined due to interest-rate complacency and U.S. equities rebounded. Fund inflows coupled with muted new issuance aided returns in the U.S. high-yield bond sector. However, the underperformance of a few individual holdings in the capital goods sector detracted from the Fund’s performance relative to the ICE BofAML U.S. High Yield Constrained Index.
What was the Fund’s duration3 strategy during the reporting period?
The Fund is not managed to a duration strategy. Instead, the Fund’sbottom-up investment process drives its duration positioning. As of April 30, 2019, the Fund’s modified duration to worst4 stood at 2.9 years versus 3.5 years for the benchmark.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, investments in the energy sector provided the strongest positive contributions to the Fund’s relative performance due to security selection in the exploration & production sector. (Contributions take weightings and total
returns into account.) Security selection in the telecommunications satellite sector, particularly a lack of exposure to weak-performing bonds issued by Intelsat Jackson, also bolstered the Fund’s relative returns. The weakest contributors to the Fund’s performance included the capital goods sector, where holdings in Exide Technologies lagged, and the cable & satellite TV sector, where the Fund’s focus on comparatively high-quality credits detracted from relative returns.
What were some of the Fund’s largest purchases and sales during the reporting period?
During the reporting period, the Fund bought a new issue of aerospace component manufacturer TransDigm, a company with a $23 billion equity market capitalization and a diverse product portfolio. The Fund also purchased additional bonds issued by Mattel, one of the largest toy manufacturers in the world with iconic brands such as Barbie, Hot Wheels and Fisher price that we believe provide sufficient asset coverage.
During the same period, the Fund sold positions in Tenet Healthcare and Avis Budget Group after both companies’ bonds increased in price in the first quarter of 2019 on positive financial results.
How did the Fund’s sector weightings change during the reporting period?
There were no material changes to the Fund’s sector weightings during the reporting period. However, the Fund moderately increased its exposure to the leisure and metals/mining sectors and decreased its exposure to the health care and support services sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund remained defensively positioned relative to the ICE BofAML U.S. High Yield Constrained Index, with underweight exposure to bonds rated CCC5 and below. With regard to sector allocations, the Fund held overweight positions in basic industry, automotive and consumer goods, and underweight positions in health care/pharmaceuticals, technology and banking.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
4. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. |
5. | An obligation rated ‘CCC’ by Standard & Poor’s (“S&P”) is deemed by S&P to be currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. It is the opinion of S&P that in the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 90.8%† Convertible Bonds 0.5% |
| |||||||
Auto Parts & Equipment 0.4% |
| |||||||
Exide Technologies (a)(b)(c)(d) | ||||||||
7.00% (7.00% PIK), due 4/30/25 | $ | 88,684,974 | $ | 28,467,876 | ||||
7.25% (7.25% PIK), due 4/30/25 (e) | 21,451,797 | 8,795,237 | ||||||
|
| |||||||
37,263,113 | ||||||||
|
| |||||||
Internet 0.0%‡ |
| |||||||
At Home Corp. | 69,477,086 | 903,202 | ||||||
|
| |||||||
Media 0.1% |
| |||||||
DISH Network Corp. | 6,840,000 | 6,291,518 | ||||||
|
| |||||||
Mining 0.0%‡ |
| |||||||
Aleris International, Inc. | 11,797 | 11,275 | ||||||
|
| |||||||
Total Convertible Bonds | 44,469,108 | |||||||
|
| |||||||
Corporate Bonds 87.9% |
| |||||||
Advertising 1.0% |
| |||||||
Lamar Media Corp. | ||||||||
5.375%, due 1/15/24 | 5,515,000 | 5,645,981 | ||||||
5.75%, due 2/1/26 | 30,342,000 | 31,861,527 | ||||||
5.75%, due 2/1/26 (e) | 15,700,000 | 16,486,256 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
5.25%, due 2/15/22 | 15,600,000 | 15,795,000 | ||||||
5.625%, due 2/15/24 | 23,906,000 | 24,625,571 | ||||||
|
| |||||||
94,414,335 | ||||||||
|
| |||||||
Aerospace & Defense 1.5% |
| |||||||
TransDigm UK Holdings PLC | 15,000,000 | 15,075,000 | ||||||
TransDigm, Inc. | ||||||||
6.00%, due 7/15/22 | 4,580,000 | 4,642,975 | ||||||
6.25%, due 3/15/26 (e) | 70,875,000 | 73,798,594 | ||||||
6.50%, due 7/15/24 | 31,441,000 | 31,853,663 | ||||||
6.50%, due 5/15/25 | 5,000,000 | 5,050,000 | ||||||
Triumph Group, Inc. | 20,385,000 | 20,334,037 | ||||||
|
| |||||||
150,754,269 | ||||||||
|
| |||||||
Apparel 0.1% |
| |||||||
William Carter Co. | 8,500,000 | 8,786,875 | ||||||
|
|
Principal Amount | Value | |||||||
Auto Manufacturers 1.5% |
| |||||||
Allison Transmission, Inc. | $ | 5,000,000 | $ | 5,150,000 | ||||
BCD Acquisition, Inc. | 20,955,000 | 22,264,687 | ||||||
Ford Holdings LLC | ||||||||
9.30%, due 3/1/30 | 18,195,000 | 22,501,065 | ||||||
9.375%, due 3/1/20 | 1,695,000 | 1,779,230 | ||||||
Ford Motor Co. | 980,000 | 1,345,183 | ||||||
J.B. Poindexter & Company, Inc. | 25,480,000 | 25,989,600 | ||||||
McLaren Finance PLC | 26,535,000 | 26,123,177 | ||||||
Navistar International Corp. | 17,730,000 | 18,062,438 | ||||||
Wabash National Corp. | 20,824,000 | 19,782,800 | ||||||
|
| |||||||
142,998,180 | ||||||||
|
| |||||||
Auto Parts & Equipment 3.5% |
| |||||||
Adient Global Holdings, Ltd. | 19,005,000 | 15,441,563 | ||||||
Adient U.S. LLC | 16,640,000 | 17,035,200 | ||||||
American Axle & Manufacturing, Inc. | ||||||||
6.25%, due 4/1/25 (i) | 15,621,000 | 15,700,823 | ||||||
6.25%, due 3/15/26 | 7,950,000 | 7,950,000 | ||||||
6.50%, due 4/1/27 | 7,000,000 | 7,051,170 | ||||||
Dana Financing Luxembourg S.A.R.L. | 13,190,000 | 13,453,800 | ||||||
Exide Technologies | 110,714,575 | 96,764,539 | ||||||
IHO Verwaltungs GmbH (a)(e) | ||||||||
4.125% (4.125% Cash or 4.875% PIK), due 9/15/21 | 23,735,000 | 23,853,675 | ||||||
4.50% (4.50% Cash or 5.25% PIK), due 9/15/23 | 23,555,000 | 23,786,075 | ||||||
4.75% (4.75% Cash or 5.5% PIK), due 9/15/26 | 34,897,000 | 33,850,090 | ||||||
Meritor, Inc. | 5,000,000 | 5,153,150 | ||||||
Nexteer Automotive Group, Ltd. | 24,020,000 | 24,524,391 | ||||||
Panther BF Aggregator 2, L.P. / Panther Finance Co., Inc. | 2,175,000 | 2,264,719 | ||||||
Schaeffler Finance B.V. | 24,030,000 | 24,320,763 | ||||||
Tenneco, Inc. | ||||||||
5.00%, due 7/15/26 | 19,053,000 | 15,480,562 | ||||||
5.375%, due 12/15/24 | 3,120,000 | 2,808,000 |
10 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Auto Parts & Equipment (continued) |
| |||||||
Titan International, Inc. | $ | 5,370,000 | $ | 5,155,200 | ||||
|
| |||||||
334,593,720 | ||||||||
|
| |||||||
Banks 0.1% |
| |||||||
Freedom Mortgage Corp. | 8,000,000 | 7,100,000 | ||||||
Provident Funding Associates, L.P. / PFG Finance Corp. | 3,880,000 | 3,627,800 | ||||||
|
| |||||||
10,727,800 | ||||||||
|
| |||||||
Building Materials 1.1% |
| |||||||
James Hardie International Finance DAC (e) | ||||||||
4.75%, due 1/15/25 | 13,000,000 | 12,902,500 | ||||||
5.00%, due 1/15/28 | 26,725,000 | 26,023,469 | ||||||
Summit Materials LLC / Summit Materials Finance Corp. | ||||||||
5.125%, due 6/1/25 (e) | 5,730,000 | 5,701,350 | ||||||
6.125%, due 7/15/23 | 38,660,000 | 39,336,550 | ||||||
6.50%, due 3/15/27 (e) | 18,500,000 | 19,124,375 | ||||||
|
| |||||||
103,088,244 | ||||||||
|
| |||||||
Chemicals 1.7% |
| |||||||
Blue Cube Spinco LLC | ||||||||
9.75%, due 10/15/23 | 33,610,000 | 37,559,175 | ||||||
10.00%, due 10/15/25 | 26,425,000 | 30,058,437 | ||||||
Kissner Holdings, L.P. / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA | 21,525,000 | 22,466,719 | ||||||
Neon Holdings, Inc. | 13,400,000 | 13,802,000 | ||||||
NOVA Chemicals Corp. | 10,000,000 | 9,775,000 | ||||||
Olin Corp. | 19,094,000 | 19,953,230 | ||||||
PolyOne Corp. | 26,754,000 | 27,757,275 | ||||||
|
| |||||||
161,371,836 | ||||||||
|
| |||||||
Coal 0.1% |
| |||||||
Natural Resource Partners LP / NRP Finance Corp. | 10,000,000 | 10,350,000 | ||||||
|
| |||||||
Commercial Services 4.3% |
| |||||||
Ashtead Capital, Inc. (e) | ||||||||
4.375%, due 8/15/27 | 6,010,000 | 5,904,825 | ||||||
5.25%, due 8/1/26 | 6,000,000 | 6,232,500 | ||||||
5.625%, due 10/1/24 | 18,785,000 | 19,465,956 |
Principal Amount | Value | |||||||
Commercial Services (continued) |
| |||||||
Cimpress N.V. | $ | 24,085,000 | $ | 23,786,346 | ||||
Flexi-Van Leasing, Inc. | 28,010,000 | 24,928,900 | ||||||
Gartner, Inc. | 48,267,000 | 49,436,027 | ||||||
Graham Holdings Co. | 33,170,000 | 34,745,575 | ||||||
IHS Markit, Ltd. (e) | ||||||||
4.75%, due 2/15/25 | 6,000,000 | 6,276,960 | ||||||
5.00%, due 11/1/22 | 60,020,000 | 62,888,956 | ||||||
Jaguar Holding Co. II / Pharmaceutical Product Development LLC | 14,976,000 | 15,275,520 | ||||||
Laureate Education, Inc. | 3,155,000 | 3,415,288 | ||||||
Matthews International Corp. | 10,000,000 | 9,762,500 | ||||||
Nielsen Co. Luxembourg S.A.R.L. (e) | ||||||||
5.00%, due 2/1/25 | 28,027,000 | 27,606,595 | ||||||
5.50%, due 10/1/21 | 6,850,000 | 6,884,250 | ||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
4.50%, due 10/1/20 | 2,000,000 | 2,000,000 | ||||||
5.00%, due 4/15/22 (e) | 60,935,000 | 60,531,610 | ||||||
Ritchie Bros. Auctioneers, Inc. | 11,270,000 | 11,579,925 | ||||||
United Rentals North America, Inc. | ||||||||
4.625%, due 7/15/23 | 5,855,000 | 5,950,144 | ||||||
4.875%, due 1/15/28 | 12,000,000 | 11,910,000 | ||||||
5.25%, due 1/15/30 | 11,300,000 | 11,356,500 | ||||||
5.875%, due 9/15/26 | 2,700,000 | 2,821,500 | ||||||
6.50%, due 12/15/26 | 12,270,000 | 13,128,900 | ||||||
|
| |||||||
415,888,777 | ||||||||
|
| |||||||
Computers 0.2% |
| |||||||
NCR Corp. | 21,795,000 | 22,394,363 | ||||||
|
| |||||||
Cosmetics & Personal Care 0.5% |
| |||||||
Edgewell Personal Care Co. | ||||||||
4.70%, due 5/19/21 | 28,000,000 | 28,560,000 | ||||||
4.70%, due 5/24/22 | 20,713,000 | 21,386,173 | ||||||
|
| |||||||
49,946,173 | ||||||||
|
| |||||||
Diversified Financial Services 2.4% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 6,745,000 | 7,013,856 | ||||||
Credit Acceptance Corp. | ||||||||
6.125%, due 2/15/21 | 8,362,000 | 8,372,452 | ||||||
6.625%, due 3/15/26 (e) | 23,820,000 | 25,070,550 | ||||||
7.375%, due 3/15/23 | 25,095,000 | 26,004,694 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Diversified Financial Services (continued) |
| |||||||
Jefferies Finance LLC / JFINCo-Issuer Corp. (e) | ||||||||
7.25%, due 8/15/24 | $ | 12,250,000 | $ | 12,096,875 | ||||
7.50%, due 4/15/21 | 5,000,000 | 5,102,500 | ||||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp. (e) | ||||||||
5.25%, due 3/15/22 | 10,830,000 | 11,100,750 | ||||||
5.25%, due 10/1/25 | 1,820,000 | 1,813,175 | ||||||
5.875%, due 8/1/21 | 25,700,000 | 26,181,875 | ||||||
LPL Holdings, Inc. | 29,030,000 | 29,538,025 | ||||||
Nationstar Mortgage Holdings, Inc. | 6,000,000 | 6,015,000 | ||||||
Ocwen Loan Servicing LLC | 13,000,000 | 11,895,000 | ||||||
Oxford Finance LLC / Oxford FinanceCo-Issuer II, Inc. | 16,500,000 | 17,036,250 | ||||||
Springleaf Finance Corp. | 3,650,000 | 3,919,188 | ||||||
VFH Parent LLC / OrchestraCo-Issuer, Inc. | 26,865,000 | 27,762,828 | ||||||
Werner FinCo, L.P. / Werner FinCo, Inc. | 11,430,000 | 9,829,800 | ||||||
|
| |||||||
228,752,818 | ||||||||
|
| |||||||
Electric 1.1% |
| |||||||
Calpine Corp. (e) | �� | |||||||
5.875%, due 1/15/24 | 21,121,000 | 21,543,420 | ||||||
6.00%, due 1/15/22 | 24,773,000 | 25,020,730 | ||||||
GenOn Energy, Inc. / NRG Americas, Inc. 9.392% (6 Month LIBOR + 6.50%), due 12/1/23 (j) | 37,399,314 | 37,118,819 | ||||||
Keystone Power Pass-Through Holders LLC / Conemaugh PowerPass-Through Holders | 8,790,803 | 8,790,803 | ||||||
NRG Energy, Inc. | ||||||||
6.25%, due 5/1/24 | 5,340,000 | 5,511,948 | ||||||
6.625%, due 1/15/27 | 7,000,000 | 7,490,000 | ||||||
|
| |||||||
105,475,720 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.4% |
| |||||||
Energizer Holdings, Inc. (e) | ||||||||
5.50%, due 6/15/25 | 11,350,000 | 11,470,594 | ||||||
7.75%, due 1/15/27 | 10,760,000 | 11,661,150 | ||||||
WESCO Distribution, Inc. | 11,549,000 | 11,664,490 | ||||||
|
| |||||||
34,796,234 | ||||||||
|
|
Principal Amount | Value | |||||||
Electrical Equipment 0.2% |
| |||||||
Resideo Funding, Inc. | $ | 22,840,000 | $ | 23,639,400 | ||||
|
| |||||||
Electronics 0.2% |
| |||||||
Itron, Inc. | 16,776,000 | 16,650,180 | ||||||
|
| |||||||
Engineering & Construction 0.4% |
| |||||||
Weekley Homes LLC / Weekley Finance Corp. | ||||||||
6.00%, due 2/1/23 | 26,379,000 | 25,851,420 | ||||||
6.625%, due 8/15/25 | 11,015,000 | 10,904,850 | ||||||
|
| |||||||
36,756,270 | ||||||||
|
| |||||||
Entertainment 1.5% |
| |||||||
Boyne USA, Inc. | 14,450,000 | 15,678,250 | ||||||
Churchill Downs, Inc. (e) | ||||||||
4.75%, due 1/15/28 | 7,000,000 | 6,860,000 | ||||||
5.50%, due 4/1/27 | 32,350,000 | 33,199,187 | ||||||
International Game Technology PLC | 22,700,000 | 23,864,851 | ||||||
Jacobs Entertainment, Inc. | 10,359,000 | 11,135,925 | ||||||
Merlin Entertainments PLC | 32,100,000 | 33,295,725 | ||||||
Rivers Pittsburgh Borrower, L.P. / Rivers Pittsburgh Finance Corp. | 23,000,000 | 23,287,500 | ||||||
|
| |||||||
147,321,438 | ||||||||
|
| |||||||
Food 1.7% |
| |||||||
B&G Foods, Inc. | 25,275,000 | 24,799,830 | ||||||
C&S Group Enterprises LLC | 55,020,000 | 54,882,450 | ||||||
Ingles Markets, Inc. | 4,117,000 | 4,168,463 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | 17,625,000 | 17,536,875 | ||||||
Land O’Lakes Capital Trust I | 16,324,000 | 17,670,730 | ||||||
Land O’Lakes, Inc. | 23,000,000 | 23,690,000 | ||||||
Nathan’s Famous, Inc. | 4,000,000 | 3,890,000 | ||||||
Simmons Foods, Inc. | 7,000,000 | 7,481,250 | ||||||
TreeHouse Foods, Inc. | 14,115,000 | 14,714,887 | ||||||
|
| |||||||
168,834,485 | ||||||||
|
|
12 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Forest Products & Paper 1.2% |
| |||||||
Mercer International, Inc. | ||||||||
5.50%, due 1/15/26 | $ | 5,000,000 | $ | 4,937,500 | ||||
6.50%, due 2/1/24 | 15,958,000 | 16,436,740 | ||||||
7.375%, due 1/15/25 (e) | 15,000,000 | 15,834,375 | ||||||
Schweitzer-Mauduit International, Inc. | 16,380,000 | 16,830,450 | ||||||
Smurfit Kappa Treasury Funding DAC | 52,580,000 | 59,941,200 | ||||||
|
| |||||||
113,980,265 | ||||||||
|
| |||||||
Gas 1.0% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 7,375,000 | 7,550,156 | ||||||
5.625%, due 5/20/24 | 26,531,000 | 27,658,567 | ||||||
5.75%, due 5/20/27 | 18,505,000 | 19,106,413 | ||||||
5.875%, due 8/20/26 | 26,025,000 | 27,098,531 | ||||||
Rockpoint Gas Storage Canada, Ltd. | 17,000,000 | 17,000,000 | ||||||
|
| |||||||
98,413,667 | ||||||||
|
| |||||||
Health Care—Products 0.4% |
| |||||||
Avanos Medical, Inc. | 16,331,000 | 16,678,034 | ||||||
Hill-Rom Holdings, Inc. | 10,040,000 | 10,416,500 | ||||||
Hologic, Inc. | 8,150,000 | 8,073,594 | ||||||
|
| |||||||
35,168,128 | ||||||||
|
| |||||||
Health Care—Services 4.9% |
| |||||||
Acadia Healthcare Co., Inc. | ||||||||
5.625%, due 2/15/23 | 20,940,000 | 21,149,400 | ||||||
6.50%, due 3/1/24 | 11,195,000 | 11,586,825 | ||||||
AHP Health Partners, Inc. | 10,000,000 | 10,837,500 | ||||||
Catalent Pharma Solutions, Inc. | 10,264,000 | 10,289,660 | ||||||
Centene Corp. | ||||||||
5.375%, due 6/1/26 (e) | 8,045,000 | 8,368,650 | ||||||
5.625%, due 2/15/21 | 14,930,000 | 15,172,613 | ||||||
6.125%, due 2/15/24 | 23,817,000 | 24,948,307 | ||||||
Charles River Laboratories International, Inc. | 8,920,000 | 9,332,550 | ||||||
Encompass Health Corp. | 27,356,000 | 27,732,145 | ||||||
HCA, Inc. | ||||||||
5.25%, due 4/15/25 | 15,000,000 | 16,064,213 | ||||||
5.25%, due 6/15/26 | 8,330,000 | 8,896,825 | ||||||
5.375%, due 2/1/25 | 25,525,000 | 26,865,062 |
Principal Amount | Value | |||||||
Health Care—Services (continued) |
| |||||||
HCA, Inc. (continued) | ||||||||
5.375%, due 9/1/26 | $ | 4,170,000 | $ | 4,399,350 | ||||
5.625%, due 9/1/28 | 10,000,000 | 10,650,000 | ||||||
5.875%, due 3/15/22 | 12,030,000 | 12,867,288 | ||||||
5.875%, due 5/1/23 | 7,240,000 | 7,765,624 | ||||||
5.875%, due 2/15/26 | 26,000,000 | 28,015,000 | ||||||
5.875%, due 2/1/29 | 2,915,000 | 3,137,269 | ||||||
7.50%, due 2/15/22 | 9,417,000 | 10,358,700 | ||||||
7.50%, due 12/15/23 | 1,500,000 | 1,668,750 | ||||||
7.50%, due 11/6/33 | 17,975,000 | 20,851,000 | ||||||
7.58%, due 9/15/25 | 8,020,000 | 9,142,800 | ||||||
7.69%, due 6/15/25 | 31,650,000 | 36,160,125 | ||||||
8.36%, due 4/15/24 | 4,524,000 | 5,236,530 | ||||||
Molina Healthcare, Inc. | 8,180,000 | 8,537,875 | ||||||
MPH Acquisition Holdings LLC | 40,927,000 | 41,139,820 | ||||||
Polaris Intermediate Corp. | 15,000,000 | 14,925,000 | ||||||
RegionalCare Hospital Partners Holdings, Inc. / LifePoint Health, Inc. | 30,895,000 | 32,246,656 | ||||||
Tenet Healthcare Corp. | ||||||||
6.00%, due 10/1/20 | 5,000,000 | 5,168,750 | ||||||
8.125%, due 4/1/22 | 11,000,000 | 11,736,560 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.25%, due 4/1/25 | 15,310,000 | 15,807,575 | ||||||
5.375%, due 8/15/26 (e) | 7,255,000 | 7,598,162 | ||||||
|
| |||||||
478,656,584 | ||||||||
|
| |||||||
Home Builders 2.2% |
| |||||||
Ashton Woods USA LLC / Ashton Woods Finance Co. (e) | ||||||||
6.75%, due 8/1/25 | 5,496,000 | 5,138,760 | ||||||
9.875%, due 4/1/27 | 10,540,000 | 11,014,300 | ||||||
Brookfield Residential Properties, Inc. (e) | ||||||||
6.375%, due 5/15/25 | 6,665,000 | 6,531,700 | ||||||
6.50%, due 12/15/20 | 24,800,000 | 24,862,000 | ||||||
Brookfield Residential Properties, Inc. / Brookfield Residential U.S. Corp. | 37,996,000 | 38,736,922 | ||||||
Century Communities, Inc. | ||||||||
5.875%, due 7/15/25 | 4,630,000 | 4,595,275 | ||||||
6.875%, due 5/15/22 | 35,546,000 | 36,168,055 | ||||||
M/I Homes, Inc. | 6,000,000 | 5,887,500 | ||||||
Mattamy Group Corp. | 12,915,000 | 13,141,012 | ||||||
New Home Co., Inc. | 20,030,000 | 18,127,150 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Home Builders (continued) |
| |||||||
Shea Homes, L.P. / Shea Homes Funding Corp. (e) | ||||||||
5.875%, due 4/1/23 | $ | 10,137,000 | $ | 10,137,000 | ||||
6.125%, due 4/1/25 | 25,500,000 | 25,053,750 | ||||||
Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc. | 6,430,000 | 6,433,987 | ||||||
Williams Scotsman International, Inc. | 12,300,000 | 12,515,250 | ||||||
|
| |||||||
218,342,661 | ||||||||
|
| |||||||
Household Products & Wares 0.8% |
| |||||||
Prestige Brands, Inc. | 44,988,000 | 46,450,110 | ||||||
Spectrum Brands, Inc. | ||||||||
5.75%, due 7/15/25 | 11,687,000 | 11,953,463 | ||||||
6.125%, due 12/15/24 | 5,000,000 | 5,137,500 | ||||||
6.625%, due 11/15/22 | 12,046,000 | 12,314,626 | ||||||
|
| |||||||
75,855,699 | ||||||||
|
| |||||||
Insurance 1.2% |
| |||||||
American Equity Investment Life Holding Co. | 27,640,000 | 27,740,637 | ||||||
Fairfax Financial Holdings, Ltd. | 5,435,000 | 6,525,452 | ||||||
Fidelity & Guaranty Life Holdings, Inc. | 17,875,000 | 18,053,750 | ||||||
HUB International, Ltd. | 13,000,000 | 13,113,750 | ||||||
MGIC Investment Corp. | 30,580,000 | 32,797,050 | ||||||
USI, Inc. | 22,755,000 | 22,669,669 | ||||||
|
| |||||||
120,900,308 | ||||||||
|
| |||||||
Internet 1.8% |
| |||||||
Cogent Communications Group, Inc. | 12,046,000 | 12,437,495 | ||||||
Netflix, Inc. | ||||||||
4.875%, due 4/15/28 | 2,000,000 | 1,982,500 | ||||||
5.375%, due 11/15/29 (e) | 9,205,000 | 9,320,063 | ||||||
5.50%, due 2/15/22 | 25,265,000 | 26,559,831 | ||||||
5.75%, due 3/1/24 | 24,961,000 | 26,818,598 | ||||||
5.875%, due 2/15/25 | 7,996,000 | 8,635,680 | ||||||
5.875%, due 11/15/28 | 32,450,000 | 34,234,750 | ||||||
Symantec Corp. | 3,000,000 | 3,058,832 | ||||||
VeriSign, Inc. | ||||||||
4.625%, due 5/1/23 | 6,615,000 | 6,714,225 | ||||||
4.75%, due 7/15/27 | 14,480,000 | 14,769,600 |
Principal Amount | Value | |||||||
Internet (continued) |
| |||||||
VeriSign, Inc. (continued) | ||||||||
5.25%, due 4/1/25 | $ | 26,661,000 | $ | 28,260,660 | ||||
|
| |||||||
172,792,234 | ||||||||
|
| |||||||
Investment Companies 0.8% |
| |||||||
Compass Group Diversified Holdings LLC | 13,350,000 | 14,084,250 | ||||||
FS Energy & Power Fund | 58,700,000 | 60,620,664 | ||||||
|
| |||||||
74,704,914 | ||||||||
|
| |||||||
Iron & Steel 1.3% |
| |||||||
Allegheny Ludlum LLC | 22,688,000 | 23,368,640 | ||||||
Allegheny Technologies, Inc. | 6,610,000 | 7,153,408 | ||||||
Big River Steel LLC / BRS Finance Corp. | 61,509,000 | 65,477,561 | ||||||
Mineral Resources, Ltd. | 29,195,000 | 29,945,311 | ||||||
|
| |||||||
125,944,920 | ||||||||
|
| |||||||
Leisure Time 1.7% |
| |||||||
Brunswick Corp. | 21,573,000 | 21,569,767 | ||||||
Carlson Travel, Inc. (e) | ||||||||
6.75%, due 12/15/23 (i) | 67,516,000 | 68,359,950 | ||||||
9.50%, due 12/15/24 | 47,475,000 | 46,050,750 | ||||||
Vista Outdoor, Inc. | 29,402,000 | 27,049,840 | ||||||
|
| |||||||
163,030,307 | ||||||||
|
| |||||||
Lodging 2.0% |
| |||||||
Boyd Gaming Corp. | ||||||||
6.00%, due 8/15/26 | 29,915,000 | 31,074,206 | ||||||
6.375%, due 4/1/26 | 6,000,000 | 6,315,000 | ||||||
Choice Hotels International, Inc. | 25,470,000 | 27,125,550 | ||||||
Hilton Domestic Operating Co., Inc. | 39,515,000 | 40,453,481 | ||||||
Jack Ohio Finance LLC / Jack Ohio Finance 1 Corp. | 18,579,000 | 19,159,594 | ||||||
Marriott Ownership Resorts, Inc. / ILG LLC | 27,500,000 | 28,875,000 | ||||||
MGM Resorts International | ||||||||
5.50%, due 4/15/27 | 25,000,000 | 25,781,250 | ||||||
5.75%, due 6/15/25 | 11,615,000 | 12,282,863 | ||||||
|
| |||||||
191,066,944 | ||||||||
|
| |||||||
Machinery—Diversified 0.8% |
| |||||||
Briggs & Stratton Corp. | 9,000,000 | 9,292,500 |
14 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Machinery—Diversified (continued) |
| |||||||
Colfax Corp. (e) | ||||||||
6.00%, due 2/15/24 | $ | 13,970,000 | $ | 14,511,338 | ||||
6.375%, due 2/15/26 | 21,390,000 | 22,646,662 | ||||||
Stevens Holding Co., Inc. | 11,790,000 | 12,408,975 | ||||||
Tennant Co. | 21,840,000 | 22,440,600 | ||||||
|
| |||||||
81,300,075 | ||||||||
|
| |||||||
Media 6.1% |
| |||||||
Altice Financing S.A. | 15,335,000 | 15,565,025 | ||||||
Altice France S.A. (e) | ||||||||
6.25%, due 5/15/24 | 12,100,000 | 12,402,500 | ||||||
7.375%, due 5/1/26 | 23,300,000 | 23,605,813 | ||||||
Block Communications, Inc. | 46,497,000 | 48,240,637 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
5.00%, due 2/1/28 (e) | 31,740,000 | 31,700,325 | ||||||
5.125%, due 2/15/23 | 24,030,000 | 24,420,488 | ||||||
5.125%, due 5/1/23 (e) | 7,000,000 | 7,175,000 | ||||||
5.125%, due 5/1/27 (e) | 37,725,000 | 38,290,875 | ||||||
5.375%, due 5/1/25 (e) | 3,025,000 | 3,130,875 | ||||||
5.75%, due 2/15/26 (e) | 32,995,000 | 34,463,277 | ||||||
5.875%, due 4/1/24 (e) | 25,215,000 | 26,342,363 | ||||||
5.875%, due 5/1/27 (e) | 5,000,000 | 5,193,750 | ||||||
CSC Holdings LLC | 11,075,000 | 11,891,781 | ||||||
DISH DBS Corp. | ||||||||
5.875%, due 7/15/22 | 24,537,000 | 23,940,751 | ||||||
5.875%, due 11/15/24 | 26,150,000 | 22,554,375 | ||||||
6.75%, due 6/1/21 | 11,000,000 | 11,343,063 | ||||||
7.75%, due 7/1/26 | 15,875,000 | 14,208,125 | ||||||
Meredith Corp. | 47,420,000 | 49,316,800 | ||||||
Midcontinent Communications / Midcontinent Finance Corp. | 18,030,000 | 18,796,275 | ||||||
Quebecor Media, Inc. | 34,005,000 | 35,450,212 | ||||||
Sterling Entertainment Enterprises LLC | 20,000,000 | 21,050,000 | ||||||
Videotron, Ltd. | ||||||||
5.00%, due 7/15/22 | 20,449,000 | 21,282,936 | ||||||
5.375%, due 6/15/24 (e) | 21,850,000 | 22,942,500 | ||||||
Virgin Media Secured Finance PLC | 69,735,000 | 71,827,050 | ||||||
|
| |||||||
595,134,796 | ||||||||
|
|
Principal Amount | Value | |||||||
Metal Fabricate & Hardware 2.0% |
| |||||||
Grinding Media, Inc. / Moly-Cop AltaSteel, Ltd. | $ | 64,420,000 | $ | 62,970,550 | ||||
Novelis Corp. (e) | ||||||||
5.875%, due 9/30/26 | 61,000,000 | 61,991,250 | ||||||
6.25%, due 8/15/24 | 32,306,000 | 33,638,622 | ||||||
Optimas OE Solutions Holding LLC / Optimas OE Solutions, Inc. | 18,775,000 | 17,554,625 | ||||||
Park-Ohio Industries, Inc. | 16,190,000 | 16,190,000 | ||||||
|
| |||||||
192,345,047 | ||||||||
|
| |||||||
Mining 1.8% |
| |||||||
Alcoa Nederland Holding B.V. (e) | ||||||||
6.75%, due 9/30/24 | 7,910,000 | 8,364,825 | ||||||
7.00%, due 9/30/26 | 20,510,000 | 22,099,525 | ||||||
Constellium N.V. | 13,000,000 | 13,195,000 | ||||||
First Quantum Minerals, Ltd. | 22,827,000 | 22,610,143 | ||||||
Freeport McMoRan, Inc. | 64,911,000 | 68,481,105 | ||||||
Hecla Mining Co. | 27,335,000 | 27,369,169 | ||||||
Joseph T. Ryerson & Son, Inc. | 9,500,000 | 10,070,000 | ||||||
|
| |||||||
172,189,767 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 0.9% |
| |||||||
Amsted Industries, Inc. | 11,010,000 | 11,078,812 | ||||||
CTP Transportation Products LLC / CTP Finance, Inc. | 26,950,000 | 26,411,000 | ||||||
EnPro Industries, Inc. | 6,870,000 | 7,058,925 | ||||||
Gates Global LLC / Gates Global Co. | 17,876,000 | 17,876,000 | ||||||
Koppers, Inc. | 23,475,000 | 22,719,105 | ||||||
|
| |||||||
85,143,842 | ||||||||
|
| |||||||
Oil & Gas 6.6% |
| |||||||
Ascent Resources Utica Holdings LLC / ARU Finance Corp. (e) | ||||||||
7.00%, due 11/1/26 | 11,790,000 | 11,495,250 | ||||||
10.00%, due 4/1/22 | 13,335,000 | 14,568,487 | ||||||
California Resources Corp. | ||||||||
5.00%, due 1/15/20 | 16,470,000 | 15,564,150 | ||||||
8.00%, due 12/15/22 (e) | 65,770,000 | 49,985,200 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Oil & Gas (continued) |
| |||||||
Callon Petroleum Co. | ||||||||
6.125%, due 10/1/24 | $ | 23,000,000 | $ | 23,625,600 | ||||
6.375%, due 7/1/26 | 6,000,000 | 6,135,000 | ||||||
Calumet Specialty Products Partners, L.P. / Calumet Finance Corp. | 5,011,000 | 4,660,230 | ||||||
CNX Resources Corp. | 4,257,000 | 4,235,715 | ||||||
Comstock Resources, Inc. | 48,000,000 | 43,680,000 | ||||||
Energy Ventures Gom LLC / EnVen Finance Corp. | 13,000,000 | 14,300,000 | ||||||
Gulfport Energy Corp. | ||||||||
6.00%, due 10/15/24 | 43,999,000 | 38,581,843 | ||||||
6.375%, due 5/15/25 | 21,725,000 | 19,118,000 | ||||||
6.375%, due 1/15/26 | 5,000,000 | 4,312,500 | ||||||
6.625%, due 5/1/23 | 6,192,000 | 5,959,800 | ||||||
Hess Infrastructure Partners L.P. / Hess Infrastructure Partners Finance Corp. | 3,780,000 | 3,865,050 | ||||||
Indigo Natural Resources LLC | 18,620,000 | 17,270,050 | ||||||
Matador Resources Co. | 22,655,000 | 22,824,912 | ||||||
Moss Creek Resources Holdings, Inc. | 12,465,000 | 11,405,475 | ||||||
Murphy Oil Corp. | 10,590,000 | 11,096,814 | ||||||
Murphy Oil USA, Inc. | ||||||||
5.625%, due 5/1/27 | 6,900,000 | 7,176,000 | ||||||
6.00%, due 8/15/23 | 23,635,000 | 24,196,331 | ||||||
Newfield Exploration Co. | ||||||||
5.625%, due 7/1/24 | 10,000,000 | 10,919,000 | ||||||
5.75%, due 1/30/22 | 7,305,000 | 7,783,174 | ||||||
Oasis Petroleum, Inc. | 4,731,000 | 4,748,741 | ||||||
Parsley Energy LLC / Parsley Finance Corp. (e) | ||||||||
5.25%, due 8/15/25 | 10,525,000 | 10,617,094 | ||||||
5.625%, due 10/15/27 | 7,475,000 | 7,643,187 | ||||||
6.25%, due 6/1/24 | 7,250,000 | 7,521,875 | ||||||
PBF Holding Co. LLC / PBF Finance Corp. | ||||||||
7.00%, due 11/15/23 | 3,000,000 | 3,086,250 | ||||||
7.25%, due 6/15/25 | 10,000,000 | 10,300,000 | ||||||
PDC Energy, Inc. | 24,880,000 | 25,253,200 |
Principal Amount | Value | |||||||
Oil & Gas (continued) |
| |||||||
PetroQuest Energy, Inc. | $ | 19,891,092 | $ | 15,912,874 | ||||
QEP Resources, Inc. | 12,500,000 | 11,708,500 | ||||||
Range Resources Corp. | ||||||||
5.75%, due 6/1/21 | 21,525,000 | 22,164,669 | ||||||
5.875%, due 7/1/22 | 24,543,000 | 24,819,109 | ||||||
Rex Energy Corp. (Escrow Claim) | 124,195,000 | 1,515,179 | ||||||
Southwestern Energy Co. | 18,400,000 | 18,676,000 | ||||||
SRC Energy, Inc. | 24,660,000 | 23,431,685 | ||||||
Sunoco, L.P. / Sunoco Finance Corp. | 19,965,000 | 20,713,687 | ||||||
Talos Production LLC / Talos Production Finance, Inc. | 24,562,822 | 26,067,295 | ||||||
Transocean Guardian, Ltd. | 6,898,500 | 7,070,963 | ||||||
Transocean Poseidon, Ltd. | 8,000,000 | 8,520,000 | ||||||
Ultra Resources, Inc. | 28,880,000 | 9,386,000 | ||||||
Whiting Petroleum Corp. | 3,450,000 | 3,444,653 | ||||||
WPX Energy, Inc. | 6,154,000 | 6,400,160 | ||||||
|
| |||||||
641,759,702 | ||||||||
|
| |||||||
Oil & Gas Services 0.6% |
| |||||||
Forum Energy Technologies, Inc. | 44,275,000 | 41,618,500 | ||||||
Nine Energy Service, Inc. | 13,290,000 | 13,721,925 | ||||||
|
| |||||||
55,340,425 | ||||||||
|
| |||||||
Pharmaceuticals 0.8% |
| |||||||
Bausch Health Americas, Inc. (e) | ||||||||
8.50%, due 1/31/27 | 6,715,000 | 7,315,153 | ||||||
9.25%, due 4/1/26 | 14,000,000 | 15,575,000 | ||||||
Bausch Health Co., Inc. | 5,000,000 | 5,056,250 | ||||||
Endo Dac / Endo Finance LLC / Endo Finco, Inc. (e) | ||||||||
6.00%, due 7/15/23 | 12,521,000 | 10,204,615 | ||||||
6.00%, due 2/1/25 | 5,000,000 | 3,818,750 | ||||||
Par Pharmaceutical, Inc. | 20,790,000 | 21,565,467 |
16 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Pharmaceuticals (continued) |
| |||||||
Vizient, Inc. | $ | 10,000,000 | $ | 10,325,000 | ||||
|
| |||||||
73,860,235 | ||||||||
|
| |||||||
Pipelines 4.2% |
| |||||||
ANR Pipeline Co. | ||||||||
7.375%, due 2/15/24 | 2,555,000 | 2,894,948 | ||||||
9.625%, due 11/1/21 | 10,349,000 | 11,977,873 | ||||||
Antero Midstream Partners, L.P. / Antero Midstream Finance Corp. | 10,720,000 | 10,927,968 | ||||||
Cheniere Corpus Christi Holdings LLC | 16,380,000 | 17,649,450 | ||||||
Cheniere Energy Partners, L.P. | ||||||||
5.25%, due 10/1/25 | 14,515,000 | 14,805,300 | ||||||
5.625%, due 10/1/26 (e) | 20,280,000 | 20,948,429 | ||||||
CNX Midstream Partners, L.P. / CNX Midstream Finance Corp. | 21,066,000 | 20,355,022 | ||||||
DCP Midstream Operating, L.P. | 11,500,000 | 12,088,915 | ||||||
Delek Logistics Partners, L.P. / Delek Logistics Finance Corp. | 9,593,000 | 9,593,000 | ||||||
Enlink Midstream LLC | 5,000,000 | 5,018,950 | ||||||
Genesis Energy, L.P. / Genesis Energy Finance Corp. | 37,080,000 | 37,606,907 | ||||||
Holly Energy Partners, L.P. / Holly Energy Finance Corp. | 18,000,000 | 18,770,040 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 12/1/24 | 27,495,000 | 29,357,378 | ||||||
4.875%, due 6/1/25 | 28,790,000 | 30,654,987 | ||||||
NGPL PipeCo LLC | 16,630,000 | 17,170,475 | ||||||
NuStar Logistics, L.P. | 12,715,000 | 13,223,600 | ||||||
Plains All American Pipeline, L.P. | 17,500,000 | 16,756,250 | ||||||
Sabine Pass Liquefaction LLC | 14,550,000 | 16,206,721 | ||||||
SemGroup Corp. | 7,997,000 | 7,617,143 | ||||||
Semgroup Corp. / Rose Rock Finance Corp. | 7,681,000 | 7,296,950 |
Principal Amount | Value | |||||||
Pipelines (continued) |
| |||||||
Tallgrass Energy Partners, L.P. / Tallgrass Energy Finance Corp. | $ | 28,235,000 | $ | 29,082,050 | ||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | ||||||||
5.00%, due 1/15/28 | 5,000,000 | 4,912,300 | ||||||
5.875%, due 4/15/26 | 10,090,000 | 10,622,878 | ||||||
6.50%, due 7/15/27 (e) | 18,950,000 | 20,300,187 | ||||||
6.875%, due 1/15/29 (e) | 6,600,000 | 7,128,000 | ||||||
TransMontaigne Partners, L.P. / TLP Finance Corp. | 15,973,000 | 15,374,012 | ||||||
|
| |||||||
408,339,733 | ||||||||
|
| |||||||
Real Estate 1.4% |
| |||||||
CBRE Services, Inc. | 8,405,000 | 9,072,133 | ||||||
Howard Hughes Corp. | 26,000,000 | 26,219,960 | ||||||
Kennedy-Wilson, Inc. | 22,805,000 | 23,033,050 | ||||||
Newmark Group, Inc. | 31,644,000 | 33,210,247 | ||||||
Realogy Group LLC / RealogyCo-Issuer Corp. (e) | ||||||||
4.875%, due 6/1/23 | 17,835,000 | 17,004,959 | ||||||
9.375%, due 4/1/27 | 23,000,000 | 23,890,100 | ||||||
|
| |||||||
132,430,449 | ||||||||
|
| |||||||
Real Estate Investment Trusts 3.8% |
| |||||||
Crown Castle International Corp. | ||||||||
4.875%, due 4/15/22 | 2,000,000 | 2,108,371 | ||||||
5.25%, due 1/15/23 | 49,363,000 | 52,997,612 | ||||||
CTR Partnership, L.P. / CareTrust Capital Corp. | 6,575,000 | 6,789,871 | ||||||
Equinix, Inc. | ||||||||
5.375%, due 1/1/22 | 20,391,000 | 20,900,775 | ||||||
5.375%, due 4/1/23 | 17,525,000 | 17,892,149 | ||||||
5.375%, due 5/15/27 | 57,435,000 | 60,800,691 | ||||||
5.75%, due 1/1/25 | 40,837,000 | 42,368,387 | ||||||
5.875%, due 1/15/26 | 47,725,000 | 50,409,531 | ||||||
MGM Growth Properties Operating Partnership, L.P. / MGP FinanceCo-Issuer, Inc. | ||||||||
4.50%, due 9/1/26 | 5,000,000 | 4,937,500 | ||||||
5.625%, due 5/1/24 | 63,960,000 | 67,078,050 | ||||||
5.75%, due 2/1/27 (e) | 24,800,000 | 26,102,000 | ||||||
MPT Operating Partnership, L.P. / MPT Finance Corp. | 20,025,000 | 20,075,063 | ||||||
|
| |||||||
372,460,000 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Retail 3.7% |
| |||||||
Asbury Automotive Group, Inc. | $ | 55,326,000 | $ | 57,262,410 | ||||
Beacon Roofing Supply, Inc. | 30,930,000 | 29,760,846 | ||||||
Cumberland Farms, Inc. | 20,775,000 | 21,917,625 | ||||||
DriveTime Automotive Group, Inc. / Bridgecrest Acceptance Corp. | 43,301,000 | 43,950,515 | ||||||
Group 1 Automotive, Inc. | ||||||||
5.00%, due 6/1/22 | 10,040,000 | 10,178,050 | ||||||
5.25%, due 12/15/23 (e) | 11,305,000 | 11,587,625 | ||||||
KFC Holding Co. / Pizza Hut Holdings LLC / Taco Bell of America LLC (e) | ||||||||
4.75%, due 6/1/27 | 12,287,000 | 12,199,517 | ||||||
5.00%, due 6/1/24 | 27,355,000 | 27,970,487 | ||||||
5.25%, due 6/1/26 | 34,750,000 | 35,835,937 | ||||||
KGA Escrow, LLC | 15,000,000 | 15,487,500 | ||||||
L Brands, Inc. | ||||||||
5.625%, due 2/15/22 | 5,000,000 | 5,187,500 | ||||||
6.694%, due 1/15/27 | 10,587,000 | 10,348,793 | ||||||
Penske Automotive Group, Inc. | ||||||||
5.375%, due 12/1/24 | 7,000,000 | 7,087,500 | ||||||
5.50%, due 5/15/26 | 13,300,000 | 13,266,750 | ||||||
5.75%, due 10/1/22 | 27,491,000 | 27,937,729 | ||||||
Rite Aid Corp. | 32,040,000 | 27,234,000 | ||||||
|
| |||||||
357,212,784 | ||||||||
|
| |||||||
Semiconductors 0.3% |
| |||||||
Micron Technology, Inc. | 26,142,000 | 26,919,202 | ||||||
|
| |||||||
Software 3.8% |
| |||||||
ACI Worldwide, Inc. | 7,555,000 | 7,809,981 | ||||||
Ascend Learning LLC | 27,000,000 | 27,337,500 | ||||||
CDK Global, Inc. | ||||||||
4.875%, due 6/1/27 | 6,000,000 | 6,060,000 | ||||||
5.875%, due 6/15/26 | 32,727,000 | 34,445,167 | ||||||
Donnelley Financial Solutions, Inc. | 20,475,000 | 20,833,313 | ||||||
Fair Isaac Corp. | 14,750,000 | 15,340,000 | ||||||
First Data Corp. | 3,500,000 | 3,587,885 | ||||||
IQVIA, Inc. | 30,113,000 | 30,752,901 |
Principal Amount | Value | |||||||
Software (continued) |
| |||||||
MSCI, Inc. (e) | ||||||||
4.75%, due 8/1/26 | $ | 13,290,000 | $ | 13,619,592 | ||||
5.25%, due 11/15/24 | 32,022,000 | 32,982,660 | ||||||
5.375%, due 5/15/27 | 15,110,000 | 15,884,388 | ||||||
5.75%, due 8/15/25 | 41,284,000 | 43,244,990 | ||||||
Open Text Corp. | 8,990,000 | 9,417,025 | ||||||
PTC, Inc. | 48,968,000 | 51,293,980 | ||||||
RP Crown Parent LLC | 26,090,000 | 27,166,212 | ||||||
SS&C Technologies, Inc. | 24,595,000 | 25,225,247 | ||||||
|
| |||||||
365,000,841 | ||||||||
|
| |||||||
Telecommunications 7.1% |
| |||||||
CenturyLink, Inc. | ||||||||
5.80%, due 3/15/22 | 30,940,000 | 31,793,557 | ||||||
6.45%, due 6/15/21 | 10,000,000 | 10,425,000 | ||||||
Cogent Communications Finance, Inc. | 35,015,000 | 35,540,225 | ||||||
CommScope, Inc. (e) | ||||||||
6.00%, due 3/1/26 | 3,645,000 | 3,859,144 | ||||||
8.25%, due 3/1/27 | 21,620,000 | 23,349,600 | ||||||
Frontier Communications Corp. | ||||||||
10.50%, due 9/15/22 | 18,884,000 | 13,785,320 | ||||||
11.00%, due 9/15/25 | 35,371,000 | 22,902,722 | ||||||
Hughes Satellite Systems Corp. | ||||||||
5.25%, due 8/1/26 | 21,850,000 | 21,985,689 | ||||||
6.625%, due 8/1/26 | 19,275,000 | 19,491,844 | ||||||
7.625%, due 6/15/21 | 28,530,000 | 30,455,775 | ||||||
Inmarsat Finance PLC (e) | ||||||||
4.875%, due 5/15/22 | 23,320,000 | 23,553,200 | ||||||
6.50%, due 10/1/24 | 13,000,000 | 13,650,000 | ||||||
Level 3 Financing, Inc. | ||||||||
5.375%, due 5/1/25 | 21,200,000 | 21,594,320 | ||||||
5.625%, due 2/1/23 | 11,000,000 | 11,110,000 | ||||||
QualityTech, L.P. / QTS Finance Corp. | 25,351,000 | 24,717,225 | ||||||
Sprint Capital Corp. | ||||||||
6.875%, due 11/15/28 | 90,515,000 | 86,668,112 | ||||||
8.75%, due 3/15/32 | 11,000,000 | 11,550,000 | ||||||
Sprint Communications, Inc. | ||||||||
7.00%, due 3/1/20 (e) | 25,490,000 | 26,190,975 | ||||||
9.25%, due 4/15/22 | 6,024,000 | 6,972,780 | ||||||
Sprint Corp. | 28,700,000 | 29,896,790 | ||||||
T-Mobile USA, Inc. | ||||||||
4.00%, due 4/15/22 (i) | 3,000,000 | 3,030,000 | ||||||
4.75%, due 2/1/28 | 31,435,000 | 31,710,056 | ||||||
5.125%, due 4/15/25 | 26,615,000 | 27,413,450 |
18 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Telecommunications (continued) |
| |||||||
T-Mobile USA, Inc. (continued) | ||||||||
5.375%, due 4/15/27 | $ | 33,000,000 | $ | 34,693,621 | ||||
6.00%, due 4/15/24 | 15,315,000 | 15,946,744 | ||||||
6.375%, due 3/1/25 | 37,982,000 | 39,490,265 | ||||||
6.50%, due 1/15/24 | 14,485,000 | 14,991,975 | ||||||
6.50%, due 1/15/26 | 44,400,000 | 47,494,680 | ||||||
|
| |||||||
684,263,069 | ||||||||
|
| |||||||
Textiles 0.4% |
| |||||||
Eagle Intermediate Global Holding B.V. / Ruyi U.S. Finance LLC | 37,879,000 | 37,689,605 | ||||||
|
| |||||||
Toys, Games & Hobbies 0.6% |
| |||||||
Mattel, Inc. | 54,845,000 | 54,862,139 | ||||||
|
| |||||||
Trucking & Leasing 0.2% |
| |||||||
Fortress Transportation & Infrastructure Investors LLC | 21,100,000 | 21,680,250 | ||||||
|
| |||||||
Total Corporate Bonds | 8,494,329,709 | |||||||
|
| |||||||
Loan Assignments 2.4% |
| |||||||
Auto Parts & Equipment 0.2% |
| |||||||
Dealer Tire LLC | 10,000,000 | 9,987,500 | ||||||
Panther BF Aggregator 2, L.P. Term Loan B TBD, due 3/18/26 (d)(j) | 10,000,000 | 10,025,000 | ||||||
|
| |||||||
20,012,500 | ||||||||
|
| |||||||
Banks 0.3% |
| |||||||
Jane Street Group LLC | 34,664,192 | 34,599,197 | ||||||
|
| |||||||
Healthcare, Education & Childcare 0.1% |
| |||||||
Jaguar Holding Co. II | 14,971,503 | 14,872,586 | ||||||
|
| |||||||
Insurance 0.1% |
| |||||||
USI, Inc. | 12,987,342 | 12,860,715 | ||||||
|
|
Principal Amount | Value | |||||||
Metal Fabricate & Hardware 0.1% |
| |||||||
Neenah Foundry Co. | $ | 9,646,518 | $ | 9,453,588 | ||||
|
| |||||||
Mining, Steel, Iron & Non-Precious Metals 0.1% |
| |||||||
Aleris International, Inc. | 8,932,500 | 8,943,666 | ||||||
|
| |||||||
Oil & Gas 0.2% |
| |||||||
PetroQuest Energy, Inc. | 16,636,468 | 16,636,468 | ||||||
Prairie ECI Acquiror, L.P. | 5,000,000 | 5,046,875 | ||||||
|
| |||||||
21,683,343 | ||||||||
|
| |||||||
Retail 0.1% |
| |||||||
1011778 B.C. Unlimited Liability Co. Term Loan B3 | 4,987,277 | 4,972,729 | ||||||
|
| |||||||
Retail Stores 0.7% |
| |||||||
Bass Pro Group LLC | 63,854,521 | 63,694,884 | ||||||
|
| |||||||
Software 0.2% |
| |||||||
Ascend Learning LLC | 5,000,000 | 4,975,000 | ||||||
RP Crown Parent LLC | 19,964,286 | 19,939,330 | ||||||
|
| |||||||
24,914,330 | ||||||||
|
| |||||||
Telecommunications 0.1% |
| |||||||
CommScope, Inc. | 5,000,000 | 5,038,750 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Transportation 0.2% |
| |||||||
Commercial Barge Line Co. | $ | 22,555,651 | $ | 15,619,788 | ||||
|
| |||||||
Total Loan Assignments | 236,666,076 | |||||||
|
| |||||||
TotalLong-Term Bonds | 8,775,464,893 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 1.5% | ||||||||
Auto Parts & Equipment 0.1% | ||||||||
American Tire Distributors, Inc. (c) | 142,545 | 4,561,440 | ||||||
Exide Technologies (b)(c)(d)(g)(m) | 2,084,972 | 3,252,556 | ||||||
|
| |||||||
7,813,996 | ||||||||
|
| |||||||
Electric Utilities 0.1% |
| |||||||
Keycon Power Holdings LLC (d) | 38,680 | 10,637,000 | ||||||
|
| |||||||
Independent Power & Renewable Electricity Producers 0.6% |
| |||||||
GenOn Energy, Inc. (c) | 386,241 | 54,073,740 | ||||||
PetroQuest Energy, Inc. (b)(c)(d)(m) | 2,314,884 | 4,977,001 | ||||||
|
| |||||||
59,050,741 | ||||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, | 2,287 | 1,416,316 | ||||||
|
| |||||||
Metals & Mining 0.1% |
| |||||||
Neenah Enterprises, | 720,961 | 9,898,795 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 0.6% |
| |||||||
Talos Energy, Inc. (m) | 2,074,193 | 61,603,532 | ||||||
Titan Energy LLC (m) | 91,174 | 5,744 | ||||||
|
| |||||||
61,609,276 | ||||||||
|
| |||||||
Software 0.0%‡ |
| |||||||
ASG Corp. (b)(c) | 12,502 | 0 | ||||||
|
| |||||||
Total Common Stocks | 150,426,124 | |||||||
|
| |||||||
Exchange-Traded Funds 0.3% |
| |||||||
iShares Gold Trust (m) | 618,700 | 7,603,823 | ||||||
SPDR Gold Shares (m) | 189,000 | 22,906,800 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 30,510,623 | |||||||
|
|
Shares | Value | |||||||
Short-Term Investment 6.6% |
| |||||||
Unaffiliated Investment Company 6.6% |
| |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.37% (n) | 638,722,827 | $ | 638,722,827 | |||||
|
| |||||||
TotalShort-Term Investment | 638,722,827 | |||||||
|
| |||||||
Investment of Cash Collateral For Securities Loaned 0.3% |
| |||||||
Unaffiliated Investment Company 0.3% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (n) | 26,967,485 | 26,967,485 | ||||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 26,967,485 | |||||||
|
| |||||||
Total Investments | 99.5 | % | 9,622,091,952 | |||||
Other Assets, Less Liabilities | 0.5 | 44,845,963 | ||||||
Net Assets | 100.0 | % | $ | 9,666,937,915 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | PIK ("Payment-in-Kind")—issuer may pay interest or dividends with additional securities and/or in cash. |
(b) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(c) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2019, the total market value of fair valued securities was $266,721,318, which represented 2.8% of the Fund’s net assets. |
(d) | Illiquid security—As of April 30, 2019, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $258,962,307, which represented 2.7% of the Fund’s net assets. |
(e) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(f) | Issue in default. |
(g) | Restricted security. (See Note 5) |
(h) | Issue in non-accrual status. |
(i) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $26,434,203 and the Fund received cash collateral with a value of $26,967,485 (See Note 2(H)). |
(j) | Floating rate—Rate shown was the rate in effect as of April 30, 2019. |
20 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
(k) | Fixed to floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(l) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(m) | Non-income producing security. |
(n) | Current yield as of April 30, 2019. |
The following abbreviations are used in the preceding pages:
LIBOR—London Interbank Offered Rate
SPDR—Standard & Poor’s Depositary Receipt
TBD—To Be Determined
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Convertible Bonds (b) | $ | — | $ | 6,291,518 | $ | 38,177,590 | $ | 44,469,108 | ||||||||
Corporate Bonds (c) | — | 8,360,602,296 | 133,727,413 | 8,494,329,709 | ||||||||||||
Loan Assignments (d) | — | 227,212,488 | 9,453,588 | 236,666,076 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds | — | 8,594,106,302 | 181,358,591 | 8,775,464,893 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (e)(f) | 72,246,276 | 58,635,180 | 19,544,668 | 150,426,124 | ||||||||||||
Exchange-Traded Funds | 30,510,623 | — | — | 30,510,623 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Unaffiliated Investment Company | 638,722,827 | — | — | 638,722,827 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 26,967,485 | — | — | 26,967,485 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 768,447,211 | $ | 8,652,741,482 | $ | 200,903,259 | $ | 9,622,091,952 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $37,263,113, $903,202 and $11,275 are held in Auto Parts & Equipment, Internet and Mining, respectively, within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The Level 3 securities valued at $96,764,539, $21,050,000, and $15,912,874 are held in Auto Parts & Equipment, Media, and Oil & Gas, respectively, within the Corporate Bonds section of the Portfolio of Investments. |
(d) | The Level 3 security valued at $9,453,588 is held in Metal Fabricate & Hardware within the Loan Assignments section of the Portfolio of Investments, which was valued by a pricing service without adjustment. |
(e) | The level 2 securities valued at $4,561,440, and $54,073,740 are held in Auto Parts & Equipment and Independent Power & Renewable Electricity Producers, respectively, within the Common Stocks section of the Portfolio of Investments. |
(f) | The Level 3 securities valued at $3,252,556, $4,977,001, $1,416,316, $9,898,795, and $0 are held in Auto Parts & Equipment, Independent Power & Renewable Electricity Producers, Media and Metals & Mining and Software, respectively, within the Common Stocks section of the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2018 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2019 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held as of April 30, 2019 (c) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | $ | 64,561,066 | $ | 550,063 | $ | — | $ | (31,597,448 | ) | $ | 3,749,432 | (a) | $ | — | $ | — | $ | — | $ | 37,263,113 | $ | (31,597,448 | ) | |||||||||||||||||
Internet | — | — | — | 903,202 | — | — | — | — | 903,202 | 903,202 | ||||||||||||||||||||||||||||||
Mining | 11,029 | 459 | — | (213 | ) | — | — | — | — | 11,275 | (213 | ) | ||||||||||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 96,059,602 | 1,036,830 | — | (4,075,865 | ) | 3,743,972 | (a) | — | — | — | 96,764,539 | (4,075,865 | ) | |||||||||||||||||||||||||||
Media | 21,150,000 | 16,110 | — | (116,110 | ) | — | — | — | — | 21,050,000 | (116,110 | ) | ||||||||||||||||||||||||||||
Oil & Gas | — | (1,267,297 | ) | — | (26,636,734 | ) | 43,816,905 | — | — | — | 15,912,874 | (26,636,734 | ) | |||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Metal Fabricate & Hardware | 10,481,625 | 9,985 | 7,524 | (104,564 | ) | — | (940,982 | )(b) | — | — | 9,453,588 | (104,564 | ) | |||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 6,484,263 | — | — | (3,231,707 | ) | — | — | — | — | 3,252,556 | (3,231,707 | ) | ||||||||||||||||||||||||||||
Independent Power & Renewable Electricity Producers | — | — | — | (7,018,117 | ) | 11,995,118 | — | — | — | 4,977,001 | (7,018,117 | ) | ||||||||||||||||||||||||||||
Media | 1,416,316 | — | — | — | — | — | — | — | 1,416,316 | — | ||||||||||||||||||||||||||||||
Metals & Mining | 9,898,795 | — | — | — | — | — | — | — | 9,898,795 | — | ||||||||||||||||||||||||||||||
Software | — | — | — | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 210,062,696 | $ | 346,150 | $ | 7,524 | $ | (71,877,556 | ) | $ | 63,305,427 | $ | (940,982 | ) | $ | — | $ | — | $ | 200,903,259 | $ | (71,877,556 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
(a) | Purchases include PIK securities. |
(b) | Sales include principal reductions |
(c) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
22 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets |
| |||
Investment in securities, at value | $ | 9,622,091,952 | ||
Receivables: | ||||
Interest | 153,864,489 | |||
Fund shares sold | 18,684,895 | |||
Investment securities sold | 5,386,092 | |||
Securities lending income | 24,967 | |||
Other assets | 262,695 | |||
|
| |||
Total assets | 9,800,315,090 | |||
|
| |||
Liabilities | ||||
Due to custodian | 125,855 | |||
Payables: | ||||
Investment securities purchased | 71,537,281 | |||
Collateral received for securities on loan | 26,967,485 | |||
Fund shares redeemed | 21,721,313 | |||
Manager (See Note 3) | 4,289,978 | |||
Transfer agent (See Note 3) | 2,008,469 | |||
NYLIFE Distributors (See Note 3) | 1,148,490 | |||
Shareholder communication | 895,840 | |||
Professional fees | 179,547 | |||
Custodian | 28,012 | |||
Trustees | 9,705 | |||
Accrued expenses | 92,654 | |||
Dividend payable | 4,372,546 | |||
�� |
|
| ||
Total liabilities | 133,377,175 | |||
|
| |||
Net assets | $ | 9,666,937,915 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 17,223,715 | ||
Additional paid-in capital | 9,911,364,468 | |||
|
| |||
9,928,588,183 | ||||
Total distributable earnings (loss) | (261,650,268 | ) | ||
|
| |||
Net assets | $ | 9,666,937,915 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 3,395,064,796 | ||
|
| |||
Shares of beneficial interest outstanding | 604,836,725 | |||
|
| |||
Net asset value per share outstanding | $ | 5.61 | ||
Maximum sales charge (4.50% of offering price) | 0.26 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.87 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 165,074,076 | ||
|
| |||
Shares of beneficial interest outstanding | 29,176,409 | |||
|
| |||
Net asset value per share outstanding | $ | 5.66 | ||
Maximum sales charge (4.50% of offering price) | 0.27 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.93 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 72,028,723 | ||
|
| |||
Shares of beneficial interest outstanding | 12,891,307 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.59 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 428,109,793 | ||
|
| |||
Shares of beneficial interest outstanding | 76,584,116 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.59 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 3,587,814,460 | ||
|
| |||
Shares of beneficial interest outstanding | 638,672,832 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.62 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 47,647 | ||
|
| |||
Shares of beneficial interest outstanding | 8,499 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.61 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 11,822,497 | ||
|
| |||
Shares of beneficial interest outstanding | 2,105,639 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.61 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 774,815 | ||
|
| |||
Shares of beneficial interest outstanding | 138,190 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.61 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 2,006,201,108 | ||
|
| |||
Shares of beneficial interest outstanding | 357,957,754 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.60 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 270,109,324 | ||
Dividends | 426,469 | |||
Securities lending | 131,548 | |||
|
| |||
Total income | 270,667,341 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 23,771,080 | |||
Distribution/Service—Class A (See Note 3) | 4,008,587 | |||
Distribution/Service—Investor Class (See Note 3) | 197,516 | |||
Distribution/Service—Class B (See Note 3) | 373,568 | |||
Distribution/Service—Class C (See Note 3) | 2,497,505 | |||
Distribution/Service—Class R2 (See Note 3) | 13,902 | |||
Distribution/Service—Class R3 (See Note 3) | 1,714 | |||
Transfer agent (See Note 3) | 5,246,995 | |||
Shareholder communication | 938,386 | |||
Professional fees | 307,961 | |||
Registration | 150,098 | |||
Trustees | 102,461 | |||
Custodian | 34,042 | |||
Shareholder service (See Note 3) | 5,926 | |||
Miscellaneous | 178,507 | |||
|
| |||
Total expenses | 37,828,248 | |||
|
| |||
Net investment income (loss) | 232,839,093 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | (32,204,662 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 200,856,216 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 168,651,554 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 401,490,647 | ||
|
|
24 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 232,839,093 | $ | 488,564,779 | ||||
Net realized gain (loss) on investments | (32,204,662 | ) | 111,820,287 | |||||
Net change in unrealized appreciation (depreciation) on investments | 200,856,216 | (468,251,250 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 401,490,647 | 132,133,816 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (92,975,307 | ) | (183,893,283 | ) | ||||
Investor Class | (4,532,537 | ) | (8,500,000 | ) | ||||
Class B | (1,833,879 | ) | (4,233,276 | ) | ||||
Class C | (12,102,451 | ) | (27,573,908 | ) | ||||
Class I | (93,862,311 | ) | (215,711,694 | ) | ||||
Class R1 | (1,331 | ) | (2,823 | ) | ||||
Class R2 | (317,647 | ) | (434,175 | ) | ||||
Class R3 | (18,793 | ) | (24,035 | ) | ||||
Class R6 | (52,852,100 | ) | (54,203,430 | ) | ||||
|
| |||||||
(258,496,356 | ) | (494,576,624 | ) | |||||
|
| |||||||
Distributions to shareholders from return of capital: | ||||||||
Class A | — | (15,921,400 | ) | |||||
Investor Class | — | (735,926 | ) | |||||
Class B | — | (366,515 | ) | |||||
Class C | — | (2,387,337 | ) | |||||
Class I | — | (18,676,225 | ) | |||||
Class R1 | — | (244 | ) | |||||
Class R2 | — | (37,591 | ) | |||||
Class R3 | — | (2,081 | ) | |||||
Class R6 | — | (4,692,909 | ) | |||||
|
| |||||||
— | (42,820,228 | ) | ||||||
|
| |||||||
Total distributions to shareholders | (258,496,356 | ) | (537,396,852 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 2,758,555,777 | 2,389,951,877 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 233,432,883 | 488,685,533 | ||||||
Cost of shares redeemed | (2,175,841,448 | ) | (4,146,270,831 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 816,147,212 | (1,267,633,421 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 959,141,503 | (1,672,896,457 | ) | |||||
Net Assets | ||||||||
Beginning of period | 8,707,796,412 | 10,380,692,869 | ||||||
|
| |||||||
End of period | $ | 9,666,937,915 | $ | 8,707,796,412 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.29 | 0.30 | 0.33 | 0.31 | 0.34 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.22 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.25 | 0.07 | 0.39 | 0.53 | 0.00 | ‡ | 0.25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.29 | ) | (0.31 | ) | (0.34 | ) | (0.31 | ) | (0.40 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.32 | ) | (0.36 | ) | (0.36 | ) | (0.36 | ) | (0.40 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.59 | % | 1.29 | % | 6.91 | % | 9.96 | % | 0.06 | % | 4.14 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.26 | %†† | 5.15 | % | 5.25 | % | 5.98 | % | 5.45 | % | 5.52 | % | ||||||||||||||||
Net expenses (c) | 0.98 | %†† | 0.99 | % | 0.97 | % | 0.95 | % | 0.96 | % | 0.99 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,395,065 | $ | 3,290,659 | $ | 3,683,113 | $ | 3,551,864 | $ | 3,364,517 | $ | 3,678,466 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.57 | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | $ | 6.14 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.29 | 0.30 | 0.33 | 0.31 | 0.34 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.22 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.25 | 0.07 | 0.39 | 0.53 | (0.00 | )‡ | 0.25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.29 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.40 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.32 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.40 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.66 | $ | 5.57 | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 4.55 | % | 1.29 | % | 6.90 | % | 9.91 | % | (0.07 | %) | 4.13 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.19 | %†† | 5.12 | % | 5.21 | % | 5.90 | % | 5.39 | % | 5.50 | % | ||||||||||||||||
Net expenses (c) | 1.05 | %†† | 1.03 | % | 1.02 | % | 1.03 | % | 1.02 | % | 1.01 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 165,074 | $ | 159,970 | $ | 167,139 | $ | 287,493 | $ | 282,451 | $ | 296,535 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
26 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.50 | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.25 | 0.26 | 0.28 | 0.27 | 0.29 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.21 | ) | 0.08 | 0.20 | (0.32 | ) | (0.09 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | �� | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.23 | 0.04 | 0.34 | 0.48 | (0.05 | ) | 0.20 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.26 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | ||||||||||||||||
Return of capital | — | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.28 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.59 | $ | 5.50 | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 4.17 | % | 0.64 | % | 6.06 | % | 8.85 | % | (0.60 | %) | 3.35 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.45 | %†† | 4.37 | % | 4.47 | % | 5.16 | % | 4.64 | % | 4.75 | % | ||||||||||||||||
Net expenses (c) | 1.80 | %†† | 1.78 | % | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 72,029 | $ | 81,221 | $ | 108,263 | $ | 132,509 | $ | 139,683 | $ | 172,640 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.50 | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.25 | 0.26 | 0.28 | 0.27 | 0.29 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.21 | ) | 0.07 | 0.20 | (0.31 | ) | (0.09 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.23 | 0.04 | 0.33 | 0.48 | (0.04 | ) | 0.20 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.26 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | ||||||||||||||||
Return of capital | — | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.28 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.59 | $ | 5.50 | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 4.16 | % | 0.64 | % | 5.87 | % | 9.04 | % | (0.60 | %) | 3.34 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.45 | %†† | 4.36 | % | 4.45 | % | 5.15 | % | 4.64 | % | 4.75 | % | ||||||||||||||||
Net expenses (c) | 1.80 | %†† | 1.78 | % | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 428,110 | $ | 550,819 | $ | 676,463 | $ | 678,364 | $ | 679,392 | $ | 785,873 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.53 | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.31 | 0.32 | 0.34 | 0.33 | 0.35 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.22 | ) | 0.08 | 0.20 | (0.31 | ) | (0.08 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.26 | 0.09 | 0.40 | 0.54 | 0.02 | 0.27 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.33 | ) | (0.41 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.34 | ) | (0.37 | ) | (0.37 | ) | (0.38 | ) | (0.41 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.62 | $ | 5.53 | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.73 | % | 1.57 | % | 7.17 | % | 10.23 | % | 0.32 | % | 4.58 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.51 | %†† | 5.40 | % | 5.51 | % | 6.23 | % | 5.70 | % | 5.76 | % | ||||||||||||||||
Net expenses (c) | 0.73 | %†† | 0.74 | % | 0.72 | % | 0.70 | % | 0.71 | % | 0.74 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,587,814 | $ | 3,709,306 | $ | 4,067,560 | $ | 5,313,266 | $ | 4,844,891 | $ | 3,762,169 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.30 | 0.32 | 0.34 | 0.32 | 0.34 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (0.22 | ) | 0.07 | 0.19 | (0.31 | ) | (0.08 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.25 | 0.08 | 0.39 | 0.53 | 0.01 | 0.26 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.30 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.41 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.33 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.41 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.68 | % | 1.46 | % | 7.07 | % | 10.13 | % | 0.21 | % | 4.31 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.42 | %†† | 5.25 | % | 5.48 | % | 6.11 | % | 5.60 | % | 5.66 | % | ||||||||||||||||
Net expenses (c) | 0.83 | %†† | 0.84 | % | 0.82 | % | 0.80 | % | 0.81 | % | 0.84 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 48 | $ | 72 | $ | 37 | $ | 59 | $ | 39 | $ | 29 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
28 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.29 | 0.30 | 0.32 | 0.31 | 0.33 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.22 | ) | 0.08 | 0.20 | (0.31 | ) | (0.09 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | 0.00 | ‡ | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.25 | 0.07 | 0.38 | 0.52 | (0.00 | )‡ | 0.24 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.29 | ) | (0.30 | ) | (0.33 | ) | (0.31 | ) | (0.39 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.32 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | 4.54 | % | 1.20 | % | 6.80 | % | 9.83 | % | (0.04 | %) | 4.04 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.16 | %†† | 5.06 | % | 5.16 | % | 5.89 | % | 5.35 | % | 5.43 | % | ||||||||||||||||
Net expenses (c) | 1.08 | %†† | 1.09 | % | 1.07 | % | 1.05 | % | 1.06 | % | 1.09 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 11,822 | $ | 11,116 | $ | 9,562 | $ | 10,917 | $ | 10,084 | $ | 11,049 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Six months ended April 30, | Year ended October 31, | February 29, 2016** through October 31, | ||||||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | ||||||||||||||||
Net asset value at beginning of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.17 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.13 | 0.27 | 0.28 | 0.20 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.22 | ) | 0.09 | 0.60 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.24 | 0.05 | 0.37 | 0.80 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.15 | ) | (0.28 | ) | (0.29 | ) | (0.21 | ) | ||||||||||||
Return of capital | — | (0.02 | ) | (0.05 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.15 | ) | (0.30 | ) | (0.34 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.52 | $ | 5.77 | $ | 5.74 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.41 | % | 0.96 | % | 6.58 | % | 15.59 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.90 | %†† | 4.77 | % | 4.81 | % | 5.40 | %†† | ||||||||||||
Net expenses (c) | 1.33 | %†† | 1.34 | % | 1.32 | % | 1.30 | %†† | ||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 775 | $ | 606 | $ | 392 | $ | 130 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R6 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | $ | 6.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.31 | 0.32 | 0.35 | 0.34 | 0.36 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (0.21 | ) | 0.09 | 0.19 | (0.31 | ) | (0.08 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.25 | 0.10 | 0.41 | 0.54 | 0.03 | 0.28 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.32 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | (0.43 | ) | ||||||||||||||||
Return of capital | — | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.35 | ) | (0.38 | ) | (0.38 | ) | (0.39 | ) | (0.43 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.60 | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.62 | % | 1.71 | % | 7.36 | % | 10.24 | % | 0.50 | % | 4.60 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.63 | %†† | 5.54 | % | 5.45 | % | 6.23 | % | 5.84 | % | 5.88 | % | ||||||||||||||||
Net expenses (c) | 0.59 | %†† | 0.58 | % | 0.58 | % | 0.58 | % | 0.58 | % | 0.58 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,006,201 | $ | 904,028 | $ | 1,668,163 | $ | 53,712 | $ | 15,017 | $ | 9,093 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
30 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay High Yield Corporate Bond Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Class R2 shares were first offered to the public on December 14, 2007, but did not commence operations until May 1, 2008. Investor Class shares commenced operations on February 28, 2008. Class R1 shares commenced operations on June 29, 2012. Class R6 shares commenced operations on June 17, 2013. Class R3 shares commenced operations on February 29, 2016.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares
convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek maximum current income through investment in a diversified portfolio of high-yield debt securities. Capital appreciation is a secondary objective.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the
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Notes to Financial Statements(Unaudited) (continued)
“Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities, including exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the
32 | MainStay MacKay High Yield Corporate Bond Fund |
relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent
pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
The valuation techniques and significant amounts of unobservable inputs used in the fair valuation measurement of the Fund’s Level 3 securities are outlined in the table below. A significant increase or decrease in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.
Asset Class | Fair Value at 4/30/19* | Valuation Technique | Unobservable Inputs | Inputs/Range | ||||||||
Convertible Bonds | $ | 37,263,113 | Market Approach | 50% As-Converted Component: Enterprise Value | $ | 873.6m–$995.2m | ||||||
50% Converage Analysis Component: Enterprise Value | $ | 873.6m–$995.2m | ||||||||||
Implied Recovery to First Lien Term Loan | 100.00 | % | ||||||||||
903,202 | Market Approach | Discount Rate | 2.00 | % | ||||||||
11,275 | Income Approach | Liquidity Discount | 100bps | |||||||||
Subordination Discount | 150bps | |||||||||||
Corporate Bonds | 96,764,539 | Income Approach | Estimated Yield to Maturity | 18.06 | % | |||||||
Spread Adjustment | 4.78 | % | ||||||||||
15,912,874 | Market Approach | Asset Coverage at $50 Crude, $3.00 Natural Gas | $1.07 | |||||||||
PIK Discount Spread | 3.00 | % | ||||||||||
Common Stocks | 3,252,556 | Market Approach | Estimated Enterprise Value | $ | 873.6m–$995.2m | |||||||
Estimated Volatility | 25.00 | % | ||||||||||
4,977,001 | Market Approach | Implied Equity Value | $29mm | |||||||||
Liquidity Discount | 25.00 | % | ||||||||||
1,416,316 | Market Approach | Terminal Value Multiple Liquidity Discount | 9.0x 20.00 | % | ||||||||
9,898,795 | Market Approach | EBITDA Multiple Discount Rate | 5.75x 10.00 | % | ||||||||
0 | Qualitative Assessment | $0.00 | ||||||||||
|
| |||||||||||
$ | 170,399,671 | |||||||||||
|
|
* | The table above does not include Level 3 investments that were valued by brokers without adjustment. As of April 30, 2019, the value of these investments was $30,503,588. The inputs for these investments were not readily available or cannot be reasonably estimated. |
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Notes to Financial Statements(Unaudited) (continued)
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to
shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income frompayment-in-kind securities is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may cause the costs of investing in ETFs and mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
34 | MainStay MacKay High Yield Corporate Bond Fund |
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2019, the Fund did not hold any unfunded commitments.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $26,434,203 and the Fund received cash collateral with a value of $26,967,485.
(I) Debt Securities and Loan Risk. The Fund primarily invests in high-yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These securities pay
investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The loans in which the Fund invests are usually rated below investment grade, or if unrated, determined by the Subadvisor to be of comparable quality (commonly referred to as “junk bonds”) and are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. Moreover, such securities may, under certain circumstances, be particularly susceptible to liquidity and valuation risks. Although certain loans are collateralized, there is no guarantee that the value of the collateral will be sufficient or available to satisfy the borrower’s obligation. In times of unusual or adverse market, economic or political conditions, loans may experience higher than normal default rates. In the event of a recession or serious credit event, among other eventualities, the value of the Fund’s investments in loans are more likely to decline. The secondary market for loans is limited and, thus, the Fund’s ability to sell or realize the full value of its investment in these loans to reinvest sale proceeds or to meet redemption obligations may be impaired. In addition, loans generally are subject to extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of the anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the
35 |
Notes to Financial Statements(Unaudited) (continued)
responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million up to $5 billion; 0.525% from $5 billion up to $7 billion; 0.50% from $7 billion up to $10 billion; 0.49% from $10 billion to $15 billion; and 0.48% in excess of $15 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
During the six-month period ended April 30, 2019, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.55% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/ or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $23,771,080.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 22 | ||
Class R2 | 5,561 | |||
Class R3 | 343 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $292,612 and $35,313, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $33,297, $44,556 and $9,562, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has
36 | MainStay MacKay High Yield Corporate Bond Fund |
entered into an agreement with DST Asset Manager Solutions, Inc.
(“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 2,259,702 | ||
Investor Class | 170,071 | |||
Class B | 80,329 | |||
Class C | 536,292 | |||
Class I | 2,192,276 | |||
Class R1 | 32 | |||
Class R2 | 7,819 | |||
Class R3 | 474 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 988,321 | 0.0 | %‡ | ||||
Class R1 | 36,938 | 77.5 |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 9,642,092,479 | $ | 238,617,169 | $ | (258,617,696 | ) | $ | (20,000,527 | ) |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $166,082,864 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $18,952 | $147,131 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 494,576,624 | ||
Return of Capital | 42,820,228 | |||
Total | $ | 537,396,852 |
Note 5–Restricted Securities
Restricted securities, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
37 |
Notes to Financial Statements(Unaudited) (continued)
As of April 30, 2019, the Fund held the following restricted securities.
Security | Date(s) of Acquisition | Principal Amount/ Shares | Cost | 04/30/19 Value | Percent of Net Assets | |||||||||||||||
Aleris International, Inc. | 7/6/10 | $ | 11,797 | $ | 10,208 | $ | 11,275 | 0.0 | %‡ | |||||||||||
At Home Corp. | 5/29/01 | $ | 69,477,086 | — | 903,202 | 0.0 | ‡ | |||||||||||||
Exide Technologies | 4/30/15-9/29/17 | 2,084,972 | 53,289,038 | 3,252,556 | 0.1 | |||||||||||||||
ION Media Networks, Inc. | 3/12/10-9/29/17 | 2,287 | 13,572 | 1,416,316 | 0.0 | ‡ | ||||||||||||||
Rex Energy Corp. (Escrow Claim) | 10/03/2018 | $ | 124,195,000 | — | 1,515,179 | 0.0 | ‡ | |||||||||||||
Sterling Entertainment Enterprises LLC | 12/28/17 | $ | 20,000,000 | 19,741,823 | 21,050,000 | 0.2 | ||||||||||||||
Total | $ | 73,054,641 | $ | 28,148,528 | 0.3 | % |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or LIBOR, whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $1,859,292 and $1,304,845, respectively.
38 | MainStay MacKay High Yield Corporate Bond Fund |
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 49,922,670 | $ | 277,088,004 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,424,752 | 79,423,900 | ||||||
Shares redeemed | (62,560,356 | ) | (343,460,453 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 1,787,066 | 13,051,451 | ||||||
Shares converted into Class A (See Note 1) | 8,032,393 | 44,584,071 | ||||||
Shares converted from Class A (See Note 1) | (864,586 | ) | (4,821,971 | ) | ||||
|
| |||||||
Net increase (decrease) | 8,954,873 | $ | 52,813,551 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 81,948,283 | $ | 465,649,820 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,329,032 | 171,300,889 | ||||||
Shares redeemed | (158,819,289 | ) | (900,311,177 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (46,541,974 | ) | (263,360,468 | ) | ||||
Shares converted into Class A (See Note 1) | 5,744,195 | 32,610,430 | ||||||
Shares converted from Class A (See Note 1) | (1,592,187 | ) | (8,989,832 | ) | ||||
|
| |||||||
Net increase (decrease) | (42,389,966 | ) | $ | (239,739,870 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,877,750 | $ | 10,461,967 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 775,486 | 4,306,041 | ||||||
Shares redeemed | (1,911,765 | ) | (10,630,040 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 741,471 | 4,137,968 | ||||||
Shares converted into Investor Class (See Note 1) | 1,520,566 | 8,514,360 | ||||||
Shares converted from Investor Class (See Note 1) | (1,820,156 | ) | (10,126,486 | ) | ||||
|
| |||||||
Net increase (decrease) | 441,881 | $ | 2,525,842 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,462,654 | $ | 19,807,574 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,534,158 | 8,733,134 | ||||||
Shares redeemed | 329,300 | 1,761,792 | ||||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 5,326,112 | 30,302,500 | ||||||
Shares converted into Investor Class (See Note 1) | 1,908,695 | 10,887,820 | ||||||
Shares converted from Investor Class (See Note 1) | (7,232,626 | ) | (41,236,187 | ) | ||||
|
| |||||||
Net increase (decrease) | 2,181 | $ | (45,867 | ) | ||||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 115,277 | $ | 632,290 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 303,192 | 1,661,226 | ||||||
Shares redeemed | (1,679,088 | ) | (9,188,824 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,260,619 | ) | (6,895,308 | ) | ||||
Shares converted from Class B (See Note 1) | (623,834 | ) | (3,420,158 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,884,453 | ) | $ | (10,315,466 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 241,451 | $ | 1,359,738 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 726,768 | 4,087,799 | ||||||
Shares redeemed | (3,336,932 | ) | (18,825,570 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,368,713 | ) | (13,378,033 | ) | ||||
Shares converted from Class B (See Note 1) | (1,708,658 | ) | (9,645,332 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,077,371 | ) | $ | (23,023,365 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,221,754 | $ | 12,191,979 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,978,132 | 10,837,995 | ||||||
Shares redeemed | (21,927,236 | ) | (120,918,099 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (17,727,350 | ) | (97,888,125 | ) | ||||
Shares converted from Class C (See Note 1) | (5,851,552 | ) | (32,404,210 | ) | ||||
|
| |||||||
Net increase (decrease) | (23,578,902 | ) | $ | (130,292,335 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,368,864 | $ | 36,031,045 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,736,234 | 26,644,143 | ||||||
Shares redeemed | (28,673,897 | ) | (161,805,598 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (17,568,799 | ) | (99,130,410 | ) | ||||
Shares converted from Class C (See Note 1) | (19,545 | ) | (111,523 | ) | ||||
|
| |||||||
Net increase (decrease) | (17,588,344 | ) | $ | (99,241,933 | ) | |||
|
| |||||||
39 |
Notes to Financial Statements(Unaudited) (continued)
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 251,201,063 | $ | 1,388,684,393 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 15,261,474 | 84,207,985 | ||||||
Shares redeemed | (189,600,304 | ) | (1,040,832,616 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 76,862,233 | 432,059,762 | ||||||
Shares converted into Class I (See Note 1) | 353,112 | 1,936,845 | ||||||
Shares converted from Class I (See Note 1) | (109,697,451 | ) | (600,045,057 | ) | ||||
|
| |||||||
Net increase (decrease) | (32,482,106 | ) | $ | (166,048,450 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 245,498,090 | $ | 1,396,789,903 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 38,706,098 | 218,802,565 | ||||||
Shares redeemed | (314,348,256 | ) | (1,783,949,641 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (30,144,068 | ) | (168,357,173 | ) | ||||
Shares converted into Class I (See Note 1) | 391,168 | 2,200,247 | ||||||
Shares converted from Class I (See Note 1) | (3,296,534 | ) | (18,850,230 | ) | ||||
|
| |||||||
Net increase (decrease) | (33,049,434 | ) | $ | (185,007,156 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 893 | $ | 4,903 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 242 | 1,331 | ||||||
Shares redeemed | (5,608 | ) | (31,006 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,473 | ) | $ | (24,772 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 10,062 | $ | 56,569 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 545 | 3,067 | ||||||
Shares redeemed | (4,085 | ) | (23,088 | ) | ||||
|
| |||||||
Net increase (decrease) | 6,522 | $ | 36,548 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 392,033 | $ | 2,151,898 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 48,891 | 269,286 | ||||||
Shares redeemed | (347,515 | ) | (1,902,501 | ) | ||||
|
| |||||||
Net increase (decrease) | 93,409 | $ | 518,683 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,044,931 | $ | 5,911,911 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 67,315 | 379,990 | ||||||
Shares redeemed | (752,554 | ) | (4,287,056 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 359,692 | 2,004,845 | ||||||
Shares converted from Class R2 (See Note 1) | (3,959 | ) | (22,765 | ) | ||||
|
| |||||||
Net increase (decrease) | 355,733 | $ | 1,982,080 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 28,082 | $ | 152,883 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,214 | 17,704 | ||||||
Shares redeemed | (2,271 | ) | (12,519 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 29,025 | 158,068 | ||||||
Shares converted from Class R3 (See Note 1) | (607 | ) | (3,230 | ) | ||||
|
| |||||||
Net increase (decrease) | 28,418 | $ | 154,838 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 72,058 | $ | 405,797 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,011 | 22,580 | ||||||
Shares redeemed | (34,326 | ) | (194,435 | ) | ||||
|
| |||||||
Net increase (decrease) | 41,743 | $ | 233,942 | |||||
|
| |||||||
40 | MainStay MacKay High Yield Corporate Bond Fund |
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 192,723,878 | $ | 1,067,187,460 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 9,573,685 | 52,707,415 | ||||||
Shares redeemed | (117,303,399 | ) | (648,865,390 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 84,994,164 | 471,029,485 | ||||||
Shares converted into Class R6 (See Note 1) | 109,898,841 | 600,047,709 | ||||||
Shares converted from Class R6 (See Note 1) | (776,201 | ) | (4,261,873 | ) | ||||
|
| |||||||
Net increase (decrease) | 194,116,804 | $ | 1,066,815,321 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 82,006,063 | $ | 463,939,520 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,375,321 | 58,711,366 | ||||||
Shares redeemed | (223,634,790 | ) | (1,278,636,058 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (131,253,406 | ) | (755,985,172 | ) | ||||
Shares converted into Class R6 (See Note 1) | 7,245,330 | 41,236,187 | ||||||
Shares converted from Class R6 (See Note 1) | (1,420,510 | ) | (8,078,815 | ) | ||||
|
| |||||||
|
| |||||||
Net increase (decrease) | (125,428,586 | ) | $ | (722,827,800 | ) | |||
|
|
Note 11–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
41 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay High Yield Corporate Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December 10-12, 2018 in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio manager of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds
42 | MainStay MacKay High Yield Corporate Bond Fund |
and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December 10-12, 2018 in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in a manager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certain non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the
administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager and the method for compensating the portfolio manager.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the
43 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Fund’s investment performance as well as discussions between the Fund’s portfolio manager and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged
Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
44 | MainStay MacKay High Yield Corporate Bond Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the provision of sub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board
acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
46 | MainStay MacKay High Yield Corporate Bond Fund |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
47 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1739388 MS065-19 | MSHY10-06/19 (NYLIM) NL212 |
MainStay MacKay Infrastructure Bond Fund (Formerly known as MainStay MacKay Government Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | –0.26 4.44 | %
| | –0.82 3.85 | %
| | 0.44 1.37 | %
| | 1.70 2.17 | %
| | 1.04 1.04 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –0.44 4.25 |
| | –1.03 3.64 | | | 0.16 1.09 | | | 1.48 1.95 | | | 1.44 1.44 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First | With sales charges Excluding sales charges | | 5/1/1986 | | | –1.10 3.90 |
| | –2.11 2.89 | | | –0.02 0.36 | | | 1.20 1.20 | | | 2.19 2.19 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | 2.90 3.90 |
| | 1.76 2.76 | | | 0.34 0.34 | | | 1.18 1.18 | | | 2.19 2.19 |
| ||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 4.65 | 4.20 | 1.66 | 2.45 | 0.79 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six | One Year | Five Years | Ten Years | ||||||||||||
Bloomberg Barclays Taxable Municipal Index4 | 7.01 | % | 6.54 | % | 5.14 | % | 7.31 | % | ||||||||
Bloomberg Barclays U.S. Government Bond Index5 | 4.91 | 4.76 | 1.98 | 2.55 | ||||||||||||
Morningstar Intermediate Government Category Average6 | 4.48 | 4.31 | 1.69 | 2.54 |
4. | The Bloomberg Barclays Taxable Municipal Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays Taxable Municipal Index is a rules-based, market-value-weighted index engineered for the long-term taxable bond market. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | Prior to February 28, 2019, the Bloomberg Barclays U.S. Government Bond Index was the Fund’s primary benchmark. The Bloomberg Barclays U.S. Government Bond Index consists of publicly issued debt of the U.S. Treasury |
and government agencies. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Intermediate Government Category Average is representative of funds that have at least 90% of their bond holdings in bonds backed by U.S. government or by U.S. government-linked agencies. These funds have durations between 3.5 and 6 years. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Infrastructure Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Infrastructure Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,044.40 | $ | 4.76 | $ | 1,020.13 | $ | 4.71 | 0.94% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,042.50 | $ | 6.43 | $ | 1,018.50 | $ | 6.36 | 1.27% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,039.00 | $ | 10.21 | $ | 1,014.78 | $ | 10.09 | 2.02% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,039.00 | $ | 10.21 | $ | 1,014.78 | $ | 10.09 | 2.02% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,046.50 | $ | 3.50 | $ | 1,021.37 | $ | 3.46 | 0.69% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings as of April 30, 2019(excluding short-term investment) (Unaudited)
1. | United States Treasury Notes, 1.75%, due 9/30/22 |
2. | State of Illinois, Sales Tax, Revenue Bonds, |
3. | California Educational Facilities Authority, Chapman University, Revenue Bonds, 3.661%, due 4/1/33 |
4. | County of Miami-Dade FL Aviation, Revenue Bonds, 4.28%, due 10/1/41 |
5. | City of Chicago IL, Unlimited General Obligation, 7.781%, due 1/1/35 |
6. | Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation, 5.00%, due 12/1/46 |
7. | Massachusetts Development Finance Agency, Wellforce Obligated Group, Revenue Bonds, 4.496%, due 7/1/33 |
8. | New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds, 3.95%, due 8/1/32 |
9. | Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board, Lipscomb University Project, Revenue Bonds, 4.409%, due 10/1/34 |
10. | YMCA of Greater New York, 5.021%, due 8/1/38 |
8 | MainStay MacKay Infrastructure Bond Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, CFA, Steven H. Rich, PhD, Stephen R. Cianci, CFA, and Neil Moriarty, III, (“Government Fund Team”), and John Loffredo, CFA, Robert DiMella, CFA, Michael Petty, David Dowden, Scott Sprauer, Frances Lewis, Robert Burke and John Lawlor (“Infrastructure Bond Fund Team”) of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Infrastructure Bond Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Infrastructure Bond Fund returned 4.65%, underperforming the 7.01% return of the Fund’s primary benchmark, the Bloomberg Barclays Taxable Municipal Index, and the 4.91% return of the Bloomberg Barclays U.S. Government Bond Index, which is the Fund’s former primary benchmark. Over the same period, Class I shares outperformed the 4.48% return of the Morningstar Intermediate Government Category Average.1
Were there any changes to the Fund during the reporting period?
Effective February 28, 2019, several changes to the Fund were made. The Fund was renamed MainStay MacKay Infrastructure Bond Fund and the Fund’s principal investment strategies, primary benchmark and total Fund operating expenses were modified. Also effective that date, John Loffredo, Robert DiMella, Michael Petty, David Dowden, Scott Sprauer, Frances Lewis, Robert Burke and John Lawlor were added as portfolio managers of the Fund. Dan Roberts, Steven Rich, Stephen Cianci and Neil Moriarty were removed as portfolio managers of the Fund that same day. For more information about these changes, refer to the supplement dated December 14, 2018. Effective December 31, 2018, Louis Cohen no longer served as a portfolio manager of the Fund. For more information about that change refer to the supplement dated October 18, 2018.
What factors affected the Fund’s relative performance during the reporting period?
Government Fund Team
The Government Fund Team managed the Fund from November 1, 2018, through February 27, 2019. During this portion of the reporting period, the Fund’s shorter duration2 detracted from performance relative to the Bloomberg Barclays U.S. Government Bond Index, which was the Fund’s primary benchmark at that time.
During the final months of 2018, investors speculated that tighter monetary policy might push the economy into a recession. In response, Treasury bond yields fell sharply across much of the yield curve.3 The Federal Reserve (Fed) validated
this view in early 2019 when it concluded the Fed funds benchmark rate had risen to a level consistent with its policy objectives. More modest declines on the long end of the yield curve reflected restrained inflation, trade policy in flux and aggregate demand failing to pressure resource capacity.
The positive momentum of the stock market in early 2019 reflected cautious optimism regarding the durability of the current business cycle. Swayed by similar effects, corporate bond spreads4 tightened during the reporting period, as did spreads of credit-related securitized product (asset-backed and commercial mortgage-backed securities). The wider spreads of agency residential mortgage-backed securities were an outlier during this portion of the reporting period, as the sector was roiled by volatile interest rates.
Infrastructure Bond Fund Team
The Infrastructure Bond Fund Team managed the Fund from February 28, 2019, through April 30, 2019. During this portion of the reporting period, we focused on transitioning the Fund to its new strategy which is focused on actively managed investments in infrastructure-related debt securities.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
Government Fund Team
From November 1, 2018, through February 27, 2019, derivatives were not held in the Fund.
Infrastructure Bond Fund Team
The Fund added a slight allocation to Treasury futures from February 28, 2019, through April 30, 2019. The futures had minimal impact on the Fund’s relative performance.
What was the Fund’s duration strategy during the reporting period?
Government Fund Team
During the portion of the reporting period in which the Government Fund Team managed the Fund, the Fund maintained a shorter duration than the Bloomberg Barclays U.S. Government Bond Index to buffer against higher Treasury yields. The Fund’s duration was lowered by swapping mortgage-backed securities into Treasury notes of shorter duration.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
3. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
4. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. |
9 |
Infrastructure Bond Fund Team
The Fund continued to maintain a shorter-duration bias during the transition. As of the end of the reporting period, the Fund’s modified duration to worst5 was 7.89 years compared with 8.35 years for the Bloomberg Barclays Taxable Municipal Index.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Government Fund Team
During the portion of the reporting period in which the Government Fund Team managed the Fund, relative to the Bloomberg Barclays U.S. Government Bond Index, the Fund’s Treasury positions contributed positively to returns. (Contributions take weightings and total returns into account.) The Fund’s shorter-duration, mortgage-related positions detracted from relative performance.
Infrastructure Bond Fund Team
During the portion of the reporting period in which the Infrastructure Bond Fund Team managed the Fund, relative to the Bloomberg Barclays Taxable Municipal Index, the Fund’sout-of-index holdings detracted from performance. The shorter-duration, mortgage-backed securities that remained in the Fund underperformed the long-term taxable bond market.
What were some of the Fund’s largest purchases and sales during the reporting period?
Government Fund Team
As short- and intermediate-duration Treasury yields rose at the beginning of the reporting period, the Fund rotated assets from mortgage-backed securities to Treasury bonds.
Infrastructure Bond Fund Team
During the portion of the reporting period in which the Infrastructure Bond Fund Team managed the Fund, the
management team began selling the Fund’s mortgage-backed securities and Treasury bonds and began buying infrastructure-related debt securities, transitioning toward its target of holding at least 60% of assets in taxable municipal debt securities and up to 20% of assets intax-exempt municipal debt securities.
How did the Fund’s sector weightings change during the reporting period?
Government Fund Team
During the portion of the reporting period in which the Government Fund Team managed the Fund, the Fund increased its exposure to Treasury notes by decreasing its allocation to mortgage-backed securities. Weightings in the other bond sectors remained stable. However, the Fund’s cash position increased in preparation for the Fund’s transition.
Infrastructure Bond Fund Team
During the portion of the reporting period in which the Infrastructure Bond Fund Team managed the Fund, the Fund transitioned to its new strategy emphasizing actively managed, infrastructure-related debt securities. Most notably, the Fund decreased itsout-of-benchmark positions in areas such as Treasury bonds and mortgage-backed securities.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund’s largest overweight positions relative to the Bloomberg Barclays Taxable Municipal Index were in mortgage-backed securities and Treasury bonds, which are not included in the Index. As of the same date, the Fund held underweight exposure to the state general obligations and water/sewer sectors.
5. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Infrastructure Bond Fund |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 98.6%† Asset-Backed Securities 0.8% | ||||||||
Utilities 0.8% | ||||||||
Atlantic City Electric Transition Funding LLC | $ | 857,825 | $ | 887,769 | ||||
|
| |||||||
Total Asset-Backed Securities | 887,769 | |||||||
|
| |||||||
Corporate Bonds 7.4% |
| |||||||
Consumer Services 2.3% |
| |||||||
YMCA of Greater New York | 2,440,000 | 2,597,080 | ||||||
|
| |||||||
Electric 0.9% |
| |||||||
Duke Energy Florida Project Finance LLC | 1,100,000 | 1,061,723 | ||||||
|
| |||||||
Health Care—Services 4.2% |
| |||||||
Adventist Health System | 1,600,000 | 1,608,392 | ||||||
Toledo Hospital | ||||||||
5.325%, due 11/15/28 | 2,000,000 | 2,117,847 | ||||||
5.75%, due 11/15/38 | 1,000,000 | 1,101,134 | ||||||
|
| |||||||
4,827,373 | ||||||||
|
| |||||||
Total Corporate Bonds | 8,486,176 | |||||||
|
| |||||||
Municipal Bonds 78.4% |
| |||||||
Arkansas 1.5% |
| |||||||
City of Rogers, Sales & Use Tax, Revenue Bonds | 1,675,000 | 1,762,150 | ||||||
|
| |||||||
California 6.6% |
| |||||||
California Educational Facilities Authority, Chapman University, Revenue Bonds | 3,300,000 | 3,271,554 | ||||||
Inglewood Joint Powers Authority, Revenue Bonds | 1,000,000 | 1,006,690 | ||||||
State of California, Build America Bonds, Unlimited General Obligation | 1,250,000 | 1,819,150 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
University of California, Revenue Bonds | $ | 1,500,000 | $ | 1,527,330 | ||||
|
| |||||||
7,624,724 | ||||||||
|
| |||||||
Connecticut 4.1% |
| |||||||
Connecticut Airport Authority, Ground Transportation Center Project, Revenue Bonds | ||||||||
Series B | 2,045,000 | 2,034,796 | ||||||
Series B | 1,500,000 | 1,505,655 | ||||||
State of Connecticut, Unlimited General Obligation | 1,000,000 | 1,196,890 | ||||||
|
| |||||||
4,737,341 | ||||||||
|
| |||||||
Delaware 0.4% |
| |||||||
Delaware Municipal Electric Corp., Middletown & Seaford Projects, Revenue Bonds | 500,000 | 501,245 | ||||||
|
| |||||||
Florida 5.1% |
| |||||||
City of Gainesville, Utilities System, Revenue Bonds | 1,500,000 | 1,535,730 | ||||||
City of Miami FL, Street & Sidewalk Improvement Program, Revenue Bonds | 1,115,000 | 1,180,116 | ||||||
County of Miami-Dade FL Aviation, Revenue Bonds | 3,000,000 | 3,087,990 | ||||||
|
| |||||||
5,803,836 | ||||||||
|
| |||||||
Georgia 3.0% |
| |||||||
Main Street Natural Gas, Inc., Revenue Bonds | 2,000,000 | 2,506,260 | ||||||
Municipal Electric Authority of Georgia, Build America Bonds, Plant Vogtle Project, Revenue Bonds | 750,000 | 938,888 | ||||||
|
| |||||||
3,445,148 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois 23.2% |
| |||||||
Chicago Transit Authority, Sales & Transfer Tax Receipts, Revenue Bonds | $ | 1,000,000 | $ | 1,309,360 | ||||
City of Chicago IL, Unlimited General Obligation | ||||||||
Series A | 1,000,000 | 1,104,840 | ||||||
Series B, Insured: BAM | 1,000,000 | 1,176,430 | ||||||
Series C1, Insured: BAM | 2,195,000 | 2,874,748 | ||||||
Cook County High School District No. 201, Qualified School Construction Bonds, Limited General Obligation | 950,000 | 1,006,268 | ||||||
County of Cook IL, Build America Bonds, Unlimited General Obligation | ||||||||
Series D | 1,611,000 | 1,996,851 | ||||||
Series B, Insured: AGM | 1,725,000 | 2,151,092 | ||||||
Series B | 1,500,000 | 1,874,070 | ||||||
Lake County Community Unit School District No. 187, Unlimited General Obligation | ||||||||
Series A, Insured: BAM | 750,000 | 773,775 | ||||||
Series A, Insured: BAM | 500,000 | 513,355 | ||||||
Series A, Insured: BAM | 750,000 | 766,657 | ||||||
Series A, Insured: BAM | 750,000 | 764,993 | ||||||
Sales Tax Securitization Corp., Revenue Bonds | 2,000,000 | 2,099,420 | ||||||
State of Illinois, Build America Bonds, Unlimited General Obligation | 1,510,000 | 1,794,665 | ||||||
State of Illinois, Sales Tax, Revenue Bonds | 3,750,000 | 3,641,212 | ||||||
Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation | 2,610,000 | 2,696,835 | ||||||
|
| |||||||
26,544,571 | ||||||||
|
|
Principal Amount | Value | |||||||
Kentucky 4.0% |
| |||||||
Kenton County Airport Board, Senior Customer Facility Charge, Revenue Bonds | $ | 2,500,000 | $ | 2,592,300 | ||||
Kentucky Economic Development Finance Authority, Louisville Arena Project, Revenue Bonds | 2,000,000 | 2,044,840 | ||||||
|
| |||||||
4,637,140 | ||||||||
|
| |||||||
Massachusetts 4.2% |
| |||||||
City of Worcester, Ballpark Project, Limited General Obligation | 1,975,000 | 2,080,821 | ||||||
Massachusetts Development Finance Agency, Wellforce Obligated Group, Revenue Bonds | 2,545,000 | 2,683,346 | ||||||
|
| |||||||
4,764,167 | ||||||||
|
| |||||||
Michigan 1.5% |
| |||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds | 1,500,000 | 1,680,585 | ||||||
|
| |||||||
New Jersey 1.3% |
| |||||||
New Jersey Educational Facilities Authority, Kean University, Revenue Bonds | 1,445,000 | 1,448,511 | ||||||
|
| |||||||
New York 10.7% |
| |||||||
Brooklyn Arena Local Development Corp., Barclays Center Project, Revenue Bonds | 1,500,000 | 1,521,345 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds Subseries B-3 | 2,570,000 | 2,660,078 | ||||||
New York State Dormitory Authority, Montefiore Obligated Group, Revenue Bonds | 1,500,000 | 1,567,140 | ||||||
New York State Dormitory Authority, New York University, Revenue Bonds | 1,195,000 | 1,235,570 |
12 | MainStay MacKay Infrastructure Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New York (continued) |
| |||||||
New York State Energy Research & Development Authority, Green, Revenue Bonds | ||||||||
Series A | $ | 750,000 | $ | 750,120 | ||||
Series A | 1,045,000 | 1,045,115 | ||||||
Series A | 995,000 | 995,070 | ||||||
Triborough Bridge & Tunnel Authority, Build America Bonds, Revenue Bonds | 2,000,000 | 2,446,600 | ||||||
|
| |||||||
12,221,038 | ||||||||
|
| |||||||
Ohio 2.1% |
| |||||||
American Municipal Power, Inc., Build America Bonds, Revenue Bonds | 1,920,000 | 2,464,685 | ||||||
|
| |||||||
Oregon 0.9% |
| |||||||
Port of Portland Airport, Portland International Airport, Revenue Bonds | 1,000,000 | 1,006,080 | ||||||
|
| |||||||
Pennsylvania 2.1% |
| |||||||
City of Erie, Unlimited General Obligation | 500,000 | 509,050 | ||||||
Pennsylvania Economic Development Financing Authority, Build America Bonds, Revenue Bonds | 1,495,000 | 1,896,138 | ||||||
|
| |||||||
2,405,188 | ||||||||
|
| |||||||
Rhode Island 0.9% |
| |||||||
Rhode Island Commerce Corp., Historic Structures Tax Credit Financing Program, Revenue Bonds | 1,000,000 | 1,007,740 | ||||||
|
| |||||||
South Carolina 1.7% |
| |||||||
South Carolina Public Service Authority, Revenue Bonds | 2,000,000 | 1,947,660 | ||||||
|
|
Principal Amount | Value | |||||||
Tennessee 2.3% |
| |||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board, Lipscomb University Project, Revenue Bonds | $ | 2,600,000 | $ | 2,610,712 | ||||
|
| |||||||
Texas 2.8% |
| |||||||
Gainesville Hospital District, Limited General Obligation | 1,020,000 | 1,052,355 | ||||||
Port of Corpus Christi Authority of Nueces County, Revenue Bonds | 2,000,000 | 2,164,260 | ||||||
|
| |||||||
3,216,615 | ||||||||
|
| |||||||
Total Municipal Bonds | 89,829,136 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 12.0% |
| |||||||
Fannie Mae (Collateralized Mortgage Obligation) 0.0%‡ (b) |
| |||||||
Series 360, Class 2, IO | 117,096 | 23,254 | ||||||
Series 361, Class 2, IO | 24,033 | 5,856 | ||||||
|
| |||||||
29,110 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
4.00%, due 10/1/48 | 343,932 | 358,090 | ||||||
6.50%, due 4/1/37 | 49,221 | 55,820 | ||||||
|
| |||||||
413,910 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
4.00%, due 8/1/38 | 1,014,674 | 1,054,783 | ||||||
4.00%, due 8/1/48 | 1,227,610 | 1,262,750 | ||||||
4.00%, due 9/1/48 | 1,030,260 | 1,059,487 | ||||||
5.50%, due 7/1/41 | 2,002,776 | 2,203,982 | ||||||
6.00%, due 4/1/37 | 15,505 | 16,400 | ||||||
6.00%, due 7/1/39 | 1,121,400 | 1,254,693 | ||||||
6.50%, due 10/1/39 | 130,851 | 151,549 | ||||||
|
| |||||||
7,003,644 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
4.00%, due 6/20/47 | 831,284 | 848,794 | ||||||
6.00%, due 8/15/32 | 205,765 | 228,203 | ||||||
6.00%, due 12/15/32 | 86,577 | 94,001 | ||||||
6.50%, due 8/15/28 | 77,753 | 84,733 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) |
| |||||||
Government National Mortgage Association | ||||||||
6.50%, due 4/15/31 | $ | 199,914 | $ | 226,082 | ||||
|
| |||||||
1,481,813 | ||||||||
|
| |||||||
United States Treasury Notes 4.2% | ||||||||
1.75%, due 9/30/22 | 4,880,000 | 4,799,747 | ||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 13,728,224 | |||||||
|
| |||||||
TotalLong-Term Bonds | 112,931,305 | |||||||
|
| |||||||
Short-Term Investment 1.7% |
| |||||||
U.S. Government & Federal Agencies 1.7% |
| |||||||
Federal Home Loan Bank Discount Notes | 2,000,000 | 2,000,000 | ||||||
|
| |||||||
TotalShort-Term Investment | 2,000,000 | |||||||
|
| |||||||
Total Investments | 100.3 | % | 114,931,305 | |||||
Other Assets, Less Liabilities | (0.3 | ) | (319,194 | ) | ||||
Net Assets | 100.0 | % | $ | 114,612,111 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Collateralized Mortgage Obligation Interest Only Strip—Pays a fixed or variable rate of interest based on mortgage loans or mortgage pass-through securities. The principal amount of the underlying pool represents the notional amount on which the current interest was calculated. The value of these stripped securities may be particularly sensitive to changes in prevailing interest rates and are typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities. |
As of April 30, 2019, the Fund held the following futures contracts1:
Type | Number of Contracts | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
Short Contracts | ||||||||||||||||||||
United States Treasury Long Bond | (30 | ) | June 2019 | $ | (4,424,930 | ) | $ | (4,424,063 | ) | $ | 867 | |||||||||
|
|
1. | As of April 30, 2019, cash in the amount of $76,500 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2019. |
The following abbreviations are used in the preceding pages:
AGM—Assured Guaranty Municipal Corp.
BAM—Build America Mutual Assurance Co.
IO—Interest Only
14 | MainStay MacKay Infrastructure Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets and liabilities:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 887,769 | $ | — | $ | 887,769 | ||||||||
Corporate Bonds | — | 8,486,176 | — | 8,486,176 | ||||||||||||
Municipal Bonds | — | 89,829,136 | — | 89,829,136 | ||||||||||||
U.S. Government & Federal Agencies | — | 13,728,224 | — | 13,728,224 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds | — | 112,931,305 | — | 112,931,305 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
U.S. Government & Federal Agencies | — | 2,000,000 | — | 2,000,000 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | — | 114,931,305 | — | 114,931,305 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts (b) | 867 | — | — | 867 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 867 | $ | 114,931,305 | $ | — | $ | 114,932,172 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown in the Portfolio of Investments. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2018 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers into Level 3 | Transfers out of Level 3 | Balance as of April 30, 2019 | Change in 2019 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | $ | 816,243 | $ | 235 | $ | (72,720 | ) | $ | 32,697 | $ | — | $ | (776,455 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 816,243 | $ | 235 | $ | (72,720 | ) | $ | 32,697 | $ | — | $ | (776,455 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 114,931,305 | ||
Cash | 344,603 | |||
Cash collateral on deposit at broker for futures contracts | 76,500 | |||
Receivables: | ||||
Interest | 1,145,780 | |||
Investment securities sold | 1,002,560 | |||
Fund shares sold | 368,807 | |||
Other assets | 51,967 | |||
|
| |||
Total assets | 117,921,522 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 3,000,000 | |||
Fund shares redeemed | 115,551 | |||
Transfer agent (See Note 3) | 42,628 | |||
Professional fees | 32,808 | |||
NYLIFE Distributors (See Note 3) | 31,298 | |||
Shareholder communication | 26,229 | |||
Manager (See Note 3) | 25,137 | |||
Variation margin on futures contracts | 15,000 | |||
Custodian | 5,163 | |||
Trustees | 228 | |||
Accrued expenses | 75 | |||
Dividend payable | 15,294 | |||
|
| |||
Total liabilities | 3,309,411 | |||
|
| |||
Net assets | $ | 114,612,111 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 139,793 | ||
Additional paid-in capital | 114,256,684 | |||
|
| |||
114,396,477 | ||||
Total distributable earnings (loss) | 215,634 | |||
|
| |||
Net assets | $ | 114,612,111 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 67,833,721 | ||
|
| |||
Shares of beneficial interest outstanding | 8,287,818 | |||
|
| |||
Net asset value per share outstanding | $ | 8.18 | ||
Maximum sales charge (4.50% of offering price) | 0.39 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.57 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 20,970,849 | ||
|
| |||
Shares of beneficial interest outstanding | 2,551,040 | |||
|
| |||
Net asset value per share outstanding | $ | 8.22 | ||
Maximum sales charge (4.50% of offering price) | 0.39 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.61 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 2,767,775 | ||
|
| |||
Shares of beneficial interest outstanding | 338,117 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.19 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 13,219,746 | ||
|
| |||
Shares of beneficial interest outstanding | 1,615,723 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.18 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 9,820,020 | ||
|
| |||
Shares of beneficial interest outstanding | 1,186,629 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.28 | ||
|
|
16 | MainStay MacKay Infrastructure 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 Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 1,824,293 | ||
Dividends—affiliated | 32,819 | |||
|
| |||
Total income | 1,857,112 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 274,131 | |||
Distribution/Service—Class A (See Note 3) | 84,224 | |||
Distribution/Service—Investor Class (See Note 3) | 25,784 | |||
Distribution/Service—Class B (See Note 3) | 14,747 | |||
Distribution/Service—Class C (See Note 3) | 62,348 | |||
Transfer agent (See Note 3) | 122,976 | |||
Registration | 42,554 | |||
Professional fees | 34,294 | |||
Shareholder communication | 15,873 | |||
Custodian | 14,137 | |||
Trustees | 1,378 | |||
Miscellaneous | 5,570 | |||
|
| |||
Total expenses before waiver/reimbursement | 698,016 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (70,866 | ) | ||
|
| |||
Net expenses | 627,150 | |||
|
| |||
Net investment income (loss) | 1,229,962 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts |
| |||
Net realized gain (loss) on unaffiliated investments | 1,171,583 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 2,261,471 | |||
Futures contracts | 867 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 2,262,338 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | 3,433,921 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 4,663,883 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,229,962 | $ | 2,472,097 | ||||
Net realized gain (loss) on investments and futures contracts | 1,171,583 | (1,466,663 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 2,262,338 | (4,072,054 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 4,663,883 | (3,066,620 | ) | |||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (840,360 | ) | (1,745,008 | ) | ||||
Investor Class | (224,121 | ) | (451,882 | ) | ||||
Class B | (21,286 | ) | (49,618 | ) | ||||
Class C | (93,271 | ) | (101,506 | ) | ||||
Class I | (80,430 | ) | (152,092 | ) | ||||
|
| |||||||
Total distributions to shareholders | (1,259,468 | ) | (2,500,106 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 19,636,664 | 5,392,265 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,180,455 | 2,316,879 | ||||||
Cost of shares redeemed | (14,729,314 | ) | (25,167,407 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 6,087,805 | (17,458,263 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 9,492,220 | (23,024,989 | ) | |||||
Net Assets | ||||||||
Beginning of period | 105,119,891 | 128,144,880 | ||||||
|
| |||||||
End of period | $ | 114,612,111 | $ | 105,119,891 | ||||
|
|
18 | MainStay MacKay Infrastructure Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 7.93 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.10 | 0.19 | 0.17 | 0.17 | 0.20 | 0.21 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | (0.40 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.35 | (0.21 | ) | (0.05 | ) | 0.22 | 0.10 | 0.29 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.19 | ) | (0.18 | ) | (0.17 | ) | (0.20 | ) | (0.21 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.10 | ) | (0.19 | ) | (0.18 | ) | (0.17 | ) | (0.22 | ) | (0.23 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.18 | $ | 7.93 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.44 | % | (2.54 | %) | (0.60 | %) | 2.60 | % | 1.17 | % | 3.46 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.44 | %†† | 2.31 | % | 2.07 | % | 1.99 | %(c) | 2.38 | % | 2.47 | % | ||||||||||||||||
Net expenses (d) | 0.94 | %†† | 1.00 | % | 1.00 | % | 0.98 | %(e) | 1.00 | % | 0.98 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.06 | %†† | 1.04 | % | 1.00 | % | 0.99 | % | 1.00 | % | 0.98 | % | ||||||||||||||||
Portfolio turnover rate (f) | 119 | % | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 67,834 | $ | 68,269 | $ | 82,828 | $ | 93,242 | $ | 90,119 | $ | 100,212 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 7.97 | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | $ | 8.60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.16 | 0.15 | 0.15 | 0.18 | 0.19 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | (0.39 | ) | (0.23 | ) | 0.05 | (0.10 | ) | 0.08 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.34 | (0.23 | ) | (0.08 | ) | 0.20 | 0.08 | 0.27 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.16 | ) | (0.15 | ) | (0.15 | ) | (0.18 | ) | (0.19 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.16 | ) | (0.15 | ) | (0.15 | ) | (0.20 | ) | (0.21 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.22 | $ | 7.97 | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.25 | % | (2.72 | %) | (0.91 | %) | 2.34 | % | 0.88 | % | 3.15 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.12 | %†† | 1.98 | % | 1.77 | % | 1.74 | %(c) | 2.11 | % | 2.19 | % | ||||||||||||||||
Net expenses (d) | 1.27 | %†† | 1.33 | % | 1.30 | % | 1.23 | %(e) | 1.28 | % | 1.26 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.41 | %†† | 1.44 | % | 1.30 | % | 1.24 | % | 1.28 | % | 1.26 | % | ||||||||||||||||
Portfolio turnover rate (f) | 119 | % | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 20,971 | $ | 21,012 | $ | 24,187 | $ | 40,094 | $ | 42,444 | $ | 45,947 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.73%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.24%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 7.94 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.06 | 0.10 | 0.08 | 0.08 | 0.12 | 0.12 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | (0.39 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.31 | (0.29 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.06 | ) | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.19 | $ | 7.94 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 3.90 | % | (3.46 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.38 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.36 | %†† | 1.23 | % | 1.01 | % | 0.99 | %(c) | 1.35 | % | 1.44 | % | ||||||||||||||||
Net expenses (d) | 2.02 | %†† | 2.08 | % | 2.05 | % | 1.98 | %(e) | 2.03 | % | 2.01 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.16 | %†† | 2.19 | % | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | ||||||||||||||||
Portfolio turnover rate (f) | 119 | % | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,768 | $ | 3,224 | $ | 4,730 | $ | 7,154 | $ | 8,363 | $ | 10,550 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 7.93 | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | $ | 8.56 | ||||||||||||||||
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| |||||||||||||||||
Net investment income (loss) (a) | 0.06 | 0.10 | 0.08 | 0.08 | 0.12 | 0.12 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | (0.39 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | |||||||||||||||||||
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|
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| |||||||||||||||||
Total from investment operations | 0.31 | (0.29 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | ||||||||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
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|
|
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| |||||||||||||||||
Total dividends and distributions | (0.06 | ) | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||||
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| |||||||||||||||||
Net asset value at end of period | $ | 8.18 | $ | 7.93 | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | ||||||||||||||||
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| |||||||||||||||||
Total investment return (b) | 3.90 | % | (3.46 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.39 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.38 | %†† | 1.23 | % | 1.00 | % | 0.99 | %(c) | 1.34 | % | 1.44 | % | ||||||||||||||||
Net expenses (d) | 2.02 | %†† | 2.08 | % | 2.05 | % | 1.98 | %(e) | 2.03 | % | 2.01 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.16 | %†† | 2.19 | % | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | ||||||||||||||||
Portfolio turnover rate (f) | 119 | % | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,220 | $ | 7,612 | $ | 9,472 | $ | 19,338 | $ | 17,073 | $ | 11,226 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
20 | MainStay MacKay Infrastructure Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.02 | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | $ | 8.65 | ||||||||||||||||
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|
|
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|
| |||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.21 | 0.20 | 0.19 | 0.22 | 0.23 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.26 | (0.40 | ) | (0.22 | ) | 0.05 | (0.09 | ) | 0.09 | |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.37 | (0.19 | ) | (0.02 | ) | 0.24 | 0.13 | 0.32 | ||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.21 | ) | (0.20 | ) | (0.19 | ) | (0.23 | ) | (0.24 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.21 | ) | (0.20 | ) | (0.19 | ) | (0.25 | ) | (0.26 | ) | ||||||||||||||||
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|
|
|
|
|
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|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.28 | $ | 8.02 | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.65 | % | (2.26 | %) | (0.23 | %) | 2.83 | % | 1.41 | % | 3.69 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.70 | %†† | 2.56 | % | 2.33 | % | 2.16 | %(c) | 2.57 | % | 2.70 | % | ||||||||||||||||
Net expenses (d) | 0.69 | %†† | 0.75 | % | 0.75 | % | 0.73 | %(e) | 0.75 | % | 0.73 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.81 | %†† | 0.79 | % | 0.75 | % | 0.74 | % | 0.75 | % | 0.73 | % | ||||||||||||||||
Portfolio turnover rate (f) | 119 | % | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 9,820 | $ | 5,003 | $ | 6,926 | $ | 14,061 | $ | 4,492 | $ | 10,020 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 2.15%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.74%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Infrastructure Bond Fund (formerly known as MainStay MacKay Government Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has six classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R6 shares were registered for sale effective as of February 28, 2017. As of April 30, 2019, Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $250,000 or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. Investments in Class C shares are subject to a purchase maximum of $250,000. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to
either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A and Investor Class shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices
22 | MainStay MacKay Infrastructure Bond Fund |
on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of
23 |
Notes to Financial Statements(Unaudited) (continued)
convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase(“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty
in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends from net investment income, if any, daily and intends to pay them at least monthly and pays distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and
24 | MainStay MacKay Infrastructure Bond Fund |
amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(H) Dollar Rolls. The Fund may enter into dollar roll transactions in which it sells mortgage-backed securities (“MBS”) from its portfolio to a counterparty from whom it simultaneously agrees to buy a similar security on a delayed delivery basis. The Fund generally transfers MBS where the MBS are “to be announced,” therefore, the Fund accounts for these transactions as purchases and sales.
When accounted for as purchase and sales, the securities sold in connection with the dollar rolls are removed from the portfolio and a realized gain or loss is recognized. The securities the Fund has agreed to acquire are included at market value in the Portfolio of Investments and liabilities for such purchase commitments are included as payables for investments purchased. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future as well as by the earnings on the cash proceeds of the initial sale. Dollar rolls may be renewed without physical delivery of the securities subject to the contract. The Fund maintains liquid assets from its portfolio having a value not less than the repurchase price, including accrued interest. Dollar roll transactions involve certain risks, including the risk that the securities returned to the Fund at the end of the roll period, while substantially similar, could be inferior to what was initially sold to the counterparty. The Fund accounts for a dollar roll transaction as a purchase and sale whereby the difference in the sales price and purchase price of the security sold is recorded as a realized gain (loss).
(I) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures
25 |
Notes to Financial Statements(Unaudited) (continued)
contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2019, open futures contracts are shown in the Portfolio of Investments.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund did not have any portfolio securities on loan.
(K) Government, Infrastructure Investment and Municipal Bond Risk. Investments in the Fund are not guaranteed, even though some of the Fund’s underlying investments are guaranteed by the U.S. government or its agencies or instrumentalities. The principal risk of mortgage-related and asset-backed securities is that the underlying debt may be prepaid ahead of schedule, if interest rates fall, thereby reducing the value of the Fund’s investment. If interest rates rise, less of the debt may be prepaid and the Fund may lose money because the Fund may be unable to invest in higher yielding assets. The Fund is
subject to interest-rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, in which the bond issuer may fail to pay interest and principal in a timely manner.
The Fund’s investments in infrastructure-related securities will expose the Fund to potential adverse economic, regulatory, political, legal and other changes affecting such investments. Issuers of securities in infrastructure-related businesses are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, high leverage, costs associated with environmental or other regulations and the effects of economic slowdowns. Rising interest rates could lead to higher financing costs and reduced earnings for infrastructure companies.
Municipal bond risks include the inability of the issuer to repay the obligation, the relative lack of information about certain issuers, and the possibility of future tax and legislative changes, which could affect the market for and value of municipal securities.
Municipalities continue to experience political, economic and financial difficulties in the current economic environment. The ability of a municipal issuer to make payments and the value of municipal bonds can be affected by uncertainties in the municipal securities market. Such uncertainties could cause increased volatility in the municipal securities market and could negatively impact the Fund’s net asset value, and/or the distributions paid by the Fund.
(L) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(M) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. These derivatives are not accounted for as hedging instruments.
26 | MainStay MacKay Infrastructure Bond Fund |
Fair value of derivative instruments as of April 30, 2019:
Asset Derivatives
Statement of Assets and Liabilities Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net Assets— Net unrealized appreciation on investments and futures contracts (a) | $ | 867 | $ | 867 | |||||
|
| |||||||||
Total Fair Value | $ | 867 | $ | 867 | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019:
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 867 | $ | 867 | |||||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 867 | $ | 867 | ||||||
|
|
Average Notional Amount
Interest Rate Contracts | Total | |||||||
Futures Contracts Short (a) | $(4,424,063) | $ | (4,424,063 | ) | ||||
|
|
|
(a) | Positions were open less than one month during the reporting period. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance
Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.50% up to $500 million; 0.475% from $500 million to $1 billion; and 0.45% in excess of $1 billion. During the six-month period ended April 30, 2019, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.50%.
Effective February 28, 2019, New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for Class A shares do not exceed 0.85% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund, except for Class R6. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
Prior to February 28, 2019, New York Life Investments had contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for Class A shares did not exceed 1.00% of its average daily net assets. New York Life Investments would apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund, except for Class R6. New York Life Investments had also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 did not exceed those of Class I.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $274,131 and waived fees/reimbursed expenses in the amount of $70,866.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments.
27 |
Notes to Financial Statements(Unaudited) (continued)
These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $1,222 and $1,107, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $46, $56, $1,926 and $179, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 38,197 | ||
Investor Class | 46,756 | |||
Class B | 6,704 | |||
Class C | 27,816 | |||
Class I | 3,503 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 1,801 | $ | 62,888 | $ | (64,689 | ) | $ | — | $ | — | $ | — | $ | 33 | $ | — | — |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 113,185,360 | $ | 1,849,580 | $ | (103,635 | ) | $ | 1,745,945 |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $2,664,406 were available as shown in the table
below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $845 | $1,819 |
28 | MainStay MacKay Infrastructure Bond Fund |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 2,500,106 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of U.S. government securities were $34,918 and $118,204, respectively. Purchases and sales of securities, other than U.S. government securities andshort-term securities, were $100,769 and $7,869, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 220,596 | $ | 1,782,064 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 95,973 | 776,557 | ||||||
Shares redeemed | (695,641 | ) | (5,606,148 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (379,072 | ) | (3,047,527 | ) | ||||
Shares converted into Class A | 87,599 | 706,310 | ||||||
Shares converted from Class A | (24,463 | ) | (200,107 | ) | ||||
|
| |||||||
Net increase (decrease) | (315,936 | ) | $ | (2,541,324 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 207,443 | $ | 1,680,510 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 198,448 | 1,609,156 | ||||||
Shares redeemed | (1,828,879 | ) | (14,888,704 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,422,988 | ) | (11,599,038 | ) | ||||
Shares converted into Class A | 138,473 | 1,123,106 | ||||||
Shares converted from Class A | (58,839 | ) | (475,124 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,343,354 | ) | $ | (10,951,056 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 31,129 | $ | 252,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 26,629 | 216,483 | ||||||
Shares redeemed | (161,224 | ) | (1,304,129 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (103,466 | ) | (835,028 | ) | ||||
Shares converted into Investor Class | 70,292 | 572,746 | ||||||
Shares converted from Investor Class | (52,357 | ) | (423,700 | ) | ||||
|
| |||||||
Net increase (decrease) | (85,531 | ) | $ | (685,982 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 82,740 | $ | 675,433 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 53,673 | 437,016 | ||||||
Shares redeemed | (377,584 | ) | (3,081,823 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (241,171 | ) | (1,969,374 | ) | ||||
Shares converted into Investor Class | 96,421 | 783,567 | ||||||
Shares converted from Investor Class | (111,225 | ) | (906,001 | ) | ||||
|
| |||||||
Net increase (decrease) | (255,975 | ) | $ | (2,091,808 | ) | |||
|
| |||||||
29 |
Notes to Financial Statements(Unaudited) (continued)
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 6,605 | $ | 53,414 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,415 | 19,549 | ||||||
Shares redeemed | (47,748 | ) | (384,151 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (38,728 | ) | (311,188 | ) | ||||
Shares converted from Class B | (29,398 | ) | (236,687 | ) | ||||
|
| |||||||
Net increase (decrease) | (68,126 | ) | $ | (547,875 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 13,090 | $ | 106,303 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,700 | 46,265 | ||||||
Shares redeemed | (115,760 | ) | (941,872 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (96,970 | ) | (789,304 | ) | ||||
Shares converted from Class B | (64,751 | ) | (525,548 | ) | ||||
|
| |||||||
Net increase (decrease) | (161,721 | ) | $ | (1,314,852 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,053,119 | $ | 8,438,101 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,865 | 88,011 | ||||||
Shares redeemed | (355,975 | ) | (2,871,136 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 708,009 | 5,654,976 | ||||||
Shares converted from Class C | (51,770 | ) | (418,562 | ) | ||||
|
| |||||||
Net increase (decrease) | 656,239 | $ | 5,236,414 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 216,696 | $ | 1,741,803 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,834 | 87,818 | ||||||
Shares redeemed | (405,938 | ) | (3,300,912 | ) | ||||
|
| |||||||
Net increase (decrease) | (178,408 | ) | $ | (1,471,291 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,113,097 | $ | 9,110,467 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 9,741 | 79,855 | ||||||
Shares redeemed | (559,838 | ) | (4,563,750 | ) | ||||
|
| |||||||
Net increase (decrease) | 563,000 | $ | 4,626,572 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 143,403 | $ | 1,188,216 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 16,667 | 136,624 | ||||||
Shares redeemed | (359,405 | ) | (2,954,096 | ) | ||||
|
| |||||||
Net increase (decrease) | (199,335 | ) | $ | (1,629,256 | ) | |||
|
|
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
30 | MainStay MacKay Infrastructure Bond Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay Government Fund (now known as the MainStay MacKay Infrastructure Bond Fund) (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior
management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. The Board also took into account New York Life Investments’ proposal to reposition the Fund, effective on or about February 28, 2019. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except
for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also
32 | MainStay MacKay Infrastructure Bond Fund |
considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions. In considering the investment performance of the Fund, the Board noted that the Fund underperformed its peer funds over various periods. The Board considered its discussions with representatives from New York Life Investments and MacKay regarding the Fund’s investment performance relative to that of its benchmark index and peer funds.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and
MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard
33 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to
intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight
34 | MainStay MacKay Infrastructure Bond Fund |
showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
35 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
36 | MainStay MacKay Infrastructure Bond Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737431 MS065-19 | MSG10-06/19 (NYLIM) NL211 |
MainStay MacKay International Equity Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One | Five | Ten | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | 2.26 8.21 | %
| | –7.64 –2.27 | %
| | 2.80 3.97 | %
| | 6.21 6.81 | %
| | 1.32 1.32 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 2.07 8.01 |
| | –7.98 –2.63 |
| | 2.44 3.60 | | | 5.86 6.46 | | | 1.70 1.70 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 9/13/1994 | | 2.61 7.61 |
| | –8.12 –3.34 | | | 2.48 2.84 | | | 5.66 5.66 | | | 2.44 2.44 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 6.61 7.61 |
| | –4.30 –3.34 | | | 2.82 2.82 | | | 5.66 5.66 | | | 2.44 2.44 |
| ||||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 8.36 | –2.02 | 4.22 | 7.07 | 1.07 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | 8.28 | –2.15 | 4.12 | 6.97 | 1.17 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | 8.13 | –2.38 | 3.87 | 6.71 | 1.42 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 8.00 | –2.63 | 3.60 | 6.43 | 1.67 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2019 | 3.53 | N/A | N/A | N/A | 1.00 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five | Ten Years | ||||||||||||
MSCI ACWI® Ex U.S. Index4 | 9.12 | % | –3.23 | % | 2.83 | % | 7.75 | % | ||||||||
MSCI EAFE® Index5 | 7.45 | –3.22 | 2.60 | 7.95 | ||||||||||||
Morningstar Foreign Large Growth Category Average6 | 11.28 | –0.11 | 4.44 | 9.22 |
4. | The Fund has selected the MSCI ACWI® (All Country World Index) Ex U.S. Index as its primary broad-based securities market index for comparison purposes. The MSCI ACWI® Ex U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the U.S. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI EAFE® Index is the Fund’s secondary benchmark. The MSCI EAFE® Index consists of international stocks representing the developed world outside of North America. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Foreign Large Growth Category Average is representative of funds that focus on high-priced growth stocks, mainly outside of the United States. Most of these portfolios divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These portfolios primarily invest in stocks that have market caps in the top 70% of each economically integrated market and will have less than 20% of assets invested in U.S. stocks. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay International Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay International Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,082.10 | $ | 6.25 | $ | 1,018.79 | $ | 6.06 | 1.21% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,080.10 | $ | 8.36 | $ | 1,016.76 | $ | 8.10 | 1.62% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,076.10 | $ | 12.20 | $ | 1,013.04 | $ | 11.83 | 2.37% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,076.10 | $ | 12.20 | $ | 1,013.04 | $ | 11.83 | 2.37% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,083.60 | $ | 4.86 | $ | 1,020.13 | $ | 4.71 | 0.94% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,082.80 | $ | 5.84 | $ | 1,019.19 | $ | 5.66 | 1.13% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,081.30 | $ | 6.81 | $ | 1,018.25 | $ | 6.61 | 1.32% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,080.00 | $ | 8.10 | $ | 1,017.01 | $ | 7.85 | 1.57% | |||||||||||
Class R6 Shares3,4 | $ | 1,000.00 | $ | 1,035.30 | $ | 1.41 | $ | 1,006.97 | $ | 1.39 | 0.83% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period) and 61 days for Class R6 share (to reflect the since-inception period. The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
3. | The inception date was February 28, 2019 . |
4. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2019. Had these shares been offered for the full six-month period ended April 30, 2019, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $4.16 for Class R6 shares and the ending account value would have been $1,020.68 for Class R6 shares. |
7 |
Country Composition as of April 30, 2019(Unaudited)
United Kingdom | 19.8 | % | ||
Japan | 14.1 | |||
Germany | 8.3 | |||
Netherlands | 7.8 | |||
Ireland | 6.5 | |||
Spain | 5.2 | |||
Switzerland | 5.2 | |||
Canada | 4.9 | |||
India | 3.8 | |||
Sweden | 3.4 |
France | 3.1 | % | ||
China | 3.0 | |||
Italy | 3.0 | |||
United States | 2.9 | |||
Denmark | 2.3 | |||
Taiwan | 1.6 | |||
Mexico | 1.4 | |||
Other Assets, Less Liabilities | 3.7 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Holdings as of April 30, 2019 (excluding short-term investment) (Unaudited)
1. | ICON PLC |
2. | Hexagon AB, Class B |
3. | Koninklijke Philips N.V. |
4. | Prudential PLC |
5. | TE Connectivity, Ltd. |
6. | Teleperformance S.E. |
7. | Tencent Holdings, Ltd. |
8. | Johnson Matthey PLC |
9. | Accenture PLC, Class A |
10. | Fresenius Medical Care A.G. & Co. KGaA |
8 | MainStay MacKay International Equity Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Carlos Garcia-Tunon, CFA, Ian Murdoch, CFA, and Lawrence Rosenberg, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay International Equity Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay International Equity Fund returned 8.36%, underperforming the 9.12% return of the Fund’s primary benchmark, the MSCI ACWI® Ex U.S. Index, while outperforming the 7.45% return of the Fund’s secondary benchmark, the MSCI EAFE® Index. Over the same period, Class I shares underperformed the 11.28% return of the Morningstar Foreign Large Growth Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The Fund underperformed its primary benchmark, the MSCI ACWI® Ex U.S. Index, during the reporting period primarily due to stock selection on a sector basis, particularly in the consumer discretionary, consumer staples and information technology areas. Stock selection on a country basis also detracted from relative performance to a lesser degree.
During the reporting period, which sectors and/or countries were the strongest positive contributors to the Fund’s relative performance and which were particularly weak?
During the reporting period, the strongest positive contributors to the Fund’s relative performance included the industrials, financials and materials sectors. (Contributions take weightings and total returns into account.) During the same period, the weakest contributors to relative performance included the consumer discretionary, consumer staples and health care sectors. On a country basis, the strongest contributors to Fund performance included the U.K., Canada and France, while Japan, Germany and Hong Kong were the weakest contributors.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
During the reporting period, the individual stocks that made the strongest positive contributions to the Fund’s absolute perform-
ance included Chinese Internet value-added service provider Tencent, U.K. interventional, medicine-focused health care company BTG, and Swiss connectivity and sensor solutions manufacturer TE Connectivity. The Fund’s greatest detractors in terms of absolute contributions during the same period included Japanese online apparel shopping site operator ZOZO, U.K. medical technology company LivaNova, and German Internet payment & processing firm Wirecard.
What were some of the Fund’s largest purchases and sales during the reporting period?
Over the reporting period, the Fund made its largest initial purchase in U.K.-domiciled multinational food caterer Compass Group, and made its largest addition to an existing position in French customer relationship management services firm Teleperformance. The Fund made its largest full sale in Wirecard, mentioned above, while significantly reducing the size of its position in Spanish manufacturer of blood plasma derivatives Grifols.
How did the Fund’s sector and/or country weightings change during the reporting period?
During the reporting period, the Fund saw its largest increases in sector exposure relative to the MSCI ACWI® Ex U.S. Index in the materials and industrials sectors. Conversely, the Fund’s largest sector decreases relative to the benchmark occurred in the consumer discretionary and health care sectors. During the same period, the Fund increased its benchmark-relative country exposure most significantly in Japan, the Netherlands and Italy, while notably decreasing country exposure to the U.K., Germany and Spain.
How was the Fund positioned at the end of the reporting period?
Relative to the MSCI ACWI® Ex U.S. Index, the Fund ended the reporting period holding its most overweight sector exposure to health care and technology, and its most underweight sector exposure to energy and financials.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Shares | Value | |||||||
Common Stocks 95.8%† |
| |||||||
Canada 4.9% |
| |||||||
Bank of Nova Scotia (Banks) | 161,951 | $ | 8,918,971 | |||||
Constellation Software, Inc. (Software) | 7,919 | 6,987,245 | ||||||
|
| |||||||
15,906,216 | ||||||||
|
| |||||||
China 3.0% |
| |||||||
Tencent Holdings, Ltd. (Interactive Media & Services) | 199,284 | 9,856,490 | ||||||
|
| |||||||
Denmark 2.3% |
| |||||||
Novo Nordisk A/S, Class B (Pharmaceuticals) | 151,515 | 7,409,241 | ||||||
|
| |||||||
France 3.1% |
| |||||||
Teleperformance S.E. (Professional Services) | 51,829 | 9,957,915 | ||||||
|
| |||||||
Germany 8.3% |
| |||||||
Fresenius Medical Care A.G. & Co. KGaA (Health Care Providers & Services) | 115,055 | 9,673,270 | ||||||
Scout24 A.G. (Interactive Media & Services) (a) | 168,285 | 8,663,559 | ||||||
United Internet A.G., Registered (Diversified Telecommunication Services) | 215,426 | 8,633,151 | ||||||
|
| |||||||
26,969,980 | ||||||||
|
| |||||||
India 3.8% |
| |||||||
Housing Development Finance Corp., Ltd. (Thrifts & Mortgage Finance) | 300,566 | 8,623,467 | ||||||
Yes Bank, Ltd. (Banks) | 1,522,390 | 3,649,818 | ||||||
|
| |||||||
12,273,285 | ||||||||
|
| |||||||
Ireland 6.5% |
| |||||||
Accenture PLC, Class A (IT Services) | 53,460 | 9,765,538 | ||||||
ICON PLC (Life Sciences Tools & Services) (b) | 82,458 | 11,262,114 | ||||||
|
| |||||||
21,027,652 | ||||||||
|
| |||||||
Italy 3.0% |
| |||||||
Banca IFIS S.p.A. (Diversified Financial Services) (c) | 241,794 | 4,168,287 | ||||||
DiaSorin S.p.A. (Health Care Equipment & Supplies) | 56,186 | 5,488,889 | ||||||
|
| |||||||
9,657,176 | ||||||||
|
| |||||||
Japan 14.1% |
| |||||||
CyberAgent, Inc. (Media) (d) | 120,900 | 4,834,678 | ||||||
Lion Corp. (Household Products) (d) | 267,900 | 5,520,360 | ||||||
Relo Group, Inc. (Real Estate Management & Development) (c)(d) | 235,800 | 6,386,254 | ||||||
Takeda Pharmaceutical Co., Ltd. (Pharmaceuticals) (d) | 114,221 | 4,234,600 | ||||||
TechnoPro Holdings, Inc. (Professional Services) (d) | 105,900 | 6,360,925 | ||||||
Tsuruha Holdings, Inc. (Food & Staples Retailing) (d) | 108,388 | 9,247,262 |
Shares | Value | |||||||
Japan (continued) |
| |||||||
ZOZO, Inc. (Internet & Direct Marketing Retail) (d) | 517,396 | $ | 9,168,676 | |||||
|
| |||||||
45,752,755 | ||||||||
|
| |||||||
Mexico 1.4% |
| |||||||
Regional S.A.B. de C.V. (Banks) | 864,239 | 4,677,291 | ||||||
|
| |||||||
Netherlands 7.8% |
| |||||||
GrandVision N.V. (Specialty Retail) (a) | 163,725 | 3,683,699 | ||||||
IMCD N.V. (Trading Companies & Distributors) | 86,703 | 7,001,722 | ||||||
Koninklijke DSM N.V. (Chemicals) | 35,015 | 3,999,939 | ||||||
Koninklijke Philips N.V. (Health Care Equipment & Supplies) | 244,305 | 10,402,889 | ||||||
|
| |||||||
25,088,249 | ||||||||
|
| |||||||
Spain 5.2% |
| |||||||
Amadeus IT Group S.A. (IT Services) | 85,181 | 6,775,630 | ||||||
Grifols S.A. (Biotechnology) | 29,817 | 827,374 | ||||||
Industria de Diseno Textil S.A. (Specialty Retail) (c) | 300,965 | 9,104,061 | ||||||
|
| |||||||
16,707,065 | ||||||||
|
| |||||||
Sweden 3.4% |
| |||||||
Hexagon AB, Class B (Electronic Equipment, Instruments & Components) | 198,751 | 10,840,412 | ||||||
|
| |||||||
Switzerland 5.2% |
| |||||||
Sika A.G., Registered (Chemicals) | 44,094 | 6,750,738 | ||||||
TE Connectivity, Ltd. (Electronic Equipment, Instruments & Components) | 105,231 | 10,065,345 | ||||||
|
| |||||||
16,816,083 | ||||||||
|
| |||||||
Taiwan 1.6% |
| |||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Semiconductors & Semiconductor Equipment) | 121,784 | 5,336,575 | ||||||
|
| |||||||
United Kingdom 19.8% |
| |||||||
Big Yellow Group PLC (Equity Real Estate Investment Trusts) | 300,470 | 4,078,773 | ||||||
BTG PLC (Pharmaceuticals) (b) | 370,472 | 4,036,264 | ||||||
Compass Group PLC (Hotels, Restaurants & Leisure) | 341,974 | 7,772,633 | ||||||
Experian PLC (Professional Services) | 218,800 | 6,348,264 | ||||||
HomeServe PLC (Commercial Services & Supplies) | 427,436 | 6,047,537 | ||||||
Johnson Matthey PLC (Chemicals) | 225,824 | 9,826,616 | ||||||
LivaNova PLC (Health Care Equipment & Supplies) (b) | 95,543 | 6,581,957 | ||||||
Prudential PLC (Insurance) | 448,995 | 10,158,245 | ||||||
St. James’s Place PLC (Capital Markets) | 566,956 | 8,291,370 | ||||||
Whitbread PLC (Hotels, Restaurants & Leisure) | 12,794 | 744,079 | ||||||
|
| |||||||
63,885,738 | ||||||||
|
|
10 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
United States 2.4% |
| |||||||
Samsonite International S.A. (Textiles, Apparel & Luxury Goods) (a)(b) | 2,678,412 | $ | 7,682,066 | |||||
|
| |||||||
Total Common Stocks | 309,844,189 | |||||||
|
| |||||||
Short-Term Investment 0.5% |
| |||||||
Affiliated Investment Company 0.5% |
| |||||||
United States 0.5% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (e) | 1,544,008 | 1,544,008 | ||||||
|
| |||||||
TotalShort-Term Investment | 1,544,008 | |||||||
|
| |||||||
Total Investments | 96.3 | % | 311,388,197 | |||||
Other Assets, Less Liabilities | 3.7 | 12,077,000 | ||||||
Net Assets | 100.0 | % | $ | 323,465,197 |
† | Percentages indicated are based on Fund net assets. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $10,629,811 and the Fund received non-cash collateral in the form of U.S. Treasury securities with a value of $11,643,280 (See Note 2(I)). |
(d) | Temporarily deemed illiquid due to the extended closure of the Japanese market. |
(e) | Current yield as of April 30, 2019. |
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b) | $ | 264,091,434 | $ | 45,752,755 | $ | — | $ | 309,844,189 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 1,544,008 | — | — | 1,544,008 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 265,635,442 | $ | 45,752,755 | $ | — | $ | 311,388,197 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 2 securities valued at $45,752,755 are temporarily deemed illiquid due to the extended closure of the Japanese market. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
The table below sets forth the diversification of the Fund’s investments by industry.
Industry Diversification
Value | Percent † | |||||||
Banks | $ | 17,246,080 | 5.3 | % | ||||
Biotechnology | 827,374 | 0.2 | ||||||
Capital Markets | 8,291,370 | 2.6 | ||||||
Chemicals | 20,577,293 | 6.4 | ||||||
Commercial Services & Supplies | 6,047,537 | 1.9 | ||||||
Diversified Financial Services | 4,168,287 | 1.3 | ||||||
Diversified Telecommunication Services | 8,633,151 | 2.7 | ||||||
Electronic Equipment, Instruments & Components | 20,905,757 | 6.5 | ||||||
Equity Real Estate Investment Trusts | 4,078,773 | 1.3 | ||||||
Food & Staples Retailing | 9,247,262 | 2.9 | ||||||
Health Care Equipment & Supplies | 22,473,735 | 6.9 | ||||||
Health Care Providers & Services | 9,673,270 | 3.0 | ||||||
Hotels, Restaurants & Leisure | 8,516,712 | 2.6 | ||||||
Household Products | 5,520,360 | 1.7 | ||||||
Insurance | 10,158,245 | 3.1 | ||||||
Interactive Media & Services | 18,520,049 | 5.7 | ||||||
Internet & Direct Marketing Retail | 9,168,676 | 2.8 | ||||||
IT Services | 16,541,168 | 5.1 | ||||||
Life Sciences Tools & Services | 11,262,114 | 3.5 | ||||||
Media | 4,834,678 | 1.5 | ||||||
Pharmaceuticals | 15,680,105 | 4.8 | ||||||
Professional Services | 22,667,104 | 7.0 | ||||||
Real Estate Management & Development | 6,386,254 | 2.0 | ||||||
Semiconductors & Semiconductor Equipment | 5,336,575 | 1.6 | ||||||
Software | 6,987,245 | 2.2 | ||||||
Specialty Retail | 12,787,760 | 3.9 | ||||||
Textiles, Apparel & Luxury Goods | 7,682,066 | 2.4 | ||||||
Thrifts & Mortgage Finance | 8,623,467 | 2.7 | ||||||
Trading Companies & Distributors | 7,001,722 | 2.2 | ||||||
|
|
|
| |||||
309,844,189 | 95.8 | |||||||
Short-Term Investment | 1,544,008 | 0.5 | ||||||
Other Assets, Less Liabilities | 12,077,000 | 3.7 | ||||||
|
|
|
| |||||
Net Assets | $ | 323,465,197 | 100.0 | % | ||||
|
|
|
|
† | Percentages indicated are based on Fund net assets. |
12 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 309,844,189 | ||
Investment in affiliated investment company, at value (identified cost $1,544,008) | 1,544,008 | |||
Cash denominated in foreign currencies (identified cost $10,483,777) | 10,478,560 | |||
Receivables: | ||||
Dividends and interest | 1,503,593 | |||
Fund shares sold | 794,855 | |||
Securities lending income | 2,204 | |||
Other assets | 74,088 | |||
|
| |||
Total assets | 324,241,497 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 389,438 | |||
Manager (See Note 3) | 188,821 | |||
Transfer agent (See Note 3) | 56,552 | |||
Custodian | 47,234 | |||
Shareholder communication | 34,219 | |||
Professional fees | 32,933 | |||
NYLIFE Distributors (See Note 3) | 25,865 | |||
Trustees | 426 | |||
Investment securities purchased | 78 | |||
Accrued expenses | 734 | |||
|
| |||
Total liabilities | 776,300 | |||
|
| |||
Net assets | $ | 323,465,197 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 195,074 | ||
Additional paid-in capital | 299,615,582 | |||
|
| |||
299,810,656 | ||||
Total distributable earnings (loss) | 23,654,541 | |||
|
| |||
Net assets | $ | 323,465,197 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 61,084,245 | ||
|
| |||
Shares of beneficial interest outstanding | 3,684,428 | |||
|
| |||
Net asset value per share outstanding | $ | 16.58 | ||
Maximum sales charge (5.50% of offering price) | 0.96 | |||
|
| |||
Maximum offering price per share outstanding | $ | 17.54 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 24,054,334 | ||
|
| |||
Shares of beneficial interest outstanding | 1,463,553 | |||
|
| |||
Net asset value per share outstanding | $ | 16.44 | ||
Maximum sales charge (5.50% of offering price) | 0.96 | |||
|
| |||
Maximum offering price per share outstanding | $ | 17.40 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 3,900,648 | ||
|
| |||
Shares of beneficial interest outstanding | 268,230 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 14.54 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 5,404,312 | ||
|
| |||
Shares of beneficial interest outstanding | 371,603 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 14.54 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 112,294,359 | ||
|
| |||
Shares of beneficial interest outstanding | 6,727,372 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.69 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 337,877 | ||
|
| |||
Shares of beneficial interest outstanding | 20,361 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.59 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 435,776 | ||
|
| |||
Shares of beneficial interest outstanding | 26,233 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.61 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 987,420 | ||
|
| |||
Shares of beneficial interest outstanding | 60,037 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.45 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 114,966,226 | ||
|
| |||
Shares of beneficial interest outstanding | 6,885,614 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.70 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends-unaffiliated (a) | $ | 2,511,115 | ||
Interest | 9,474 | |||
Securities lending | 6,292 | |||
Dividends-affiliated | 5,008 | |||
|
| |||
Total income | 2,531,889 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,374,294 | |||
Transfer agent (See Note 3) | 169,637 | |||
Distribution/Service—Class A (See Note 3) | 73,564 | |||
Distribution/Service—Investor Class (See Note 3) | 27,620 | |||
Distribution/Service—Class B (See Note 3) | 20,351 | |||
Distribution/Service—Class C (See Note 3) | 32,229 | |||
Distribution/Service—Class R2 (See Note 3) | 621 | |||
Distribution/Service—Class R3 (See Note 3) | 2,350 | |||
Registration | 60,573 | |||
Custodian | 51,846 | |||
Professional fees | 43,102 | |||
Shareholder communication | 21,972 | |||
Trustees | 3,760 | |||
Shareholder service (See Note 3) | 1,106 | |||
Miscellaneous | 15,459 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,898,484 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (226,996 | ) | ||
|
| |||
Net expenses | 1,671,488 | |||
|
| |||
Net investment income (loss) | 860,401 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Unaffiliated investment transactions | 8,516,439 | |||
Foreign currency transactions | (542,659 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 7,973,780 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 15,667,996 | |||
Translation of other assets and liabilities in foreign currencies | 199,967 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 15,867,963 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 23,841,743 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 24,702,144 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $260,379. |
14 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 860,401 | $ | 895,933 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 7,973,780 | 38,217,248 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 15,867,963 | (55,576,108 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 24,702,144 | (16,462,927 | ) | |||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (588,241 | ) | (306,159 | ) | ||||
Investor Class | (216,773 | ) | (44,461 | ) | ||||
Class B | (45,981 | ) | — | |||||
Class C | (75,663 | ) | — | |||||
Class I | (2,235,732 | ) | (1,621,018 | ) | ||||
Class R1 | (20,554 | ) | (17,860 | ) | ||||
Class R2 | (4,901 | ) | (5,543 | ) | ||||
Class R3 | (8,671 | ) | (2,963 | ) | ||||
|
| |||||||
Total distributions to shareholders | (3,196,516 | ) | (1,998,004 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 20,516,364 | 84,138,632 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 3,166,330 | 1,980,858 | ||||||
Cost of shares redeemed | (30,868,926 | ) | (62,141,023 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (7,186,232 | ) | 23,978,467 | |||||
|
| |||||||
Net increase (decrease) in net assets | 14,319,396 | 5,517,536 | ||||||
Net Assets | ||||||||
Beginning of period | 309,145,801 | 303,628,265 | ||||||
|
| |||||||
End of period | $ | 323,465,197 | $ | 309,145,801 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.03 | 0.03 | 0.00 | ‡ | 0.04 | 0.03 | 0.07 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.24 | (0.83 | ) | 2.90 | (0.04 | ) | 0.49 | (0.26 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.25 | (0.81 | ) | 2.91 | 0.01 | 0.49 | (0.23 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.09 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | (0.03 | ) | |||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.09 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | (0.03 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.58 | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.21 | % | (4.98 | %) | 21.59 | % | 0.05 | % | 3.78 | % | (1.76 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.43 | %†† | 0.17 | % | 0.01 | % | 0.28 | %(c) | 0.20 | % | 0.51 | % | ||||||||||||||||
Net expenses (d) | 1.21 | %†† | 1.32 | % | 1.34 | % | 1.32 | %(e) | 1.33 | % | 1.34 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.34 | %†† | — | — | — | — | — | |||||||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 61,084 | $ | 59,304 | $ | 54,553 | $ | 41,891 | $ | 43,405 | $ | 45,882 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.27%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.33%. |
16 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.38 | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | $ | 13.35 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | (0.03 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.03 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.23 | (0.82 | ) | 2.87 | (0.04 | ) | 0.50 | (0.27 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.21 | (0.86 | ) | 2.84 | (0.04 | ) | 0.45 | (0.28 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | — | — | (0.05 | ) | — | ||||||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.03 | ) | — | — | (0.05 | ) | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.44 | $ | 15.38 | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.01 | % | (5.31 | %) | 21.15 | % | (0.30 | %) | 3.43 | % | (2.10 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | %†† | (0.19 | %) | (0.26 | %) | (0.11 | %)(c) | (0.14 | %) | 0.19 | % | ||||||||||||||||
Net expenses (d) | 1.62 | %†† | 1.66 | % | 1.69 | % | 1.69 | % (e) | 1.68 | % | 1.67 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 1.77 | %†† | 1.70 | % | 1.69 | % | 1.69 | % (e) | 1.68 | % | 1.67 | % | ||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 24,054 | $ | 21,679 | $ | 25,029 | $ | 31,523 | $ | 34,329 | $ | 34,377 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.70%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 13.68 | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | $ | 12.26 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.14 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.08 | (0.72 | ) | 2.58 | (0.04 | ) | 0.46 | (0.24 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.01 | (0.87 | ) | 2.45 | (0.13 | ) | 0.32 | (0.35 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 14.54 | $ | 13.68 | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 7.61 | % | (5.98 | %) | 20.25 | % | (1.06 | %) | 2.69 | % | (2.85 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.79 | %)†† | (0.95 | %) | (1.05 | %) | (0.86 | %)(c) | (0.91 | %) | (0.57 | %) | ||||||||||||||||
Net expenses (d) | 2.37 | % †† | 2.41 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.52 | % †† | 2.44 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,901 | $ | 4,404 | $ | 6,210 | $ | 6,991 | $ | 8,982 | $ | 11,058 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.87)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 13.68 | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | $ | 12.26 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.06 | ) | (0.14 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.09 | (0.73 | ) | 2.59 | (0.04 | ) | 0.45 | (0.24 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.03 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.01 | (0.88 | ) | 2.46 | (0.13 | ) | 0.31 | (0.34 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 14.54 | $ | 13.68 | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 7.61 | % | (6.04 | %) | 20.33 | % | (1.06 | %) | 2.60 | % | (2.77 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.88 | %)†† | (0.93 | %) | (1.05 | %) | (0.84 | %)(c) | (0.90 | %) | (0.57 | %) | ||||||||||||||||
Net expenses (d) | 2.37 | % †† | 2.41 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) (d) | 2.52 | % †† | 2.44 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 5,404 | $ | 6,960 | $ | 7,564 | $ | 7,850 | $ | 8,292 | $ | 8,383 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.85)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.57 | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | $ | 13.45 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.02 | 0.07 | 0.05 | 0.07 | 0.06 | 0.11 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.28 | (0.84 | ) | 2.90 | (0.04 | ) | 0.50 | (0.27 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.28 | (0.78 | ) | 2.96 | 0.04 | 0.53 | (0.20 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.13 | ) | (0.07 | ) | (0.04 | ) | (0.13 | ) | (0.06 | ) | ||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.13 | ) | (0.07 | ) | (0.04 | ) | (0.13 | ) | (0.06 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.69 | $ | 15.57 | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.36 | % | (4.80 | %) | 21.94 | % | 0.29 | % | 4.04 | % | (1.49 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.30 | %†† | 0.42 | % | 0.31 | % | 0.54 | %(c) | 0.46 | % | 0.79 | % | ||||||||||||||||
Net expenses (d) | 0.94 | %†† | 1.07 | % | 1.09 | % | 1.07 | %(e) | 1.08 | % | 1.09 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.09 | %†† | — | — | — | — | — | |||||||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 112,295 | $ | 213,030 | $ | 205,009 | $ | 179,274 | $ | 224,307 | $ | 223,797 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.53%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.08%. |
18 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.05 | 0.03 | 0.06 | 0.04 | 0.09 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.27 | (0.83 | ) | 2.89 | (0.05 | ) | 0.50 | (0.27 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.26 | (0.79 | ) | 2.93 | 0.02 | 0.51 | (0.22 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.11 | ) | (0.06 | ) | (0.02 | ) | (0.11 | ) | (0.04 | ) | |||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.11 | ) | (0.06 | ) | (0.02 | ) | (0.11 | ) | (0.04 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.59 | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.28 | % | (4.86 | %) | 21.78 | % | 0.18 | % | 3.95 | % | (1.63 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | %†† | 0.29 | % | 0.21 | % | 0.41 | %(c) | 0.33 | % | 0.66 | % | ||||||||||||||||
Net expenses (d) | 1.13 | %†† | 1.17 | % | 1.19 | % | 1.17 | %(e) | 1.18 | % | 1.19 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.19 | %†† | — | — | — | — | — | |||||||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 338 | $ | 2,109 | $ | 2,616 | $ | 2,478 | $ | 3,032 | $ | 3,597 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.40%. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.18%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.52 | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | $ | 13.40 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | (0.02 | ) | 0.01 | 0.01 | 0.01 | 0.05 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.25 | (0.79 | ) | 2.88 | (0.01 | ) | 0.50 | (0.26 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.00 | ‡ | (0.03 | ) | (0.04 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.24 | (0.82 | ) | 2.90 | 0.00 | ‡ | 0.48 | (0.25 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.08 | ) | (0.02 | ) | — | (0.08 | ) | (0.01 | ) | ||||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.08 | ) | (0.02 | ) | — | (0.08 | ) | (0.01 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.61 | $ | 15.52 | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.13 | % | (5.06 | %)(c) | 21.55 | %(c) | (0.07 | %) | 3.73 | % | (1.88 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.18 | %†† | (0.13 | %) | 0.06 | % | 0.08 | % | 0.11 | % | 0.36 | % | ||||||||||||||||
Net expenses (d) | 1.32 | %†† | 1.42 | % | 1.44 | % | 1.42 | % | 1.43 | % | 1.44 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.44 | %†† | — | — | — | — | — | |||||||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 436 | $ | 602 | $ | 1,201 | $ | 847 | $ | 2,313 | $ | 3,509 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
20 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 15.38 | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | $ | 13.35 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | (0.04 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.02 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.23 | (0.82 | ) | 2.88 | (0.04 | ) | 0.50 | (0.26 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.22 | (0.87 | ) | 2.85 | (0.04 | ) | 0.45 | (0.28 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | — | — | (0.04 | ) | — | ||||||||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.04 | ) | — | — | (0.04 | ) | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 16.45 | $ | 15.38 | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 8.00 | % | (5.39 | %)(c) | 21.21 | % | (0.30 | %) | 3.44 | % | (2.10 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.08 | %†† | (0.21 | %) | (0.27 | %) | (0.11 | %)(d) | (0.15 | %) | 0.17 | % | ||||||||||||||||
Net expenses (e) | 1.57 | %†† | 1.67 | % | 1.69 | % | 1.67 | % (f) | 1.68 | % | 1.69 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.69 | %†† | — | — | — | — | — | |||||||||||||||||||||
Portfolio turnover rate | 25 | % | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 987 | $ | 1,057 | $ | 1,446 | $ | 1,108 | $ | 1,204 | $ | 1,291 |
* | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(e) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(f) | Without the custody fee reimbursement, net expenses would have been 1.68%. |
Class R6 | February 28, 2019* through April 30, 2019** | |||
Net asset value at beginning of period | $ | 16.13 | ||
|
| |||
Net investment income (loss) (a) | 0.11 | |||
Net realized and unrealized gain (loss) on investments | 0.47 | |||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | ||
|
| |||
Total from investment operations | 0.57 | |||
|
| |||
Net asset value at end of period | $ | 16.70 | ||
|
| |||
Total investment return (b) | 3.53 | % | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) | 3.75 | %†† | ||
Net expenses (c) | 0.83 | %†† | ||
Expenses (before waiver/reimbursement) (c) | 1.02 | %†† | ||
Portfolio turnover rate | 25 | % | ||
Net assets at end of period (in 000’s) | $ | 114,966 |
* | Inception date. |
** | Unaudited. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay International Equity Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on September 13, 1994. Class C shares commenced operations on September 1, 1998. Class I, Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 shares of the Fund were registered for sale effective as of February 28, 2017. Class R6 shares commenced operations on February 28, 2019.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the
calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seeklong-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
22 | MainStay MacKay International Equity Fund |
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
23 |
Notes to Financial Statements(Unaudited) (continued)
in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2019, no foreign equity securities held by the Fund were fair valued in such a manner.
Equity securities, including exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor
might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2019, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations
24 | MainStay MacKay International Equity Fund |
that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability in the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may cause the costs of investing in ETFs and mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually
financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $10,629,811 and the Fund receivednon-cash collateral in the form of U.S. Treasury securities with a value of $11,643,280.
(J) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean
25 |
Notes to Financial Statements(Unaudited) (continued)
between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities— at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(K) Foreign Securities Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(L) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses
of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings LLC, the former subadvisor, transitioned to MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life. MacKay Shields serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.89% up to $500 million; and 0.85% in excess of $500 million.
During the six-month period ended April 30, 2019, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.89%.
Effective February 28, 2019, New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) do not exceed the following percentages of average daily net assets: Class I, 0.85% and Class R6, 0.83%. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points of the Class R6 shares waiver/reimbursement to the Class A, Investor Class, Class B, Class C, Class R1, Class R2 and Class R3 shares. This agreement will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
Prior to February 28, 2019, New York Life Investments had contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 would not exceed those of Class I.
New York Life Investments has voluntarily agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time without notice.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $1,374,294 and waived its fees and/or reimbursed expenses in the amount of $226,996.
26 | MainStay MacKay International Equity Fund |
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual
rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 387 | ||
Class R2 | 249 | |||
Class R3 | 470 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $4,289 and $4,221, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $1,540, $1,748 and $156, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 21,022 | ||
Investor Class | 55,233 | |||
Class B | 10,192 | |||
Class C | 16,160 | |||
Class I | 66,247 | |||
Class R1 | 271 | |||
Class R2 | 176 | |||
Class R3 | 336 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 615 | $ | 16,109 | $ | (15,180 | ) | $ | — | $ | — | $ | 1,544 | $ | 5 | $ | — | 1,544 |
27 |
Notes to Financial Statements(Unaudited) (continued)
(G) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R6 | $ | 89,463,555 | 77.8 | % |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 296,523,073 | $ | 35,905,893 | $ | (21,040,769 | ) | $ | 14,865,124 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 1,998,004 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $73,536 and $80,749, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 245,892 | $ | 3,909,207 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 39,110 | 581,950 | ||||||
Shares redeemed | (430,177 | ) | (6,706,360 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (145,175 | ) | (2,215,203 | ) | ||||
Shares converted into Class A (See Note 1) | 45,551 | 727,511 | ||||||
Shares converted from Class A (See Note 1) | (46,862 | ) | (754,985 | ) | ||||
|
| |||||||
Net increase (decrease) | (146,486 | ) | $ | (2,242,677 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 915,766 | $ | 15,804,049 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,877 | 301,222 | ||||||
Shares redeemed | (652,088 | ) | (11,185,225 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 281,555 | 4,920,046 | ||||||
Shares converted into Class A (See Note 1) | 235,657 | 4,058,475 | ||||||
Shares converted from Class A (See Note 1) | (16,148 | ) | (277,043 | ) | ||||
|
| |||||||
Net increase (decrease) | 501,064 | $ | 8,701,478 | |||||
|
| |||||||
28 | MainStay MacKay International Equity Fund |
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 57,499 | $ | 903,151 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,658 | 216,497 | ||||||
Shares redeemed | (78,609 | ) | (1,233,270 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,452 | ) | (113,622 | ) | ||||
Shares converted into Investor Class (See Note 1) | 86,744 | 1,375,235 | ||||||
Shares converted from Investor Class (See Note 1) | (26,555 | ) | (421,592 | ) | ||||
|
| |||||||
Net increase (decrease) | 53,737 | $ | 840,021 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 181,940 | $ | 3,114,134 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,537 | 42,599 | ||||||
Shares redeemed | (142,385 | ) | (2,425,059 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 42,092 | 731,674 | ||||||
Shares converted into Investor Class (See Note 1) | 51,656 | 881,872 | ||||||
Shares converted from Investor Class (See Note 1) | (222,310 | ) | (3,809,182 | ) | ||||
|
| |||||||
Net increase (decrease) | (128,562 | ) | $ | (2,195,636 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 4,294 | $ | 58,580 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,501 | 45,898 | ||||||
Shares redeemed | (37,704 | ) | (523,771 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (29,909 | ) | (419,293 | ) | ||||
Shares converted from Class B (See Note 1) | (23,902 | ) | (328,991 | ) | ||||
|
| |||||||
Net increase (decrease) | (53,811 | ) | $ | (748,284 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 19,666 | $ | 295,697 | |||||
Shares redeemed | (67,685 | ) | (1,025,420 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (48,019 | ) | (729,723 | ) | ||||
Shares converted from Class B (See Note 1) | (56,653 | ) | (865,791 | ) | ||||
|
| |||||||
Net increase (decrease) | (104,672 | ) | $ | (1,595,514 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 26,237 | $ | 357,811 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,560 | 72,886 | ||||||
Shares redeemed | (126,398 | ) | (1,781,481 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (94,601 | ) | (1,350,784 | ) | ||||
Shares converted from Class C (See Note 1) | (42,634 | ) | (598,900 | ) | ||||
|
| |||||||
Net increase (decrease) | (137,235 | ) | $ | (1,949,684 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 106,648 | $ | 1,618,061 | |||||
Shares redeemed | (117,432 | ) | (1,776,629 | ) | ||||
|
| |||||||
Net increase (decrease) | (10,784 | ) | $ | (158,568 | ) | |||
|
|
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 887,013 | $ | 14,180,747 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 149,207 | 2,233,635 | ||||||
Shares redeemed | (928,410 | ) | (14,575,827 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 107,810 | 1,838,555 | ||||||
Shares converted into Class I (See Note 1) | 104 | 1,721 | ||||||
Shares converted from Class I (See Note 1) | (7,059,124 | ) | (115,167,678 | ) | ||||
|
| |||||||
Net increase (decrease) | (6,951,210 | ) | $ | (113,327,402 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,653,814 | $ | 62,248,511 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 95,420 | 1,614,501 | ||||||
Shares redeemed | (2,512,532 | ) | (43,353,547 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 1,236,702 | 20,509,465 | ||||||
Shares converted into Class I (See Note 1) | 653 | 11,669 | ||||||
|
| |||||||
Net increase (decrease) | 1,237,355 | $ | 20,521,134 | |||||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,014 | $ | 15,597 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 204 | 3,039 | ||||||
Shares redeemed | (117,099 | ) | (1,745,851 | ) | ||||
|
| |||||||
Net increase (decrease) | (115,881 | ) | $ | (1,727,215 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 12,744 | $ | 221,403 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,061 | 17,860 | ||||||
Shares redeemed | (37,224 | ) | (638,649 | ) | ||||
|
| |||||||
Net increase (decrease) | (23,419 | ) | $ | (399,386 | ) | |||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,345 | $ | 36,345 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 254 | 3,784 | ||||||
Shares redeemed | (15,174 | ) | (244,275 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,575 | ) | $ | (204,146 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 24,226 | $ | 421,614 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 102 | 1,720 | ||||||
Shares redeemed | (58,640 | ) | (988,905 | ) | ||||
|
| |||||||
Net increase (decrease) | (34,312 | ) | $ | (565,571 | ) | |||
|
| |||||||
29 |
Notes to Financial Statements(Unaudited) (continued)
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 7,119 | $ | 111,164 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 585 | 8,641 | ||||||
Shares redeemed | (16,369 | ) | (249,633 | ) | ||||
|
| |||||||
Net increase (decrease) | (8,665 | ) | $ | (129,828 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 24,025 | $ | 415,163 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 176 | 2,956 | ||||||
Shares redeemed | (44,289 | ) | (747,589 | ) | ||||
|
| |||||||
Net increase (decrease) | (20,088 | ) | $ | (329,470 | ) | |||
|
| |||||||
Class R6 | Shares | Amount | ||||||
Period ended April 30, 2019 (a): | ||||||||
Shares sold | 56,930 | $ | 943,762 | |||||
Shares redeemed | (230,439 | ) | (3,808,458 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (173,509 | ) | (2,864,696 | ) | ||||
Shares converted into Class R6 (See Note 1) | 7,059,123 | 115,167,679 | ||||||
|
| |||||||
|
| |||||||
Net increase (decrease) | 6,885,614 | $ | 112,302,983 | |||||
|
|
(a) | The inception date of the class was February 28, 2019. |
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
30 | MainStay MacKay International Equity Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay International Equity Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December 10-12, 2018 in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December 10-12, 2018 in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in a manager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certain non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group
of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track
32 | MainStay MacKay International Equity Fund |
record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. The Board recognized, for example, the benefits to MacKay from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to MacKay in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
33 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board considered its discussions with representatives from New York Life Investments regarding the management fee paid by the Fund. The Board noted that, following discussions with the Board, New York Life Investments proposed the implementation of an expense limitation arrangement for Class I and Class R6 shares of the Fund and that New York Life Investments will apply an equivalent waiver or reimbursement as the Class R6 shares waiver/reimbursement to the other applicable share classes of the Fund, effective February 28, 2019.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s
transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the provision of sub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of
34 | MainStay MacKay International Equity Fund |
management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
35 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
36 | MainStay MacKay International Equity Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737261 MS065-19 | MSIE10-06/19 (NYLIM) NL213 |
MainStay MacKay Tax Free Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years or Since | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | 0.04 4.76 | %
| | 0.91 5.67 | %
| | 3.20 4.16 | %
| | 4.90 5.39 | %
| | 0.80 0.80 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | 0.04 4.75 |
| | 0.92 5.67 |
| | 3.20 4.16 |
| | 4.85 5.33 |
| | 0.78 0.78 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 5/1/1986 | | | –0.37 4.63 |
| | 0.42 5.42 |
| | 3.55 3.90 |
| | 5.08 5.08 |
| | 1.03 1.03 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | 3.63 4.63 |
| | 4.42 5.42 |
| | 3.90 3.90 |
| | 5.07 5.07 |
| | 1.03 1.03 |
| ||||||||
Class I Shares | No Sales Charge | 12/21/2009 | 4.89 | 5.93 | 4.42 | 5.24 | 0.55 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Bloomberg Barclays Municipal Bond Index4 | 5.68 | % | 6.16 | % | 3.56 | % | 4.55 | % | ||||||||
Morningstar Muni National Long Category Average5 | 5.92 | 5.83 | 3.68 | 4.81 |
4. | The Bloomberg Barclays Municipal Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays Municipal Bond Index is considered representative of the broad-based market for investment-grade, tax-exempt bonds with a maturity of at least one year. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Muni National Long Category Average is representative of funds that invest in bonds issued by various state and local governments to fund public projects. The income from these bonds is generally free from federal taxes. These portfolios have durations of more than 7.0 years. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Tax Free Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Tax Free Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,047.60 | $ | 4.01 | $ | 1,020.88 | $ | 3.96 | 0.79% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,047.50 | $ | 3.96 | $ | 1,020.93 | $ | 3.91 | 0.78% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,046.30 | $ | 5.23 | $ | 1,019.69 | $ | 5.16 | 1.03% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,046.30 | $ | 5.23 | $ | 1,019.69 | $ | 5.16 | 1.03% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,048.90 | $ | 2.69 | $ | 1,022.17 | $ | 2.66 | 0.53% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
New York | 14.2 | % | ||
California | 12.9 | |||
Illinois | 11.0 | |||
Texas | 5.9 | |||
Puerto Rico | 5.4 | |||
New Jersey | 4.0 | |||
Georgia | 3.8 | |||
Michigan | 3.1 | |||
South Carolina | 3.0 | |||
Connecticut | 2.9 | |||
Pennsylvania | 2.9 | |||
Massachusetts | 2.5 | |||
Nebraska | 1.8 | |||
Florida | 1.7 | |||
Maryland | 1.6 | |||
U.S. Virgin Islands | 1.6 | |||
Colorado | 1.5 | |||
Ohio | 1.5 | |||
Utah | 1.5 | |||
Alabama | 1.4 | |||
Arkansas | 1.2 | |||
Indiana | 1.2 | |||
Oklahoma | 1.1 | |||
Virginia | 1.1 | |||
Wisconsin | 1.1 | |||
Guam | 1.0 |
Montana | 1.0 | % | ||
Louisiana | 0.9 | |||
Arizona | 0.8 | |||
Missouri | 0.8 | |||
District of Columbia | 0.7 | |||
Iowa | 0.7 | |||
Tennessee | 0.7 | |||
Washington | 0.7 | |||
North Carolina | 0.6 | |||
Minnesota | 0.5 | |||
Oregon | 0.4 | |||
Rhode Island | 0.4 | |||
Idaho | 0.3 | |||
Kansas | 0.3 | |||
North Dakota | 0.3 | |||
South Dakota | 0.3 | |||
Wyoming | 0.3 | |||
New Hampshire | 0.2 | |||
Alaska | 0.1 | |||
Hawaii | 0.1 | |||
Kentucky | 0.1 | |||
Mississippi | 0.1 | |||
New Mexico | 0.1 | |||
Other Assets, Less Liabilities | –1.3 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s holdings are subject to change.
Top Ten Issuers Held as of April 30, 2019 (Unaudited)
1. | New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds, 2.30%–5.00%, due 5/1/32–11/1/44 |
2. | New York State Dormitory Authority, Sales Tax, Revenue Bonds, 5.00%, due 3/15/37–3/15/45 |
3. | Central Plains Energy, Project No. 3, Revenue Bonds, |
4. | Puerto Rico Highway & Transportation Authority, Revenue Bonds, 5.25%–5.50%, due 7/1/21–7/1/41 |
5. | Los Angeles Unified School District, Election 2008, Unlimited General Obligation, 5.25%, due 7/1/42 |
6. | Municipal Electric Authority of Georgia, Revenue Bonds, 2.30%, due 1/1/48 |
7. | South Carolina Public Service Authority, Revenue Bonds, 5.00%–5.25%, due 12/1/29–12/1/56 |
8. | Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation, (zero coupon)–6.00%, due 7/1/19–7/1/37 |
9. | State of Illinois, Unlimited General Obligation, 4.00%–5.00%, due 9/1/27–6/1/41 |
10. | City of Chicago IL, Wastewater Transmission, Revenue Bonds, 5.00%–5.25%, due 1/1/28–1/1/47 |
8 | MainStay MacKay Tax Free Bond Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers John Loffredo, CFA, Robert DiMella, CFA, Michael Petty, David Dowden, Scott Sprauer and Frances Lewis of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Tax Free Bond Fund perform relative to its benchmark and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Tax Free Bond Fund returned 4.89%, underperforming the 5.68% return of the Fund’s primary benchmark, the Bloomberg Barclays Municipal Bond Index. Over the same period, Class I shares also underperformed the 5.92% return of the Morningstar Muni National Long Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Several factors affected the Fund’s performance relative to the Bloomberg Barclays Municipal Bond Index during the reporting period. Underweight exposure to bonds from Texas contributed to the Fund’s relative underperformance. (Contributions take weightings and total returns into account.) The Fund’s yield curve2 positioning produced mixed results, with an overweight position to bonds maturing in twenty-to twenty-five years adding to performance while underweight exposure to bonds maturing in five- toten-years detracted from performance. The Fund’s Treasury hedge enhanced relative returns, as did overweight exposure to bonds from Puerto Rico and Illinois.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
We believe the use of derivatives, specifically U.S. Treasury futures, allows the Fund to manage its effective duration3 and maximize an attractivetax-exempt income stream for our shareholders. During the reporting period, this approach bolstered the Fund’s relative performance.
What was the Fund’s duration strategy during the reporting period?
At the end of the reporting period, the Fund’s modified duration to worst4 was 5.48 years while the modified duration to worst of
the Bloomberg Barclays Municipal Bond Index was 4.85 years. The Fund used a10-year and30-year Treasury futures hedge during the reporting period to help remain neutral to the benchmark duration.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Relative to the Bloomberg Barclays Municipal Bond Index, exposure to the state general obligations, transportation, and hospital sectors detracted from the Fund’s performance, as did holdings withinAAA-rated5 bonds. Conversely, the Fund’s relative performance benefited from security selections in the special tax, leasing and local general obligations sectors, as well security selection among bonds with credit ratings ranging from AA to BBB.6
What were some of the Fund’s largest purchases and sales during the reporting period?
Because the Fund remained focused on diversification and liquidity during the reporting period, no individual purchase or sale was considered significant.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s largest decreases in sector exposure during the reporting period occurred in the special tax, leasing and transportation sectors. Exposure to the hospital and housing sectors saw small increases, with the Fund’s housing sector increase reflecting a late-cycle defensive strategy. The Fund decreased its exposure to bonds from Puerto Rico, South Carolina and California while increasing its exposure to bonds from Georgia, Utah and Texas during the same period.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
4. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. |
5. | An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s (“S&P”), and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
6. | An obligation rated ‘AA’ by S&P is deemed by S&P to differ from the highest-rated obligations only to a small degree. In the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is very strong. An obligation rated ‘BBB’ by S&P is deemed by S&P to exhibit adequate protection parameters. In the opinion of S&P, however, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
9 |
How was the Fund positioned at the end of the reporting period?
As of April 30, 2019, the Fund held overweight positions relative to the Bloomberg Barclays Municipal Index in the special tax and leasing sectors, and underweight positions in the state general obligations and transportation sectors. With regard to state exposure, the Fund held an overweight position in bonds from Puerto Rico and underweight positions in bonds from Texas and Florida. From a credit rating and yield curve perspective, the Fund held an overweight position inAA-rated bonds, and an underweight position inAAA-rated bonds and in bonds with maturities of less than one year.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Tax Free Bond Fund |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Municipal Bonds 100.1%† |
| |||||||
Alabama 1.4% |
| |||||||
City of Birmingham AL, Unlimited General Obligation | $ | 4,150,000 | $ | 4,526,571 | ||||
Houston County Health Care Authority, Southeast Alabama Medical, Revenue Bonds | 1,000,000 | 1,151,590 | ||||||
Tuscaloosa County Industrial Development Authority, Hunt Refining Project, Revenue Bonds | 35,000,000 | 35,000,000 | ||||||
University of South Alabama, Revenue Bonds | ||||||||
Insured: AGM | 2,000,000 | 2,151,120 | ||||||
Insured: AGM | 1,110,000 | 1,313,596 | ||||||
Insured: AGM | 2,000,000 | 2,353,340 | ||||||
Water Works Board of the City of Birmingham, Revenue Bonds | 6,140,000 | 7,252,752 | ||||||
|
| |||||||
53,748,969 | ||||||||
|
| |||||||
Alaska 0.1% |
| |||||||
Alaska Industrial Development & Export Authority, FairBanks Community Hospital, Revenue Bonds | 3,550,000 | 3,849,726 | ||||||
|
| |||||||
Arizona 0.8% |
| |||||||
Arizona Health Facilities Authority, Phoenix Children’s Hospital, Revenue Bonds | 1,000,000 | 1,062,570 | ||||||
Salt River Project Agricultural Improvement & Power District, Revenue Bonds | 25,100,000 | 28,666,459 | ||||||
|
| |||||||
29,729,029 | ||||||||
|
| |||||||
Arkansas 1.2% |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds | ||||||||
Insured: BAM | 1,945,000 | 2,352,808 |
Principal Amount | Value | |||||||
Arkansas (continued) |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds (continued) | ||||||||
Insured: BAM | $ | 1,535,000 | $ | 1,847,894 | ||||
Insured: BAM | 1,075,000 | 1,286,141 | ||||||
Insured: BAM | 2,335,000 | 2,756,491 | ||||||
County of Pulaski AR, Arkansas Children’s Hospital, Revenue Bonds | 2,000,000 | 2,299,100 | ||||||
Pulaski County Special School District, Limited General Obligation | 15,500,000 | 15,909,200 | ||||||
Springdale Public Facilities Board, Arkansas Children’s Northwest, Revenue Bonds | 2,890,000 | 3,361,792 | ||||||
Springdale School District No. 50, Limited General Obligation | ||||||||
4.00%, due 6/1/36 | 2,500,000 | 2,593,250 | ||||||
4.00%, due 6/1/40 | 11,000,000 | 11,272,580 | ||||||
University of Arkansas, UALR Campus, Revenue Bonds | ||||||||
5.00%, due 10/1/29 | 1,315,000 | 1,582,274 | ||||||
5.00%, due 10/1/30 | 1,110,000 | 1,327,149 | ||||||
5.00%, due 10/1/31 | 1,205,000 | 1,432,432 | ||||||
|
| |||||||
48,021,111 | ||||||||
|
| |||||||
California 12.9% |
| |||||||
Alta Loma School District, Unlimited General Obligation | 4,000,000 | 4,649,640 | ||||||
Anaheim Public Financing Authority, Public Improvements Project, Revenue Bonds | 11,990,000 | 8,366,262 | ||||||
Antelope Valley Community College District, Election 2016, Unlimited General Obligation | 15,000,000 | 16,809,450 | ||||||
California Educational Facilities Authority, Loma Linda University, Revenue Bonds | 390,000 | 448,535 | ||||||
California Educational Facilities Authority, Prerefunded—University of San Francisco, Revenue Bonds | 745,000 | 827,688 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
California (continued) |
| |||||||
California Educational Facilities Authority, Unrefunded—University of San Francisco, Revenue Bonds | $ | 780,000 | $ | 867,563 | ||||
California Health Facilities Financing Authority, Dignity Health, Revenue Bonds | 3,000,000 | 3,021,510 | ||||||
California Health Facilities Financing Authority, Providence St. Joseph Health, Revenue Bonds | 1,230,000 | 1,329,987 | ||||||
California Health Facilities Financing Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,692,200 | ||||||
California Infrastructure & Economic Development Bank, Revenue Bonds | 3,505,000 | 3,746,600 | ||||||
California Municipal Finance Authority, Southern California Institute of Architecture Project, Revenue Bonds | ||||||||
5.00%, due 12/1/22 | 390,000 | 431,683 | ||||||
5.00%, due 12/1/23 | 405,000 | 458,699 | ||||||
5.00%, due 12/1/24 | 425,000 | 491,100 | ||||||
5.00%, due 12/1/25 | 450,000 | 528,651 | ||||||
5.00%, due 12/1/26 | 470,000 | 559,253 | ||||||
5.00%, due 12/1/27 | 495,000 | 597,341 | ||||||
5.00%, due 12/1/28 | 520,000 | 625,664 | ||||||
California Municipal Finance Authority, West Village Student Housing Project, Revenue Bonds | ||||||||
5.00%, due 5/15/32 | 1,570,000 | 1,849,334 | ||||||
5.00%, due 5/15/38 | 2,895,000 | 3,335,185 | ||||||
Insured: BAM | 9,815,000 | 11,515,645 | ||||||
Insured: BAM | 11,750,000 | 13,699,678 | ||||||
California School Facilities Financing Authority, Azusa Unified School District, Revenue Bonds | 16,000,000 | 4,220,000 | ||||||
California State Educational Facilities Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,815,900 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
California State Public Works Board, Various Capital Project, Revenue Bonds | ||||||||
Series G-1 | $ | 1,400,000 | $ | 1,425,144 | ||||
Series I-1 | 160,000 | 160,000 | ||||||
California Statewide Communities Development Authority, Cottage Health Obligation Group, Revenue Bonds | 1,475,000 | 1,550,476 | ||||||
City of Escondido CA, Unlimited General Obligation | 5,000,000 | 5,841,950 | ||||||
City of Long Beach CA, Airport System, Revenue Bonds | 5,000,000 | 5,188,350 | ||||||
City of Los Angeles CA, Wastewater System Revenue, Revenue Bonds Subseries A | 10,000,000 | 12,003,500 | ||||||
City of Richmond CA, Wastewater Revenue, Revenue Bonds | 10,530,000 | 12,605,884 | ||||||
Coachella Valley Unified School District, Election 2005, Unlimited General Obligation | 12,385,000 | 14,269,378 | ||||||
Coast Community College District, Election 2012, Unlimited General Obligation | 20,000,000 | 22,798,800 | ||||||
Colton Joint Unified School District, Unlimited General Obligation | 3,495,000 | 3,892,277 | ||||||
Cotati-Rohnert Park Unified School District, Unlimited General Obligation | 2,865,000 | 3,302,056 | ||||||
Etiwanda School District, Election 2016, Unlimited General Obligation | 5,725,000 | 6,702,658 | ||||||
Firebaugh-Las Deltas Unified School District, Election 2016, Unlimited General Obligation | 3,000,000 | 3,585,810 |
12 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
California (continued) |
| |||||||
Fontana Public Finance Authority, Revenue Bonds | $ | 2,640,000 | $ | 2,983,147 | ||||
Fontana Unified School District, Unlimited General Obligation | ||||||||
Series C | 14,800,000 | 6,881,408 | ||||||
Series C | 15,500,000 | 6,688,250 | ||||||
Fresno Unified School District, Election 2001, Unlimited General Obligation | ||||||||
Series G | 6,000,000 | 2,716,440 | ||||||
Series G | 10,000,000 | 4,203,600 | ||||||
Series G | 23,485,000 | 5,634,991 | ||||||
Golden State Tobacco Securitization Corp., Asset-Backed, Revenue Bonds | 5,410,000 | 6,110,108 | ||||||
Golden State Tobacco Securitization Corp., Revenue Bonds | 12,545,000 | 14,322,626 | ||||||
Jurupa Unified School District, Unlimited General Obligation | 5,500,000 | 6,700,375 | ||||||
Live Oak Elementary School District, Certificates of Participation | 3,205,000 | 3,672,802 | ||||||
Los Angeles Department of Water & Power, Revenue Bonds | 16,480,000 | 19,024,677 | ||||||
Los Angeles Unified School District, Election 2008, Unlimited General Obligation | 50,000,000 | 60,091,000 | ||||||
Oakland Unified School District, Alameda County, Unlimited General Obligation | ||||||||
Insured: AGM | 1,160,000 | 1,365,100 | ||||||
Insured: AGM | 1,755,000 | 2,063,722 | ||||||
Insured: AGM | 2,535,000 | 2,957,255 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Oceanside Unified School District, Unrefunded Election 2008, Unlimited General Obligation | $ | 560,000 | $ | 74,026 | ||||
Paramount Unified School District, Unlimited General Obligation | 25,000,000 | 5,878,750 | ||||||
Pomona Unified School District, Election 2008, Unlimited General Obligation | 3,285,000 | 3,607,554 | ||||||
Riverside County Redevelopment Successor Agency, Jurupa Valley Project, Tax Allocation | ||||||||
Series B, Insured: BAM | 2,510,000 | 2,999,023 | ||||||
Series B, Insured: BAM | 875,000 | 1,039,640 | ||||||
Series B, Insured: BAM | 2,645,000 | 3,121,655 | ||||||
Riverside County Transportation Commission, Limited Tax, Revenue Bonds | 23,920,000 | 29,038,402 | ||||||
San Bernardino City Unified School District, Election 2012, Unlimited General Obligation | 1,000,000 | 1,127,660 | ||||||
San Diego Association of Governments, South Bay Expressway, Senior Lien, Revenue Bonds | ||||||||
Series A | 2,475,000 | 3,000,220 | ||||||
Series A | 1,800,000 | 2,161,170 | ||||||
Series A | 1,150,000 | 1,355,827 | ||||||
San Diego Public Facilities Financing Authority, Capital Improvement Projects, Revenue Bonds | 3,000,000 | 3,463,770 | ||||||
San Jose Redevelopment Agency Successor Agency, Tax Allocation | 20,000,000 | 23,966,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
California (continued) |
| |||||||
San Marcos School Financing Authority, Revenue Bonds | ||||||||
Insured: AGM | $ | 500,000 | $ | 599,650 | ||||
Insured: AGM | 1,000,000 | 1,192,380 | ||||||
Insured: AGM | 1,000,000 | 1,189,040 | ||||||
Insured: AGM | 1,100,000 | 1,302,015 | ||||||
Santa Clara County Financing Authority, Revenue Bonds | 5,000,000 | 5,400,750 | ||||||
Santa Clara Valley Transportation Authority, Revenue Bonds | 3,900,000 | 4,517,058 | ||||||
Santa Clara Valley Water District, Revenue Bonds | 2,865,000 | 3,321,194 | ||||||
Simi Valley Unified School District, Election 2016, Unlimited General Obligation | ||||||||
Series A | 1,000,000 | 1,192,680 | ||||||
Series A | 1,000,000 | 1,188,260 | ||||||
Series A | 1,195,000 | 1,413,183 | ||||||
Solano County Community College District, Election 2012, Unlimited General Obligation | 16,460,000 | 19,786,401 | ||||||
Southern California Public Power Authority, Apex Power Project, Revenue Bonds | 4,500,000 | 5,186,340 | ||||||
Southwestern Community College District, Election 2008, Unlimited General Obligation | 13,000,000 | 4,930,250 | ||||||
State of California, Unlimited General Obligation | ||||||||
5.25%, due 10/1/39 | 5,635,000 | 6,645,130 | ||||||
6.25%, due 11/1/34 | 4,000,000 | 4,095,000 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Tahoe-Truckee Unified School District, Unlimited General Obligation | $ | 2,200,000 | $ | 2,557,192 | ||||
Twin Rivers Unified School District, Unrefunded Election 2006, Unlimited General Obligation | 5,120,000 | 3,342,797 | ||||||
University of California, Revenue Bonds | ||||||||
Series AL-4 | 20,000,000 | 20,000,000 | ||||||
Series AV | 1,725,000 | 2,025,081 | ||||||
Series AZ | 2,500,000 | 2,980,975 | ||||||
Westminster School District, Election 2008, Unlimited General Obligation | 13,900,000 | 2,310,319 | ||||||
|
| |||||||
504,638,744 | ||||||||
|
| |||||||
Colorado 1.5% |
| |||||||
Adams State University, Revenue Bonds | ||||||||
Series A | 750,000 | 822,870 | ||||||
Series A | 1,085,000 | 1,185,417 | ||||||
Series A | 1,500,000 | 1,624,995 | ||||||
City of Colorado Springs CO, Utilities System, Revenue Bonds | ||||||||
Series A-2 | 530,000 | 592,932 | ||||||
Series A-4 | 855,000 | 956,523 | ||||||
Series A-2 | 600,000 | 668,874 | ||||||
Series A-4 | 700,000 | 780,353 | ||||||
Series A-2 | 430,000 | 477,760 | ||||||
Series A-4 | 900,000 | 999,963 | ||||||
Series A-2 | 385,000 | 424,636 | ||||||
Series A-4 | 740,000 | 816,183 | ||||||
Colorado Health Facilities Authority, Evangelical Lutheran Good Samaritan, Revenue Bonds | 1,180,000 | 1,301,068 |
14 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Colorado (continued) |
| |||||||
Colorado State Housing & Finance Authority, Revenue Bonds | $ | 6,010,000 | $ | 6,466,520 | ||||
Denver City & County Airport Revenue | 5,370,000 | 6,337,459 | ||||||
Denver Convention Center Hotel Authority, Revenue Bonds | ||||||||
5.00%, due 12/1/30 | 1,305,000 | 1,483,759 | ||||||
5.00%, due 12/1/31 | 1,395,000 | 1,582,948 | ||||||
5.00%, due 12/1/32 | 2,500,000 | 2,843,725 | ||||||
5.00%, due 12/1/36 | 1,000,000 | 1,132,710 | ||||||
Rampart Range Metropolitan District No. 1, Revenue Bonds | 10,055,000 | 11,621,066 | ||||||
Regional Transportation District, Certificates of Participation | 15,500,000 | 16,512,615 | ||||||
Vista Ridge Metropolitan District, Unlimited General Obligation | 1,250,000 | 1,434,550 | ||||||
|
| |||||||
60,066,926 | ||||||||
|
| |||||||
Connecticut 2.9% |
| |||||||
City of Bridgeport CT, Unlimited General Obligation | ||||||||
Series D, Insured: AGM | 3,090,000 | 3,530,819 | ||||||
Series D, Insured: AGM | 3,090,000 | 3,519,170 | ||||||
Series D, Insured: AGM | 3,090,000 | 3,508,232 | ||||||
Series D, Insured: AGM | 3,090,000 | 3,498,374 | ||||||
City of Hartford CT, Unlimited General Obligation | ||||||||
Series A | 2,500,000 | 2,693,125 | ||||||
Series C, Insured: AGM | 7,470,000 | 8,516,995 | ||||||
Series C, Insured: AGM | 2,500,000 | 2,832,425 | ||||||
City of Hartford CT, Unrefunded, Unlimited General Obligation | ||||||||
Series A | 895,000 | 964,640 | ||||||
Series A, Insured: AGM | 195,000 | 209,412 |
Principal Amount | Value | |||||||
Connecticut (continued) |
| |||||||
Connecticut State Health & Educational Facility Authority, Quinnipiac University, Revenue Bonds | $ | 10,425,000 | $ | 11,870,322 | ||||
Connecticut State Housing Finance Authority, Revenue Bonds | ||||||||
Subseries C-1 | 5,950,000 | 6,350,971 | ||||||
Series B-1 | 2,800,000 | 3,036,460 | ||||||
State of Connecticut Special Tax, Transportation Infrastructure, Revenue Bonds | ||||||||
Series A | 5,000,000 | 5,610,550 | ||||||
Series A, Insured: BAM | 14,470,000 | 16,910,655 | ||||||
Series A | 13,000,000 | 14,863,030 | ||||||
State of Connecticut, Unlimited General Obligation | 12,810,000 | 15,647,799 | ||||||
University of Connecticut, Revenue Bonds | ||||||||
Series A | 2,000,000 | 2,397,460 | ||||||
Series A | 2,000,000 | 2,389,660 | ||||||
Series A | 3,990,000 | 4,755,841 | ||||||
|
| |||||||
113,105,940 | ||||||||
|
| |||||||
District of Columbia 0.7% |
| |||||||
District of Columbia, Friendship Public Charter School, Inc., Revenue Bonds | 5,500,000 | 5,756,575 | ||||||
District of Columbia, Gallery Place Project, Tax Allocation | 525,000 | 557,660 | ||||||
District of Columbia, KIPP Charter School, Revenue Bonds | 1,575,000 | 1,848,168 | ||||||
Metropolitan Washington Airports Authority Dulles Toll Road, Revenue Bonds | ||||||||
Series C, Insured: AGC | 8,000,000 | 10,180,160 | ||||||
Series B | 7,140,000 | 9,285,713 | ||||||
|
| |||||||
27,628,276 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Florida 1.7% |
| |||||||
City of Miami Beach FL Parking, Revenue Bonds | $ | 2,500,000 | $ | 2,866,250 | ||||
City of Orlando FL, Unrefunded Third Lien, Tourist Development Tax, Revenue Bonds | 4,015,000 | 4,026,403 | ||||||
County of Miami-Dade FL Aviation, Revenue Bonds | 750,000 | 885,937 | ||||||
County of Miami-Dade Florida Water & Sewer System, Revenue Bonds | ||||||||
Series A | 9,500,000 | 10,202,240 | ||||||
Series B | 10,000,000 | 11,670,100 | ||||||
County of St. Lucie FL, Power & Light Co. Project, Revenue Bonds | 6,500,000 | 6,500,000 | ||||||
Florida Housing Finance Corp., Revenue Bonds | 2,750,000 | 2,927,705 | ||||||
JEA Electric System, Revenue Bonds | 4,500,000 | 4,738,095 | ||||||
Orange County Health Facilities Authority, Presbyterian Retirement Communities, Revenue Bonds | 1,500,000 | 1,663,140 | ||||||
South Miami Health Facilities Authority, Baptist Health South Florida, Revenue Bonds | 20,000,000 | 22,961,000 | ||||||
|
| |||||||
68,440,870 | ||||||||
|
| |||||||
Georgia 3.8% |
| |||||||
Burke County Development Authority, Georgia Power Co., Vogtle Project, Revenue Bonds (a) | ||||||||
2.37%, due 11/1/52 | 15,580,000 | 15,580,000 | ||||||
1st Series | 33,100,000 | 33,100,000 | ||||||
Coweta County Development Authority, Plant Yates Project, Revenue Bonds | 2,275,000 | 2,275,000 | ||||||
Dalton GA, Board of Water Light & Sinking Fund Commissioners, Revenue Bonds | 2,055,000 | 2,429,216 |
Principal Amount | Value | |||||||
Georgia (continued) |
| |||||||
Gwinnett County School District, Unlimited General Obligation | $ | 11,410,000 | $ | 13,871,365 | ||||
Heard County Development Authority, Georgia Power Co. Plant Wansley, Revenue Bonds (a) | ||||||||
2.30%, due 9/1/29 | 3,300,000 | 3,300,000 | ||||||
2.39%, due 9/1/26 | 800,000 | 800,000 | ||||||
Main Street Natural Gas, Inc., Revenue Bonds | ||||||||
Series A | 3,000,000 | 3,634,260 | ||||||
Series A | 3,700,000 | 4,489,506 | ||||||
Monroe County Development Authority, Georgia Power Co., Scherer Project, Revenue Bonds | 10,650,000 | 10,650,000 | ||||||
Municipal Electric Authority of Georgia, Revenue Bonds | 60,000,000 | 60,000,000 | ||||||
|
| |||||||
150,129,347 | ||||||||
|
| |||||||
Guam 1.0% |
| |||||||
Antonio B Won Pat International Airport Authority, Revenue Bonds | 5,000,000 | 5,784,450 | ||||||
Guam Government, Waterworks Authority, Revenue Bonds | ||||||||
5.00%, due 7/1/36 | 1,750,000 | 1,933,330 | ||||||
5.00%, due 1/1/46 | 2,500,000 | 2,730,825 | ||||||
Guam Power Authority, Revenue Bonds | ||||||||
Series A, Insured: AGM | 5,610,000 | �� | 6,154,282 | |||||
Series A, Insured: AGM | 655,000 | 724,856 | ||||||
Territory of Guam, Revenue Bonds | ||||||||
Series D | 8,350,000 | 9,013,074 | ||||||
Series A | 3,085,000 | 3,189,736 | ||||||
Series A | 2,000,000 | 2,087,160 | ||||||
Series A | 2,700,000 | 2,897,208 | ||||||
Territory of Guam, Section 30, Revenue Bonds | ||||||||
Series A | 2,265,000 | 2,577,026 | ||||||
Series A | 1,250,000 | 1,379,225 |
16 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Guam (continued) |
| |||||||
Territory of Guam, Section 30, Revenue Bonds (continued) | ||||||||
Series A | $ | 2,290,000 | $ | 2,506,634 | ||||
|
| |||||||
40,977,806 | ||||||||
|
| |||||||
Hawaii 0.1% |
| |||||||
State of Hawaii Department of Budget & Finance, Hawaiian Electric Co., Revenue Bonds | 3,000,000 | 3,028,470 | ||||||
|
| |||||||
Idaho 0.3% |
| |||||||
Idaho Housing & Finance Association, Revenue Bonds | ||||||||
Series B, Insured: GNMA | 5,000,000 | 5,263,500 | ||||||
Series A, Insured: GNMA | 5,478,429 | 5,798,315 | ||||||
|
| |||||||
11,061,815 | ||||||||
|
| |||||||
Illinois 11.0% |
| |||||||
Carol Stream Park District, Unlimited General Obligation | 3,985,000 | 4,512,455 | ||||||
Chicago Board of Education, School Reform, Unlimited General Obligation | 19,995,000 | 15,268,182 | ||||||
Chicago Board of Education, Special Tax | 19,485,000 | 22,578,049 | ||||||
Chicago Board of Education, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 8,250,000 | 9,689,212 | ||||||
Series A, Insured: AGM | 11,455,000 | 12,295,339 | ||||||
Chicago Park District, Limited General Obligation | ||||||||
Series A | 1,000,000 | 1,133,120 | ||||||
Series A | 750,000 | 845,910 | ||||||
Series A | 1,000,000 | 1,115,730 | ||||||
Series A | 2,000,000 | 2,209,000 | ||||||
Chicago Transit Authority, Second Lien, Revenue Bonds | 10,000,000 | 11,053,500 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
City of Chicago IL Motor Fuel Tax, Revenue Bonds | $ | 4,725,000 | $ | 5,100,732 | ||||
City of Chicago IL, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 10,000,000 | 10,218,000 | ||||||
Series A | 2,000,000 | 2,219,140 | ||||||
Series A | 4,510,000 | 5,121,827 | ||||||
Series A | 20,000,000 | 22,819,200 | ||||||
Series A, Insured: BAM | 6,000,000 | 7,220,040 | ||||||
City of Chicago IL, Wastewater Transmission, Revenue Bonds | ||||||||
5.00%, due 1/1/28 | 1,000,000 | 1,108,350 | ||||||
Series B, Insured: AGM | 7,585,000 | 8,821,734 | ||||||
5.00%, due 1/1/33 | 2,000,000 | 2,177,140 | ||||||
5.00%, due 1/1/39 | 8,420,000 | 9,017,315 | ||||||
5.00%, due 1/1/44 | 13,840,000 | 14,840,770 | ||||||
Series A | 7,675,000 | 8,382,328 | ||||||
Series A, Insured: AGM | 4,000,000 | 4,599,720 | ||||||
City of Chicago IL, Wastewater, Revenue Bonds | ||||||||
5.00%, due 11/1/27 | 1,000,000 | 1,120,400 | ||||||
Series 2017-2, Insured: AGM | 2,000,000 | 2,378,640 | ||||||
5.00%, due 11/1/29 | 1,700,000 | 1,900,311 | ||||||
Series 2017-2, Insured: AGM | 3,000,000 | 3,523,260 | ||||||
Series 2017-2, Insured: AGM | 5,000,000 | 5,783,700 | ||||||
Series 2017-2, Insured: AGM | 10,000,000 | 11,523,400 | ||||||
Series 2017-2, Insured: AGM | 3,500,000 | 3,960,495 | ||||||
Insured: AGM | 4,535,000 | 5,310,485 | ||||||
Insured: AGM | 1,785,000 | 2,084,112 | ||||||
Insured: AGM | 3,025,000 | 3,526,636 | ||||||
City of Country Club Hills IL, Unlimited General Obligation | 455,000 | 486,158 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Illinois (continued) |
| |||||||
Cook County Community College District No. 508, City College of Chicago, Unlimited General Obligation | $ | 5,000,000 | $ | 5,603,700 | ||||
Cook County Community High School District No. 212 Leyden, Revenue Bonds | ||||||||
Series C, Insured: BAM | 3,370,000 | 3,799,271 | ||||||
Series C, Insured: BAM | 2,610,000 | 2,938,782 | ||||||
Illinois Finance Authority, Rehab Institute of Chicago, Revenue Bonds | 9,600,000 | 10,759,584 | ||||||
Illinois Sports Facilities Authority, Revenue Bonds | 5,000,000 | 5,580,500 | ||||||
Madison County Community Unit School, District No. 7 Edwardsville, Unlimited General Obligation | 2,085,000 | 2,156,807 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation, Revenue Bonds | 14,250,000 | 9,861,855 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation-McCormick, Revenue Bonds | 58,750,000 | 30,375,512 | ||||||
Peoria County School District No. 150, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 750,000 | 778,538 | ||||||
Series A, Insured: AGM | 1,175,000 | 1,216,900 | ||||||
Series A, Insured: AGM | 1,060,000 | 1,198,372 | ||||||
Public Building Commission of Chicago, Chicago Transit Authority, | 580,000 | 679,598 | ||||||
Rock Island County, Public Building Commission, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 574,555 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
Rock Island County, Public Building Commission, Revenue Bonds (continued) | ||||||||
Insured: AGM | $ | 2,645,000 | $ | 2,996,732 | ||||
Southern Illinois University, Housing & Auxiliary Facilities System, Revenue Bonds | ||||||||
Series B, Insured: BAM | 1,175,000 | 1,356,502 | ||||||
Series B, Insured: BAM | 1,620,000 | 1,833,079 | ||||||
Series B, Insured: BAM | 1,000,000 | 1,124,370 | ||||||
State of Illinois, Unlimited General Obligation | ||||||||
Insured: BAM | 12,600,000 | 12,952,044 | ||||||
Series B | 23,750,000 | 26,242,087 | ||||||
Series C | 10,000,000 | 10,970,700 | ||||||
United City of Yorkville, Special Tax Insured: AGM | 3,780,000 | 4,287,276 | ||||||
Village of Bellwood IL, Unlimited General Obligation | 1,500,000 | 1,716,600 | ||||||
Village of Crestwood IL, Alternative Revenue Source, Unlimited General Obligation | ||||||||
Series B, Insured: BAM | 750,000 | 831,578 | ||||||
Series B, Insured: BAM | 850,000 | 942,506 | ||||||
Series B, Insured: BAM | 955,000 | 1,057,004 | ||||||
Village of Oswego IL, Unlimited General Obligation | 7,670,000 | 8,881,246 | ||||||
Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 8,090,000 | 9,244,767 | ||||||
Series A, Insured: AGM | 3,335,000 | 3,755,110 | ||||||
Village of Schaumburg IL, Unlimited General Obligation | 39,295,000 | 40,808,643 | ||||||
|
| |||||||
428,468,608 | ||||||||
|
|
18 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Indiana 1.2% |
| |||||||
Indiana Finance Authority, Educational Facilities-Butler University, Revenue Bonds | ||||||||
Series B | $ | 2,100,000 | $ | 2,264,367 | ||||
Series A | 2,215,000 | 2,387,283 | ||||||
Series B | 2,210,000 | 2,381,894 | ||||||
Series B | 2,320,000 | 2,499,011 | ||||||
Indiana Finance Authority, Parkview Health System, Revenue Bonds (a) | ||||||||
Series B | 6,330,000 | 6,330,000 | ||||||
Series D | 29,885,000 | 29,885,000 | ||||||
Indiana Housing & Community Development Authority Single Family Mortgage, Revenue Bonds | 3,000,000 | 3,194,310 | ||||||
|
| |||||||
48,941,865 | ||||||||
|
| |||||||
Iowa 0.7% |
| |||||||
City of Coralville IA, Certificates of Participation | ||||||||
Series E | 545,000 | 541,507 | ||||||
Series E | 1,405,000 | 1,391,610 | ||||||
Series E | 1,320,000 | 1,295,871 | ||||||
Iowa Finance Authority Revenue Bonds | 2,910,000 | 3,155,691 | ||||||
Iowa Finance Authority, Mortgage-Backed Securities Program, Revenue Bonds | 2,000,000 | 2,137,940 | ||||||
Iowa Finance Authority, Unity Point Health Project, Revenue Bonds | 17,000,000 | 17,000,000 | ||||||
|
| |||||||
25,522,619 | ||||||||
|
| |||||||
Kansas 0.3% |
| |||||||
City of Hutchinson KS, Hutchinson Regional Medical Center, Inc., Revenue Bonds | ||||||||
5.00%, due 12/1/26 | 565,000 | 641,925 | ||||||
5.00%, due 12/1/28 | 410,000 | 461,705 | ||||||
5.00%, due 12/1/30 | 500,000 | 556,680 |
Principal Amount | Value | |||||||
Kansas (continued) |
| |||||||
University of Kansas Hospital Authority, KU Health System, Revenue Bonds | ||||||||
5.00%, due 9/1/33 | $ | 2,500,000 | $ | 2,860,625 | ||||
5.00%, due 9/1/34 | 5,000,000 | 5,705,550 | ||||||
5.00%, due 9/1/35 | 2,800,000 | 3,182,844 | ||||||
|
| |||||||
13,409,329 | ||||||||
|
| |||||||
Kentucky 0.1% |
| |||||||
City of Ashland KY, King’s Daughters Medical Center Project, Revenue Bonds | ||||||||
Series A | 1,070,000 | 1,095,990 | ||||||
Series A | 1,525,000 | 1,659,978 | ||||||
|
| |||||||
2,755,968 | ||||||||
|
| |||||||
Louisiana 0.9% |
| |||||||
City of Shreveport LA, Unlimited General Obligation | ||||||||
Insured: BAM | 2,285,000 | 2,715,585 | ||||||
Insured: BAM | 5,355,000 | 6,321,310 | ||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, McNeese State University Student Parking Co., Revenue Bonds | ||||||||
Insured: AGM | 335,000 | 353,810 | ||||||
Insured: AGM | 350,000 | 369,754 | ||||||
Louisiana Public Facilities Authority, Loyola University, Revenue Bonds | 2,930,000 | 3,185,847 | ||||||
Louisiana Public Facilities Authority, Unrefunded-Ochsner Clinic Foundation Project, Revenue Bonds | 2,010,000 | 2,280,546 | ||||||
Louisiana Stadium & Exposition District, Revenue Bonds | 1,485,000 | 1,650,073 | ||||||
State Of Louisiana, Unlimited General Obligation | 10,000,000 | 10,662,400 | ||||||
State of Louisiana, Unlimited General Obligation | 5,000,000 | 6,022,400 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Louisiana (continued) |
| |||||||
Terrebonne Parish LA, Sales & Use Tax, Morganza Levee Project, Revenue Bonds | ||||||||
Series B, Insured: AGM | $ | 655,000 | $ | 392,293 | ||||
Series B, Insured: AGM | 1,520,000 | 870,793 | ||||||
Series B, Insured: AGM | 1,000,000 | 520,940 | ||||||
|
| |||||||
35,345,751 | ||||||||
|
| |||||||
Maryland 1.6% |
| |||||||
Maryland Community Development Administration, Department of Housing & Community Development, Revenue Bonds | 15,000,000 | 16,242,900 | ||||||
Maryland Stadium Authority, Baltimore City Public Schools, Revenue Bonds | 14,000,000 | 16,013,620 | ||||||
Maryland Stadium Authority, Construction & Revitalization, Revenue Bonds | 24,645,000 | 28,785,853 | ||||||
|
| |||||||
61,042,373 | ||||||||
|
| |||||||
Massachusetts 1.3% |
| |||||||
Commonwealth of Massachusetts, General Obligation | 14,405,000 | 17,616,595 | ||||||
Massachusetts Development Finance Agency, Boston University, Revenue Bonds | 7,245,000 | 7,245,000 | ||||||
Massachusetts Development Finance Agency, UMass Boston Student Housing Project, Revenue Bonds | ||||||||
5.00%, due 10/1/30 | 1,200,000 | 1,357,596 | ||||||
5.00%, due 10/1/31 | 1,200,000 | 1,349,112 | ||||||
5.00%, due 10/1/32 | 1,240,000 | 1,387,113 | ||||||
5.00%, due 10/1/33 | 1,500,000 | 1,672,710 | ||||||
5.00%, due 10/1/34 | 2,170,000 | 2,412,302 | ||||||
Massachusetts Development Finance Agency, WGBH Educational Foundation, Revenue Bonds | 1,000,000 | 1,088,060 |
Principal Amount | Value | |||||||
Massachusetts (continued) |
| |||||||
Massachusetts Educational Financing Authority, Revenue Bonds | ||||||||
Series B | $ | 1,015,000 | $ | 1,035,706 | ||||
Series I | 955,000 | 975,227 | ||||||
Massachusetts Health & Educational Facilities Authority, Baystate Medical Center, Revenue Bonds | 4,000,000 | 4,000,000 | ||||||
Massachusetts Housing Finance Agency, Single Family Housing, Revenue Bonds | 3,640,000 | 3,878,784 | ||||||
Massachusetts State Development Finance Agency, Prerefunded-Suffolk University, Revenue Bonds | 1,285,000 | 1,294,368 | ||||||
Massachusetts State Development Finance Agency, Unrefunded-Suffolk University, Revenue Bonds | ||||||||
Series A | 715,000 | 720,091 | ||||||
Series A | 2,050,000 | 2,065,436 | ||||||
Metropolitan Boston Transit Parking Corp., Revenue Bonds | 2,000,000 | 2,136,280 | ||||||
|
| |||||||
50,234,380 | ||||||||
|
| |||||||
Michigan 3.1% |
| |||||||
City of Detroit MI, Sewage Disposal System, Senior Lien, Revenue Bonds | 5,000,000 | 5,043,300 | ||||||
Detroit City School District, Improvement School Building & Site, Unlimited General Obligation | ||||||||
Series A, Insured: Q-SBLF | 750,000 | 814,185 | ||||||
Series A, Insured: Q-SBLF | 3,620,000 | 3,922,994 | ||||||
Series A, Insured: Q-SBLF | 4,535,000 | 4,894,988 | ||||||
Downriver Utility Wastewater Authority, Revenue Bonds | 1,600,000 | 1,882,032 |
20 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Michigan (continued) |
| |||||||
Grand Rapids Public Schools, Unlimited General Obligation | $ | 1,400,000 | $ | 1,659,140 | ||||
Great Lakes Water Authority, Sewage Disposal System, Revenue Bonds Senior Lien-Series A | 14,150,000 | 15,326,006 | ||||||
Great Lakes Water Authority, Water Supply System, Revenue Bonds | ||||||||
Series C | 20,000,000 | 23,675,800 | ||||||
Senior Lien-Series A | 5,000,000 | 5,316,950 | ||||||
Senior Lien-Series A | 5,550,000 | 5,985,952 | ||||||
Lincoln Consolidated School District, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 2,030,000 | 2,417,040 | ||||||
Series A, Insured: AGM | 1,455,000 | 1,714,048 | ||||||
Series A, Insured: AGM | 1,500,000 | 1,708,650 | ||||||
Livonia Public School District, Unlimited General Obligation | 4,365,000 | 4,939,609 | ||||||
Michigan Finance Authority, Great Lakes Water, Revenue Bonds | ||||||||
Series C-7, Insured: NATL-RE | 2,500,000 | 2,817,625 | ||||||
Series C-3, Insured: AGM | 3,000,000 | 3,374,430 | ||||||
Series C-1 | 2,500,000 | 2,674,950 | ||||||
Michigan Finance Authority, Henry Ford Health System, Revenue Bonds | 7,500,000 | 8,784,825 | ||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds | ||||||||
Series D2, Insured: AGM | 500,000 | 571,540 | ||||||
Series D-1 | 500,000 | 573,930 | ||||||
Series D-1 | 500,000 | 572,570 |
Principal Amount | Value | |||||||
Michigan (continued) |
| |||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds (continued) | ||||||||
Series D1, Insured: AGM | $ | 2,000,000 | $ | 2,240,960 | ||||
Series D6, Insured: NATL-RE | 7,400,000 | 8,278,306 | ||||||
Michigan Finance Authority, Wayne County Criminal Justice Center Project, Revenue Bonds | ||||||||
5.00%, due 11/1/24 | 750,000 | 871,463 | ||||||
5.00%, due 11/1/25 | 1,000,000 | 1,184,910 | ||||||
5.00%, due 11/1/27 | 1,200,000 | 1,467,108 | ||||||
5.00%, due 11/1/30 | 500,000 | 608,390 | ||||||
5.00%, due 11/1/31 | 750,000 | 907,755 | ||||||
Saginaw City School District, Unlimited General Obligation | ||||||||
Insured: Q-SBLF | 260,000 | 300,521 | ||||||
Insured: Q-SBLF | 350,000 | 402,045 | ||||||
Insured: Q-SBLF | 750,000 | 856,598 | ||||||
Insured: Q-SBLF | 250,000 | 282,665 | ||||||
Insured: Q-SBLF | 350,000 | 394,814 | ||||||
Insured: Q-SBLF | 425,000 | 478,448 | ||||||
Wayne County Michigan, Capital Improvement, Limited General Obligation | 2,500,000 | 2,506,100 | ||||||
|
| |||||||
119,450,647 | ||||||||
|
| |||||||
Minnesota 0.5% |
| |||||||
Housing & Redevelopment Authority of The City of St. Paul Minnesota, Fairview Health Services, Revenue Bonds | 1,000,000 | 1,068,270 | ||||||
Minnesota Housing Finance Agency, Residential Housing Finance, Revenue Bonds | ||||||||
Series E, Insured: GNMA/FMNA/FHLMC 4.25%, due 1/1/49 | 5,000,000 | 5,393,950 | ||||||
Series B, Insured: GNMA/FNMA/FHLMC 4.25%, due 7/1/49 | 10,500,000 | 11,371,290 | ||||||
|
| |||||||
17,833,510 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Mississippi 0.1% |
| |||||||
Mississippi Development Bank, Hinds County School District Project, Revenue Bonds | $ | 1,510,000 | $ | 1,744,533 | ||||
Mississippi Home Corp., Mortgage Revenue, Revenue Bonds | 2,000,000 | 2,137,700 | ||||||
|
| |||||||
3,882,233 | ||||||||
|
| |||||||
Missouri 0.8% |
| |||||||
City of Kansas MO, Improvement Downtown Arena Project, Revenue Bonds | 10,055,000 | 11,261,600 | ||||||
Health & Educational Facilities Authority of the State of Missouri, SSM Health Care, Revenue Bonds | 4,000,000 | 4,508,120 | ||||||
Joplin Industrial Development Authority, Freeman Health System, Revenue Bonds | 605,000 | 658,119 | ||||||
Missouri Housing Development Commission Mortgage Revenue, Homeownership Loan Program, Revenue Bonds | ||||||||
Series A, Insured: GNMA/FNMA/FHLMC 4.25%, due 5/1/47 | 7,750,000 | 8,411,850 | ||||||
Series A, Insured: GNMA/FNMA/FHLMC 4.25%, due 5/1/49 | 4,555,000 | 4,912,886 | ||||||
|
| |||||||
29,752,575 | ||||||||
|
| |||||||
Montana 1.0% |
| |||||||
Missoula County Elementary School District No. 1 School Building, Unlimited General Obligation | ||||||||
4.00%, due 7/1/30 | 145,000 | 162,201 | ||||||
4.00%, due 7/1/31 | 345,000 | 382,415 | ||||||
4.00%, due 7/1/32 | 590,000 | 649,437 | ||||||
4.00%, due 7/1/33 | 555,000 | 609,063 | ||||||
Missoula High School District No. 1 School Building, Unlimited General Obligation | ||||||||
4.00%, due 7/1/30 | 500,000 | 562,475 | ||||||
4.00%, due 7/1/31 | 335,000 | 372,637 | ||||||
4.00%, due 7/1/33 | 350,000 | 386,799 | ||||||
4.00%, due 7/1/34 | 370,000 | 406,208 | ||||||
4.00%, due 7/1/35 | 515,000 | 561,855 |
Principal Amount | Value | |||||||
Montana (continued) |
| |||||||
Montana Board of Housing, Revenue Bonds | ||||||||
Series B | $ | 1,645,000 | $ | 1,715,587 | ||||
Series B | 2,125,000 | 2,185,520 | ||||||
Series B | 1,775,000 | 1,879,903 | ||||||
Montana Facilities Finance Authority, Revenue Bonds | ||||||||
5.00%, due 2/15/30 | 1,790,000 | 2,088,518 | ||||||
5.00%, due 2/15/31 | 1,500,000 | 1,736,700 | ||||||
5.00%, due 2/15/32 | 775,000 | 892,149 | ||||||
5.00%, due 2/15/33 | 1,320,000 | 1,509,156 | ||||||
5.00%, due 2/15/34 | 1,200,000 | 1,366,164 | ||||||
Silver Bow County School District No. 1, Unlimited General Obligation | ||||||||
4.00%, due 7/1/30 | 1,745,000 | 1,988,445 | ||||||
4.00%, due 7/1/32 | 1,945,000 | 2,192,190 | ||||||
4.00%, due 7/1/33 | 2,020,000 | 2,268,420 | ||||||
Yellowstone County K-12, School District No 26 Lockwood, Unlimited General Obligation | ||||||||
5.00%, due 7/1/29 | 2,260,000 | 2,786,896 | ||||||
5.00%, due 7/1/30 | 2,500,000 | 3,056,775 | ||||||
5.00%, due 7/1/31 | 3,015,000 | 3,658,672 | ||||||
5.00%, due 7/1/32 | 3,300,000 | 3,986,598 | ||||||
|
| |||||||
37,404,783 | ||||||||
|
| |||||||
Nebraska 1.8% |
| |||||||
Central Plains Energy, Project No. 3, Revenue Bonds | ||||||||
5.00%, due 9/1/32 | 5,190,000 | 5,617,552 | ||||||
Series A | 20,000,000 | 25,158,400 | ||||||
5.00%, due 9/1/42 | 13,960,000 | 15,123,985 | ||||||
5.25%, due 9/1/37 | 15,535,000 | 16,948,685 | ||||||
Nebraska Investment Finance Authority Single Family Housing, Revenue Bonds | 5,440,000 | 5,795,450 | ||||||
|
| |||||||
68,644,072 | ||||||||
|
| |||||||
New Hampshire 0.2% |
| |||||||
City of Manchester NH, General Airport, Revenue Bonds | 1,800,000 | 1,932,606 | ||||||
New Hampshire Health & Education Facilities Authority, Southern University, Revenue Bonds | ||||||||
5.00%, due 1/1/31 | 905,000 | 1,035,030 | ||||||
5.00%, due 1/1/32 | 950,000 | 1,079,504 |
22 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
New Hampshire (continued) |
| |||||||
New Hampshire Health & Education Facilities Authority, Southern University, Revenue Bonds (continued) | ||||||||
5.00%, due 1/1/33 | $ | 1,000,000 | $ | 1,130,120 | ||||
5.00%, due 1/1/34 | 1,050,000 | 1,180,221 | ||||||
5.00%, due 1/1/35 | 600,000 | 670,908 | ||||||
|
| |||||||
7,028,389 | ||||||||
|
| |||||||
New Jersey 4.0% |
| |||||||
Atlantic County Improvement Authority, Stockton University-Atlantic City, Revenue Bonds | ||||||||
Series A, Insured: AGM | 2,670,000 | 3,106,865 | ||||||
Series A, Insured: AGM | 1,305,000 | 1,513,944 | ||||||
Series A, Insured: AGM | 1,395,000 | 1,614,071 | ||||||
City of Atlantic City NJ, Unlimited General Obligation | ||||||||
Series B, Insured: AGM | 6,270,000 | 6,603,815 | ||||||
Series B, Insured: AGM | 4,500,000 | 5,241,420 | ||||||
New Brunswick Parking Authority, Revenue Bonds | ||||||||
Series A, Insured: BAM | 4,880,000 | 5,866,882 | ||||||
Series A, Insured: BAM | 2,370,000 | 2,832,008 | ||||||
Series A, Insured: BAM | 4,605,000 | 5,464,569 | ||||||
Series A, Insured: BAM | 6,780,000 | 7,998,230 | ||||||
New Jersey Building Authority, Unrefunded, Revenue Bonds | ||||||||
Series A, Insured: BAM | 2,015,000 | 2,319,789 | ||||||
Series A, Insured: BAM | 1,805,000 | 2,094,955 | ||||||
New Jersey Economic Development Authority, Revenue Bonds | ||||||||
5.00%, due 1/1/28 (c) | 1,000,000 | 1,117,910 | ||||||
Series A, Insured: BAM | 2,000,000 | 2,337,500 | ||||||
5.50%, due 1/1/26 (c) | 1,000,000 | 1,145,600 | ||||||
New Jersey Educational Facilities Authority, Stockton University, Revenue Bonds | ||||||||
Series A, Insured: BAM | 4,775,000 | 5,563,878 |
Principal Amount | Value | |||||||
New Jersey (continued) |
| |||||||
New Jersey Educational Facilities Authority, Stockton University, Revenue Bonds (continued) | ||||||||
Series A, Insured: BAM | $ | 5,000,000 | $ | 5,803,900 | ||||
Series A, Insured: BAM | 3,000,000 | 3,473,820 | ||||||
New Jersey Health Care Facilities Financing Authority, Hackensack Meridian Health, Inc., Revenue Bonds | 10,000,000 | 11,645,600 | ||||||
New Jersey Housing & Mortgage Finance Agency, Revenue Bonds | 12,500,000 | 13,777,625 | ||||||
New Jersey Transportation Trust Fund Authority, Federal Highway Reimbursement, Revenue Bonds | ||||||||
Series A | 4,800,000 | 5,533,920 | ||||||
Series A | 8,380,000 | 9,611,609 | ||||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 30,000,000 | 17,140,500 | ||||||
New Jersey Transportation Trust Fund Authority, Transportation System, Revenue Bonds | 5,000,000 | 5,820,000 | ||||||
New Jersey Turnpike Authority, Revenue Bonds | 4,000,000 | 4,488,680 | ||||||
Newark Housing Authority, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 545,080 | ||||||
Insured: AGM | 250,000 | 270,035 | ||||||
Insured: AGM | 250,000 | 268,110 | ||||||
Insured: AGM | 225,000 | 239,796 | ||||||
Insured: AGM | 750,000 | 882,203 | ||||||
Insured: AGM | 1,740,000 | 1,979,302 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
New Jersey (continued) |
| |||||||
Tobacco Settlement Financing Corp., Revenue Bonds | ||||||||
Series A | $ | 3,000,000 | $ | 3,510,150 | ||||
Series A | 6,500,000 | 7,549,490 | ||||||
Series A | 1,500,000 | 1,732,020 | ||||||
Series A | 6,000,000 | 6,859,620 | ||||||
|
| |||||||
155,952,896 | ||||||||
|
| |||||||
New Mexico 0.1% |
| |||||||
City of Farmington NM, Revenue Bonds | 2,000,000 | 2,079,420 | ||||||
New Mexico Mortgage Finance Authority, Single Family Mortgage Program, Revenue Bonds | 3,475,000 | 3,705,844 | ||||||
|
| |||||||
5,785,264 | ||||||||
|
| |||||||
New York 14.2% |
| |||||||
Build NYC Resource Corp., Royal Charter Properties, Revenue Bonds | ||||||||
Insured: AGM | 975,000 | 994,110 | ||||||
Insured: AGM | 1,025,000 | 1,074,743 | ||||||
Insured: AGM | 1,075,000 | 1,160,355 | ||||||
City of New York NY, Unlimited General Obligation | ||||||||
Subseries H-2 | 1,200,000 | 1,200,000 | ||||||
5.25%, due 10/1/32 | 20,000,000 | 24,590,000 | ||||||
Long Island Power Authority, Electric System, Revenue Bonds | 10,000,000 | 11,145,700 | ||||||
Long Island Power Authority, Revenue Bonds | ||||||||
Series A, Insured: BAM | 10,000,000 | 11,263,600 | ||||||
Series B | 8,970,000 | 10,120,133 | ||||||
Metropolitan Transportation Authority, Green, Revenue Bonds | 4,500,000 | 5,294,880 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
Metropolitan Transportation Authority, Revenue Bonds | ||||||||
Series C-2, Insured: BAM | $ | 5,000,000 | $ | 2,384,150 | ||||
Series D | 9,000,000 | 10,771,920 | ||||||
Series C-1 | 10,000,000 | 11,857,200 | ||||||
New York City Housing Development Corp., Revenue Bonds | 4,625,000 | 5,114,464 | ||||||
New York City Transitional Finance Authority, Building Aid, Revenue Bonds | ||||||||
Series S-1 | 6,060,000 | 6,983,544 | ||||||
Series S-2 | 5,000,000 | 5,813,800 | ||||||
Series S-1 | 10,000,000 | 11,455,300 | ||||||
Series S-1 | 11,880,000 | 13,639,666 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds | ||||||||
Subseries C-4 | 35,000,000 | 35,000,000 | ||||||
Subseries F-1 | 4,000,000 | 4,803,040 | ||||||
Series B-1 | 10,000,000 | 11,441,800 | ||||||
5.00%, due 5/1/33 | 10,000,000 | 11,773,700 | ||||||
Series A-2 | 7,795,000 | 9,327,809 | ||||||
Series A1 | 5,100,000 | 5,904,321 | ||||||
SubseriesE-1 | 5,000,000 | 5,787,700 | ||||||
Series E-1 | 2,500,000 | 2,845,050 | ||||||
Subseries F-1 | 11,500,000 | 13,419,925 | ||||||
New York City Water & Sewer System, Revenue Bonds | 6,235,000 | 7,645,856 | ||||||
New York Liberty Development Corp., Bank of America, Revenue Bonds Class 2 | 5,000,000 | 5,159,300 |
24 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
New York (continued) |
| |||||||
New York Liberty Development Corp., Revenue Bonds | $ | 12,315,000 | $ | 13,256,112 | ||||
New York Liberty Development Corp., World Trade Center, Revenue Bonds | 18,940,000 | 20,765,248 | ||||||
New York Mortgage Agency, Homeowner Mortgage, Revenue Bonds | 6,540,000 | 6,707,489 | ||||||
New York State Dormitory Authority, New York University, Revenue Bonds | 6,610,000 | 7,688,620 | ||||||
New York State Dormitory Authority, Revenue Bonds | 4,190,000 | 4,876,573 | ||||||
New York State Dormitory Authority, Sales Tax, Revenue Bonds | ||||||||
Series E | 5,250,000 | 6,350,925 | ||||||
Series E | 5,000,000 | 5,985,950 | ||||||
5.00%, due 3/15/40 | 8,280,000 | 9,683,626 | ||||||
Series B | 26,080,000 | 30,978,606 | ||||||
Series E | 20,000,000 | 23,792,400 | ||||||
Series A | 10,000,000 | 11,806,600 | ||||||
5.00%, due 3/15/44 | 5,000,000 | 5,823,900 | ||||||
Series A | 3,000,000 | 3,529,770 | ||||||
New York State Dormitory Authority, State Personal Income Tax, Revenue Bonds | 13,490,000 | 15,984,706 | ||||||
New York State Dormitory Authority, University Facilities, Revenue Bonds | ||||||||
Series A | 1,000,000 | 1,183,330 | ||||||
Series A | 1,000,000 | 1,174,950 | ||||||
New York State Urban Development Corp., Personal Income Tax, Revenue Bonds | ||||||||
Series A | 12,350,000 | 14,659,821 | ||||||
Series A | 10,360,000 | 12,333,891 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
New York Transportation Development Corp., LaGuardia Airport Terminal B Redevelopment Project, Revenue Bonds (c) | ||||||||
Insured: AGM | $ | 10,925,000 | $ | 11,604,207 | ||||
Series A, Insured: AGM | 24,800,000 | 26,010,488 | ||||||
Port Authority of New York & New Jersey, Revenue Bonds | 5,000,000 | 5,944,850 | ||||||
Rensselaer City School District, Certificates of Participation | ||||||||
Insured: AGM | 1,060,000 | 1,276,102 | ||||||
Insured: AGM | 1,000,000 | 1,199,990 | ||||||
Insured: AGM | 1,880,000 | 2,220,092 | ||||||
Insured: AGM | 2,000,000 | 2,339,940 | ||||||
Syracuse Industrial Development Agency, Carousel Center Project, Revenue Bonds (c) | ||||||||
5.00%, due 1/1/29 | 1,615,000 | 1,723,528 | ||||||
Series A | 2,100,000 | 2,234,841 | ||||||
Triborough Bridge & Tunnel Authority, Revenue Bonds | ||||||||
Subseries B-2 | 12,200,000 | 12,200,000 | ||||||
Series B | 8,560,000 | 10,195,474 | ||||||
Series B | 3,600,000 | 4,248,828 | ||||||
Series A | 3,150,000 | 3,749,634 | ||||||
Series A | 12,540,000 | 14,929,246 | ||||||
TSASC, Inc., Revenue Bonds | ||||||||
Series A | 6,990,000 | 7,911,352 | ||||||
Series A | 2,865,000 | 3,229,571 | ||||||
|
| |||||||
555,572,726 | ||||||||
|
| |||||||
North Carolina 0.6% |
| |||||||
North Carolina Medical Care Commission, Moses Cone Health System, Revenue Bonds | 9,370,000 | 9,370,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
North Carolina (continued) |
| |||||||
North Carolina Medical Care Commission, North Carolina Baptist Hospital, Revenue Bonds | $ | 1,000,000 | $ | 1,037,920 | ||||
University of North Carolina Hospital, Chapel Hill, Revenue Bonds | 14,595,000 | 14,595,000 | ||||||
|
| |||||||
25,002,920 | ||||||||
|
| |||||||
North Dakota 0.3% |
| |||||||
North Dakota Housing Finance Agency, Home Mortgage Finance Program, Revenue Bonds | ||||||||
Series D | 9,000,000 | 9,671,850 | ||||||
Series A | 3,000,000 | 3,248,880 | ||||||
|
| |||||||
12,920,730 | ||||||||
|
| |||||||
Ohio 1.5% |
| |||||||
Allen County Hospital Facilities, Catholic Healthcare, Revenue Bonds | 10,000,000 | 10,000,000 | ||||||
City of Cleveland OH, Airport System, Revenue Bonds | 3,000,000 | 3,225,870 | ||||||
City of Cleveland OH, Income Tax, Bridges & Roadways Improvements, Revenue Bonds, | 1,500,000 | 1,673,675 | ||||||
Clermont County Port Authority, W. Clermont Local School District Project, Revenue Bonds | ||||||||
Insured: BAM | 650,000 | 752,186 | ||||||
Insured: BAM | 2,200,000 | 2,537,744 | ||||||
Insured: BAM | 1,335,000 | 1,535,197 | ||||||
Cleveland-Cuyahoga County Port Authority, Revenue Bonds | 1,980,000 | 2,108,443 | ||||||
County of Hamilton OH, Christ Hospital Project, Revenue Bonds | 2,000,000 | 2,172,280 |
Principal Amount | Value | |||||||
Ohio (continued) |
| |||||||
County of Montgomery OH, Premier Health-Miami Valley Hospital, Revenue Bonds (a) | ||||||||
Series E | $ | 10,740,000 | $ | 10,740,000 | ||||
Series F | 7,800,000 | 7,800,000 | ||||||
Ohio Higher Educational Facilities Commission, Cleveland Clinic Health System, Revenue Bonds | 9,500,000 | 9,500,000 | ||||||
Ohio Housing Finance Agency, Residential Mortgage Revenue, Revenue Bonds | 5,995,000 | 6,515,965 | ||||||
|
| |||||||
58,561,360 | ||||||||
|
| |||||||
Oklahoma 1.1% |
| |||||||
Garfield County Educational Facilities Authority, Enid Public Schools Project, Revenue Bonds | ||||||||
Series A | 1,800,000 | 2,159,136 | ||||||
Series A | 3,780,000 | 4,494,420 | ||||||
Series A | 5,000,000 | 5,910,250 | ||||||
Series A | 4,620,000 | 5,428,038 | ||||||
Lincoln County Educational Facilities Authority, Stroud Public Schools Project, Revenue Bonds | ||||||||
5.00%, due 9/1/28 | 3,200,000 | 3,756,608 | ||||||
5.00%, due 9/1/29 | 2,370,000 | 2,774,085 | ||||||
Oklahoma Housing Finance Agency, Homeownership Loan Program, Revenue Bonds | 3,305,000 | 3,633,517 | ||||||
Oklahoma Municipal Power Authority, Revenue Bonds | 7,650,000 | 7,894,035 | ||||||
Oklahoma State Municipal Power Authority, Revenue Bonds | ||||||||
Series A | 250,000 | 294,760 | ||||||
Series A | 900,000 | 1,056,240 |
26 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Oklahoma (continued) |
| |||||||
Oklahoma State Municipal Power Authority, Revenue Bonds (continued) | ||||||||
Series A | $ | 805,000 | $ | 934,943 | ||||
Series A | 230,000 | 265,291 | ||||||
Tulsa Airports Improvement Trust, Revenue Bonds | 500,000 | 516,755 | ||||||
Weatherford Industrial Trust Educational Facilities, Weatherford Public Schools Project, Revenue Bonds | ||||||||
5.00%, due 3/1/31 | 1,820,000 | 2,170,787 | ||||||
5.00%, due 3/1/33 | 2,500,000 | 2,955,700 | ||||||
|
| |||||||
44,244,565 | ||||||||
|
| |||||||
Oregon 0.4% |
| |||||||
Marion & Polk Counties, Salem-Keizer School District No. 24J, Unlimited General Obligation | 4,000,000 | 4,814,800 | ||||||
Oregon State Housing & Community Services Department, Single Family Mortgage Program, Revenue Bonds | 10,675,000 | 11,586,431 | ||||||
|
| |||||||
16,401,231 | ||||||||
|
| |||||||
Pennsylvania 2.9% |
| |||||||
Commonwealth Financing Authority PA, Tobacco Master Settlement Payment, Revenue Bonds | 7,000,000 | 7,456,470 | ||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment, Revenue Bonds | 10,000,000 | 11,950,200 | ||||||
County of Lancaster PA, Unlimited General Obligation | ||||||||
Series A, Insured: BAM | 500,000 | 543,465 | ||||||
Series A, Insured: BAM | 420,000 | 454,575 | ||||||
Insured: AGM | 1,390,000 | 1,644,773 |
Principal Amount | Value | |||||||
Pennsylvania (continued) |
| |||||||
Geisinger Authority Health System, Revenue Bonds (a) | ||||||||
Series A | $ | 5,000,000 | $ | 5,000,000 | ||||
Series A | 16,000,000 | 16,000,000 | ||||||
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds | 4,270,000 | 5,115,844 | ||||||
Philadelphia Gas Works Co., 1998 General Ordinance, Revenue Bonds | 2,300,000 | 2,672,669 | ||||||
Philadelphia Hospitals & Higher Education Facilities Authority, Children’s Hospital Philadelphia Project, Revenue Bonds | 20,000,000 | 20,000,000 | ||||||
State Public School Building Authority, Philadelphia Community College, Revenue Bonds | 5,505,000 | 6,324,144 | ||||||
State Public School Building Authority, Philadelphia School District, Revenue Bonds | 30,000,000 | 35,020,500 | ||||||
|
| |||||||
112,182,640 | ||||||||
|
| |||||||
Puerto Rico 5.4% |
| |||||||
Commonwealth of Puerto Rico, Aqueduct & Sewer Authority, Revenue Bonds | 14,410,000 | 14,461,588 | ||||||
Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation | ||||||||
Insured: NATL-RE | 25,000 | 24,849 | ||||||
Series A, Insured: AGM | 715,000 | 727,827 | ||||||
Series A, Insured: AGC | 575,000 | 587,621 | ||||||
Series A, Insured: AGC | 525,000 | 535,626 | ||||||
Series A-4, Insured: AGM | 5,170,000 | 5,261,457 | ||||||
Series A, Insured: AGM | 32,580,000 | 33,674,688 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Puerto Rico (continued) |
| |||||||
Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation (continued) | ||||||||
Insured: AGM | $ | 1,430,000 | $ | 1,464,821 | ||||
Series A, Insured: NATL-RE | 440,000 | 444,422 | ||||||
Series A, Insured: AGM | 1,955,000 | 2,053,552 | ||||||
Series C, Insured: AGM | 700,000 | 717,703 | ||||||
Series A, Insured: NATL-RE | 550,000 | 552,046 | ||||||
Series A, Insured: NATL-RE | 4,850,000 | 4,970,037 | ||||||
Series C, Insured: AGM | 1,150,000 | 1,175,956 | ||||||
Series C-7, Insured: NATL-RE | 2,240,000 | 2,291,901 | ||||||
Commonwealth of Puerto Rico, Unrefunded, Unlimited General Obligation | ||||||||
Series A, Insured: AGC | 285,000 | 288,360 | ||||||
Insured: AGC | 500,000 | 508,955 | ||||||
Puerto Rico Commonwealth, Aqueduct & Sewer Authority, Revenue Bonds | ||||||||
Series A, Insured: AGC | 4,350,000 | 4,430,649 | ||||||
Series A, Insured: AGC | 770,000 | 824,347 | ||||||
Puerto Rico Convention Center District Authority, Revenue Bonds | 4,855,000 | 4,861,360 | ||||||
Puerto Rico Electric Power Authority, Revenue Bonds | ||||||||
Series DDD, Insured: AGM | 3,115,000 | 3,114,969 | ||||||
Series UU, Insured: AGC | 2,345,000 | 2,345,211 | ||||||
Series NN, Insured: NATL-RE | 1,140,000 | 1,139,943 | ||||||
Series MM, Insured: NATL-RE | 2,600,000 | 2,607,566 | ||||||
Series RR, Insured: NATL-RE | 1,200,000 | 1,215,324 | ||||||
Series RR, Insured: NATL-RE | 1,450,000 | 1,467,907 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Electric Power Authority, Revenue Bonds (continued) | ||||||||
Series UU, Insured: AGM | $ | 2,290,000 | $ | 2,338,319 | ||||
Series SS, Insured: NATL-RE | 825,000 | 834,842 | ||||||
Series PP, Insured: NATL-RE | 1,105,000 | 1,118,183 | ||||||
Series UU, Insured: AGM | 4,415,000 | 4,511,953 | ||||||
Series PP, Insured: NATL-RE | 2,915,000 | 2,948,552 | ||||||
Series TT, Insured: AGM | 500,000 | 510,120 | ||||||
Series SS, Insured: AGM | 550,000 | 558,333 | ||||||
Series VV, Insured: NATL-RE | 1,875,000 | 2,021,906 | ||||||
Series VV, Insured: NATL-RE | 1,470,000 | 1,594,597 | ||||||
Series VV, Insured: NATL-RE | 2,000,000 | 2,158,980 | ||||||
Series VV, Insured: NATL-RE | 550,000 | 591,916 | ||||||
Series VV, Insured: NATL-RE | 620,000 | 665,700 | ||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds | ||||||||
Series L, Insured: NATL-RE | 2,195,000 | 2,343,031 | ||||||
Series N, Insured: NATL-RE | 5,525,000 | 5,964,182 | ||||||
Series CC, Insured: AGM | 2,165,000 | 2,362,123 | ||||||
Series N, Insured: NATL-RE | 5,030,000 | 5,424,905 | ||||||
Series N, Insured: AGC | 5,125,000 | 5,570,977 | ||||||
Series CC, Insured: AGM | 2,355,000 | 2,533,744 | ||||||
Series N, Insured: AGC | 16,965,000 | 18,251,456 | ||||||
Series N, Insured: AGC, AGM | 1,425,000 | 1,533,058 | ||||||
Series N, Insured: AGC | 135,000 | 143,016 | ||||||
Series L, Insured: AGC | 2,535,000 | 2,672,017 | ||||||
Series E, Insured: AGM | 670,000 | 702,569 | ||||||
Series N, Insured: AGC | 625,000 | 691,056 |
28 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds (continued) | ||||||||
Series N, Insured: AGC, AGM | $ | 10,325,000 | $ | 11,527,862 | ||||
Series CC, Insured: AGC | 1,780,000 | 1,984,130 | ||||||
Puerto Rico Highway & Transportation Authority, Unrefunded, Revenue Bonds | ||||||||
Series D, Insured: AGM | 2,240,000 | 2,285,338 | ||||||
Series J, Insured: NATL-RE | 650,000 | 655,857 | ||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds | ||||||||
Series A, Insured: AGM | 820,000 | 832,259 | ||||||
Series A, Insured: AGM | 195,000 | 197,964 | ||||||
Series A, Insured: AGM | 290,000 | 295,870 | ||||||
Series A, Insured: AGM | 1,720,000 | 1,746,058 | ||||||
Series C, Insured: AGM | 1,195,000 | 1,201,573 | ||||||
Series C, Insured: AGC | 210,000 | 215,473 | ||||||
Series C, Insured: AGC | 340,000 | 363,433 | ||||||
Puerto Rico Public Buildings Authority, Government Facilities, Revenue Bonds | ||||||||
Series F, Insured: NATL-RE, XLCA | 265,000 | 280,786 | ||||||
Series K, Insured: AGM | 1,150,000 | 1,169,389 | ||||||
Series M-3, Insured: NATL-RE | 300,000 | 308,247 | ||||||
Series M-3, Insured: NATL-RE | 7,465,000 | 7,605,267 | ||||||
Puerto Rico Sales Tax Financing Corp Sales Tax, Revenue Bonds | ||||||||
Series 2007-A | 15,955,041 | 13,371,615 | ||||||
Insured: BHAC | 869,927 | 183,128 | ||||||
Puerto Rico Sales Tax Financing Corp., Revenue Bonds,Series 2007-A | ||||||||
Series 2007-A | 7,862,713 | 6,794,839 | ||||||
|
| |||||||
210,813,308 | ||||||||
|
|
Principal Amount | Value | |||||||
Rhode Island 0.4% |
| |||||||
Providence Public Buildings Authority, Revenue Bonds | $ | 1,565,000 | $ | 1,684,754 | ||||
Rhode Island Health & Educational Building Corp., Hospital Financing-Lifespan Obligated Group, Revenue Bonds | 5,000,000 | 5,828,100 | ||||||
Rhode Island Health & Educational Building Corp., Rhode Island School of Design, Revenue Bonds | ||||||||
5.00%, due 8/15/29 | 500,000 | 616,480 | ||||||
5.00%, due 8/15/31 | 400,000 | 485,440 | ||||||
5.00%, due 8/15/33 | 450,000 | 540,648 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Homeownership Opportunity, Revenue Bonds | 5,620,000 | 5,993,393 | ||||||
|
| |||||||
15,148,815 | ||||||||
|
| |||||||
South Carolina 3.0% |
| |||||||
Patriots Energy Group Financing Agency, Gas Supply, Revenue Bonds | 4,300,000 | 4,665,070 | ||||||
Piedmont Municipal Power Agency, Revenue Bonds | 10,345,000 | 11,152,013 | ||||||
South Carolina Jobs-Economic Development Authority, Palmetto Health, Revenue Bonds | 420,000 | 423,486 | ||||||
South Carolina Public Service Authority, Revenue Bonds | ||||||||
Series C | 5,000,000 | 5,661,650 | ||||||
Series A | 10,000,000 | 11,508,800 | ||||||
Series B | 3,500,000 | 3,974,005 | ||||||
Series B | 3,125,000 | 3,543,469 | ||||||
Series B | 2,500,000 | 2,804,550 | ||||||
Series E | 27,430,000 | 30,812,668 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
South Carolina (continued) |
| |||||||
South Carolina Public Service Authority, Santee Cooper Project, Revenue Bonds | ||||||||
Series A | $ | 6,445,000 | $ | 6,922,381 | ||||
Series D | 2,595,000 | 2,810,229 | ||||||
Series C | 3,310,000 | 3,491,388 | ||||||
Series D | 5,150,000 | 5,455,138 | ||||||
South Carolina State Housing Finance & Development Authority, Revenue Bonds | 3,985,000 | 4,312,766 | ||||||
South Carolina Transportation Infrastructure Bank, Revenue Bonds | 15,000,000 | 17,611,500 | ||||||
Sumter Two School Facilities Inc., Sumter School District Project, Revenue Bonds Insured: BAM | 1,100,000 | 1,271,842 | ||||||
|
| |||||||
116,420,955 | ||||||||
|
| |||||||
South Dakota 0.3% |
| |||||||
South Dakota Conservancy District, Revenue Bonds | ||||||||
5.00%, due 8/1/37 | 1,750,000 | 2,115,032 | ||||||
5.00%, due 8/1/38 | 3,000,000 | 3,613,110 | ||||||
South Dakota Housing Development Authority, Revenue Bonds | 5,000,000 | 5,361,700 | ||||||
|
| |||||||
11,089,842 | ||||||||
|
| |||||||
Tennessee 0.7% |
| |||||||
Johnson City Health & Educational Facilities Board, Mountain States Health Alliance, Revenue Bonds | 3,605,000 | 3,784,962 | ||||||
Tennessee Housing & Development Agency, Residential Finance Program, Revenue Bonds | ||||||||
Issue 3 | 3,955,000 | 4,256,331 | ||||||
4.25%, due 1/1/50 | 10,000,000 | 10,854,000 | ||||||
4.50%, due 7/1/49 | 8,140,000 | 8,866,821 | ||||||
|
| |||||||
27,762,114 | ||||||||
|
|
Principal Amount | Value | |||||||
Texas 5.9% |
| |||||||
Bexar County Hospital District, Limited General Obligation | $ | 4,200,000 | $ | 4,542,930 | ||||
Central Texas Turnpike System, Revenue Bonds | ||||||||
Series C | 5,000,000 | 5,575,050 | ||||||
Series B | 1,445,000 | 1,617,865 | ||||||
Series C | 2,135,000 | 2,365,900 | ||||||
City of Austin TX, Airport System, Revenue Bonds (c) | ||||||||
5.00%, due 11/15/24 | 4,000,000 | 4,625,040 | ||||||
5.00%, due 11/15/25 | 4,000,000 | 4,714,800 | ||||||
City of Donna TX, Tax & Toll Bridge, Limited General Obligation | 1,035,000 | 1,164,665 | ||||||
City of Houston, Limited General Obligation | 5,000,000 | 6,025,900 | ||||||
Fort Bend Independent School District, Unlimited General Obligation | ||||||||
Series B, Insured: PSF | 1,765,000 | 2,172,397 | ||||||
Series B, Insured: PSF | 3,250,000 | 3,977,545 | ||||||
Gulf Coast Industrial Development Authority, Exxon Mobil Project, Revenue Bonds | 20,000,000 | 20,000,000 | ||||||
Harris County Cultural Education Facilities Finance Corp., Houston Methodist Hospital, Revenue Bonds | 1,700,000 | 1,700,000 | ||||||
Harris County Cultural Education Facilities Finance Corp., Memorial Hermann Health System, Revenue Bonds | 4,280,000 | 4,849,625 | ||||||
Harris County Cultural Education Facilities Finance Corp., Texas Medical Center, Revenue Bonds | 2,800,000 | 2,800,000 | ||||||
Harris County Health Facilities Development Corp., Methodist Hospital System, Revenue Bonds | 7,700,000 | 7,700,000 |
30 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Texas (continued) |
| |||||||
Harris County-Houston Sports Authority Cap Appreciation, Senior Lien, Revenue Bonds | $ | 17,115,000 | $ | 6,291,132 | ||||
Little Elm Independent School District, Unlimited General Obligation | 30,000,000 | 35,296,200 | ||||||
North Harris County Regional Water Authority, Senior Lien, Revenue Bonds Insured: BAM | 3,215,000 | 3,547,656 | ||||||
North Texas Tollway Authority, Revenue Bonds | ||||||||
Series A | 1,400,000 | 1,589,532 | ||||||
Series A | 2,950,000 | 3,342,527 | ||||||
Series A, Insured: BAM | 9,500,000 | 10,693,960 | ||||||
Series B | 22,140,000 | 24,174,002 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Buckner Retirement Services, Revenue Bonds | ||||||||
Series A | 1,245,000 | 1,377,244 | ||||||
Series A | 1,305,000 | 1,466,507 | ||||||
Series A | 1,370,000 | 1,566,732 | ||||||
Series A | 1,440,000 | 1,666,886 | ||||||
Texas Department of Housing & Community Affairs, Revenue Bonds | ||||||||
Series A, Insured: GNMA/FNMA | 7,000,000 | 7,739,130 | ||||||
Series A | 4,985,000 | 5,462,713 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds | ||||||||
5.00%, due 12/15/30 | 17,100,000 | 18,557,262 | ||||||
5.00%, due 12/15/31 | 4,575,000 | 4,954,359 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien, LBJ Infrastructure, Revenue Bonds | ||||||||
7.00%, due 6/30/40 | 5,020,000 | 5,306,491 | ||||||
7.50%, due 6/30/32 | 4,095,000 | 4,364,328 | ||||||
7.50%, due 6/30/33 | 5,500,000 | 5,855,795 |
Principal Amount | Value | |||||||
Texas (continued) |
| |||||||
Texas Public Finance Authority, Financing System-Texas Southern University, Revenue Bonds | ||||||||
Insured: BAM | $ | 1,000,000 | $ | 1,063,150 | ||||
Insured: BAM | 1,295,000 | 1,370,006 | ||||||
Texas State Municipal Power Agency, Revenue Bonds | ||||||||
5.00%, due 9/1/42 | 1,900,000 | 1,971,592 | ||||||
5.00%, due 9/1/47 | 2,750,000 | 2,851,393 | ||||||
Texas Water Development Board, Water Implementation Fund, Revenue Bonds | 5,000,000 | 6,245,450 | ||||||
Town of Prosper TX, Unlimited General Obligation | 1,235,000 | 1,383,855 | ||||||
Viridian Municipal Management District, Unlimited General Obligation | 500,000 | 604,600 | ||||||
|
| |||||||
232,574,219 | ||||||||
|
| |||||||
U.S. Virgin Islands 1.6% |
| |||||||
Virgin Islands Public Finance Authority, Matching Fund Loan, Revenue Bonds | ||||||||
Series A | 5,100,000 | 4,934,250 | ||||||
Series A | 6,960,000 | 6,838,896 | ||||||
Series A | 5,000,000 | 4,913,000 | ||||||
Virgin Islands Public Finance Authority, Revenue Bonds | ||||||||
5.00%, due 9/1/30 (b) | 5,000,000 | 5,450,250 | ||||||
Series C | 18,500,000 | 16,973,750 | ||||||
Series A, Insured: AGM | 15,655,000 | 16,926,969 | ||||||
Series C, Insured: AGM | 5,920,000 | 6,418,582 | ||||||
|
| |||||||
62,455,697 | ||||||||
|
| |||||||
Utah 1.5% |
| |||||||
City of Herriman UT, Special Assessment, Towne Centre Assessment Area | 55,000 | 56,876 | ||||||
City of Murray UT, Murray City Hospital, IHC Health Services, Inc., Revenue Bonds | 28,400,000 | 28,400,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) |
| |||||||
Utah (continued) |
| |||||||
Utah Housing Corp., Revenue Bonds | ||||||||
Series H, Insured: GNMA | $ | 4,189,682 | $ | 4,434,317 | ||||
Series J | 4,970,499 | 5,260,726 | ||||||
Series A, Insured: GNMA | 9,957,994 | 10,539,442 | ||||||
Series B, Insured: GNMA | 5,981,648 | 6,330,916 | ||||||
Utah Infrastructure Agency, Revenue Bonds | ||||||||
5.00%, due 10/15/31 | 350,000 | 421,092 | ||||||
5.00%, due 10/15/38 | 1,990,000 | 2,335,763 | ||||||
5.00%, due 10/15/41 | 2,175,000 | 2,537,094 | ||||||
|
| |||||||
60,316,226 | ||||||||
|
| |||||||
Virginia 1.1% |
| |||||||
Chesapeake Bay Bridge & Tunnel District, Revenue Bonds | 11,575,000 | 13,386,719 | ||||||
Hampton Roads Sanitation District, Revenue Bonds | ||||||||
Series A | 3,540,000 | 4,308,392 | ||||||
Series A | 2,500,000 | 3,026,075 | ||||||
Virginia Commonwealth Transportation Board, Revenue Bonds | ||||||||
Series A | 4,000,000 | 4,993,000 | ||||||
Series A | 3,750,000 | 4,652,888 | ||||||
Series A | 8,000,000 | 9,860,160 | ||||||
Virginia Resources Authority, Infrastructure Revenue, Revenue Bonds | 2,315,000 | 2,566,918 | ||||||
|
| |||||||
42,794,152 | ||||||||
|
| |||||||
Washington 0.7% |
| |||||||
Washington State Housing Finance Commission, Single Family Program, Revenue Bonds | ||||||||
Series 1N | 6,000,000 | 6,404,940 | ||||||
Series 1N | 7,500,000 | 8,055,450 |
Principal Amount | Value | |||||||
Washington (continued) |
| |||||||
Washington State, Unlimited General Obligation | $ | 11,335,000 | $ | 13,368,386 | ||||
|
| |||||||
27,828,776 | ||||||||
|
| |||||||
Wisconsin 1.1% |
| |||||||
University Hospitals & Clinics Authority, Revenue Bonds | 12,375,000 | 12,375,000 | ||||||
Wisconsin Center District, Junior Dedicated, Revenue Bonds | ||||||||
Series A | 3,665,000 | 4,011,416 | ||||||
Series A | 2,850,000 | 3,110,461 | ||||||
Wisconsin Health & Educational Facilities Authority, Marshfield Clinic Health System, Revenue Bonds | 13,985,000 | 13,985,000 | ||||||
Wisconsin Housing & Economic Development Authority, Revenue Bonds | 8,200,000 | 8,735,788 | ||||||
|
| |||||||
42,217,665 | ||||||||
|
| |||||||
Wyoming 0.3% |
| |||||||
West Park Hospital District, Revenue Bonds | ||||||||
Series A | 250,000 | 261,610 | ||||||
Series A | 1,000,000 | 1,070,730 | ||||||
Wyoming Community Development Authority, Revenue Bonds | ||||||||
Series 3 | 4,450,000 | 4,733,910 | ||||||
Series 1 | 4,000,000 | 4,283,480 | ||||||
|
| |||||||
10,349,730 | ||||||||
|
| |||||||
Total Municipal Bonds | 3,910,539,962 | |||||||
|
|
32 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Closed-End Funds 1.2% |
| |||||||
Massachusetts 1.2% | ||||||||
Invesco National AMT-Free Municipal Bond ETF | $ | 1,870,000 | $ | 48,189,900 | ||||
|
| |||||||
Total Closed-End Funds | 48,189,900 | |||||||
|
| |||||||
Total Investments | 101.3 | % | 3,958,729,862 | |||||
Other Assets, Less Liabilities | (1.3 | ) | (51,725,003 | ) | ||||
Net Assets | 100.0 | % | $ | 3,907,004,859 |
† | Percentages indicated are based on Fund net assets. |
(a) | Variable-rate demand notes (VRDNs)—Provide the right to sell the security at face value on either that day or within the rate-reset period. VRDNs will normally trade as if the maturity is the earlier put date, even though stated maturity is longer. The interest rate is reset on the put date at a stipulated daily, weekly, monthly, quarterly, or other specified time interval to reflect current market conditions. These securities do not indicate a reference rate and spread in their description. The maturity date shown is the final maturity. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Interest on these securities is subject to alternative minimum tax. |
(d) | Floating rate—Rate shown was the rate in effect as of April 30, 2019. |
The following abbreviations are used in the preceding pages:
AGC—Assured Guaranty Corp.
AGM—Assured Guaranty Municipal Corp.
AMBAC—Ambac Assurance Corp.
BAM—Build America Mutual Assurance Co.
BHAC—Berkshire Hathaway Assurance Corp.
ETF—Exchange-Traded Fund
FHLMC—Federal Home Loan Mortgage Corp.
FNMA—Federal National Mortgage Association
GNMA—Government National Mortgage Association
NATL-RE—National Public Finance Guarantee Corp.
Q-SBLF—Qualified School Board Loan Fund
XLCA—XL Capital Assurance, Inc.
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Municipal Bonds | $ | — | $ | 3,910,539,962 | $ | — | $ | 3,910,539,962 | ||||||||
Closed-End Funds | 48,189,900 | — | — | 48,189,900 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 48,189,900 | $ | 3,910,539,962 | $ | — | $ | 3,958,729,862 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets |
| |||
Investment in securities, at value | $ | 3,958,729,862 | ||
Cash | 11,592,931 | |||
Receivables: | ||||
Interest | 42,166,637 | |||
Fund shares sold | 15,368,548 | |||
Investment securities sold | 469,190 | |||
Other assets | 122,719 | |||
|
| |||
Total assets | 4,028,449,887 | |||
|
| |||
Liabilities |
| |||
Payables: | ||||
Investment securities purchased | 110,978,321 | |||
Fund shares redeemed | 5,510,502 | |||
Manager (See Note 3) | 1,214,329 | |||
Transfer agent (See Note 3) | 452,443 | |||
NYLIFE Distributors (See Note 3) | 393,581 | |||
Professional fees | 67,995 | |||
Shareholder communication | 66,352 | |||
Custodian | 8,205 | |||
Trustees | 3,075 | |||
Accrued expenses | 2,332 | |||
Dividend payable | 2,747,893 | |||
|
| |||
Total liabilities | 121,445,028 | |||
|
| |||
Net assets | $ | 3,907,004,859 | ||
|
| |||
Composition of Net Assets |
| |||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 3,863,574 | ||
Additional paid-in capital | 3,862,289,527 | |||
|
| |||
3,866,153,101 | ||||
Total distributable earnings (loss) | 40,851,758 | |||
|
| |||
Net assets | $ | 3,907,004,859 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 1,447,839,147 | ||
|
| |||
Shares of beneficial interest outstanding | 143,196,971 | |||
|
| |||
Net asset value per share outstanding | $ | 10.11 | ||
Maximum sales charge (4.50% of offering price) | 0.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.59 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 9,688,146 | ||
|
| |||
Shares of beneficial interest outstanding | 954,143 | |||
|
| |||
Net asset value per share outstanding | $ | 10.15 | ||
Maximum sales charge (4.50% of offering price) | 0.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.63 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 13,515,320 | ||
|
| |||
Shares of beneficial interest outstanding | 1,337,093 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.11 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 224,141,523 | ||
|
| |||
Shares of beneficial interest outstanding | 22,162,056 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.11 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 2,211,820,723 | ||
|
| |||
Shares of beneficial interest outstanding | 218,707,109 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.11 | ||
|
|
34 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 60,584,137 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 6,611,974 | |||
Distribution/Service—Class A (See Note 3) | 1,726,820 | |||
Distribution/Service—Investor Class (See Note 3) | 11,931 | |||
Distribution/Service—Class B (See Note 3) | 34,832 | |||
Distribution/Service—Class C (See Note 3) | 540,144 | |||
Transfer agent (See Note 3) | 1,351,773 | |||
Professional fees | 115,027 | |||
Registration | 85,698 | |||
Shareholder communication | 62,005 | |||
Trustees | 36,472 | |||
Custodian | 19,016 | |||
Miscellaneous | 54,184 | |||
|
| |||
Total expenses | 10,649,876 | |||
|
| |||
Net investment income (loss) | 49,934,261 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | (3,428,157 | ) | ||
Futures transactions | (10,907,030 | ) | ||
|
| |||
Net realized gain (loss) on investments and futures transactions | (14,335,187 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 127,880,979 | |||
Futures contracts | (12,342,076 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 115,538,903 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | 101,203,716 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 151,137,977 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 35 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 49,934,261 | $ | 96,130,666 | ||||
Net realized gain (loss) on investments and futures contracts | (14,335,187 | ) | 10,132,105 | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 115,538,903 | (77,398,554 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 151,137,977 | 28,864,217 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (21,415,009 | ) | (48,970,403 | ) | ||||
Investor Class | (148,663 | ) | (314,661 | ) | ||||
Class B | (199,941 | ) | (468,606 | ) | ||||
Class C | (3,089,519 | ) | (6,678,082 | ) | ||||
Class I | (25,081,129 | ) | (39,698,956 | ) | ||||
|
| |||||||
Total distributions to shareholders | (49,934,261 | ) | (96,130,708 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,290,740,215 | 908,337,837 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 34,611,967 | 70,847,755 | ||||||
Cost of shares redeemed | (484,222,046 | ) | (800,275,249 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 841,130,136 | 178,910,343 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 942,333,852 | 111,643,852 | ||||||
Net Assets | ||||||||
Beginning of period | 2,964,671,007 | 2,853,027,155 | ||||||
|
| |||||||
End of period | $ | 3,907,004,859 | $ | 2,964,671,007 | ||||
|
|
36 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.33 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) | 0.15 | 0.31 | 0.31 | 0.32 | 0.35 | 0.39 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.31 | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.70 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.46 | 0.09 | 0.15 | 0.57 | 0.25 | 1.09 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.31 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.39 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.11 | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (a) | 4.76 | % | 0.94 | % | 1.50 | % | 5.73 | % | 2.58 | % | 11.86 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.10 | %†† | 3.15 | % | 3.05 | % | 3.04 | % | 3.51 | % | 3.99 | % | ||||||||||||||||
Net expenses | 0.79 | %†† | 0.80 | % | 0.81 | % | 0.80 | % | 0.81 | % | 0.78 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.79 | %†† | 0.80 | % | 0.81 | % | 0.80 | % | 0.82 | % | 0.83 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 1,447,839 | $ | 1,405,803 | $ | 1,564,955 | $ | 1,248,065 | $ | 761,278 | $ | 427,586 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.84 | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | $ | 9.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) | 0.15 | 0.32 | 0.31 | 0.32 | 0.35 | 0.39 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.31 | (0.22 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.69 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.46 | 0.10 | 0.14 | 0.58 | 0.24 | 1.08 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.32 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.38 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.15 | $ | 9.84 | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (a) | 4.75 | % | 0.97 | % | 1.43 | % | 5.83 | % | 2.47 | % | 11.76 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.12 | %†† | 3.17 | % | 3.10 | % | 3.11 | % | 3.54 | % | 3.94 | % | ||||||||||||||||
Net expenses | 0.78 | %†† | 0.78 | % | 0.79 | % | 0.79 | % | 0.82 | % | 0.84 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.78 | %†† | 0.78 | % | 0.79 | % | 0.79 | % | 0.83 | % | 0.89 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 9,688 | $ | 9,690 | $ | 10,216 | $ | 16,344 | $ | 17,259 | $ | 18,264 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 37 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.80 | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | $ | 9.33 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) | 0.14 | 0.29 | 0.28 | 0.29 | 0.33 | 0.35 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.31 | (0.21 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.71 | |||||||||||||||||||
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|
|
|
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|
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|
|
| |||||||||||||||||
Total from investment operations | 0.45 | 0.08 | 0.11 | 0.55 | 0.22 | 1.06 | ||||||||||||||||||||||
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|
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|
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| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.29 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | ||||||||||||||||
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| |||||||||||||||||
Net asset value at end of period | $ | 10.11 | $ | 9.80 | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | ||||||||||||||||
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|
|
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| |||||||||||||||||
Total investment return (a) | 4.63 | % | 0.81 | % | 1.17 | % | 5.58 | % | 2.21 | % | 11.52 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.87 | %†† | 2.92 | % | 2.85 | % | 2.84 | % | 3.28 | % | 3.69 | % | ||||||||||||||||
Net expenses | 1.03 | %†† | 1.03 | % | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | %†† | 1.03 | % | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,515 | $ | 14,704 | $ | 17,068 | $ | 19,318 | $ | 16,806 | $ | 12,439 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||||||||
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|
|
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|
| |||||||||||||||||
Net investment income (loss) | 0.14 | 0.29 | 0.28 | 0.29 | 0.33 | 0.36 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.31 | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.45 | 0.07 | 0.12 | 0.54 | 0.23 | 1.05 | ||||||||||||||||||||||
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|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.29 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | ||||||||||||||||
|
|
|
|
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|
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| |||||||||||||||||
Net asset value at end of period | $ | 10.11 | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (a) | 4.63 | % | 0.71 | % | 1.27 | % | 5.48 | % | 2.31 | % | 11.40 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.86 | %†† | 2.92 | % | 2.85 | % | 2.81 | % | 3.28 | % | 3.68 | % | ||||||||||||||||
Net expenses | 1.03 | %†† | 1.03 | % | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | %†† | 1.03 | % | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 224,142 | $ | 213,883 | $ | 241,526 | $ | 273,386 | $ | 183,509 | $ | 154,863 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
38 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) | 0.17 | 0.34 | 0.33 | 0.34 | 0.38 | 0.41 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.31 | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.48 | 0.12 | 0.17 | 0.59 | 0.28 | 1.10 | ||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.34 | ) | (0.33 | ) | (0.34 | ) | (0.38 | ) | (0.41 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.11 | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (a) | 4.89 | % | 1.19 | % | 1.75 | % | 5.99 | % | 2.83 | % | 12.02 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.33 | %†† | 3.40 | % | 3.31 | % | 3.29 | % | 3.78 | % | 4.21 | % | ||||||||||||||||
Net expenses | 0.53 | %†† | 0.55 | % | 0.56 | % | 0.55 | % | 0.56 | % | 0.53 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.53 | %†† | 0.55 | % | 0.56 | % | 0.55 | % | 0.57 | % | 0.58 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,211,821 | $ | 1,320,591 | $ | 1,019,263 | $ | 899,128 | $ | 513,893 | $ | 314,005 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 39 |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Tax Free Bond Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has six classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on December 21, 2009. Class R6 shares were registered for sale effective as of February 28, 2017. As of April 30, 2019, Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $250,000 or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after
the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A and Investor Class shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income exempt from regular federal income tax.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices
40 | MainStay MacKay Tax Free Bond Fund |
on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
41 |
Notes to Financial Statements(Unaudited) (continued)
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Municipal debt securities are valued at the evaluated mean prices supplied by a pricing agent or broker selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Municipal debt securities are generally categorized as Level 2 in the hierarchy.
In calculating NAV, each closed end fund is valued at market value, which will generally be determined using the last reported official closing or last trading price on the exchange or market on which the security is primarily traded at the time of valuation. Price information on closed end funds are taken from the exchange where the security is primarily traded. In addition, because closed-end funds and ETFs trade on a secondary market, their shares may trade at a premium or discount to the actual net asset value of their portfolio securities and their shares may have greater volatility because of the potential lack of liquidity.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends from net investment income, if any, daily and intends to pay them at least monthly and declares and pays distributions from net realized capital gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of
42 | MainStay MacKay Tax Free Bond Fund |
shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2019, open futures contracts are shown in the Portfolio of Investments.
(H) Municipal Bond Risk. The Fund may invest more heavily in municipal bonds from certain cities, states or regions than others, which may increase the Fund’s exposure to losses resulting from economic,
political, or regulatory occurrences impacting these particular cities, states or regions. In addition, many state and municipal governments that issue securities are under significant economic and financial stress and may not be able to satisfy their obligations. The Fund may invest a substantial amount of its assets in municipal bonds whose interest is paid solely from revenues of similar projects, such as tobacco settlement bonds. If the Fund concentrates its investments in this manner, it assumes the legal and economic risks relating to such projects and this may have a significant impact on the Fund’s investment performance.
Certain of the issuers in which the Fund may invest have recently experienced, or may experience, significant financial difficulties and repeated credit rating downgrades. On May 3, 2017, the Commonwealth of Puerto Rico began proceedings to seek bankruptcy-type protections from approximately $74 billion in debt and approximately $48 billion in unfunded pension obligations. Puerto Rico’s debt restructuring of $122 billion is significantly larger than the previous largest U.S. public bankruptcy, which covered approximately $18 billion of debt for the city of Detroit. Puerto Rico has reached agreements with certain bondholders to restructure outstanding debt issued by certain of Puerto Rico’s instrumentalities and is negotiating the restructuring of its debt with certain other bondholders. Any agreement to restructure such outstanding debt must be approved by the judge overseeing the debt restructuring. Puerto Rico’s debt restructuring process and other economic factors or developments could occur rapidly and may significantly affect the value of municipal securities of Puerto Rico. The Fund’s vulnerability to potential losses associated with such developments may be reduced through investing in municipal securities that feature credit enhancements (such as bond insurance). The bond insurance provider pays both principal and interest when due to the bond holder. The magnitude of Puerto Rico’s debt restructuring or other adverse economic developments could pose significant strains on the ability of municipal securities insurers to meet all future claims. As of April 30, 2019, 94.4% of the Puerto Rico municipal securities held by the Fund were insured.
On February 4, 2019, Judge Laura Taylor Swain confirmed the Puerto Rico Sales Tax Financing Corporation’s (COFINA) Plan of Adjustment, which provided for the restructuring of over $17.6 billion in secured obligations and the issuance of $12 billion in new COFINA bonds under the Restricting Support Agreement. The confirmation order decreed that COFINA Revenues are not “Available Resources” of the Commonwealth as termed in the Puerto Rico Constitution and have a Statutory first lien against the COFINA Pledged Taxes. There are currently two appeals pending on the COFINA Plan of Adjustment with no certainty the COFINA debt restructuring plan will be upheld by higher courts. The COFINA plan is one of five Puerto Rico public entities to file for Title III bankruptcy which resulted in the restructuring of over $17 billion in debt exchanged for new debt at a lower face value. As of April 30, 2019, the Fund held 0.5% of its net assets in COFINA bonds that have not yet been restructured.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this
43 |
Notes to Financial Statements(Unaudited) (continued)
would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(J) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio. These derivatives are not accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019:
Realized Gain (Loss)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | (10,907,030 | ) | $ | (10,907,030 | ) | |||
|
| |||||||||
Total Realized Gain (Loss) | $ | (10,907,030 | ) | $ | (10,907,030 | ) | ||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | (12,342,076 | ) | $ | (12,342,076 | ) | |||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (12,342,076 | ) | $ | (12,342,076 | ) | ||||
|
|
Average Notional Amount
Interest Rate Contracts Risk | Total | |||||||
Futures Contracts Short | $ | (481,585,463 | ) | $ | (481,585,463 | ) | ||
|
|
|
|
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained
by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.45% up to $500 million; 0.425% from $500 million to $1 billion; 0.40% from $1 billion to $5 billion; and 0.39% in excess of $5 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
During the six-month period ended April 30, 2019, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.42% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for Class A shares do not exceed 0.82% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund, except for Class R6. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2020, and shall renew automatically for one year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $6,611,974.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
44 | MainStay MacKay Tax Free Bond Fund |
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A and Investor Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 0.50%. Class I shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $22,784 and $1,883, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $108,727, $144, $4,192 and $9,809, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During thesix-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 605,161 | ||
Investor Class | 3,780 | |||
Class B | 5,523 | |||
Class C | 85,424 | |||
Class I | 651,885 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain
shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 3,884,256,909 | $ | 90,695,871 | $ | (16,222,918 | ) | $ | 74,472,953 |
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $6,353,534 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
2019 | $2,136 | $ — | ||
Unlimited | 4,218 | — | ||
Total | $6,354 | $ — |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 408,463 | ||
Exempt Interest Dividends | 95,722,245 | |||
Total | $ | 96,130,708 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with
45 |
Notes to Financial Statements(Unaudited) (continued)
an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $1,393,346 and $480,847, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 20,707,890 | $ | 205,755,891 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,899,627 | 18,929,702 | ||||||
Shares redeemed | (23,050,429 | ) | (228,060,644 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (442,912 | ) | (3,375,051 | ) | ||||
Shares converted into Class A (See Note 1) | 187,852 | 1,874,788 | ||||||
Shares converted from Class A (See Note 1) | (29,887 | ) | (298,551 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (284,947 | ) | $ | (1,798,814 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 27,829,562 | $ | 277,281,404 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,415,082 | 43,848,053 | ||||||
Shares redeemed | (45,038,927 | ) | (446,306,716 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (12,794,283 | ) | (125,177,259 | ) | ||||
Shares converted into Class A (See Note 1) | 166,398 | 1,653,064 | ||||||
Shares converted from Class A (See Note 1) | (120,030 | ) | (1,185,433 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,747,915 | ) | $ | (124,709,628 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 56,116 | $ | 561,081 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13,776 | 137,828 | ||||||
Shares redeemed | (57,345 | ) | (572,346 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 12,547 | 126,563 | ||||||
Shares converted into Investor Class (See Note 1) | 28,616 | 287,353 | ||||||
Shares converted from Investor Class (See Note 1) | (71,880 | ) | (718,276 | ) | ||||
|
| |||||||
Net increase (decrease) | (30,717 | ) | $ | (304,360 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 140,459 | $ | 1,403,995 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 29,038 | 289,625 | ||||||
Shares redeemed | (128,010 | ) | (1,278,335 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 41,487 | 415,285 | ||||||
Shares converted into Investor Class (See Note 1) | 55,754 | 554,849 | ||||||
Shares converted from Investor Class (See Note 1) | (127,835 | ) | (1,275,192 | ) | ||||
|
| |||||||
Net increase (decrease) | (30,594 | ) | $ | (305,058 | ) | |||
|
| |||||||
46 | MainStay MacKay Tax Free Bond Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 69,110 | $ | 685,472 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 18,556 | 184,816 | ||||||
Shares redeemed | (237,203 | ) | (2,354,319 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (149,537 | ) | (1,484,031 | ) | ||||
Shares converted from Class B (See Note 1) | (14,532 | ) | (144,685 | ) | ||||
|
| |||||||
Net increase (decrease) | (164,069 | ) | $ | (1,628,716 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 34,039 | $ | 341,621 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 43,176 | 428,654 | ||||||
Shares redeemed | (227,067 | ) | (2,257,077 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (149,852 | ) | (1,486,802 | ) | ||||
Shares converted from Class B (See Note 1) | (53,311 | ) | (529,520 | ) | ||||
|
| |||||||
Net increase (decrease) | (203,163 | ) | $ | (2,016,322 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,953,652 | $ | 29,356,922 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 232,195 | 2,314,401 | ||||||
Shares redeemed | (2,730,322 | ) | (27,102,779 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 455,525 | 4,568,544 | ||||||
Shares converted from Class C (See Note 1) | (117,234 | ) | (1,173,143 | ) | ||||
|
| |||||||
Net increase (decrease) | 338,291 | $ | 3,395,401 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 2,787,815 | $ | 27,771,578 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 503,206 | 4,998,795 | ||||||
Shares redeemed | (5,571,996 | ) | (55,431,369 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,280,975 | ) | $ | (22,660,996 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 105,424,907 | $ | 1,054,380,849 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,307,682 | 13,045,220 | ||||||
Shares redeemed | (22,799,016 | ) | (226,131,958 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 83,933,573 | 841,294,111 | ||||||
Shares converted into Class I (See Note 1) | 17,334 | 172,514 | ||||||
|
| |||||||
Net increase (decrease) | 83,950,907 | $ | 841,466,625 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 60,501,972 | $ | 601,539,239 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,142,891 | 21,282,628 | ||||||
Shares redeemed | (29,694,922 | ) | (295,001,752 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 32,949,941 | 327,820,115 | ||||||
Shares converted into Class I (See Note 1) | 79,237 | 782,232 | ||||||
|
| |||||||
Net increase (decrease) | 33,029,178 | $ | 328,602,347 | |||||
|
|
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay Tax Free Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the per-
48 | MainStay MacKay Tax Free Bond Fund |
formance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay and ongoing analysis of, and interactions with, MacKay with respect to, among other things, Fund investment performance and risk as well as MacKay’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group
of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay provides to the Fund. The Board evaluated MacKay’s experience in serving as subadvisor to the Fund and managing other portfolios and MacKay’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay, and MacKay’s overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay. The Board reviewed MacKay’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
49 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay
The Board considered the costs of the services provided by New York Life Investments and MacKay under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund. Because MacKay is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay and profits realized by New York Life Investments and its affiliates, including MacKay, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay and acknowledged that New York Life Investments and MacKay must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay, due to their relationships with the Fund were not excessive.
50 | MainStay MacKay Tax Free Bond Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer
agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board
51 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
52 | MainStay MacKay Tax Free Bond Fund |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
53 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737619 MS065-19 | MST10-06/19 (NYLIM) NL215 |
MainStay MacKay Unconstrained Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six | One | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/1997 | | –2.58 2.01 | %
| | –2.19 2.42 | %
| | 0.93 1.86 | %
| | 5.47 5.96 | %
| | 1.25 1.25 | %
| ||||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –2.61 1.98 |
| | –2.22 2.39 |
| | 0.90 1.83 |
| | 5.37 5.85 |
| | 1.27 1.27 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 2/28/1997 | | | –3.49 1.51 |
| | –3.42 1.53 |
| | 0.71 1.07 |
| | 5.06 5.06 |
| | 2.02 2.02 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within | With sales charges Excluding sales charges | | 9/1/1998 | | | 0.63 1.63 |
| | 0.66 1.65 |
| | 1.07 1.07 |
| | 5.07 5.07 |
| | 2.02 2.02 |
| ||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 2.13 | 2.68 | 2.12 | 6.23 | 1.00 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/28/2014 | 1.84 | 2.21 | 1.74 | 1.81 | 1.35 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 1.83 | 1.96 | 4.93 | 4.93 | 1.60 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | 2.23 | 2.86 | 2.37 | 2.37 | 0.83 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six | One | Five | Ten | ||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index4 | 5.49 | % | 5.29 | % | 2.57 | % | 3.72 | % | ||||||||
ICE BofAML US Dollar 3-Month Deposit Offered Rate Constant Maturity Index5 | 1.34 | 2.52 | 1.03 | 0.71 | ||||||||||||
Morningstar Nontraditional Bond Category Average6 | 2.51 | 2.25 | 2.23 | 4.73 |
4. | The Bloomberg Barclays U.S. Aggregate Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the ICE BofAML US Dollar 3-Month Deposit Offered Rate Constant Maturity Index as a secondary benchmark. The ICE BofAML US Dollar 3-Month Deposit Offered Rate Constant Maturity Index is unmanaged and tracks the performance of a synthetic asset paying London Interbank Offered Rate to a stated maturity. The index is based on the |
assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that day’s fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Morningstar Nontraditional Bond Category Average as an additional benchmark. The Morningstar Nontraditional Bond Category Average contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Morningstar category averages are equal-weighted returns based on constituents of the category at the end of the period. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Unconstrained Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Unconstrained Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2,3 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,020.10 | $ | 6.36 | $ | 1,018.50 | $ | 6.36 | 1.27% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,019.80 | $ | 6.46 | $ | 1,018.40 | $ | 6.46 | 1.29% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,015.10 | $ | 10.19 | $ | 1,014.68 | $ | 10.19 | 2.04% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,016.30 | $ | 10.20 | $ | 1,014.68 | $ | 10.19 | 2.04% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,021.30 | $ | 5.11 | $ | 1,019.74 | $ | 5.11 | 1.02% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,018.40 | $ | 6.86 | $ | 1,018.00 | $ | 6.85 | 1.37% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,018.30 | $ | 8.11 | $ | 1,016.76 | $ | 8.10 | 1.62% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,022.30 | $ | 4.21 | $ | 1,020.68 | $ | 4.21 | 0.84% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
3. | Expenses are inclusive of dividends and interest on investments sold short. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s holdings are subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings or Issuers as of April 30, 2019(excluding short-term investments) (Unaudited)
1. | United States Treasury Inflation—Indexed Notes, 0.75%–0.875%, due 7/15/28–1/15/29 |
2. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 3.00%–4.50%, due 8/1/48–2/1/49 |
3. | Morgan Stanley, 3.125%–7.30%, due 5/13/19–1/20/27 |
4. | Goldman Sachs Group, Inc., 2.35%–5.25%, due 7/27/21–5/15/26 |
5. | Bank of America Corp., 3.004%–8.57%, due 6/17/19–10/22/26 |
6. | Citigroup, Inc., 2.35%–6.30%, due 8/2/21–7/1/26 |
7. | Lennar Corp., 4.50%–8.375%, due 6/15/19–12/15/21 |
8. | Wells Fargo & Co., 2.60%–5.90%, due 7/22/20–5/22/28 |
9. | Anadarko Petroleum Corp., (zero coupon), due 10/10/36 |
10. | NXP B.V. / NXP Funding LLC, 4.125%–4.625%, due 6/1/21–6/15/22 |
8 | MainStay MacKay Unconstrained Bond Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Joseph Cantwell, Stephen R. Cianci, CFA, Matt Jacob, Neil Moriarty III, andShu-Yang Tan, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Unconstrained Bond Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MacKay Unconstrained Bond Fund returned 2.13%, underperforming the 5.49% return of the Fund’s primary benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, and outperforming the 1.34% return of the Fund’s secondary benchmark, the ICE BofAML U.S. Dollar3-Month Deposit Offered Rate Constant Maturity Index. Over the same period, Class I shares underperformed the 2.51% return of the Morningstar Nontraditional Bond Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
In the fourth quarter of 2018, Treasury bond yields declined and credit spreads2 widened as investors speculated that further tightening by the Federal Reserve Board (Fed) in 2019 might push the economy into recession. At the beginning of the first quarter of 2019, the Fed concluded the benchmark federal funds rate had risen to a level consistent with its policy objectives, noting that more modest declines in the long end of the yield curve3 reflected restrained inflation, trade policy in flux and aggregate demand failing to pressure resource capacity. Stocks rallied on the Fed’s revised stance, reflecting cautious optimism regarding the durability of the current business cycle. Swayed by similar effects, corporate bond spreads tightened during the remainder of the reporting period, as did spreads of credit-related securitized product (asset-backed and commercial mortgage-backed securities).
The Fund lagged the Bloomberg Barclays U.S. Aggregate Bond Index, in large part due to the Fund’s lower duration4 positioning. The Fed’s “pause” stance on rates caused the longer end of the yield curve to rally, and the Fund’s duration was approximately 4.5 years shorter than the Index.
Were there any changes to the Fund during the reporting period?
Effective December 31, 2018, Louis Cohen no longer served as a portfolio manager of the Fund. Dan Roberts, Joseph Cantwell, Stephen R. Cianci, Matt Jacob, Neil Moriarty andShu-Yang Tan
continue to manage the Fund. For more information about this change refer to the supplement dated October 18, 2018.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
The Fund’s use of U.S. Treasury futures for duration and yield-curve management detracted slightly from performance during the reporting period.
What was the Fund’s duration strategy during the reporting period?
As of the beginning of the reporting period, the Fund targeted a duration of about one year. After the Fed pulled back from their tightening stance in late 2018, we began to let the Fund’s duration drift slightly higher, with a goal of remaining below 1.5 years. At the end of the reporting period, the Fund’s duration was 1.2 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Spread product, specifically high-yield and emerging-market debt, performed well during the reporting period and contributed positively to the Fund’s performance relative to the Bloomberg Barclays U.S. Aggregate Bond Index. (Contributions take weightings and total returns into account.) Emerging markets benefited from renewed risk appetites sparked by dovish central banks. The Fund’s investment process favored a modest exposure to relatively conservative positions in state-backed businesses and higher-quality corporates. Securitized assets, including residential mortgage-backed securities (RMBS) and consumer-related asset-backed securities (ABS), though positive for the reporting period, lagged the overall return of the market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index. These securities are generally higher rated and shorter duration in nature.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. The term “spread product” refers to asset classes that typically trade at a spread to comparable U.S. Treasury securities. |
3. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
4. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
What were some of the Fund’s largest purchases and sales during the reporting period?
In general terms, as credit spreads narrowed during the reporting period and the compensation for “risk” compressed, we reduced the Fund’s exposure to credit in the form of high-yield bonds and bank loans. At the same time, we methodically added securitized assets—such as ABS, RMBS and commercial mortgage-backed securities (CMBS)—into the Fund, both to reduce volatility and for diversification purposes.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, we trimmed the Fund’s weightings to both high-yield bonds and bank loans while selectively adding
securitized assets, such as ABS and CMBS. Additionally, as spreads narrowed, we shifted the Fund’s investment-grade corporate positions to the front end of the yield curve to reduce volatility.
How was the Fund positioned at the end of the reporting period?
Relative to its primary benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, the Fund ended the reporting period with overweight exposure to high-yield credit, bank loans and investment-grade credit. As of the end of the reporting period, the Fund held underweight positions in U.S. Treasury bonds and agency mortgage-backed securities.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Unconstrained Bond Fund |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 96.0%† Asset-Backed Securities 3.4% |
| |||||||
Auto Floor Plan Asset-Backed Securities 0.7% |
| |||||||
Ford Credit Floorplan Master Owner Trust | $ | 3,340,000 | $ | 3,461,391 | ||||
Navistar Financial Dealer Note Master Owner Trust II | 3,980,000 | 3,988,394 | ||||||
|
| |||||||
7,449,785 | ||||||||
|
| |||||||
Automobile Asset-Backed Securities 0.2% |
| |||||||
World Omni Auto Receivables Trust | 2,355,000 | 2,377,708 | ||||||
|
| |||||||
Credit Cards 1.5% |
| |||||||
American Express Credit Account Master Trust | ||||||||
Series 2018-9, Class A | 2,105,000 | 2,101,860 | ||||||
Series 2019-1, Class A | 2,060,000 | 2,079,414 | ||||||
Capital One Multi-Asset Execution Trust | 3,765,000 | 3,796,911 | ||||||
Citibank Credit Card Issuance Trust | 4,785,000 | 4,779,736 | ||||||
Discover Card Execution Note Trust | 2,425,000 | 2,457,302 | ||||||
|
| |||||||
15,215,223 | ||||||||
|
| |||||||
Home Equity 0.0% ‡ |
| |||||||
First NLC Trust | 318,523 | 188,430 | ||||||
JPMorgan Mortgage Acquisition Trust | 113,397 | 78,738 | ||||||
MASTR Asset-Backed Securities Trust | 84,660 | 39,272 |
Principal Amount | Value | |||||||
Home Equity (continued) |
| |||||||
Morgan Stanley ABS Capital I Trust | $ | 85,376 | $ | 37,390 | ||||
|
| |||||||
343,830 | ||||||||
|
| |||||||
Other Asset-Backed Securities 1.0% |
| |||||||
Daimler Trucks Retail Trust | 2,925,000 | 2,926,876 | ||||||
Dell Equipment Finance Trust | 4,040,000 | 4,090,875 | ||||||
Verizon Owner Trust | 3,195,000 | 3,223,361 | ||||||
|
| |||||||
10,241,112 | ||||||||
|
| |||||||
Student Loans 0.0%‡ |
| |||||||
KeyCorp Student Loan Trust | 295,318 | 294,488 | ||||||
|
| |||||||
Total Asset-Backed Securities | 35,922,146 | |||||||
|
| |||||||
Convertible Bonds 0.0%‡ |
| |||||||
Internet 0.0% ‡ |
| |||||||
At Home Corp. | 570,000 | 7,410 | ||||||
|
| |||||||
Total Convertible Bonds | 7,410 | |||||||
|
| |||||||
Corporate Bonds 73.1% |
| |||||||
Advertising 0.3% |
| |||||||
Lamar Media Corp. | 2,695,000 | 2,759,006 | ||||||
|
| |||||||
Aerospace & Defense 0.8% |
| |||||||
Moog, Inc. | 5,505,000 | 5,587,575 | ||||||
Rockwell Collins, Inc. | 3,350,000 | 3,319,699 | ||||||
|
| |||||||
8,907,274 | ||||||||
|
| |||||||
Agriculture 0.5% |
| |||||||
Altria Group, Inc. | 3,660,000 | 3,728,259 | ||||||
JBS Investments II GmbH | 1,915,000 | 1,992,558 | ||||||
|
| |||||||
5,720,817 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Airlines 1.6% |
| |||||||
Continental Airlines, Inc. | ||||||||
Series 2007-1, Class A | $ | 2,592,670 | $ | 2,732,415 | ||||
Series 2005-ERJ1 | 152,254 | 158,648 | ||||||
Delta Air Lines, Inc. | ||||||||
Series 2019-1, Class AA | 3,360,000 | 3,406,800 | ||||||
Series 2007-1, Class A | 1,261,665 | 1,376,476 | ||||||
U.S. Airways Group, Inc. | 4,956,151 | 5,340,749 | ||||||
United Airlines, Inc. | 4,159,640 | 4,230,770 | ||||||
|
| |||||||
17,245,858 | ||||||||
|
| |||||||
Auto Manufacturers 2.2% |
| |||||||
Daimler Finance North America LLC | 6,950,000 | 6,920,596 | ||||||
Ford Motor Credit Co. LLC | 3,345,000 | 3,335,742 | ||||||
General Motors Financial Co., Inc. | 4,480,000 | 4,501,833 | ||||||
Toyota Motor Credit Corp. | 5,700,000 | 5,660,968 | ||||||
Volkswagen Group of America Finance LLC | 2,925,000 | 2,965,624 | ||||||
|
| |||||||
23,384,763 | ||||||||
|
| |||||||
Banks 18.4% |
| |||||||
Bank of America Corp. | ||||||||
3.004%, due 12/20/23 (h) | 7,718,000 | 7,686,496 | ||||||
3.30%, due 1/11/23 (g) | 510,000 | 516,450 | ||||||
3.499%, due 5/17/22 (h) | 5,150,000 | 5,207,827 | ||||||
4.25%, due 10/22/26 (g) | 7,260,000 | 7,496,286 | ||||||
5.125%, due 6/17/19 (h)(i) | 4,990,000 | 4,993,318 | ||||||
6.30%, due 3/10/26 (h)(i) | 3,570,000 | 3,900,225 | ||||||
8.57%, due 11/15/24 | 1,645,000 | 2,045,456 | ||||||
Bank of New York Mellon Corp. | 4,660,000 | 4,630,055 | ||||||
Barclays Bank PLC | 8,037,000 | 8,259,285 | ||||||
BB&T Corp. | 6,370,000 | 6,374,856 | ||||||
Capital One Financial Corp. | 1,535,000 | 1,563,781 | ||||||
Citigroup, Inc. | ||||||||
2.35%, due 8/2/21 (g) | 5,000,000 | 4,955,073 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Citigroup, Inc. (continued) | ||||||||
3.352%, due 4/24/25 (h) | $ | 1,880,000 | $ | 1,889,571 | ||||
3.842% (3 Month LIBOR + 1.25%), due 7/1/26 (a) | 4,000,000 | 4,035,065 | ||||||
6.30%, due 5/15/24 (h)(i)(j) | 10,800,000 | 11,232,000 | ||||||
Citizens Bank N.A. | 1,330,000 | 1,342,164 | ||||||
Citizens Financial Group, Inc. | 2,270,000 | 2,317,336 | ||||||
Goldman Sachs Group, Inc. | ||||||||
2.35%, due 11/15/21 | 9,335,000 | 9,200,841 | ||||||
2.908%, due 6/5/23 (h) | 4,285,000 | 4,248,877 | ||||||
3.00%, due 4/26/22 | 7,000,000 | 7,004,813 | ||||||
3.625%, due 1/22/23 | 3,227,000 | 3,291,439 | ||||||
3.854% (3 Month LIBOR + 1.17%), due 5/15/26 (a) | 3,220,000 | 3,192,276 | ||||||
5.25%, due 7/27/21 | 6,047,000 | 6,358,059 | ||||||
Huntington National Bank | 4,580,000 | 4,615,616 | ||||||
Lloyds Banking Group PLC | ||||||||
4.582%, due 12/10/25 | 3,465,000 | 3,554,610 | ||||||
4.65%, due 3/24/26 | 1,985,000 | 2,030,284 | ||||||
Morgan Stanley | ||||||||
3.125%, due 1/23/23 | 6,380,000 | 6,404,896 | ||||||
3.625%, due 1/20/27 | 6,055,000 | 6,113,060 | ||||||
4.00%, due 7/23/25 | 1,920,000 | 1,996,144 | ||||||
4.875%, due 11/1/22 | 4,287,000 | 4,538,636 | ||||||
5.00%, due 11/24/25 | 2,465,000 | 2,664,349 | ||||||
5.45%, due 7/15/19 (h)(i) | 9,333,000 | 9,344,666 | ||||||
7.30%, due 5/13/19 | 3,000,000 | 3,004,183 | ||||||
PNC Bank N.A. | 3,925,000 | 3,912,269 | ||||||
Royal Bank of Canada | 5,565,000 | 5,557,631 | ||||||
Royal Bank of Scotland Group PLC | 2,171,000 | 2,256,583 | ||||||
Santander Holdings USA, Inc. | ||||||||
3.40%, due 1/18/23 | 1,500,000 | 1,500,935 | ||||||
3.70%, due 3/28/22 | 2,000,000 | 2,020,298 | ||||||
Santander UK Group Holdings PLC | 2,650,000 | 2,659,106 | ||||||
U.S. Bank N.A. | 6,935,000 | 6,941,335 | ||||||
Wells Fargo & Co. | ||||||||
2.60%, due 7/22/20 | 4,975,000 | 4,964,473 | ||||||
3.584%, due 5/22/28 (h) | 2,145,000 | 2,153,545 | ||||||
5.90%, due 6/15/24 (h)(i) | 3,690,000 | 3,833,910 | ||||||
Wells Fargo Bank N.A. | 2,000,000 | 1,996,153 | ||||||
|
| |||||||
193,804,231 | ||||||||
|
|
12 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Beverages 0.7% |
| |||||||
Anheuser-Busch InBev Worldwide, Inc. | ||||||||
4.15%, due 1/23/25 (g) | $ | 885,000 | $ | 924,247 | ||||
4.75%, due 1/23/29 | 1,770,000 | 1,895,154 | ||||||
Diageo Capital PLC | 4,505,000 | 4,509,280 | ||||||
|
| |||||||
7,328,681 | ||||||||
|
| |||||||
Building Materials 0.4% |
| |||||||
Masco Corp. | 290,000 | 300,457 | ||||||
Standard Industries, Inc. | 3,580,000 | 3,647,125 | ||||||
|
| |||||||
3,947,582 | ||||||||
|
| |||||||
Chemicals 2.2% |
| |||||||
Air Liquide Finance S.A. (b) | ||||||||
1.375%, due 9/27/19 | 4,135,000 | 4,110,277 | ||||||
1.75%, due 9/27/21 | 2,785,000 | 2,722,998 | ||||||
Ashland LLC | 2,970,000 | 3,033,112 | ||||||
Braskem Netherlands Finance B.V. (b) | ||||||||
3.50%, due 1/10/23 | 1,870,000 | 1,848,514 | ||||||
4.50%, due 1/10/28 | 2,505,000 | 2,454,900 | ||||||
Mexichem S.A.B. de C.V. | 2,600,000 | 2,548,000 | ||||||
W.R. Grace & Co. | 6,410,000 | 6,634,350 | ||||||
|
| |||||||
23,352,151 | ||||||||
|
| |||||||
Commercial Services 0.8% |
| |||||||
IHS Markit, Ltd. | ||||||||
3.625%, due 5/1/24 | 3,710,000 | 3,721,872 | ||||||
4.125%, due 8/1/23 | 1,075,000 | 1,100,499 | ||||||
Service Corp. International | ||||||||
5.375%, due 1/15/22 | 1,835,000 | 1,851,056 | ||||||
5.375%, due 5/15/24 (g) | 2,200,000 | 2,257,992 | ||||||
|
| |||||||
8,931,419 | ||||||||
|
| |||||||
Computers 1.1% |
| |||||||
Dell International LLC / EMC Corp. | 4,000,000 | 4,097,104 | ||||||
Hewlett Packard Enterprise Co. | 2,520,000 | 2,635,568 | ||||||
International Business Machines Corp. | 4,500,000 | 4,478,771 | ||||||
|
| |||||||
11,211,443 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.4% |
| |||||||
Unilever Capital Corp. | 4,500,000 | 4,464,051 | ||||||
|
|
Principal Amount | Value | |||||||
Diversified Financial Services 2.1% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
3.50%, due 5/26/22 | $ | 4,430,000 | $ | 4,437,856 | ||||
4.50%, due 5/15/21 | 480,000 | 490,952 | ||||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 (g) | 3,275,000 | 3,258,384 | ||||||
2.625%, due 7/1/22 | 2,040,000 | 2,007,633 | ||||||
3.25%, due 3/1/25 | 4,000,000 | 3,884,066 | ||||||
Ally Financial, Inc. | 3,820,000 | 4,139,925 | ||||||
Capital One Bank USA N.A. | 3,000,000 | 3,005,914 | ||||||
Capital One Financial Corp. | 800,000 | 823,573 | ||||||
|
| |||||||
22,048,303 | ||||||||
|
| |||||||
Electric 5.2% |
| |||||||
Appalachian Power Co. | 1,800,000 | 1,779,287 | ||||||
Baltimore Gas & Electric Co. | 4,150,000 | 3,915,770 | ||||||
CMS Energy Corp. | 3,818,000 | 3,916,994 | ||||||
Consolidated Edison, Inc. | 2,815,000 | 2,797,107 | ||||||
Entergy Arkansas LLC | 1,235,000 | 1,252,879 | ||||||
Evergy, Inc. | ||||||||
4.85%, due 6/1/21 (g) | 5,200,000 | 5,356,639 | ||||||
5.292%, due 6/15/22 (k) | 663,000 | 701,098 | ||||||
Florida Power & Light Co. | 2,680,000 | 2,688,019 | ||||||
IPALCO Enterprises, Inc. | 8,560,000 | 8,586,504 | ||||||
MidAmerican Energy Co. | 6,000,000 | 6,011,421 | ||||||
Potomac Electric Power Co. | 1,305,000 | 1,344,352 | ||||||
Public Service Electric & Gas Co. | 3,405,000 | 3,378,992 | ||||||
Public Service Enterprise Group, Inc. | 3,500,000 | 3,467,771 | ||||||
Southwestern Electric Power Co. | 2,750,000 | 2,568,101 | ||||||
WEC Energy Group, Inc. | ||||||||
3.10%, due 3/8/22 | 2,345,000 | 2,361,946 | ||||||
4.796% (3 Month LIBOR + 2.113%), due 5/15/67 (a) | 5,495,000 | 4,753,175 | ||||||
|
| |||||||
54,880,055 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Entertainment 0.5% |
| |||||||
Eldorado Resorts, Inc. | $ | 4,515,000 | $ | 4,718,175 | ||||
|
| |||||||
Environmental Controls 0.4% |
| |||||||
Waste Management, Inc. | 3,880,000 | 3,816,709 | ||||||
|
| |||||||
Food 3.7% |
| |||||||
Kerry Group Financial Services Unlimited Co. | 4,595,000 | 4,572,119 | ||||||
Kroger Co. | 4,130,000 | 4,109,206 | ||||||
Mondelez International Holdings |
| |||||||
1.625%, due 10/28/19 | 4,500,000 | 4,474,413 | ||||||
2.00%, due 10/28/21 | 4,885,000 | 4,771,431 | ||||||
Nestle Holdings, Inc. | 4,920,000 | 4,971,930 | ||||||
Smithfield Foods, Inc. (b) | ||||||||
2.70%, due 1/31/20 | 4,005,000 | 4,008,991 | ||||||
3.35%, due 2/1/22 | 2,490,000 | 2,446,637 | ||||||
Sysco Corp. | 5,240,000 | 5,176,193 | ||||||
Tyson Foods, Inc. | ||||||||
2.65%, due 8/15/19 | 1,656,000 | 1,656,680 | ||||||
3.95%, due 8/15/24 | 2,892,000 | 2,986,897 | ||||||
|
| |||||||
39,174,497 | ||||||||
|
| |||||||
Forest Products & Paper 0.8% |
| |||||||
Georgia-Pacific LLC | ||||||||
5.40%, due 11/1/20 (b) | 4,375,000 | 4,540,069 | ||||||
8.00%, due 1/15/24 | 2,945,000 | 3,590,183 | ||||||
|
| |||||||
8,130,252 | ||||||||
|
| |||||||
Gas 0.3% |
| |||||||
NiSource, Inc. | 3,120,000 | 3,123,866 | ||||||
|
| |||||||
Health Care—Products 1.4% |
| |||||||
Abbott Laboratories | 3,520,000 | 3,597,124 | ||||||
Becton Dickinson & Co. | ||||||||
2.675%, due 12/15/19 | 3,971,000 | 3,962,180 | ||||||
3.363%, due 6/6/24 | 2,860,000 | 2,866,452 | ||||||
Stryker Corp. | 2,179,000 | 2,173,870 | ||||||
Zimmer Biomet Holdings, Inc. | 1,895,000 | 1,891,257 | ||||||
|
| |||||||
14,490,883 | ||||||||
|
|
Principal Amount | Value | |||||||
Health Care—Services 0.5% |
| |||||||
Laboratory Corporation of America Holdings | $ | 5,775,000 | $ | 5,763,485 | ||||
|
| |||||||
Holding Company—Diversified 0.4% |
| |||||||
CK Hutchison International (17) II, Ltd. | 3,855,000 | 3,765,139 | ||||||
|
| |||||||
Home Builders 3.0% |
| |||||||
D.R. Horton, Inc. | 4,250,000 | 4,593,304 | ||||||
KB Home | 2,250,000 | 2,340,000 | ||||||
Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 3,300,000 | 3,302,063 | ||||||
4.50%, due 11/15/19 | 4,740,000 | 4,748,887 | ||||||
6.25%, due 12/15/21 | 2,875,000 | 3,025,938 | ||||||
8.375%, due 1/15/21 | 2,540,000 | 2,755,646 | ||||||
MDC Holdings, Inc. | 1,608,000 | 1,628,100 | ||||||
Meritage Homes Corp. | 4,720,000 | 5,050,400 | ||||||
Toll Brothers Finance Corp. | 3,735,000 | 3,940,425 | ||||||
|
| |||||||
31,384,763 | ||||||||
|
| |||||||
Insurance 4.2% |
| |||||||
Jackson National Life Global Funding | 2,830,000 | 2,820,262 | ||||||
Liberty Mutual Group, Inc. | 3,829,000 | 4,575,655 | ||||||
Lincoln National Corp. | 3,537,000 | 3,041,820 | ||||||
MassMutual Global Funding II | 3,600,000 | 3,581,292 | ||||||
Oil Insurance, Ltd. | 5,727,000 | 5,564,181 | ||||||
Pricoa Global Funding I | 2,725,000 | 2,717,851 | ||||||
Protective Life Corp. | 3,621,000 | 5,146,198 | ||||||
Protective Life Global Funding (b) | ||||||||
1.555%, due 9/13/19 | 4,200,000 | 4,182,460 | ||||||
2.161%, due 9/25/20 | 1,355,000 | 1,344,176 | ||||||
Prudential Financial, Inc. | 800,000 | 837,912 | ||||||
Scottish Widows, Ltd. | GBP | 6,500,000 | 9,366,508 |
14 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Insurance (continued) |
| |||||||
Voya Financial, Inc. | $ | 1,240,000 | $ | 1,237,788 | ||||
|
| |||||||
44,416,103 | ||||||||
|
| |||||||
Internet 1.2% |
| |||||||
Baidu, Inc. | 2,380,000 | 2,477,594 | ||||||
Booking Holdings, Inc. | 2,790,000 | 2,851,352 | ||||||
Expedia Group, Inc. | 3,485,000 | 3,617,020 | ||||||
Tencent Holdings, Ltd. | 3,820,000 | 3,824,804 | ||||||
|
| |||||||
12,770,770 | ||||||||
|
| |||||||
Iron & Steel 0.8% |
| |||||||
ArcelorMittal | 3,470,000 | 3,595,140 | ||||||
Vale Overseas, Ltd. | 4,330,000 | 4,728,360 | ||||||
|
| |||||||
8,323,500 | ||||||||
|
| |||||||
Lodging 0.8% |
| |||||||
Marriott International, Inc. | ||||||||
3.75%, due 10/1/25 | 5,888,000 | 5,991,143 | ||||||
7.15%, due 12/1/19 | 2,341,000 | 2,394,573 | ||||||
|
| |||||||
8,385,716 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.6% |
| |||||||
Caterpillar Financial Services Corp. | 6,640,000 | 6,614,587 | ||||||
|
| |||||||
Media 0.7% |
| |||||||
Comcast Corp. | 3,135,000 | 3,159,227 | ||||||
Sky, Ltd. | 1,480,000 | 1,531,221 | ||||||
Time Warner Entertainment Co., L.P. | 1,087,000 | 1,274,818 | ||||||
Virgin Media Secured Finance PLC | 1,620,000 | 1,647,880 | ||||||
|
| |||||||
7,613,146 | ||||||||
|
| |||||||
Mining 0.3% |
| |||||||
Anglo American Capital PLC | 3,000,000 | 3,165,624 | ||||||
|
| |||||||
Miscellaneous—Manufacturing 1.0% |
| |||||||
Amsted Industries, Inc. | 1,450,000 | 1,459,063 | ||||||
Siemens Financieringsmaatschappij N.V. (b) | ||||||||
2.15%, due 5/27/20 | 1,900,000 | 1,888,835 | ||||||
2.70%, due 3/16/22 | 3,320,000 | 3,311,817 |
Principal Amount | Value | |||||||
Miscellaneous—Manufacturing (continued) |
| |||||||
Textron Financial Corp. | $ | 4,350,000 | $ | 3,523,500 | ||||
|
| |||||||
10,183,215 | ||||||||
|
| |||||||
Oil & Gas 4.0% |
| |||||||
Anadarko Petroleum Corp. | 19,735,000 | 9,865,915 | ||||||
Concho Resources, Inc. | 2,995,000 | 3,120,995 | ||||||
Gazprom Via Gaz Capital S.A. | 2,520,000 | 3,013,356 | ||||||
Marathon Petroleum Corp. | 8,050,000 | 8,262,835 | ||||||
Murphy Oil USA, Inc. | 5,798,000 | 5,935,702 | ||||||
Petrobras Global Finance B.V. | 3,775,000 | 4,212,145 | ||||||
Petroleos Mexicanos | 4,835,000 | 4,457,870 | ||||||
QEP Resources, Inc. | 3,350,000 | 3,295,562 | ||||||
|
| |||||||
42,164,380 | ||||||||
|
| |||||||
Packaging & Containers 1.3% |
| |||||||
Crown European Holdings S.A. | EUR | 3,540,000 | 4,347,660 | |||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC | $ | 4,555,000 | 4,621,093 | |||||
WestRock MWV LLC | 1,800,000 | 1,825,715 | ||||||
WRKCo, Inc. | 2,735,000 | 2,684,422 | ||||||
|
| |||||||
13,478,890 | ||||||||
|
| |||||||
Pharmaceuticals 0.7% |
| |||||||
Bausch Health Cos., Inc. | 2,835,000 | 2,954,070 | ||||||
Eli Lilly & Co. | 2,200,000 | 2,188,361 | ||||||
Takeda Pharmaceutical Co., Ltd. | 1,435,000 | 1,454,611 | ||||||
Zoetis, Inc. | 770,000 | 776,187 | ||||||
|
| |||||||
7,373,229 | ||||||||
|
| |||||||
Pipelines 0.9% |
| |||||||
Kinder Morgan, Inc. | ||||||||
5.625%, due 11/15/23 (b) | 2,449,000 | 2,675,330 | ||||||
7.75%, due 1/15/32 | 2,035,000 | 2,682,695 | ||||||
MPLX, L.P. | 560,000 | 560,655 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Pipelines (continued) |
| |||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | $ | 3,725,000 | $ | 3,771,563 | ||||
|
| |||||||
9,690,243 | ||||||||
|
| |||||||
Private Equity 0.1% |
| |||||||
Icahn Enterprises, L.P. / Icahn Enterprises Finance Corp. | 1,390,000 | 1,432,089 | ||||||
|
| |||||||
Real Estate Investment Trusts 1.4% |
| |||||||
American Tower Corp. | 5,500,000 | 5,484,817 | ||||||
Digital Realty Trust, L.P. | 3,605,000 | 3,592,148 | ||||||
GLP Capital, L.P. / GLP Financing II, Inc. | 4,749,000 | 4,839,231 | ||||||
Host Hotels & Resorts, L.P. | 472,000 | 473,722 | ||||||
Ventas Realty, L.P. / Ventas Capital Corp. | 1,000 | 999 | ||||||
|
| |||||||
14,390,917 | ||||||||
|
| |||||||
Retail 1.8% |
| |||||||
Alimentation Couche-Tard, Inc. (b) | ||||||||
2.35%, due 12/13/19 | 3,415,000 | 3,403,716 | ||||||
2.70%, due 7/26/22 | 1,500,000 | 1,481,172 | ||||||
CVS Health Corp. | 3,750,000 | 3,762,030 | ||||||
CVS Pass-Through Trust | 47,667 | 49,913 | ||||||
Darden Restaurants, Inc. | 4,847,000 | 4,894,898 | ||||||
QVC, Inc. | 5,680,000 | 5,810,655 | ||||||
|
| |||||||
19,402,384 | ||||||||
|
| |||||||
Semiconductors 1.1% |
| |||||||
Broadcom, Inc. | 2,040,000 | 2,013,608 | ||||||
NXP B.V. / NXP Funding LLC (b) | ||||||||
4.125%, due 6/1/21 | 6,300,000 | 6,423,921 | ||||||
4.625%, due 6/15/22 | 2,960,000 | 3,075,144 | ||||||
|
| |||||||
11,512,673 | ||||||||
|
| |||||||
Software 0.6% |
| |||||||
First Data Corp. | 270,000 | 276,780 | ||||||
Microsoft Corp. | 6,190,000 | 6,158,320 | ||||||
|
| |||||||
6,435,100 | ||||||||
|
|
Principal Amount | Value | |||||||
Telecommunications 3.4% |
| |||||||
AT&T, Inc. | ||||||||
3.20%, due 3/1/22 (g) | $ | 5,840,000 | $ | 5,898,489 | ||||
3.777% (3 Month LIBOR + 1.18%), due 6/12/24 (a) | 2,880,000 | 2,892,442 | ||||||
Crown Castle Towers LLC | 3,825,000 | 3,984,332 | ||||||
Hughes Satellite Systems Corp. | 2,250,000 | 2,257,650 | ||||||
Rogers Communications, Inc. | 5,635,000 | 5,776,735 | ||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC | 3,425,000 | 3,489,219 | ||||||
T-Mobile USA, Inc. | 3,000,000 | 3,086,250 | ||||||
Telefonica Emisiones SAU | 1,000 | 1,045 | ||||||
VEON Holdings B.V. | 3,345,000 | 3,396,245 | ||||||
Verizon Communications, Inc. | ||||||||
4.125%, due 3/16/27 (g) | 685,000 | 722,428 | ||||||
5.15%, due 9/15/23 | 3,573,000 | 3,910,064 | ||||||
|
| |||||||
35,414,899 | ||||||||
|
| |||||||
Textiles 0.5% |
| |||||||
Cintas Corp. No 2 | 4,920,000 | 4,921,980 | ||||||
|
| |||||||
Total Corporate Bonds | 770,042,848 | |||||||
|
| |||||||
Foreign Bonds 0.1% |
| |||||||
Banks 0.1% |
| |||||||
Barclays Bank PLC | GBP | 449,000 | 677,602 | |||||
|
| |||||||
Total Foreign Bonds | 677,602 | |||||||
|
| |||||||
Loan Assignments 7.5% (a) |
| |||||||
Advertising 0.5% |
| |||||||
Outfront Media Capital LLC | $ | 5,128,750 | 5,117,210 | |||||
|
| |||||||
Commercial Services 0.8% |
| |||||||
Global Payments, Inc. | 2,523,500 | 2,519,293 |
16 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Commercial Services (continued) |
| |||||||
KAR Auction Services, Inc. | $ | 5,647,171 | $ | 5,638,350 | ||||
|
| |||||||
8,157,643 | ||||||||
|
| |||||||
Containers, Packaging & Glass 0.3% |
| |||||||
Berry Global, Inc. | 3,050,109 | 3,046,003 | ||||||
|
| |||||||
Environmental Controls 0.5% |
| |||||||
Advanced Disposal Services, Inc. Term Loan B3 | 5,535,000 | 5,545,838 | ||||||
|
| |||||||
Food Services 0.1% |
| |||||||
Aramark Services, Inc. | 1,500,146 | 1,497,645 | ||||||
|
| |||||||
Hand & Machine Tools 0.4% |
| |||||||
Milacron LLC | 4,325,288 | 4,282,035 | ||||||
|
| |||||||
Health Care—Services 0.4% |
| |||||||
Syneos Health, Inc. | 4,053,561 | 4,036,459 | ||||||
|
| |||||||
Household Products & Wares 0.4% |
| |||||||
Prestige Brands, Inc. | 3,898,047 | 3,880,506 | ||||||
|
| |||||||
Insurance 0.4% |
| |||||||
MPH Acquisition Holdings LLC | 4,100,144 | 4,057,863 | ||||||
|
|
Principal Amount | Value | |||||||
Lodging 0.5% |
| |||||||
Boyd Gaming Corp. | $ | 332,504 | $ | 332,401 | ||||
Hilton Worldwide Finance LLC | 5,324,239 | 5,341,984 | ||||||
|
| |||||||
5,674,385 | ||||||||
|
| |||||||
Machinery—Diversified 0.2% |
| |||||||
Zebra Technologies Corp. | 1,836,065 | 1,837,705 | ||||||
|
| |||||||
Media 0.6% |
| |||||||
Nielsen Finance LLC | 3,885,700 | 3,866,272 | ||||||
Virgin Media Bristol LLC | 2,335,000 | 2,339,378 | ||||||
|
| |||||||
6,205,650 | ||||||||
|
| |||||||
Pharmaceuticals 0.5% |
| |||||||
Change Healthcare Holdings, Inc. | 5,265,600 | 5,261,840 | ||||||
|
| |||||||
Retail 0.1% |
| |||||||
1011778 B.C. Unlimited Liability Co. Term Loan B3 | 1,541,808 | 1,537,310 | ||||||
|
| |||||||
Software 0.3% |
| |||||||
First Data Corp. | 3,662,825 | 3,662,572 | ||||||
|
| |||||||
Telecommunications 1.2% |
| |||||||
Level 3 Financing, Inc. | 4,000,000 | 4,000,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Telecommunications (continued) |
| |||||||
SBA Senior Finance II LLC | $ | 8,633,215 | $ | 8,576,564 | ||||
|
| |||||||
12,576,564 | ||||||||
|
| |||||||
Transportation 0.3% |
| |||||||
XPO Logistics, Inc. | 3,285,000 | 3,267,846 | ||||||
|
| |||||||
Total Loan Assignments | 79,645,074 | |||||||
|
| |||||||
Mortgage-Backed Securities 3.6% |
| |||||||
Agency (Collateralized Mortgage Obligations) 0.5% |
| |||||||
Federal National Mortgage Association REMICSeries 2019-25, Class PA | 2,610,000 | 2,613,393 | ||||||
Government National | 2,498,000 | 2,495,421 | ||||||
|
| |||||||
5,108,814 | ||||||||
|
| |||||||
Commercial Mortgage Loans |
| |||||||
Bayview Commercial Asset Trust | 19,827 | 19,202 | ||||||
BX Commercial Mortgage Trust | 3,027,604 | 3,026,654 | ||||||
Federal Home Loan Mortgage Corporation Multifamily Structured Pass Through Certificates | ||||||||
Series K087, Class A2 | 2,065,000 | 2,192,294 | ||||||
Series K085, Class A2 | 3,485,000 | 3,778,083 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust | ||||||||
Series 2018-AON, Class A | 3,940,000 | 4,138,151 | ||||||
Series 2013-C16, Class A4 | 1,990,000 | 2,096,467 |
Principal Amount | Value | |||||||
Commercial Mortgage Loans |
| |||||||
JPMBB Commercial Mortgage | $ | 3,235,000 | $ | 3,265,856 | ||||
Wells Fargo Commercial | ||||||||
Series 2018-1745, Class A | 3,450,000 | 3,557,605 | ||||||
Series 2018-AUS, Class A | 4,200,000 | 4,420,580 | ||||||
|
| |||||||
26,494,892 | ||||||||
|
| |||||||
Residential Mortgage (Collateralized Mortgage Obligation) 0.2% |
| |||||||
JP Morgan Mortgage Trust | 2,049,625 | 2,077,379 | ||||||
|
| |||||||
Whole Loan (Collateralized Mortgage Obligations) 0.4% |
| |||||||
Chase Home Lending Mortgage Trust | 3,810,000 | 3,879,998 | ||||||
Wells Fargo Mortgage Backed | 55,712 | 56,208 | ||||||
|
| |||||||
3,936,206 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 37,617,291 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 8.3% |
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
4.00%, due 2/1/49 | 2,452,556 | 2,521,750 | ||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
3.00%, due 10/1/48 | 3,257,885 | 3,233,330 | ||||||
4.00%, due 8/1/48 | 14,760,320 | 15,182,825 | ||||||
4.00%, due 2/1/49 | 5,512,594 | 5,663,184 | ||||||
4.50%, due 1/1/49 | 10,940,847 | 11,417,359 | ||||||
|
| |||||||
35,496,698 | ||||||||
|
| |||||||
United States Treasury Inflation—Indexed Notes 4.7% (o) |
| |||||||
0.75%, due 7/15/28 | 11,740,104 | 11,985,950 | ||||||
0.875%, due 1/15/29 | 36,439,221 | 37,539,869 | ||||||
|
| |||||||
49,525,819 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies |
| 87,544,267 | ||||||
|
| |||||||
TotalLong-Term Bonds | 1,011,456,638 | |||||||
|
|
18 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks 0.0%‡ |
| |||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 14 | $ | 171 | |||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. (c)(d)(f)(p)(q) | 22 | 13,625 | ||||||
|
| |||||||
Tobacco 0.0% ‡ |
| |||||||
Turning Point Brands, Inc. (j) | 6,802 | 290,921 | ||||||
|
| |||||||
Total Common Stocks | 304,717 | |||||||
|
| |||||||
Short-Term Investments 6.1% |
| |||||||
Affiliated Investment Company 6.1% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (r) | 63,922,527 | 63,922,527 | ||||||
|
| |||||||
Total Affiliated Investment Company | 63,922,527 | |||||||
|
| |||||||
Principal Amount | ||||||||
Repurchase Agreement 0.0%‡ |
| |||||||
Fixed Income Clearing Corp. | $ | 134,294 | 134,294 | |||||
|
| |||||||
Total Repurchase Agreement | 134,294 | |||||||
|
| |||||||
TotalShort-Term Investments | 64,056,821 | |||||||
|
| |||||||
Shares | ||||||||
Investment of Cash Collateral For Securities Loaned 0.2% |
| |||||||
Unaffiliated Investment Company 0.2% |
| |||||||
State Street Navigator Securities Lending Government Money Market | 2,172,832 | 2,172,832 | ||||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 2,172,832 | |||||||
|
| |||||||
Total Investments, Before Investments Sold Short | 102.3 | % | 1,077,991,008 | |||||
|
|
Principal Amount | Value | |||||||
Investments Sold Short (3.2%) Corporate Bonds Sold Short (3.2%) |
| |||||||
Health Care—Services (0.2%) |
| |||||||
Davita, Inc. | $ | (2,940,000 | ) | $ | (2,876,614 | ) | ||
|
| |||||||
Internet (1.0%) |
| |||||||
Netflix, Inc. | (10,400,000 | ) | (10,283,000 | ) | ||||
|
| |||||||
Oil & Gas (1.2%) |
| |||||||
Noble Energy, Inc. | (12,115,000 | ) | (12,367,600 | ) | ||||
|
| |||||||
Pharmaceuticals (0.3%) |
| |||||||
Mylan N.V. | (3,090,000 | ) | (2,975,581 | ) | ||||
|
| |||||||
Semiconductors (0.5%) |
| |||||||
Amkor Technology, Inc. | (5,000,000 | ) | (5,095,312 | ) | ||||
|
| |||||||
Total Investments Sold Short (Proceeds $32,060,340) | (33,598,107 | ) | ||||||
|
| |||||||
Total Investments, Net of Investments Sold Short | 99.1 | % | 1,044,392,901 | |||||
Other Assets, Less Liabilities | 0.9 | 9,485,816 | ||||||
Net Assets | 100.0 | % | $ | 1,053,878,717 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Illiquid security—As of April 30, 2019, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $70,948, which represented less than one-tenth of a percent of the Fund's net assets. |
(d) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2019, the total market value of the fair valued securities was $2,684,341, which represented 0.3% of the Fund's net assets. |
(e) | Issue in default. |
(f) | Restricted security. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
(g) | Security, or a portion thereof, was maintained in a segregated account at the Fund's custodian as collateral for securities sold short (See Note 2(O)). |
(h) | Fixed to floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(i) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(j) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $2,185,730; the total market value of collateral held by the Fund was $2,221,361. The market value of the collateral held includes non-cash collateral in the form of U.S. Treasury securities with a value of $48,529 (See Note 2(P)). |
(k) | Step coupon—Rate shown was the rate in effect as of April 30, 2019. |
(l) | Issue in non-accrual status. |
(m) | Coupon rate may change based on changes of the underlying collateral or prepayments of principal. The coupon rate shown represents the rate at period end. |
(n) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of April 30, 2019. |
(o) | Treasury Inflation Protected Security—Pays a fixed rate of interest on a principal amount that is continuously adjusted for inflation based on the Consumer Price Index-Urban Consumers. |
(p) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(q) | Non-income producing security. |
(r) | Current yield as of April 30, 2019. |
Foreign Currency Forward Contracts
As of April 30, 2019, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | |||||||||||||||
Unrealized Appreciation (Depreciation) | ||||||||||||||||||
EUR | 3,865,000 | USD | 4,323,544 | JPMorgan Chase Bank N.A. | 5/2/19 | $ | 11,443 | |||||||||||
GBP | 7,913,000 | USD | 10,238,093 | JPMorgan Chase Bank N.A. | 5/2/19 | 80,462 | ||||||||||||
USD | 13,222,858 | EUR | 11,487,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 339,032 | ||||||||||||
USD | 10,442,311 | GBP | 7,913,000 | JPMorgan Chase Bank N.A. | 5/2/19 | 123,757 | ||||||||||||
|
| |||||||||||||||||
Total unrealized appreciation | 554,694 | |||||||||||||||||
|
| |||||||||||||||||
EUR | 7,622,000 | USD | 8,759,965 | JPMorgan Chase Bank N.A. | 5/2/19 | (211,125 | ) | |||||||||||
USD | 4,422,418 | EUR | 3,923,000 | JPMorgan Chase Bank N.A. | 8/1/19 | (11,721 | ) | |||||||||||
USD | 10,505,735 | GBP | 8,082,000 | JPMorgan Chase Bank N.A. | 8/1/19 | (82,789 | ) | |||||||||||
|
| |||||||||||||||||
Total unrealized depreciation | (305,635 | ) | ||||||||||||||||
|
| |||||||||||||||||
Net unrealized appreciation | $ | 249,059 | ||||||||||||||||
|
|
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be "sold or repurchased," although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
Futures Contracts
As of April 30, 2019, the Fund held the following futures contracts1:
Type | Number of Contracts | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
Long Contracts | ||||||||||||||||||||
Euro Bund | 20 | June 2019 | $ | 3,664,076 | $ | 3,708,236 | $ | 44,160 | ||||||||||||
United States Treasury Bond | 14 | June 2019 | 2,081,970 | 2,064,563 | (17,407 | ) | ||||||||||||||
United States Treasury Ultra Bond | 19 | June 2019 | 3,064,672 | 3,121,344 | 56,672 | |||||||||||||||
|
| |||||||||||||||||||
Total Long Contracts | 83,425 | |||||||||||||||||||
|
| |||||||||||||||||||
Short Contracts | ||||||||||||||||||||
2-Year United States Treasury Note | (200 | ) | June 2019 | (42,460,478 | ) | (42,601,562 | ) | (141,084 | ) | |||||||||||
5-Year United States Treasury Note | (380 | ) | June 2019 | (43,880,268 | ) | (43,943,437 | ) | (63,169 | ) | |||||||||||
10-Year United States Treasury Ultra Note | (783 | ) | June 2019 | (101,571,074 | ) | (103,184,719 | ) | (1,613,645 | ) | |||||||||||
10-Year United States Treasury Note | (621 | ) | June 2019 | (76,018,382 | ) | (76,800,234 | ) | (781,852 | ) | |||||||||||
Euro-BTP | (24 | ) | June 2019 | (3,430,714 | ) | (3,511,776 | ) | (81,062 | ) | |||||||||||
|
| |||||||||||||||||||
Total Short Contracts | (2,680,812 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Net Unrealized Depreciation | $ | (2,597,387 | ) | |||||||||||||||||
|
|
1. | As of April 30, 2019, cash in the amount of $2,391,923 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2019. |
20 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Swap Contracts
As of April 30, 2019, the Fund held the following centrally cleared interest rate swap agreements1:
Notional Amount | Currency | Expiration Date | Payments made by Fund | Payments Received by Fund | Payment Paid/ Received | Upfront (Paid) | Value | Unrealized (Depreciation) | ||||||||||||||||||||||
$250,000,000 | USD | 8/8/2019 | Fixed 1.621% | 3-Month USD-LIBOR | Quarterly | $ | 8,058 | $ | 694,490 | $ | 702,548 | |||||||||||||||||||
150,000,000 | USD | 11/9/2019 | Fixed 1.830% | 3-Month USD-LIBOR | Quarterly | (3,623 | ) | 607,941 | 604,318 | |||||||||||||||||||||
40,000,000 | USD | 3/16/2023 | Fixed 2.793% | 3-Month USD-LIBOR | Quarterly | — | (710,724 | ) | (710,724 | ) | ||||||||||||||||||||
41,000,000 | USD | �� | 3/29/2023 | Fixed 2.762% | 3-Month USD-LIBOR | Quarterly | — | (688,253 | ) | (688,253 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 4,435 | $ | (96,546 | ) | $ | (92,111 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
As of April 30, 2019, the Fund held the following OTC credit default swap contracts:
Reference Entity | Counterparty | Termination Date | Buy/Sell Protection2 | Notional Amount (000)3 | (Pay)/ Receive Fixed Rate4 | Payment Received | Upfront (Paid) | Value | Unrealized Appreciation/ (Depreciation)5 | |||||||||||||||||||||||||||
Staples, Inc. 2.75%, 1/12/18 | Credit Suisse First Boston | 6/20/2019 | Buy | $ | 7,000 | 1.00 | % | Quarterly | $ | (13,381 | ) | $ | (13,899 | ) | $ | (27,280 | ) |
1. | As of April 30, 2019, cash in the amount of $1,016,877 was on deposit with a broker for centrally cleared swap agreements. |
2. | Buy-Fund pays premium and buys credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
Sell-Fund receives premium and sells credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
3. | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap contract. |
4. | The annual fixed rate represents the interest received by the Fund (as a seller of protection) or paid by the Fund (as a buyer of protection) annually on the notional amount of the credit default swap contract. |
5. | Represents the difference between the value of the credit default swap contracts at the time they were opened and the value at April 30, 2019. |
The following abbreviations are used in the preceding pages:
BTP—Buoni del Tesoro Poliennali (Eurex Exchange index)
EUR—Euro
GBP—British Pound Sterling
LIBOR—London Interbank Offered Rate
USD—United States Dollar
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund's assets and liabilities:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 35,922,146 | $ | — | $ | 35,922,146 | ||||||||
Convertible Bonds (b) | — | — | 7,410 | 7,410 | ||||||||||||
Corporate Bonds | — | 770,042,848 | — | 770,042,848 | ||||||||||||
Foreign Bonds | — | 677,602 | — | 677,602 | ||||||||||||
Loan Assignments | — | 79,645,074 | — | 79,645,074 | ||||||||||||
Mortgage-Backed Securities | — | 37,617,291 | — | 37,617,291 | ||||||||||||
U.S. Government & Federal Agencies | — | 87,544,267 | — | 87,544,267 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds | — | 1,011,449,228 | 7,410 | 1,011,456,638 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (c) | 291,092 | — | 13,625 | 304,717 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Affiliated Investment Company | 63,922,527 | — | — | 63,922,527 | ||||||||||||
Repurchase Agreement | — | 134,294 | — | 134,294 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalShort-Term Investments | 63,922,527 | 134,294 | — | 64,056,821 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 2,172,832 | — | — | 2,172,832 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 66,386,451 | 1,011,583,522 | 21,035 | 1,077,991,008 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (d) | — | 554,694 | — | 554,694 | ||||||||||||
Futures Contracts (d) | 100,832 | — | — | 100,832 | ||||||||||||
Interest Rate Swap Contracts (d) | — | 1,306,866 | — | 1,306,866 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 100,832 | 1,861,560 | — | 1,962,392 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 66,487,283 | $ | 1,013,445,082 | $ | 21,035 | $ | 1,079,953,400 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liability Valuation Inputs | ||||||||||||||||
Long-Term Bonds Sold Short | ||||||||||||||||
Corporate Bonds Sold Short | $ | — | $ | (33,598,107 | ) | $ | — | $ | (33,598,107 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
TotalLong-Term Bonds Sold Short | — | (33,598,107 | ) | — | (33,598,107 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (d) | — | (305,635 | ) | — | (305,635 | ) | ||||||||||
Futures Contracts (d) | (2,698,219 | ) | — | — | (2,698,219 | ) | ||||||||||
Credit Default Swap Contracts (d) | — | (27,280 | ) | — | (27,280 | ) | ||||||||||
Interest Rate Swap Contracts (d) | — | (1,398,977 | ) | — | (1,398,977 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | (2,698,219 | ) | (1,731,892 | ) | — | (4,430,111 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities Sold Short and Other Financial Instruments | $ | (2,698,219 | ) | $ | (35,329,999 | ) | $ | — | $ | (38,028,218 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $7,410 is held in Internet within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $13,624 is held in Media within the Common Stocks section of the Portfolio of Investments. |
(d) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
22 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2018 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2019 | Change in 2019 (a) | ||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||
Internet | $ | — | $ | — | $ | — | $ | 7,410 | $ | — | $ | — | $ | — | $ | — | $ | 7,410 | $ | 7,410 | ||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 13,625 | — | — | — | — | — | — | — | 13,625 | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 13,625 | $ | — | $ | — | $ | 7,410 | $ | — | $ | — | $ | — | $ | — | $ | 21,035 | $ | 7,410 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets |
| |||
Investment in unaffiliated securities before investments sold short, at value (identified cost $1,007,575,745) including securities on loan of $2,185,730 | $ | 1,014,068,481 | ||
Investment in affiliated investment company, at value (identified cost $63,922,527) | 63,922,527 | |||
Cash collateral on deposit at broker for futures contracts | 2,391,923 | |||
Cash collateral on deposit at broker for swap contracts | 1,016,877 | |||
Cash denominated in foreign currencies | 28,302 | |||
Receivables: | ||||
Investment securities sold | 15,120,286 | |||
Dividends and interest | 8,776,075 | |||
Fund shares sold | 2,364,648 | |||
Securities lending income | 1,311 | |||
Unrealized appreciation on foreign currency forward contracts | 554,694 | |||
Other assets | 109,208 | |||
Premiums paid for OTC swap contracts | 13,381 | |||
|
| |||
Total assets | 1,108,367,713 | |||
|
| |||
Liabilities |
| |||
Investments sold short (proceeds $32,060,340) | 33,598,107 | |||
Payables: | ||||
Investment securities purchased | 13,420,462 | |||
Fund shares redeemed | 2,380,115 | |||
Collateral received for securities on loan | 2,172,832 | |||
Interest on investments sold short | 589,610 | |||
Manager (See Note 3) | 507,429 | |||
Variation margin on futures contracts | 446,568 | |||
Transfer agent (See Note 3) | 330,169 | |||
NYLIFE Distributors (See Note 3) | 145,932 | |||
Broker fees and charges on short sales | 138,461 | |||
Shareholder communication | 85,454 | |||
Variation margin on centrally cleared swap contracts | 68,704 | |||
Professional fees | 48,761 | |||
Custodian | 11,566 | |||
Trustees | 2,191 | |||
Accrued expenses | 10,373 | |||
Unrealized depreciation on foreign currency forward contracts | 305,635 | |||
Dividend payable | 199,347 | |||
Unrealized depreciation on OTC swap contracts | 27,280 | |||
|
| |||
Total liabilities | 54,488,996 | |||
|
| |||
Net assets | $ | 1,053,878,717 | ||
|
| |||
Composition of Net Assets |
| |||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 1,212,776 | ||
Additional paid-in capital | 1,244,808,791 | |||
|
| |||
1,246,021,567 | ||||
Total distributable earnings (loss) | (192,142,850 | ) | ||
|
| |||
Net assets | $ | 1,053,878,717 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 205,126,182 | ||
|
| |||
Shares of beneficial interest outstanding | 23,608,473 | |||
|
| |||
Net asset value per share outstanding | $ | 8.69 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.10 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 20,483,823 | ||
|
| |||
Shares of beneficial interest outstanding | 2,338,120 | |||
|
| |||
Net asset value per share outstanding | $ | 8.76 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.17 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 9,055,303 | ||
|
| |||
Shares of beneficial interest outstanding | 1,047,553 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.64 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 108,326,243 | ||
|
| |||
Shares of beneficial interest outstanding | 12,541,597 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.64 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 657,312,058 | ||
|
| |||
Shares of beneficial interest outstanding | 75,580,885 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.70 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 6,811,108 | ||
|
| |||
Shares of beneficial interest outstanding | 784,297 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.68 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 194,357 | ||
|
| |||
Shares of beneficial interest outstanding | 22,365 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.69 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 46,569,643 | ||
|
| |||
Shares of beneficial interest outstanding | 5,354,337 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.70 | ||
|
|
24 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) |
| |||
Income | ||||
Interest | $ | 21,663,769 | ||
Dividends-affiliated | 331,900 | |||
Securities lending | 5,517 | |||
Dividends-unaffiliated | 2,814 | |||
|
| |||
Total income | 22,004,000 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,122,768 | |||
Transfer agent (See Note 3) | 968,176 | |||
Distribution/Service—Class A (See Note 3) | 262,610 | |||
Distribution/Service—Investor Class (See Note 3) | 25,035 | |||
Distribution/Service—Class B (See Note 3) | 49,277 | |||
Distribution/Service—Class C (See Note 3) | 582,829 | |||
Distribution/Service—Class R2 (See Note 3) | 8,284 | |||
Distribution/Service—Class R3 (See Note 3) | 472 | |||
Interest on investments sold short | 672,845 | |||
Broker fees and charges on short sales | 392,437 | |||
Registration | 84,198 | |||
Shareholder communication | 65,952 | |||
Professional fees | 65,937 | |||
Custodian | 21,131 | |||
Interest expense | 17,136 | |||
Trustees | 13,882 | |||
Shareholder service (See Note 3) | 3,408 | |||
Miscellaneous | 26,327 | |||
|
| |||
Total expenses | 6,382,704 | |||
|
| |||
Net investment income (loss) | 15,621,296 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Unaffiliated investment transactions | (9,899,828 | ) | ||
Investments sold short | (75,425 | ) | ||
Futures transactions | (9,100,832 | ) | ||
Swap transactions | 1,797,944 | |||
Foreign currency forward transactions | 611,896 | |||
Foreign currency transactions | (120,837 | ) | ||
|
| |||
Net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (16,787,082 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 31,844,981 | |||
Investments sold short | (1,339,532 | ) | ||
Futures contracts | (3,061,385 | ) | ||
Swap contracts | (5,206,455 | ) | ||
Foreign currency forward contracts | (602,652 | ) | ||
Translation of other assets and liabilities in foreign currencies | 10,812 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | 21,645,769 | |||
|
| |||
Net realized and unrealized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | 4,858,687 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 20,479,983 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 15,621,296 | $ | 34,902,238 | ||||
Net realized gain (loss) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | (16,787,082 | ) | 12,030,856 | |||||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | 21,645,769 | (42,770,282 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 20,479,983 | 4,162,812 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (3,225,939 | ) | (7,841,617 | ) | ||||
Investor Class | (304,414 | ) | (629,840 | ) | ||||
Class B | (113,053 | ) | (297,747 | ) | ||||
Class C | (1,338,292 | ) | (3,365,854 | ) | ||||
Class I | (10,956,332 | ) | (25,600,022 | ) | ||||
Class R2 | (98,852 | ) | (77,254 | ) | ||||
Class R3 | (2,569 | ) | (3,444 | ) | ||||
Class R6 | (827,270 | ) | (1,320,203 | ) | ||||
|
| |||||||
(16,866,721 | ) | (39,135,981 | ) | |||||
|
| |||||||
Distributions to shareholders from return of capital: | ||||||||
Class A | — | (119,065 | ) | |||||
Investor Class | — | (9,563 | ) | |||||
Class B | — | (4,521 | ) | |||||
Class C | — | (51,106 | ) | |||||
Class I | — | (388,702 | ) | |||||
Class R2 | — | (1,173 | ) | |||||
Class R3 | — | (52 | ) | |||||
Class R6 | — | (20,046 | ) | |||||
|
| |||||||
— | (594,228 | ) | ||||||
|
| |||||||
Total distributions to shareholders | (16,866,721 | ) | (39,730,209 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 121,079,332 | 317,200,945 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 15,494,760 | 36,078,388 | ||||||
Cost of shares redeemed | (243,151,703 | ) | (506,161,638 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (106,577,611 | ) | (152,882,305 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (102,964,349 | ) | (188,449,702 | ) | ||||
Net Assets |
| |||||||
Beginning of period | 1,156,843,066 | 1,345,292,768 | ||||||
|
| |||||||
End of period | $ | 1,053,878,717 | $ | 1,156,843,066 | ||||
|
|
26 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.28 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.24 | 0.25 | 0.35 | 0.36 | 0.36 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.23 | ) | 0.15 | 0.08 | (0.63 | ) | (0.05 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.02 | ) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.17 | 0.02 | 0.40 | 0.41 | (0.25 | ) | 0.32 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.69 | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 2.01 | % | 0.25 | % | 4.65 | % | 4.94 | % | (2.70 | %) | 3.48 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 2.83 | %†† | 2.69 | % | 2.79 | % | 4.04 | % | 4.01 | % | 3.81 | % | |||||||||||||||||||||||
Net expenses (c)(d) | 1.27 | %†† | 1.25 | % | 1.13 | % | 1.16 | % | 1.01 | % | 1.04 | % | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 205,126 | $ | 220,618 | $ | 302,192 | $ | 412,834 | $ | 584,184 | $ | 675,552 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.07% | 0.20% | ||
October 31, 2018 | 1.03% | 0.22% | ||
October 31, 2017 | 1.01% | 0.12% | ||
October 31, 2016 | 1.00% | 0.16% | ||
October 31, 2015 | 0.96% | 0.05% | ||
October 31, 2014 | 0.98% | 0.06% |
(d) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.72 | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | $ | 9.34 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.24 | 0.24 | 0.35 | 0.36 | 0.36 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.23 | ) | 0.16 | 0.10 | (0.63 | ) | (0.05 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.17 | 0.02 | 0.40 | 0.42 | (0.25 | ) | 0.32 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.76 | $ | 8.72 | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 1.98 | % | 0.23 | % | 4.59 | % | 5.00 | % | (2.70 | %) | 3.42 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 2.80 | %†† | 2.68 | % | 2.74 | % | 4.01 | % | 3.99 | % | 3.78 | % | |||||||||||||||||||||||
Net expenses (c)(d) | 1.29 | %†† | 1.27 | % | 1.15 | % | 1.18 | % | 1.03 | % | 1.06 | % | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 20,484 | $ | 20,451 | $ | 22,033 | $ | 31,851 | $ | 32,498 | $ | 31,690 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.09% | 0.20% | ||
October 31, 2018 | 1.05% | 0.22% | ||
October 31, 2017 | 1.03% | 0.12% | ||
October 31, 2016 | 1.02% | 0.16% | ||
October 31, 2015 | 0.98% | 0.05% | ||
October 31, 2014 | 1.00% | 0.06% |
28 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.61 | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | $ | 9.24 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.17 | 0.18 | 0.28 | 0.29 | 0.28 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.23 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.13 | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.10 | ) | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.64 | $ | 8.61 | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 1.51 | % | (0.52 | %) | 3.86 | % | 4.16 | % | (3.45 | %) | 2.71 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 2.06 | %†† | 1.92 | % | 2.00 | % | 3.26 | % | 3.24 | % | 3.03 | % | |||||||||||||||||||||||
Net expenses (c)(d) | 2.04 | %†† | 2.02 | % | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 9,055 | $ | 11,015 | $ | 15,223 | $ | 18,313 | $ | 19,833 | $ | 22,460 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.84% | 0.20% | ||
October 31, 2018 | 1.80% | 0.22% | ||
October 31, 2017 | 1.78% | 0.12% | ||
October 31, 2016 | 1.77% | 0.16% | ||
October 31, 2015 | 1.73% | 0.05% | ||
October 31, 2014 | 1.75% | 0.06% |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.60 | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | $ | 9.23 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.17 | 0.18 | 0.28 | 0.29 | 0.28 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.23 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.14 | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.10 | ) | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.64 | $ | 8.60 | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 1.63 | % | (0.52 | %) | 3.86 | % | 4.16 | % | (3.46 | %) | 2.71 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 2.06 | %†† | 1.92 | % | 2.00 | % | 3.27 | % | 3.24 | % | 3.05 | % | |||||||||||||||||||||||
Net expenses (c)(d) | 2.04 | %†† | 2.02 | % | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 108,326 | $ | 128,279 | $ | 167,595 | $ | 220,513 | $ | 315,183 | $ | 345,900 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.84% | 0.20% | ||
October 31, 2018 | 1.80% | 0.22% | ||
October 31, 2017 | 1.78% | 0.12% | ||
October 31, 2016 | 1.77% | 0.16% | ||
October 31, 2015 | 1.73% | 0.05% | ||
October 31, 2014 | 1.75% | 0.06% |
30 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.66 | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | $ | 9.29 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.26 | 0.26 | 0.37 | 0.38 | 0.38 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.23 | ) | 0.16 | 0.11 | (0.63 | ) | (0.05 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.18 | 0.04 | 0.42 | 0.45 | (0.23 | ) | 0.34 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.29 | ) | (0.33 | ) | (0.35 | ) | (0.33 | ) | (0.35 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.29 | ) | (0.33 | ) | (0.35 | ) | (0.33 | ) | (0.35 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.70 | $ | 8.66 | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 2.13 | % | 0.51 | % | 4.90 | % | 5.32 | % | (2.56 | %) | 3.73 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 3.08 | %†† | 2.94 | % | 2.99 | % | 4.30 | % | 4.25 | % | 4.08 | % | |||||||||||||||||||||||
Net expenses (c)(d) | 1.02 | %†† | 1.00 | % | 0.88 | % | 0.91 | % | 0.76 | % | 0.79 | % | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 657,312 | $ | 717,129 | $ | 837,363 | $ | 735,359 | $ | 1,263,695 | $ | 1,481,314 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 0.82% | 0.20% | ||
October 31, 2018 | 0.78% | 0.22% | ||
October 31, 2017 | 0.76% | 0.12% | ||
October 31, 2016 | 0.75% | 0.16% | ||
October 31, 2015 | 0.71% | 0.05% | ||
October 31, 2014 | 0.73% | 0.06% |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | February 28, 2014** through October 31, | |||||||||||||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.39 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.23 | 0.23 | 0.34 | 0.35 | 0.23 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.23 | ) | 0.16 | 0.10 | (0.63 | ) | (0.16 | ) | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.02 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 0.16 | 0.01 | 0.39 | 0.41 | (0.26 | ) | 0.09 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.26 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | |||||||||||||||||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.26 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 8.68 | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 1.84 | % | 0.16 | % | 4.54 | % | 4.84 | % | (2.81 | %) | 0.99 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 2.72 | %†† | 2.67 | % | 2.63 | % | 3.97 | % | 3.87 | % | 3.78 | %†† | |||||||||||||||||||||||
Net expenses (c)(d) | 1.37 | %†† | 1.34 | % | 1.23 | % | 1.28 | % | 1.11 | % | 1.14 | %†† | |||||||||||||||||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 6,811 | $ | 6,657 | $ | 773 | $ | 662 | $ | 112 | $ | 336 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.17% | 0.20% | ||
October 31, 2018 | 1.14% | 0.20% | ||
October 31, 2017 | 1.11% | 0.12% | ||
October 31, 2016 | 1.12% | 0.16% | ||
October 31, 2015 | 1.06% | 0.05% | ||
October 31, 2014†† | 1.08% | 0.06% |
32 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | February 29, 2016 ** through October 31, | ||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | ||||||||||||
Net asset value at beginning of period | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.20 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.11 | 0.21 | 0.21 | 0.21 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.23 | ) | 0.16 | 0.86 | |||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | (0.00 | )‡ | (0.27 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | 0.16 | (0.01 | ) | 0.37 | 0.80 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less dividends and distributions: | ||||||||||||||||
From net investment income | (0.12 | ) | (0.24 | ) | (0.28 | ) | (0.19 | ) | ||||||||
Return of capital | — | (0.00 | )‡ | (0.00 | )‡ | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.12 | ) | (0.24 | ) | (0.28 | ) | (0.19 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value at end of period | $ | 8.69 | $ | 8.65 | $ | 8.90 | $ | 8.81 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment return (b) | 1.83 | % | (0.09 | %) | 4.28 | % | 9.77 | % | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 2.47 | %†† | 2.36 | % | 2.34 | % | 3.32 | %†† | ||||||||
Net expenses (c)(d) | 1.62 | %†† | 1.60 | % | 1.48 | % | 1.50 | %†† | ||||||||
Portfolio turnover rate | 21 | % | 22 | % | 41 | % | 15 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 194 | $ | 190 | $ | 114 | $ | 32 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 1.42% | 0.20% | ||
October 31, 2018 | 1.38% | 0.22% | ||
October 31, 2017 | 1.36% | 0.12% | ||
October 31, 2016†† | 1.34% | 0.16% |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Financial Highlightsselected per share data and ratios
Class R6 | Six months ended April 30, 2019* | February 28, 2018** through October 31, 2018 | ||||||||||
Net asset value at beginning of period | $ | 8.66 | $ | 8.83 | ||||||||
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.14 | 0.19 | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.05 | (0.15 | ) | |||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | |||||||||
|
|
|
| |||||||||
Total from investment operations | 0.19 | 0.05 | ||||||||||
|
|
|
| |||||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.15 | ) | (0.22 | ) | ||||||||
Return of capital | — | (0.00 | )‡ | |||||||||
|
|
|
| |||||||||
Total dividends and distributions | (0.15 | ) | (0.22 | ) | ||||||||
|
|
|
| |||||||||
Net asset value at end of period | $ | 8.70 | $ | 8.66 | ||||||||
|
|
|
| |||||||||
Total investment return (b) | 2.23 | % | 0.54 | % | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 3.27 | %†† | 3.18 | %†† | ||||||||
Net expenses (c)(d) | 0.84 | %†† | 0.85 | %†† | ||||||||
Portfolio turnover rate | 21 | % | 22 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 46,570 | $ | 52,504 |
* | Unaudited. |
** | Inception date. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The expense ratios presented below exclude short sales expense: |
Period Ended | Net Expenses (excluding short sale expenses) | Short Sale Expenses | ||
April 30, 2019*†† | 0.64% | 0.20% | ||
October 31, 2018†† | 0.62% | 0.23% |
34 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Unconstrained Bond Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers eight classes of shares. Class A and Class B shares commenced operations on February 28, 1997. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 28, 2014. Class R3 shares commenced operations on February 29, 2016. Class R6 shares were registered for sale effective February 28, 2017. Class R6 shares commenced operations on February 28, 2018.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar
quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class R2 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee. This is in addition to any fees paid under a distribution plan, where applicable.
The Fund’s investment objective is to seek total return by investing primarily in domestic and foreign debt securities.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
35 |
Notes to Financial Statements(Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation
36 | MainStay MacKay Unconstrained Bond Fund |
date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2019, no foreign equity securities held by the Fund were fair valued in such a manner.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent
pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
Swaps are marked to market daily based upon quotations from pricing agents, brokers or market makers. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including: (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2019 and can change at any time in response to, among other relevant factors, market conditions or events or developments with
37 |
Notes to Financial Statements(Unaudited) (continued)
respect to an individual issuer or instrument. As of April 30, 2019, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, repurchase agreements are shown in the Portfolio of Investments.
(I) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a
38 | MainStay MacKay Unconstrained Bond Fund |
specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund may invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2019, open futures contracts are shown in the Portfolio of Investments.
(J) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2019, the Fund did not hold any unfunded commitments.
(K) Swap Contracts. The Fund may enter into credit default, interest rate, equity, index and currency exchange rate swap contracts (“swaps”). In a typical swap transaction, two parties agree to exchange the future returns (or differentials in rates of future returns) earned or realized at periodic intervals on a particular investment or instrument based on a notional principal amount. Generally, the Fund will enter into a swap on a net basis, which means that the two payment streams under the swap are netted, with the Fund receiving or paying (as the case may be) only the net amount of the two payment streams. Therefore, the Fund’s current obligation under a swap generally will be equal to the net amount to be paid or received under the swap, based on the relative value of notional positions attributable to each counterparty to the swap. The payments may be adjusted for transaction costs, interest payments, the amount of interest paid on the investment or instrument or other factors. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the custodian bank or broker in accordance with the terms of the swap. Swap agreements are privately negotiated in the over the counter (“OTC”) market and may be executed in a multilateral or other trade facilities platform, such as a registered commodities exchange (“centrally cleared swaps”).
Certain standardized swaps, including certain credit default and interest rate swaps, are subject to mandatory clearing and exchange-trading, and more types of standardized swaps are expected to be subject to mandatory clearing and exchange-trading in the future. The counterparty risk for exchange-traded and cleared derivatives is expected to be generally lower than for uncleared derivatives, but cleared contracts are not risk-free. In a cleared derivative transaction, the Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund’s exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse
39 |
Notes to Financial Statements(Unaudited) (continued)
may be greater than the margin the Fund would be required to post in an uncleared transaction. As of April 30, 2019, open swap positions are shown in the Portfolio of Investments.
Swaps are marked to market daily based upon quotations from pricing agents, brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation. Any payments made or received upon entering into a swap would be amortized or accreted over the life of the swap and recorded as a realized gain or loss. Early termination of a swap is recorded as a realized gain or loss. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statement of Assets and Liabilities.
The Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of the swap counterparty. The Fund may be able to eliminate its exposure under a swap either by assignment or other disposition, or by entering into an offsetting swap with the same party or a similar credit-worthy party. Swaps are not actively traded on financial markets. Entering into swaps involves elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibilities that there will be no liquid market for these swaps, that the counterparty to the swaps may default on its obligation to perform or disagree as to the meaning of the contractual terms in the swaps and that there may be unfavorable changes in interest rates, the price of the index or the security underlying these transactions.
Interest Rate Swaps: An interest rate swap is an agreement between two parties where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often LIBOR). The Fund will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.
Credit Default Swaps: The Fund may enter into credit default swaps to simulate long and short bond positions or to take an active long or short position with respect to the likelihood of a default or credit event by the issuer of the underlying reference obligation. The types of reference obligations underlying the swaps that may be entered into by the Fund include debt obligations of a single issuer of corporate or sovereign debt, a basket of obligations of different issuers or a credit index. A credit index is an equally-weighted credit default swap index that is designed to track a representative segment of the credit default swap market (e.g., investment grade, high volatility, below investment grade or emerging markets) and provides an investor with exposure to specific “baskets” of issuers of certain debt instruments. Index credit default swaps have standardized terms including a fixed spread and standard maturity dates. The composition of the obligations within a particular index changes periodically. Credit default swaps involve one party, the protection buyer, making a stream of payments to another party, the protection seller, in exchange for the right to receive a contingent payment if there is a credit event related to the underlying reference obligation. In the event that the reference obligation matures prior to the termination date of the contract, a similar security will be substituted for the duration of the contract term. Credit events are defined under individual swap agreements and generally include bankruptcy, failure to
pay, restructuring, repudiation/moratorium, obligation acceleration and obligation default. Selling protection effectively adds leverage to a portfolio up to the notional amount of the swap agreement. Potential liabilities under these contracts may be reduced by: the auction rates of the underlying reference obligations; upfront payments received at the inception of a swap; and net amounts received from credit default swaps purchased with the identical reference obligation.
(L) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of April 30, 2019, open foreign currency forward contracts are shown in the Portfolio of Investments.
40 | MainStay MacKay Unconstrained Bond Fund |
(M) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities— at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(N) Securities Sold Short. During the six-month period ended April 30, 2019, the Fund engaged in sales of securities it did not own (“short sales”) as part of its investment strategies. When the Fund enters into a short sale, it must segregate or maintain with a broker the cash proceeds from the security sold short or other securities as collateral for its obligation to deliver the security upon conclusion of the sale. During the period a short position is open, depending on the nature and type of security, a short position is reflected as a liability and is marked to market in accordance with the valuation methodologies previously detailed (See Note 2(A)). Liabilities for securities sold short are closed out by purchasing the applicable securities for delivery to the counterparty broker. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited as to dollar amount, will be recognized upon termination of a short sale if the market price on the date the short position is closed out is less or greater, respectively, than the proceeds originally received. Any such gain or loss may be offset, completely or in part, by the change in the value of the hedged investments. Interest on short positions held is accrued daily, while dividends declared on short positions existing on the record date are recorded on the ex-dividend date as a dividend expense in the Statement of Operations. Broker fees and other expenses related to securities sold short are disclosed in the Statement of Operations. Short sales involve risk of loss in excess of the related amounts reflected in the Statement of Assets and Liabilities.
(O) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the
Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $2,185,730; the total market value of collateral held by the Fund was $2,221,361. The market value of the collateral held includesnon-cash collateral in the form of U.S. Treasury securities with a value of $48,529.
(P) Debt and Foreign Securities Risk. The Fund primarily invests in high yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The Fund may invest in loans which are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These investments pay investors a higher interest rate than investment grade debt securities because of the increased risk of loss. Although certain loans are collateralized, there is no guarantee that the value of
the collateral will be sufficient to repay the loan. In a recession or serious credit event, the value of these investments could decline significantly. As a result of these and other events, the Fund’s NAVs could go down and you could lose money.
In addition, loans generally are subject to the extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
41 |
Notes to Financial Statements(Unaudited) (continued)
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(Q) Counterparty Credit Risk. In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains collateral posting terms and netting provisions. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels or if the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
(R) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(S) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund entered into interest rate and credit default swap contracts in order to obtain a desired return at a lower cost to the Fund, rather than directly investing in an instrument yielding that desired return or to hedge against credit and interest rate risk. The Fund also entered into foreign currency forward contracts to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of April 30, 2019:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | 100,832 | $ | 100,832 | |||||||||
Centrally Cleared Swap Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (b) | — | — | 1,306,866 | 1,306,866 | |||||||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 554,694 | — | — | 554,694 | |||||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | 554,694 | $ | — | $ | 1,407,698 | $ | 1,962,392 | ||||||||||
|
|
42 | MainStay MacKay Unconstrained Bond Fund |
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | (2,698,219 | ) | $ | (2,698,219 | ) | |||||||
OTC Swap Contracts | Unrealized depreciation on OTC swap contracts | — | (27,280 | ) | — | (27,280 | ) | |||||||||||
Centrally Cleared Swap Contracts | Net Assets—Net unrealized depreciation on investments, swap contracts and futures contracts (b) | — | — | (1,398,977 | ) | (1,398,977 | ) | |||||||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (305,635 | ) | — | — | (305,635 | ) | |||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | (305,635 | ) | $ | (27,280 | ) | $ | (4,097,196 | ) | $ | (4,430,111 | ) | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
(b) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements as reported in the Portfolio of Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | — | $ | (9,100,832 | ) | $ | (9,100,832 | ) | |||||||
Swap Contracts | Net realized gain (loss) on swap transactions | — | (83,632 | ) | 1,881,576 | 1,797,944 | ||||||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | 611,896 | — | — | 611,896 | |||||||||||||
|
| |||||||||||||||||
Total Realized Gain (Loss) | $ | 611,896 | $ | (83,632 | ) | $ | (7,219,256 | ) | $ | (6,690,992 | ) | |||||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | — | $ | (3,061,385 | ) | $ | (3,061,385 | ) | |||||||
Swap Contracts | Net change in unrealized appreciation (depreciation) on swap contracts | — | 60,808 | (5,267,263 | ) | (5,206,455 | ) | |||||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | (602,652 | ) | — | — | (602,652 | ) | |||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (602,652 | ) | $ | 60,808 | $ | (8,328,648 | ) | $ | (8,870,492 | ) | |||||||
|
|
43 |
Notes to Financial Statements(Unaudited) (continued)
Average Notional Amount
Foreign Exchange Contracts | Credit Contracts Risk | Interest Rate | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | — | $ | 11,485,442 | $ | 11,485,442 | ||||||||
Futures Contracts Short | $ | — | $ | — | $ | (277,700,432 | ) | $ | (277,700,432 | ) | ||||||
Swap Contracts Long | $ | — | $ | 7,000,000 | $ | 481,000,000 | $ | 488,000,000 | ||||||||
Forward Contracts Long (a) | $ | 16,082,288 | $ | — | $ | — | $ | 16,082,288 | ||||||||
Forward Contracts Short | $ | (29,901,608 | ) | $ | — | $ | — | $ | (29,901,608 | ) | ||||||
|
|
(a) | Positions were open four months during the reporting period. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million to $1 billion; 0.50% from $1 billion to $5 billion; and 0.475% in excess of $5 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2019, the effective management fee rate was 0.58%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/ or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020 and shall renew automatically for one-year terms unless New York Life Investments provides
written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $3,122,768.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect,wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
44 | MainStay MacKay Unconstrained Bond Fund |
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 3,314 | ||
Class R3 | 94 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $11,055 and $3,070, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class B and Class C shares of $12,276 and $1,394, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and
shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 195,288 | ||
Investor Class | 20,603 | |||
Class B | 10,136 | |||
Class C | 119,897 | |||
Class I | 615,919 | |||
Class R2 | 6,158 | |||
Class R3 | 175 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||
MainStay U.S. Government Liquidity Fund | $15,391 | $335,990 | $(287,458) | $ — | $ — | $63,923 | $ 332 | $ — | 63,923 |
(G) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R3 | $ | 29,116 | 15.0 | % | ||||
Class R6 | 25,694 | 0.1 |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,039,438,232 | $ | 13,394,587 | $ | (8,439,918 | ) | $ | 4,954,669 |
As of April 30, 2019, for federal income tax purposes, capital loss carryforwards of $175,122,155 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $21,994 | $153,128 |
45 |
Notes to Financial Statements(Unaudited) (continued)
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 39,135,981 | ||
Return of Capital | 594,228 | |||
Total | $ | 39,730,209 |
Note 5–Restricted Securities
Restricted securities, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
As of April 30, 2019, the Fund held the following restricted securities:
Security | Date(s) of Acquisition | Shares/ Par Amount | Cost | 4/30/19 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | ||||||||||||||||||||
Common Stock | 3/11/14 | 22 | $ | — | $ | 13,624 | 0.0 | %‡ | ||||||||||||
At Home Corp | ||||||||||||||||||||
Convertible Bonds | 3/27/19 | $ | 570,000 | — | 7,410 | 0.0 | %‡ | |||||||||||||
|
| |||||||||||||||||||
Total | $ | — | $ | 21,034 | 0.0 | %‡ | ||||||||||||||
|
|
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of U.S. government securities were $97,516 and $4,702, respectively. Purchases and sales of securities, other than U.S. government securities andshort-term securities, were $119,300 and $375,199, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,688,675 | $ | 14,529,676 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 356,404 | 3,061,174 | ||||||
Shares redeemed | (4,072,576 | ) | (35,016,331 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,027,497 | ) | (17,425,481 | ) | ||||
Shares converted into Class A (See Note 1) | 188,502 | 1,623,165 | ||||||
Shares converted from Class A (See Note 1) | (55,436 | ) | (479,652 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,894,431 | ) | $ | (16,281,968 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 5,509,621 | $ | 48,680,334 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 858,927 | 7,531,280 | ||||||
Shares redeemed | (14,910,548 | ) | (131,326,039 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (8,542,000 | ) | (75,114,425 | ) | ||||
Shares converted into Class A (See Note 1) | 195,861 | 1,723,819 | ||||||
Shares converted from Class A (See Note 1) | (105,230 | ) | (923,908 | ) | ||||
|
| |||||||
Net increase (decrease) | (8,451,369 | ) | $ | (74,314,514 | ) | |||
|
| |||||||
46 | MainStay MacKay Unconstrained Bond Fund |
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 97,788 | $ | 847,943 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 34,275 | 296,936 | ||||||
Shares redeemed | (158,889 | ) | (1,377,800 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (26,826 | ) | (232,921 | ) | ||||
Shares converted into Investor Class (See Note 1) | 115,847 | 1,007,766 | ||||||
Shares converted from Investor Class (See Note 1) | (95,774 | ) | (830,649 | ) | ||||
|
| |||||||
Net increase (decrease) | (6,753 | ) | $ | (55,804 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 219,598 | $ | 1,946,265 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,481 | 622,644 | ||||||
Shares redeemed | (385,811 | ) | (3,420,155 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (95,732 | ) | (851,246 | ) | ||||
Shares converted into Investor Class (See Note 1) | 151,447 | 1,339,805 | ||||||
Shares converted from Investor Class (See Note 1) | (166,900 | ) | (1,481,104 | ) | ||||
|
| |||||||
Net increase (decrease) | (111,185 | ) | $ | (992,545 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 4,133 | $ | 35,230 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,092 | 94,757 | ||||||
Shares redeemed | (211,366 | ) | (1,810,319 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (196,141 | ) | (1,680,332 | ) | ||||
Shares converted from Class B (See Note 1) | (36,050 | ) | (307,534 | ) | ||||
|
| |||||||
Net increase (decrease) | (232,191 | ) | $ | (1,987,866 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 23,856 | $ | 209,256 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 29,552 | 257,829 | ||||||
Shares redeemed | (406,416 | ) | (3,552,951 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (353,008 | ) | (3,085,866 | ) | ||||
Shares converted from Class B (See Note 1) | (86,222 | ) | (752,724 | ) | ||||
|
| |||||||
Net increase (decrease) | (439,230 | ) | $ | (3,838,590 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 390,039 | $ | 3,324,335 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 138,690 | 1,183,656 | ||||||
Shares redeemed | (2,776,649 | ) | (23,719,165 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,247,920 | ) | (19,211,174 | ) | ||||
Shares converted from Class C (See Note 1) | (126,680 | ) | (1,086,475 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,374,600 | ) | $ | (20,297,649 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 928,440 | $ | 8,151,489 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 340,824 | 2,969,821 | ||||||
Shares redeemed | (5,286,485 | ) | (46,214,058 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (4,017,221 | ) | (35,092,748 | ) | ||||
Shares converted from Class C (See Note 1) | (6,738 | ) | (59,487 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,023,959 | ) | $ | (35,152,235 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 11,769,953 | $ | 101,268,672 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,154,845 | 9,930,217 | ||||||
Shares redeemed | (20,176,327 | ) | (173,305,942 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (7,251,529 | ) | (62,107,053 | ) | ||||
Shares converted into Class I (See Note 1) | 8,487 | 73,379 | ||||||
|
| |||||||
Net increase (decrease) | (7,243,042 | ) | $ | (62,033,674 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 28,233,057 | $ | 248,668,294 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,652,195 | 23,274,868 | ||||||
Shares redeemed | (36,010,371 | ) | (316,679,041 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (5,125,119 | ) | (44,735,879 | ) | ||||
Shares converted into Class I (See Note 1) | 17,412 | 153,599 | ||||||
Shares converted from Class I (See Note 1) | (6,069,494 | ) | (53,593,632 | ) | ||||
|
| |||||||
Net increase (decrease) | (11,177,201 | ) | $ | (98,175,912 | ) | |||
|
| |||||||
47 |
Notes to Financial Statements(Unaudited) (continued)
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 53,624 | $ | 461,408 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,511 | 98,852 | ||||||
Shares redeemed | (50,792 | ) | (436,854 | ) | ||||
|
| |||||||
Net increase (decrease) | 14,343 | $ | 123,406 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 707,801 | $ | 6,174,706 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,998 | 78,427 | ||||||
Shares redeemed | (33,711 | ) | (294,004 | ) | ||||
|
| |||||||
Net increase (decrease) | 683,088 | $ | 5,959,129 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,066 | $ | 9,119 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 221 | 1,899 | ||||||
Shares redeemed | (930 | ) | (8,007 | ) | ||||
|
| |||||||
Net increase (decrease) | 357 | $ | 3,011 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 12,227 | $ | 106,756 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 373 | 3,270 | ||||||
Shares redeemed | (3,427 | ) | (29,943 | ) | ||||
|
| |||||||
Net increase (decrease) | 9,173 | $ | 80,083 | |||||
|
| |||||||
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 69,792 | $ | 602,949 | |||||
Shares issued to shareholders in | 96,219 | 827,269 | ||||||
Shares redeemed | (875,047 | ) | (7,477,285 | ) | ||||
|
| |||||||
Net increase (decrease) | (709,036 | ) | $ | (6,047,067 | ) | |||
|
| |||||||
Period ended October 31, 2018 : | ||||||||
Shares sold | 372,589 | $ | 3,263,845 | |||||
Shares issued to shareholders in | 153,553 | 1,340,249 | ||||||
Shares redeemed | (532,263 | ) | (4,645,447 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,121 | ) | (41,353 | ) | ||||
Shares converted into Class R6 (See Note 1) | 6,069,494 | 53,593,632 | ||||||
|
| |||||||
Net increase (decrease) | 6,063,373 | $ | 53,552,279 | |||||
|
|
Note 11–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
48 | MainStay MacKay Unconstrained Bond Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MacKay Unconstrained Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and MacKay Shields in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of
New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among
49 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of MacKay Shields and ongoing analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except
for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios and MacKay Shields’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and MacKay Shields believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also
50 | MainStay MacKay Unconstrained Bond Fund |
considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and MacKay Shields and acknowledged that New York Life Investments and MacKay Shields must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position for New York Life Investments and MacKay
Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
51 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying
52 | MainStay MacKay Unconstrained Bond Fund |
asset levels. Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
53 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
54 | MainStay MacKay Unconstrained Bond Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1738547 MS065-19 | MSUB10-06/19 (NYLIM) NL217 |
MainStay MAP Equity Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/9/1999 | | | 3.05 9.05 | %
| | 5.85 12.01 | %
| | 7.46 8.68 | %
| | 12.42 13.06 | %
| | 1.10 1.10 | %
| ||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | 2.93 8.92 |
| | 5.65 11.80 |
| | 7.26 8.48 | | | 12.20 12.84 | | | 1.31 1.31 |
| ||||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/9/1999 | | 3.64 8.52 |
| | 5.96 10.94 | | | 7.41 7.67 | | | 12.00 12.00 | | | 2.06 2.06 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 6/9/1999 | | | 7.54 8.52 |
| | 9.95 10.95 | | | 7.67 7.67 | | | 12.00 12.00 | | | 2.06 2.06 |
| ||||||||
Class I Shares | No Sales Charge | 1/21/1971 | 9.17 | 12.31 | 8.95 | 13.33 | 0.85 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | 9.12 | 12.18 | 8.84 | 13.22 | 0.95 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | 8.99 | 11.88 | 8.56 | 12.94 | 1.20 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 8.86 | 11.63 | 8.30 | 12.65 | 1.45 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations, if any, please refer to the Notes to Financial Statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Russell 3000® Index4 | 9.71 | % | 12.68 | % | 11.20 | % | 15.29 | % | ||||||||
S&P 500® Index5 | 9.76 | 13.49 | 11.63 | 15.32 | ||||||||||||
Morningstar Large Blend Category Average6 | 9.02 | 10.88 | 9.71 | 13.89 |
4. | The Russell 3000® Index is the Fund’s primary broad-based securities market index for comparison purposes. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall U.S. stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of U.S. industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MAP Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MAP Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,090.50 | $ | 5.81 | $ | 1,019.24 | $ | 5.61 | 1.12% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,089.20 | $ | 6.89 | $ | 1,018.20 | $ | 6.66 | 1.33% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,085.20 | $ | 10.70 | $ | 1,014.53 | $ | 10.34 | 2.07% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,085.20 | $ | 10.70 | $ | 1,014.53 | $ | 10.34 | 2.07% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,091.70 | $ | 4.51 | $ | 1,020.48 | $ | 4.36 | 0.87% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,091.20 | $ | 5.03 | $ | 1,019.98 | $ | 4.86 | 0.97% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,089.90 | $ | 6.32 | $ | 1,018.75 | $ | 6.11 | 1.22% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,088.60 | $ | 7.61 | $ | 1,017.51 | $ | 7.35 | 1.47% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2019(Unaudited)
Software | 7.8 | % | ||
Aerospace & Defense | 7.3 | |||
Interactive Media & Services | 6.3 | |||
Banks | 5.9 | |||
Technology Hardware, Storage & Peripherals | 5.8 | |||
Media | 5.6 | |||
Insurance | 4.6 | |||
IT Services | 4.0 | |||
Entertainment | 3.8 | |||
Oil, Gas & Consumable Fuels | 3.5 | |||
Capital Markets | 3.4 | |||
Health Care Providers & Services | 3.4 | |||
Specialty Retail | 3.4 | |||
Pharmaceuticals | 3.1 | |||
Health Care Equipment & Supplies | 2.9 | |||
Semiconductors & Semiconductor Equipment | 2.8 | |||
Road & Rail | 2.6 | |||
Chemicals | 2.3 | |||
Consumer Finance | 1.9 | |||
Beverages | 1.5 | |||
Internet & Direct Marketing Retail | 1.5 | |||
Food & Staples Retailing | 1.4 | |||
Hotels, Restaurants & Leisure | 1.4 | |||
Diversified Financial Services | 1.2 |
Biotechnology | 1.1 | % | ||
Diversified Telecommunication Services | 1.0 | |||
Machinery | 1.0 | |||
Electrical Equipment | 0.9 | |||
Industrial Conglomerates | 0.8 | |||
Construction & Engineering | 0.7 | |||
Multiline Retail | 0.7 | |||
Air Freight & Logistics | 0.6 | |||
Construction Materials | 0.6 | |||
Electronic Equipment, Instruments & Components | 0.6 | |||
Household Durables | 0.5 | |||
Life Sciences Tools & Services | 0.5 | |||
Tobacco | 0.5 | |||
Multi-Utilities | 0.4 | |||
Energy Equipment & Services | 0.3 | |||
Equity Real Estate Investment Trusts | 0.3 | |||
Food Products | 0.3 | |||
Household Products | 0.3 | |||
Metals & Mining | 0.3 | |||
Communications Equipment | 0.2 | |||
Building Products | 0.0 | ‡ | ||
Short-Term Investment | 1.0 | |||
Investment of Cash Collateral For Securities Loaned | 1.0 | |||
Other Assets, Less Liabilities | –1.0 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 12 for specific holdings within these categories. The Fund’s holdings are subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of April 30, 2019 (excludingshort-term investment) (Unaudited)
1. | Apple, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Boeing Co. |
5. | Bank of America Corp. |
6. | PayPal Holdings, Inc. |
7. | Liberty Media Corp-Liberty SiriusXM |
8. | Walt Disney Co. |
9. | Union Pacific Corp. |
10. | Facebook, Inc. |
8 | MainStay MAP Equity Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by portfolio managers Christopher Mullarkey and James Mulvey of Markston International LLC (“Markston”), a Subadvisor to the Fund; and portfolio managers William W. Priest, CFA, Michael A. Welhoelter, CFA, David N. Pearl and Justin Howell of Epoch Investment Partners, Inc. (“Epoch”), a Subadvisor to the Fund.
How did MainStay MAP Equity Fund perform relative to its benchmarks and peer group during the six months ended April 30, 2019?
For the six months ended April 30, 2019, Class I shares of MainStay MAP Equity Fund returned 9.17%, underperforming the 9.71% return of the Fund’s primary benchmark, the Russell 3000® Index, and the 9.76% return of the S&P 500® Index, which is the Fund’s secondary benchmark. Over the same period, Class I shares outperformed the 9.02% return of the Morningstar Large Blend Category Average.1
Were there any changes to the Fund during the reporting period?
Effective February 28, 2019, Justin Howell was added as portfolio manager of the Epoch portion of the Fund. As of the end of the reporting period, William Priest, Michael Welhoelter and David Pearl continued to manage the Epoch portion of the Fund.
What factors affected the Fund’s relative performance during the reporting period?
Markston
During the reporting period, the Markston portion of the Fund slightly underperformed the Russell 3000® Index partly because our portion of the portfolio had a beta2 of slightly less than 1. We attribute some of the below-index-beta to one of our larger holdings, Twentieth Century Fox, since it was being acquired by The Walt Disney Company in a cash and stock deal.
Epoch
The Epoch portion of the Fund outperformed the Russelll 3000® Index largely due to positive security selection in the consumer discretionary, energy, financials, industrials, information technology and materials sectors. Certain holdings in the communication services and health care sectors detracted somewhat from relative returns, as did the Fund’s below-benchmark exposure to communications services and its modest allocation to cash.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Markston
During the reporting period, the strongest positive sector contributors to relative performance in the Markston portion of the
Fund included communications services and industrials. (Contributions take weightings and total returns into account.) The weakest sectors on a relative basis included information technology and health care.
Epoch
In the Epoch portion of the Fund, the energy, financials and materials sectors generated the strongest contributions to relative performance during the reporting period, while communication services, health care and real estate detracted most significantly.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
Markston
The stocks that made the strongest contributions to absolute performance in the Markston portion of the Fund included software company Microsoft and digital payment company PayPal. We attribute the strength in Microsoft shares to the potential of the company’s cloud business, where it remains in the early growth phase and where margins are expanding. We attribute the rise in PayPal shares to overall strength in the company’s platform as it increases the number of users and their level of engagement with the service. The stocks that detracted most from absolute performance in the Markston portion of the Fund included health care services and plan provider CVS Health and electronics maker Apple. CVS shares declined after the company reported a shortfall across all three business segments in the first quarter of 2019. Apple shares lost ground after the company preannounced expected softness in sales during the fourth quarter. However, shares recovered during the second half of the reporting period.
Epoch
Microsoft proved to be one of the strongest contributors to the Epoch portion of the Fund. Microsoft’s shares rose after the company reported fiscal second quarter revenue and operating income that grew by 12% and 18% respectively. We believe the opportunities in cloud computing are vast, and that Microsoft has been investing appropriately to capture their fair share of the growth. While the cloud business is depressing profitability as of the end of the reporting period, margins have been improving as the business scales and could normalize in a few years. We expect these factors may drive strong revenue and free cash flow growth at Microsoft for many years. Shares in
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | Beta is a measure of volatility in relation to the market as a whole. A beta higher than 1 indicates that a security or portfolio will tend to exhibit higher volatility than the market. A beta lower than 1 indicates that a security or portfolio will tend to exhibit lower volatility than the market. |
9 |
semiconductor maker Marvell Technology, another top performer in the Epoch portion of the Fund, rose after the company reported that fourth quarter revenues increased 21.1% year-over-year to $745 million, surpassing consensus estimates of $740 million.
The most significant detractors from absolute performance in the Epoch portion of the Fund during the reporting period included Apple and health care plan provider Centene. Apple shares declined due to concerns over waning demand for the iPhone based on information from supply-chain vendors. The company subsequently reduced their guidance for quarterly revenue for their fiscal first quarter ending in December due to anticipated iPhone weakness in China in the face of increasing consumer price sensitivity and the emergence oflow-cost competitors. As smartphone demand slowed, Apple attempted to hold share by adding innovation while increasing prices to drive revenue and earnings growth. More positively, Apple noted that the company’s revenue growth in other hardware and services remained solid, with Apple Services growing at 20%. In addition, almost 20% of the company’s market capitalization remained in net cash, which Apple indicated would be used to buy back stock. The Fund continued to hold its position in the stock, reflecting our opinion that the advent of new form-factor models, such as foldable or bendable phones, offered further growth opportunities in Apple’s iPhone product-cycle as the company seeks to expand upon its track record for innovation. Centene saw its share price decline despite reporting earnings for the fourth quarter that exceeded consensus expectations. At the same time, the company reaffirmed its guidance for 2019 revenue and profit growth of 17% and 19% respectively. In our opinion the decline in the share price is likely related to the media’s recent focus on a public “Medicare for All” option, as well as short-term downward arbitrage pricing pressure on the stock resulting from Centene’s recent decision to acquire WellCare Health Plans for an estimated $17.3 billion. As of the end of the reporting period, we believe that the prospect for a new Medicare option remains remote and that Centene’s long-term growth prospects remain strong, supported by an efficient management team and greater product diversification than its peers through the company’s Medicare, Medicaid and commercial lines of business.
What were some of the Fund’s largest purchases and sales during the reporting period?
Markston
The largest purchase in the Markston portion of the Fund during the reporting period was a position in social media company Facebook. The company displayed three of our “Alpha Generators,” such as operating in a consolidating industry, an attractive discount to our estimate of intrinsic value and a stock repurchase program. Although Facebook shares had declined before the Markston portion of the Fund made its purchase in
the fourth quarter of 2018, in our opinion the shares were positioned for recovery as investors shifted their focus from fears of the company being regulated to secular tailwinds in digital advertising. We also added to the Fund’s position in insurer American International Group (AIG) because the stock’s discount to company book value had widened.
During the reporting period, the two largest sales that did not result from merger and acquisition activity were credit card and travel-related services company American Express and domain-name registry company Verisign. The Markston portion of the Fund took profits in both stocks to meet Fund redemptions. In the case of Verisign, the stock reached our price target, so we eliminated the position.
Epoch
During the reporting period, new purchases in the Epoch portion of the Fund included digital game developer Electronic Arts (EA) and Facebook. EA underperformed in late 2018 while facing several short-term headwinds. We believe that the current fiscal year will see a reacceleration in revenue growth from improved monetization of the company’s popular FIFA soccer game franchise; the release of popular new games, including Battlefield and Star Wars launches; a tailwind from fiscal year 2019 releases; and growth in FIFA properties in Asia. We anticipate seeing expanding margins from continued growth in digital purchases of games and content that have higher incremental margins than the company’s base business, and expect free cash flow per share to grow in the high single digits in the next few years driven by topline growth, margin improvement and share buybacks. Similarly, we see the Fund’s investment in Facebook as another story of renewed opportunities following a stock price correction. Facebook stock declined in late 2018 in response to the company’s rising expenditures on safety and security, and slowing revenue growth as it transitions its monetization strategy. The Fund’s investment reflects our opinion that Facebook’s current valuation does not reflect the company’s capacity to return to double-digit growth in 2020, as evidenced by its two most recent quarters of better-than-expected revenue growth.
During the reporting period, the Epoch portion of the Fund sold its entire position in package and container manufacturer Berry Global after share prices appreciated sharply. We also sold the Fund’s holdings in specialty drug maker Allergan in response to increasingly uncertain growth prospects. Specifically, the company faced the loss of patent protection on a key drug, as well as a recall of some of its breast implant products in Europe. The company’s management reduced its forward guidance for revenue and profits and failed to provide any meaningful updates or guidance on its drug pipeline.
10 | MainStay MAP Equity Fund |
How did the Fund’s sector weightings change during the reporting period?
Markston
During the reporting period, the most significant sector weighting increase in the Markston portion of the Fund was in communication services, while the weighting in industrials increased nominally. Over the same period, the Markston portion of the Fund decreased its sector exposure to health care and, nominally, consumer staples.
Epoch
The Epoch portion of the Fund increased its sector weighting to communications services and, to a lesser degree, industrials during the reporting period. Decreased sector allocations included information technology and health care.
How was the Fund positioned at the end of the reporting period?
Markston
As of April 30, 2019, the Markston portion of the Fund held an overweight position relative to the Russell 3000® Index in the
communications services and financials sectors. As of the same date, the Markston portion of the Fund held relatively underweight exposure to the consumer discretionary, real estate and utilities sectors.
Epoch
As of April 30, 2019, the most significantly overweight sector positions relative to the Russell 3000® Index in the Epoch portion of the Fund included materials and industrials. As of the same date, the most significantly underweight positions relative to the benchmark in the Epoch portion of the Fund included consumer staples and real estate.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
11 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Shares | Value | |||||||
Common Stocks 99.0%† |
| |||||||
Aerospace & Defense 7.3% |
| |||||||
Boeing Co. | 111,461 | $ | 42,097,705 | |||||
Hexcel Corp. | 90,380 | 6,390,770 | ||||||
Raytheon Co. | 88,750 | 15,761,112 | ||||||
United Technologies Corp. | 97,423 | 13,893,494 | ||||||
|
| |||||||
78,143,081 | ||||||||
|
| |||||||
Air Freight & Logistics 0.6% |
| |||||||
XPO Logistics, Inc. (a)(b) | 102,839 | 7,001,279 | ||||||
|
| |||||||
Banks 5.9% |
| |||||||
Bank of America Corp. | 863,021 | 26,391,183 | ||||||
Bank OZK | 153,494 | 5,011,579 | ||||||
Citigroup, Inc. | 91,222 | 6,449,395 | ||||||
JPMorgan Chase & Co. | 110,729 | 12,850,101 | ||||||
U.S. Bancorp | 109,676 | 5,847,924 | ||||||
Wells Fargo & Co. | 146,569 | 7,095,405 | ||||||
|
| |||||||
63,645,587 | ||||||||
|
| |||||||
Beverages 1.5% |
| |||||||
Coca-Cola Co. | 95,471 | 4,683,807 | ||||||
PepsiCo., Inc. | 85,300 | 10,922,665 | ||||||
|
| |||||||
15,606,472 | ||||||||
|
| |||||||
Biotechnology 1.1% |
| |||||||
AbbVie, Inc. | 96,193 | 7,636,762 | ||||||
Celgene Corp. (b) | 44,000 | 4,165,040 | ||||||
|
| |||||||
11,801,802 | ||||||||
|
| |||||||
Building Products 0.0%‡ |
| |||||||
Resideo Technologies, Inc. (b) | 3,850 | 87,395 | ||||||
|
| |||||||
Capital Markets 3.4% |
| |||||||
Ameriprise Financial, Inc. | 25,378 | 3,724,729 | ||||||
Bank of New York Mellon Corp. | 68,870 | 3,420,084 | ||||||
Goldman Sachs Group, Inc. | 37,774 | 7,778,422 | ||||||
Morgan Stanley | 296,080 | 14,285,860 | ||||||
State Street Corp. | 113,100 | 7,652,346 | ||||||
|
| |||||||
36,861,441 | ||||||||
|
| |||||||
Chemicals 2.3% |
| |||||||
Dow, Inc. (b) | 65,451 | 3,713,035 | ||||||
DowDuPont, Inc. | 316,720 | 12,177,884 | ||||||
Linde PLC | 29,504 | 5,318,391 | ||||||
W.R. Grace & Co. | 50,398 | 3,809,081 | ||||||
|
| |||||||
25,018,391 | ||||||||
|
| |||||||
Communications Equipment 0.2% |
| |||||||
Plantronics, Inc. | 52,820 | 2,719,174 | ||||||
|
| |||||||
Construction & Engineering 0.7% |
| |||||||
Jacobs Engineering Group, Inc. | 97,083 | 7,566,649 | ||||||
|
|
Shares | Value | |||||||
Construction Materials 0.6% |
| |||||||
Martin Marietta Materials, Inc. | 27,165 | $ | 6,027,914 | |||||
|
| |||||||
Consumer Finance 1.9% |
| |||||||
American Express Co. | 104,102 | 12,203,877 | ||||||
Capital One Financial Corp. | 46,378 | 4,305,270 | ||||||
Discover Financial Services | 42,806 | 3,488,261 | ||||||
|
| |||||||
19,997,408 | ||||||||
|
| |||||||
Diversified Financial Services 1.2% |
| |||||||
AXA Equitable Holdings, Inc. | 303,464 | 6,885,598 | ||||||
Berkshire Hathaway, Inc., Class B (b) | 29,050 | 6,295,426 | ||||||
|
| |||||||
13,181,024 | ||||||||
|
| |||||||
Diversified Telecommunication Services 1.0% |
| |||||||
AT&T, Inc. | 340,140 | 10,530,734 | ||||||
|
| |||||||
Electrical Equipment 0.9% |
| |||||||
AMETEK, Inc. | 57,445 | 5,064,926 | ||||||
Rockwell Automation, Inc. | 28,450 | 5,141,199 | ||||||
|
| |||||||
10,206,125 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.6% |
| |||||||
TE Connectivity, Ltd. | 66,000 | 6,312,900 | ||||||
|
| |||||||
Energy Equipment & Services 0.3% |
| |||||||
Schlumberger, Ltd. | 64,012 | 2,732,032 | ||||||
|
| |||||||
Entertainment 3.8% |
| |||||||
Electronic Arts, Inc. (b) | 43,556 | 4,122,576 | ||||||
Liberty Media Corp-Liberty Formula One, Class C (b) | 61,400 | 2,382,934 | ||||||
Lions Gate Entertainment Corp., Class B | 49,448 | 672,493 | ||||||
Madison Square Garden Co., Class A (b) | 39,505 | 12,342,942 | ||||||
Walt Disney Co. | 153,396 | 21,010,650 | ||||||
|
| |||||||
40,531,595 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 0.3% |
| |||||||
Ventas, Inc. | 59,526 | 3,637,634 | ||||||
|
| |||||||
Food & Staples Retailing 1.4% |
| |||||||
Costco Wholesale Corp. | 32,016 | 7,860,888 | ||||||
Walgreens Boots Alliance, Inc. | 128,449 | 6,881,013 | ||||||
|
| |||||||
14,741,901 | ||||||||
|
| |||||||
Food Products 0.3% |
| |||||||
Mondelez International, Inc., Class A | 59,750 | 3,038,288 | ||||||
|
| |||||||
Health Care Equipment & Supplies 2.9% |
| |||||||
Abbott Laboratories | 62,842 | 4,999,710 | ||||||
Boston Scientific Corp. (b) | 159,110 | 5,906,163 | ||||||
Danaher Corp. | 48,713 | 6,451,550 |
12 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Health Care Equipment & Supplies (continued) |
| |||||||
Medtronic PLC | 155,267 | $ | 13,789,262 | |||||
|
| |||||||
31,146,685 | ||||||||
|
| |||||||
Health Care Providers & Services 3.4% |
| |||||||
Centene Corp. (b) | 140,353 | 7,236,601 | ||||||
CVS Health Corp. | 259,396 | 14,105,954 | ||||||
UnitedHealth Group, Inc. | 39,726 | 9,258,939 | ||||||
Universal Health Services, Inc., Class B | 46,824 | 5,940,561 | ||||||
|
| |||||||
36,542,055 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.4% |
| |||||||
Marriott International, Inc., Class A | 26,525 | 3,618,541 | ||||||
McDonald’s Corp. | 25,651 | 5,067,868 | ||||||
MGM Resorts International | 222,669 | 5,929,675 | ||||||
|
| |||||||
14,616,084 | ||||||||
|
| |||||||
Household Durables 0.5% |
| |||||||
LGI Homes, Inc. (a)(b) | 84,661 | 5,867,854 | ||||||
|
| |||||||
Household Products 0.3% |
| |||||||
Procter & Gamble Co. | 33,856 | 3,604,987 | ||||||
|
| |||||||
Industrial Conglomerates 0.8% |
| |||||||
Honeywell International, Inc. | 50,150 | 8,707,545 | ||||||
|
| |||||||
Insurance 4.6% |
| |||||||
American International Group, Inc. | 305,184 | 14,517,603 | ||||||
Chubb, Ltd. | 37,000 | 5,372,400 | ||||||
MetLife, Inc. | 208,204 | 9,604,450 | ||||||
Travelers Cos., Inc. | 88,951 | 12,786,706 | ||||||
W.R. Berkley Corp. | 41,169 | 2,523,660 | ||||||
Willis Towers Watson PLC | 22,161 | 4,085,159 | ||||||
|
| |||||||
48,889,978 | ||||||||
|
| |||||||
Interactive Media & Services 6.3% |
| |||||||
Alphabet, Inc. (b) | ||||||||
Class A | 9,935 | 11,911,668 | ||||||
Class C | 31,173 | 37,048,487 | ||||||
Facebook, Inc., Class A (b) | 85,081 | 16,454,665 | ||||||
Tencent Holdings, Ltd., ADR | 50,000 | 2,462,000 | ||||||
|
| |||||||
67,876,820 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 1.5% |
| |||||||
Alibaba Group Holding, Ltd., Sponsored ADR (b) | 12,400 | 2,301,068 | ||||||
Booking Holdings, Inc. (b) | 2,195 | 4,071,703 | ||||||
Ctrip.com International, Ltd., ADR (b) | 41,060 | 1,808,693 | ||||||
eBay, Inc. | 111,166 | 4,307,683 | ||||||
Qurate Retail, Inc. (b) | 214,185 | 3,651,854 | ||||||
|
| |||||||
16,141,001 | ||||||||
|
|
Shares | Value | |||||||
IT Services 4.0% |
| |||||||
Automatic Data Processing, Inc. | 27,850 | $ | 4,578,262 | |||||
PayPal Holdings, Inc. (b) | 204,120 | 23,018,612 | ||||||
Visa, Inc., Class A | 91,113 | 14,981,711 | ||||||
|
| |||||||
42,578,585 | ||||||||
|
| |||||||
Life Sciences Tools & Services 0.5% |
| |||||||
Charles River Laboratories International, Inc. (b) | 36,152 | 5,078,271 | ||||||
|
| |||||||
Machinery 1.0% |
| |||||||
Caterpillar, Inc. | 17,600 | 2,453,792 | ||||||
Ingersoll-Rand PLC | 65,666 | 8,051,308 | ||||||
|
| |||||||
10,505,100 | ||||||||
|
| |||||||
Media 5.6% |
| |||||||
Comcast Corp., Class A | 347,711 | 15,135,860 | ||||||
Discovery, Inc., Class C (b) | 131,015 | 3,767,991 | ||||||
Fox Corp., Class A (b) | 98,102 | 3,824,997 | ||||||
GCI Liberty, Inc., Class A (b) | 27,252 | 1,624,764 | ||||||
Liberty Broadband Corp. (b) | ||||||||
Class A | 17,897 | 1,760,886 | ||||||
Class C | 109,073 | 10,766,596 | ||||||
Liberty Media Corp-Liberty SiriusXM (b) | ||||||||
Class A | 172,213 | 6,878,187 | ||||||
Class C | 377,416 | 15,157,027 | ||||||
MSG Networks, Inc., Class A (b) | 35,924 | 827,330 | ||||||
|
| |||||||
59,743,638 | ||||||||
|
| |||||||
Metals & Mining 0.3% |
| |||||||
Reliance Steel & Aluminum Co. | 38,501 | 3,540,552 | ||||||
|
| |||||||
Multi-Utilities 0.4% |
| |||||||
WEC Energy Group, Inc. | 50,398 | 3,952,715 | ||||||
|
| |||||||
Multiline Retail 0.7% |
| |||||||
Dollar General Corp. | 56,781 | 7,159,516 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 3.5% |
| |||||||
Anadarko Petroleum Corp. | 99,040 | 7,215,064 | ||||||
ConocoPhillips | 56,469 | 3,564,323 | ||||||
Enbridge, Inc. | 141,900 | 5,241,786 | ||||||
EOG Resources, Inc. | 21,482 | 2,063,346 | ||||||
Marathon Petroleum Corp. | 100,578 | 6,122,183 | ||||||
Occidental Petroleum Corp. | 111,073 | 6,539,978 | ||||||
Phillips 66 | 52,230 | 4,923,722 | ||||||
Williams Cos., Inc. | 83,750 | 2,372,638 | ||||||
|
| |||||||
38,043,040 | ||||||||
|
| |||||||
Pharmaceuticals 3.1% |
| |||||||
Allergan PLC | 61,988 | 9,112,236 | ||||||
Johnson & Johnson | 40,100 | 5,662,120 | ||||||
Merck & Co., Inc. | 73,100 | 5,753,701 | ||||||
Pfizer, Inc. | 309,355 | 12,562,907 | ||||||
|
| |||||||
33,090,964 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Road & Rail 2.6% |
| |||||||
CSX Corp. | 99,638 | $ | 7,934,174 | |||||
Union Pacific Corp. | 111,300 | 19,704,552 | ||||||
|
| |||||||
27,638,726 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 2.8% |
| |||||||
Applied Materials, Inc. | 161,817 | 7,131,275 | ||||||
Broadcom, Inc. | 23,396 | 7,449,286 | ||||||
Cypress Semiconductor Corp. | 284,826 | 4,893,311 | ||||||
Intel Corp. | 33,678 | 1,718,925 | ||||||
Texas Instruments, Inc. | 18,200 | 2,144,506 | ||||||
Universal Display Corp. | 40,885 | 6,525,246 | ||||||
|
| |||||||
29,862,549 | ||||||||
|
| |||||||
Software 7.8% |
| |||||||
LogMeIn, Inc. | 60,407 | 4,977,537 | ||||||
Microsoft Corp. | 442,407 | 57,778,353 | ||||||
Oracle Corp. | 207,176 | 11,463,048 | ||||||
PTC, Inc. (b) | 69,342 | 6,273,371 | ||||||
Symantec Corp. | 146,646 | 3,550,300 | ||||||
|
| |||||||
84,042,609 | ||||||||
|
| |||||||
Specialty Retail 3.4% |
| |||||||
CarMax, Inc. (b) | 47,334 | 3,685,425 | ||||||
Home Depot, Inc. | 79,677 | 16,230,205 | ||||||
Lowe’s Cos., Inc. | 93,400 | 10,567,276 | ||||||
TJX Cos., Inc. | 104,882 | 5,755,924 | ||||||
|
| |||||||
36,238,830 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 5.8% |
| |||||||
Apple, Inc. | 308,600 | 61,926,762 | ||||||
|
| |||||||
Tobacco 0.5% |
| |||||||
Philip Morris International, Inc. | 59,180 | 5,122,621 | ||||||
|
| |||||||
Total Common Stocks | 1,061,306,313 | |||||||
|
|
Shares | Value | |||||||
Short-Term Investment 1.0% |
| |||||||
Affiliated Investment Company 1.0% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.20% (c) | 11,375,890 | $ | 11,375,890 | |||||
|
| |||||||
TotalShort-Term Investment | 11,375,890 | |||||||
|
| |||||||
Investment of Cash Collateral For Securities Loaned 1.0% |
| |||||||
Unaffiliated Investment Company 1.0% |
| |||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 2.51% (c) | 10,553,183 | 10,553,183 | ||||||
|
| |||||||
Total Investment of Cash Collateral For Securities Loaned | 10,553,183 | |||||||
|
| |||||||
Total Investments | 101.0 | % | 1,083,235,386 | |||||
Other Assets, Less Liabilities | (1.0 | ) | (10,904,289 | ) | ||||
Net Assets | 100.0 | % | $ | 1,072,331,097 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | All or a portion of this security was held on loan. As of April 30, 2019, the aggregate market value of securities on loan was $10,500,343 and the Fund received cash collateral with a value of $10,553,183 (See Note 2(J)). |
(b) | Non-income producing security. |
(c) | Current yield as of April 30, 2019. |
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 1,061,306,313 | $ | — | $ | — | $ | 1,061,306,313 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 11,375,890 | — | — | 11,375,890 | ||||||||||||
Investment of Cash Collateral For Securities Loaned | ||||||||||||||||
Unaffiliated Investment Company | 10,553,183 | — | — | 10,553,183 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,083,235,386 | $ | — | $ | — | $ | 1,083,235,386 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
14 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets | ||||
Investment in unaffiliated securities, at value | $ | 1,071,859,496 | ||
Investment in affiliated investment company, at value (identified cost $11,375,890) | 11,375,890 | |||
Cash | 96,560 | |||
Receivables: | ||||
Investment securities sold | 5,835,760 | |||
Dividends | 1,004,326 | |||
Fund shares sold | 97,320 | |||
Securities lending income | 3,505 | |||
Other assets | 64,597 | |||
|
| |||
Total assets | 1,090,337,454 | |||
|
| |||
Liabilities |
| |||
Payables: | ||||
Collateral received for securities on loan | 10,553,183 | |||
Investment securities purchased | 4,354,852 | |||
Fund shares redeemed | 1,994,543 | |||
Manager (See Note 3) | 663,444 | |||
Transfer agent (See Note 3) | 172,820 | |||
NYLIFE Distributors (See Note 3) | 150,412 | |||
Shareholder communication | 60,450 | |||
Professional fees | 47,180 | |||
Custodian | 6,103 | |||
Trustees | 1,487 | |||
Accrued expenses | 1,883 | |||
|
| |||
Total liabilities | 18,006,357 | |||
|
| |||
Net assets | $ | 1,072,331,097 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 262,209 | ||
Additional paid-in capital | 595,949,967 | |||
|
| |||
596,212,176 | ||||
Total distributable earnings (loss) | 476,118,921 | |||
|
| |||
Net assets | $ | 1,072,331,097 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 425,715,240 | ||
|
| |||
Shares of beneficial interest outstanding | 10,493,967 | |||
|
| |||
Net asset value per share outstanding | $ | 40.57 | ||
Maximum sales charge (5.50% of offering price) | 2.36 | |||
|
| |||
Maximum offering price per share outstanding | $ | 42.93 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 84,258,097 | ||
|
| |||
Shares of beneficial interest outstanding | 2,077,864 | |||
|
| |||
Net asset value per share outstanding | $ | 40.55 | ||
Maximum sales charge (5.50% of offering price) | 2.36 | |||
|
| |||
Maximum offering price per share outstanding | $ | 42.91 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 24,301,581 | ||
|
| |||
Shares of beneficial interest outstanding | 682,796 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.59 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 30,908,851 | ||
|
| |||
Shares of beneficial interest outstanding | 868,343 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.60 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 504,025,760 | ||
|
| |||
Shares of beneficial interest outstanding | 12,021,269 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 41.93 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 33,461 | ||
|
| |||
Shares of beneficial interest outstanding | 818 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 40.92 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 946,303 | ||
|
| |||
Shares of beneficial interest outstanding | 23,180 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 40.82 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 2,141,804 | ||
|
| |||
Shares of beneficial interest outstanding | 52,704 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 40.64 | ||
|
|
(a) | The difference between the recalculated and stated NAV was caused by rounding. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends—unaffiliated (a) | $ | 8,942,688 | ||
Dividends—affiliated | 191,965 | |||
Securities lending | 6,786 | |||
|
| |||
Total income | 9,141,439 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,853,313 | |||
Distribution/Service—Class A (See Note 3) | 472,143 | |||
Distribution/Service—Investor Class (See Note 3) | 95,140 | |||
Distribution/Service—Class B (See Note 3) | 121,499 | |||
Distribution/Service—Class C (See Note 3) | 267,641 | |||
Distribution/Service—Class R2 (See Note 3) | 1,099 | |||
Distribution/Service—Class R3 (See Note 3) | 4,846 | |||
Transfer agent (See Note 3) | 527,284 | |||
Professional fees | 60,793 | |||
Registration | 57,915 | |||
Shareholder communication | 41,293 | |||
Custodian | 13,534 | |||
Trustees | 12,632 | |||
Shareholder service (See Note 3) | 1,424 | |||
Miscellaneous | 28,119 | |||
|
| |||
Total expenses before waiver/reimbursement | 5,558,675 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (38,418 | ) | ||
|
| |||
Net expenses | 5,520,257 | |||
|
| |||
Net investment income (loss) | 3,621,182 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Unaffiliated investment transactions | 46,478,263 | |||
Foreign currency transactions | (3,370 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 46,474,893 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Unaffiliated investments | 41,457,600 | |||
Translation of other assets and liabilities in foreign currencies | 3,914 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 41,461,514 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 87,936,407 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 91,557,589 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $24,184. |
16 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,621,182 | $ | 7,088,903 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 46,474,893 | 110,011,138 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 41,461,514 | (51,597,006 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 91,557,589 | 65,503,035 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (37,992,493 | ) | (40,500,400 | ) | ||||
Investor Class | (7,461,106 | ) | (9,291,957 | ) | ||||
Class B | (2,760,444 | ) | (3,932,227 | ) | ||||
Class C | (6,682,486 | ) | (8,673,806 | ) | ||||
Class I | (47,487,186 | ) | (63,813,864 | ) | ||||
Class R1 | (3,004 | ) | (340,768 | ) | ||||
Class R2 | (85,314 | ) | (268,113 | ) | ||||
Class R3 | (183,995 | ) | (101,402 | ) | ||||
|
| |||||||
Total distributions to shareholders | (102,656,028 | ) | (126,922,537 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 80,461,669 | 63,328,482 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 100,091,467 | 123,817,205 | ||||||
Cost of shares redeemed | (138,144,359 | ) | (322,246,615 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 42,408,777 | (135,100,928 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 31,310,338 | (196,520,430 | ) | |||||
Net Assets | ||||||||
Beginning of period | 1,041,020,759 | 1,237,541,189 | ||||||
|
| |||||||
End of period | $ | 1,072,331,097 | $ | 1,041,020,759 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class A | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 41.20 | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | $ | 43.28 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.23 | 0.21 | 0.33 | 0.38 | 0.67 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.33 | 1.78 | 8.50 | (0.63 | ) | 0.50 | 4.21 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 3.46 | 2.02 | 8.71 | (0.30 | ) | 0.88 | 4.88 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.21 | ) | (0.48 | ) | (0.40 | ) | (0.67 | ) | (0.45 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (4.09 | ) | (4.58 | ) | (0.87 | ) | (7.10 | ) | (4.37 | ) | (1.35 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 40.57 | $ | 41.20 | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.05 | % | 4.88 | % | 24.73 | % | (0.57 | %) | 1.80 | % | 11.55 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.68 | %†† | 0.57 | % | 0.52 | % | 0.92 | % | 0.85 | % | 1.49 | % | |||||||||||||||||||||||
Net expenses (c) | 1.12 | %†† | 1.10 | % | 1.10 | %(d) | 1.09 | % (d) | 1.11 | % | 1.11 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 425,715 | $ | 384,637 | $ | 389,582 | $ | 285,431 | $ | 336,812 | $ | 364,162 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
18 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 41.15 | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | $ | 43.24 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.17 | 0.14 | 0.25 | 0.31 | 0.60 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.32 | 1.78 | 8.49 | (0.63 | ) | 0.50 | 4.21 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 3.41 | 1.95 | 8.63 | (0.38 | ) | 0.81 | 4.81 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.11 | ) | (0.41 | ) | (0.34 | ) | (0.61 | ) | (0.38 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (4.01 | ) | (4.48 | ) | (0.80 | ) | (7.04 | ) | (4.31 | ) | (1.28 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 40.55 | $ | 41.15 | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 8.92 | % | 4.69 | % | 24.50 | % | (0.79 | %) | 1.63 | % | 11.38 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.47 | %†† | 0.39 | % | 0.36 | % | 0.71 | % | 0.71 | % | 1.34 | % | |||||||||||||||||||||||
Net expenses (c) | 1.33 | %†† | 1.29 | % | 1.29 | %(d) | 1.29 | % (d) | 1.25 | % | 1.26 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.38 | %†† | 1.31 | % | 1.29 | % | 1.29 | % | 1.25 | % | 1.26 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 84,258 | $ | 76,844 | $ | 90,928 | $ | 139,775 | $ | 151,582 | $ | 152,202 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | $ | 40.08 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.13 | ) | (0.13 | ) | (0.01 | ) | (0.01 | ) | 0.26 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.92 | 1.60 | 7.67 | (0.60 | ) | 0.48 | 3.89 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 2.88 | 1.47 | 7.54 | (0.61 | ) | 0.47 | 4.15 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | — | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | |||||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (3.82 | ) | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 35.59 | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 8.52 | % | 3.91 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.25 | %)†† | (0.35 | %) | (0.37 | %) | (0.03 | %) | (0.03 | %) | 0.63 | % | |||||||||||||||||||||||
Net expenses (c) | 2.07 | % †† | 2.04 | % | 2.05 | % (d) | 2.04 | % (d) | 2.00 | % | 2.01 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 2.12 | % †† | 2.06 | % | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 24,302 | $ | 26,571 | $ | 35,841 | $ | 40,977 | $ | 54,423 | $ | 71,195 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
20 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | $ | 40.08 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.14 | ) | (0.13 | ) | (0.01 | ) | (0.02 | ) | 0.25 | ||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.92 | 1.61 | 7.67 | (0.59 | ) | 0.48 | 3.90 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 2.89 | 1.47 | 7.54 | (0.60 | ) | 0.46 | 4.15 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | — | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | |||||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (3.82 | ) | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 35.60 | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 8.52 | % | 3.91 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.19 | %)†† | (0.36 | %) | (0.37 | %) | (0.03 | %) | (0.04 | %) | 0.60 | % | |||||||||||||||||||||||
Net expenses (c) | 2.07 | % †† | 2.04 | % | 2.05 | % (d) | 2.04 | % (d) | 2.00 | % | 2.01 | % | |||||||||||||||||||||||
Expenses (before waiver/reimbursement) (c) | 2.12 | % †† | 2.06 | % | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 30,909 | $ | 65,288 | $ | 79,665 | $ | 92,457 | $ | 125,642 | $ | 143,427 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class I | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 42.51 | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | $ | 44.18 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.36 | 0.34 | 0.43 | 0.50 | 0.80 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.44 | 1.84 | 8.70 | (0.65 | ) | 0.52 | 4.29 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 3.62 | 2.20 | 9.04 | (0.22 | ) | 1.02 | 5.09 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.38 | ) | (0.32 | ) | (0.57 | ) | (0.51 | ) | (0.79 | ) | (0.55 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (4.20 | ) | (4.69 | ) | (0.96 | ) | (7.21 | ) | (4.49 | ) | (1.45 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 41.93 | $ | 42.51 | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.17 | % | 5.17 | % | 25.01 | % | (0.33 | %) | 2.06 | % | 11.82 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.94 | %†† | 0.83 | % | 0.84 | % | 1.17 | % | 1.10 | % | 1.76 | % | |||||||||||||||||||||||
Net expenses (c) | 0.87 | %†† | 0.85 | % | 0.85 | %(d) | 0.84 | % (d) | 0.86 | % | 0.86 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 504,026 | $ | 484,839 | $ | 634,730 | $ | 807,694 | $ | 1,119,884 | $ | 1,506,564 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
22 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class R1 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 41.53 | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | $ | 43.49 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.37 | 0.27 | 0.38 | 0.45 | 0.73 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.36 | 1.73 | 8.56 | (0.63 | ) | 0.50 | 4.24 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total from investment operations | 3.52 | 2.10 | 8.83 | (0.25 | ) | 0.95 | 4.97 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.27 | ) | (0.53 | ) | (0.46 | ) | (0.73 | ) | (0.51 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total dividends and distributions | (4.13 | ) | (4.64 | ) | (0.92 | ) | (7.16 | ) | (4.43 | ) | (1.41 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net asset value at end of period | $ | 40.92 | $ | 41.53 | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Total investment return (b) | 9.12 | % | 5.05 | % | 24.92 | % | (0.43 | %) | 1.94 | % | 11.71 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.83 | %†† | 0.88 | % | 0.67 | % | 1.06 | % | 1.02 | % | 1.63 | % | |||||||||||||||||||||||
Net expenses (c) | 0.97 | %†† | 0.95 | % | 0.95 | %(d) | 0.94 | % (d) | 0.96 | % | 0.96 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 33 | $ | 30 | $ | 3,208 | $ | 2,500 | $ | 3,607 | $ | 7,368 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class R2 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 41.38 | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | $ | 43.38 | |||||||||||||||||||||||
| �� |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.21 | 0.20 | 0.29 | 0.34 | 0.63 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.35 | 1.78 | 8.50 | (0.63 | ) | 0.49 | 4.22 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
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Total from investment operations | 3.46 | 1.99 | 8.70 | (0.34 | ) | 0.83 | 4.85 | ||||||||||||||||||||||||||||
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Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.17 | ) | (0.43 | ) | (0.35 | ) | (0.61 | ) | (0.41 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
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Total dividends and distributions | (4.02 | ) | (4.54 | ) | (0.82 | ) | (7.05 | ) | (4.31 | ) | (1.31 | ) | |||||||||||||||||||||||
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Net asset value at end of period | $ | 40.82 | $ | 41.38 | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | |||||||||||||||||||||||
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Total investment return (b) | 8.99 | % | 4.77 | % | 24.60 | % | (0.68 | %) | 1.68 | % | 11.43 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.59 | %†† | 0.50 | % | 0.51 | % | 0.80 | % | 0.76 | % | 1.42 | % | |||||||||||||||||||||||
Net expenses (c) | 1.22 | %†† | 1.20 | % | 1.20 | %(d) | 1.20 | % (d) | 1.21 | % | 1.21 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 946 | $ | 881 | $ | 2,583 | $ | 3,528 | $ | 9,993 | $ | 15,956 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
24 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||||||||||
Class R3 | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||
Net asset value at beginning of period | $ | 41.15 | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | $ | 43.16 | |||||||||||||||||||||||
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Net investment income (loss) (a) | 0.06 | 0.08 | 0.07 | 0.20 | 0.22 | 0.54 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.34 | 1.79 | 8.50 | (0.62 | ) | 0.51 | 4.17 | ||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions ‡ | (0.00 | ) | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||||||||||||||
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Total from investment operations | 3.40 | 1.87 | 8.57 | (0.42 | ) | 0.73 | 4.71 | ||||||||||||||||||||||||||||
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Less dividends and distributions: | |||||||||||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.06 | ) | (0.34 | ) | (0.23 | ) | (0.49 | ) | (0.29 | ) | |||||||||||||||||||||||
From net realized gain on investments | (3.82 | ) | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | |||||||||||||||||||||||
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Total dividends and distributions | (3.91 | ) | (4.43 | ) | (0.73 | ) | (6.93 | ) | (4.19 | ) | (1.19 | ) | |||||||||||||||||||||||
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Net asset value at end of period | $ | 40.64 | $ | 41.15 | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | |||||||||||||||||||||||
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Total investment return (b) | 8.86 | % | 4.51 | % | 24.29 | % | (0.91 | %) | 1.42 | % | 11.18 | % | |||||||||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.33 | %†† | 0.20 | % | 0.17 | % | 0.57 | % | 0.51 | % | 1.20 | % | |||||||||||||||||||||||
Net expenses (c) | 1.47 | %†† | 1.45 | % | 1.45 | %(d) | 1.44 | % (d) | 1.46 | % | 1.46 | % | |||||||||||||||||||||||
Portfolio turnover rate | 11 | % | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | |||||||||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,142 | $ | 1,931 | $ | 1,004 | $ | 806 | $ | 1,062 | $ | 1,400 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, it also indirectly bears a pro-rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MAP Equity Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A, Class B and Class C shares commenced operations on June 9, 1999. Class I shares commenced operations in January 21, 1971 (under a former class designation) and were redesignated as Class I shares on June 9, 1999. Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 shares were registered for sale effective as of February 28, 2017. As of April 30, 2019, Class R6 shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares within 24 months of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares
convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. In addition, depending upon eligibility, Class C shares convert to either Class A or Investor Class shares at the end of the calendar quarter ten years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seeklong-term appreciation of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the
26 | MainStay MAP Equity Fund |
“Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisors or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisors, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
27 |
Notes to Financial Statements(Unaudited) (continued)
in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability in the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
28 | MainStay MAP Equity Fund |
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may cause the costs of investing in mutual funds to be greater than the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the Financial Highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, the Fund did not hold any repurchase agreements.
(I) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of April 30, 2019, the Fund did not hold any rights or warrants.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”), acting as securities lending agent on behalf of the Fund. State Street will manage the Fund’s collateral in accordance with the securities lending agency agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by cash (which may be invested in a money market fund) and/ornon-cash collateral (which may include, U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities) at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of cash collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of April 30, 2019, the Fund had securities on loan with an aggregate market value of $10,500,343 and the Fund received cash collateral with a value of $10,553,183.
(K) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar
29 |
Notes to Financial Statements(Unaudited) (continued)
equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(L) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(M) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. Markston International LLC (“Markston” or a “Subadvisor”) and Epoch Investment Partners, Inc. (“Epoch” or a “Subadvisor”), each a registered investment adviser, serve as Subadvisors to the Fund and each manages a portion of the Fund’s assets, as designated by New York Life Investments from time to time, subject to the oversight of New York Life Investments. Each Subadvisor is responsible for theday-to-day portfolio management of the Fund with respect to its allocated portion of the Fund’s assets. Pursuant to the terms of an Amended and Restated Subadvisory Agreement between New York Life Investments and Epoch, and pursuant to the terms of a Subadvisory Agreement between New York Life Investments and Markston (“Subadvisory Agreements”), New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an
annual rate of the Fund’s the Fund’s average daily net assets as follows: 0.75% up to $1 billion; 0.70% from $1 billion to $3 billion; and 0.675% in excess of $3 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2019, the effective management fee rate was 0.76% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2020 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $3,853,313 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $38,418.
State Street providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of
30 | MainStay MAP Equity Fund |
1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2019, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 15 | ||
Class R2 | 440 | |||
Class R3 | 969 |
(C) Sales Charges. During the six-month period ended April 30, 2019, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $17,064 and $10,859, respectively.
During the six-month period ended April 30, 2019, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $466, $8,429 and $513, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 123,510 | ||
Investor Class | 122,236 | |||
Class B | 38,946 | |||
Class C | 85,202 | |||
Class I | 156,458 | |||
Class R1 | 10 | |||
Class R2 | 288 | |||
Class R3 | 634 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the six-month period ended April 30, 2019, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Company | Value, Beginning of Period | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on Sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Period | Dividend Income | Other Distributions | Shares End of Period | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | 14,615 | $ | 114,976 | $ | (118,215 | ) | $ | — | $ | — | $ | 11,376 | $ | 192 | $ | — | 11,376 |
(G) Capital. As of April 30, 2019, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 6,943,641 | 1.4 | % |
Note 4–Federal Income Tax
As of April 30, 2019, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 657,145,958 | $ | 449,745,568 | $ | (23,656,140 | ) | $ | 426,089,428 |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 24,592,000 | ||
Long-Term Capital Gain | 102,330,537 | |||
Total | $ | 126,922,537 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
31 |
Notes to Financial Statements(Unaudited) (continued)
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2019, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2019, purchases and sales of securities, other thanshort-term securities, were $106,851 and $156,570, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 874,686 | $ | 33,456,947 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 959,941 | 36,592,956 | ||||||
Shares redeemed | (836,677 | ) | (31,558,774 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 997,950 | 38,491,129 | ||||||
Shares converted into Class A (See Note 1) | 202,739 | 7,739,525 | ||||||
Shares converted from Class A (See Note 1) | (42,536 | ) | (1,615,741 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,158,153 | $ | 44,614,913 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 453,868 | $ | 19,096,232 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 967,361 | 38,916,938 | ||||||
Shares redeemed | (1,492,836 | ) | (62,832,187 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (71,607 | ) | (4,819,017 | ) | ||||
Shares converted into Class A (See Note 1) | 545,533 | 23,128,807 | ||||||
Shares converted from Class A (See Note 1) | (41,220 | ) | (1,733,006 | ) | ||||
|
| |||||||
Net increase (decrease) | 432,706 | $ | 16,576,784 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 55,890 | $ | 2,125,572 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 195,178 | 7,444,109 | ||||||
Shares redeemed | (112,487 | ) | (4,271,789 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 138,581 | 5,297,892 | ||||||
Shares converted into Investor Class (See Note 1) | 125,297 | 4,710,776 | ||||||
Shares converted from Investor Class (See Note 1) | (53,560 | ) | (2,055,402 | ) | ||||
|
| |||||||
Net increase (decrease) | 210,318 | $ | 7,953,266 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 119,628 | $ | 5,041,881 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 230,335 | 9,270,981 | ||||||
Shares redeemed | (195,259 | ) | (8,227,153 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 154,704 | 6,085,709 | ||||||
Shares converted into Investor Class (See Note 1) | 113,705 | 4,789,103 | ||||||
Shares converted from Investor Class (See Note 1) | (482,609 | ) | (20,465,858 | ) | ||||
|
| |||||||
Net increase (decrease) | (214,200 | ) | $ | (9,591,046 | ) | |||
|
| |||||||
32 | MainStay MAP Equity Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 8,874 | $ | 298,431 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 82,119 | 2,757,564 | ||||||
Shares redeemed | (70,977 | ) | (2,362,348 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 20,016 | 693,647 | ||||||
Shares converted from Class B (See Note 1) | (64,572 | ) | (2,091,404 | ) | ||||
|
| |||||||
Net increase (decrease) | (44,556 | ) | $ | (1,397,757 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,896 | $ | 674,738 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 108,629 | 3,908,458 | ||||||
Shares redeemed | (155,747 | ) | (5,848,176 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (29,222 | ) | (1,264,980 | ) | ||||
Shares converted from Class B (See Note 1) | (152,395 | ) | (5,730,073 | ) | ||||
|
| |||||||
Net increase (decrease) | (181,617 | ) | $ | (6,995,053 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 92,439 | $ | 2,843,388 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 192,647 | 6,467,171 | ||||||
Shares redeemed | (1,003,702 | ) | (33,700,748 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (718,616 | ) | (24,390,189 | ) | ||||
Shares converted from Class C (See Note 1) | (200,343 | ) | (6,718,312 | ) | ||||
|
| |||||||
Net increase (decrease) | (918,959 | ) | $ | (31,108,501 | ) | |||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 59,753 | $ | 2,248,778 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 229,749 | 8,266,357 | ||||||
Shares redeemed | (522,638 | ) | (19,740,133 | ) | ||||
|
| |||||||
Net increase (decrease) | (233,136 | ) | $ | (9,224,998 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 1,118,451 | $ | 41,550,426 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,183,116 | 46,567,457 | ||||||
Shares redeemed | (1,687,659 | ) | (66,094,827 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 613,908 | 22,023,056 | ||||||
Shares converted into Class I (See Note 1) | 832 | 30,558 | ||||||
|
| |||||||
Net increase (decrease) | 614,740 | $ | 22,053,614 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 788,856 | $ | 34,282,571 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,515,623 | 62,761,957 | ||||||
Shares redeemed | (5,002,025 | ) | (219,135,881 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,697,546 | ) | (122,091,353 | ) | ||||
Shares converted into Class I (See Note 1) | 253 | 11,027 | ||||||
|
| |||||||
Net increase (decrease) | (2,697,293 | ) | $ | (122,080,326 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 15 | $ | 548 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 78 | 3,004 | ||||||
|
| |||||||
Net increase (decrease) | 93 | $ | 3,552 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 4,042 | $ | 173,227 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,414 | 340,769 | ||||||
Shares redeemed | (84,525 | ) | (3,620,010 | ) | ||||
|
| |||||||
Net increase (decrease) | (72,069 | ) | $ | (3,106,014 | ) | |||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,307 | $ | 85,536 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,962 | 75,317 | ||||||
Shares redeemed | (2,379 | ) | (91,039 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,890 | $ | 69,814 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 4,106 | $ | 173,691 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,319 | 255,592 | ||||||
Shares redeemed | (47,936 | ) | (2,120,017 | ) | ||||
|
| |||||||
Net increase (decrease) | (37,511 | ) | $ | (1,690,734 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2019: | ||||||||
Shares sold | 2,629 | $ | 100,821 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,809 | 183,889 | ||||||
Shares redeemed | (1,656 | ) | (64,834 | ) | ||||
|
| |||||||
Net increase (decrease) | 5,782 | $ | 219,876 | |||||
|
| |||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 38,554 | $ | 1,637,364 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,385 | 96,153 | ||||||
Shares redeemed | (16,984 | ) | (723,058 | ) | ||||
|
| |||||||
Net increase (decrease) | 23,955 | $ | 1,010,459 | |||||
|
|
Note 10–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provi-
33 |
Notes to Financial Statements(Unaudited) (continued)
sions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
34 | MainStay MAP Equity Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited)
The continuation of the Management Agreement with respect to the MainStay MAP Equity Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreements between New York Life Investments and each of Epoch Investment Partners, Inc. (“Epoch”) and Markston International LLC (“Markston”) with respect to the Fund (collectively, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments, Epoch and Markston in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments, Epoch and/or Markston (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments, Epoch and Markston in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments, Epoch and Markston personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior
management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments, Epoch and Markston; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments, Epoch and Markston; (iii) the costs of the services provided, and profits realized, by New York Life Investments, Epoch and Markston from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments, Epoch and/or Markston. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments, Epoch and Markston. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments, Epoch and Markston resulting from, among other things, the Board’s consideration of the Advisory Agreements in
35 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited) (continued)
prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments, Epoch and Markston
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of Epoch and Markston and ongoing analysis of, and interactions with, Epoch and Markston with respect to, among other things, Fund investment performance and risk as well as Epoch’s and Markston’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an
increasingly broad array ofnon-advisory services to the MainStay Group of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that Epoch and Markston provide to the Fund. The Board evaluated Epoch’s and Markston’s experience in serving as subadvisors to the Fund and managing other portfolios and Epoch’s and Markston’s track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Epoch and Markston, and Epoch’s and Markston’s overall legal and compliance environments, resources and histories. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments, Epoch and Markston believes the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Epoch and Markston. The Board reviewed Epoch’s and Markston’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’, Epoch’s and Markston’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
36 | MainStay MAP Equity Fund |
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments, Epoch and Markston had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments, Epoch and Markston to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments, Epoch and Markston
The Board considered the costs of the services provided by New York Life Investments, Epoch and Markston under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates and Epoch and Markston, due to their relationships with the Fund. Although the Board did not receive specific profitability information from Markston, the Board considered that the subadvisory fee paid by New York Life Investments to Markston for services provided to the Fund was the result ofarm’s-length negotiations by New York Life Investments. The Board considered that Epoch’s and Markston’s subadvisory fees are negotiated atarm’s-length by New York Life Investments and that these fees are paid by New York Life Investments, not the Fund. On this basis, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments, Epoch and Markston and profits realized by New York Life Investments and its affiliates and Epoch and Markston, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments, Epoch and Markston and acknowledged that New York Life Investments, Epoch and Markston must be in a position to attract and retain experienced professional personnel and to
maintain a strong financial position for New York Life Investments, Epoch and Markston to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates and Epoch and Markston due to their relationships with the Fund, including reputational and other indirect benefits. The Board recognized, for example, the benefits to Epoch and Markston from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Epoch and Markston in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments concerning other material business relationships between each of Epoch and Markston and its affiliates and New York Life Investments and its affiliates. In addition, the Board reviewed information regarding a money market fund advised by New York Life Investments and an affiliated subadvisor that serves as an investment option for the Fund, including the rationale for and costs associated with investments in this money market fund by the Fund, if any, and considered information from New York Life Investments that the nature and type of specific investment advisory services provided to this money market fund are distinct from or in addition to the investment advisory services provided to the Fund. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and
37 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements(Unaudited) (continued)
its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates due to their relationships with the Fund were not excessive. With respect to Epoch and Markston, the Board considered that any profits realized by Epoch and Markston due to their relationship with the Fund are the result ofarm’s-length negotiations between New York Life Investments and each of Epoch and Markston, acknowledging that any such profits are based on fees paid to Epoch and Markston by New York Life Investments, not the Fund.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to Epoch and Markston are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments, Epoch and Markston on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are
transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously
38 | MainStay MAP Equity Fund |
prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
39 |
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the SEC’s website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC 60 days after each fiscal quarter on Form N-PORT. The Fund’s Form N-PORT is available without charge, on the SEC’s website atwww.sec.govor by calling New York Life Investments at800-624-6782.
40 | MainStay MAP Equity Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1738973 MS065-19 | MSMP10-06/19 (NYLIM) NL220 |
MainStay Money Market Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2019
Beginning on January 1, 2021, paper copies of each MainStay Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from MainStay Funds or from your financial intermediary. Instead, the reports will be made available on the MainStay Funds’ website. You will be notified by mail and provided with a website address to access the report each time a new report is posted to the website.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. At any time, you may elect to receive reports and other communications from MainStay Funds electronically by calling toll-free 800-624-6782, by sending an e-mail to MainStayShareholderServices@nylim.com, or by contacting your financial intermediary.
You may elect to receive all future shareholder reports in paper form free of charge. If you hold shares of a MainStay Fund directly, you can inform MainStay Funds that you wish to receive paper copies of reports by calling toll-free 800-624-6782 or by sending an e-mail to MainStayShareholderServices@nylim.com. If you hold shares of a MainStay Fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper form will apply to all MainStay Funds in which you are invested and may apply to all funds held with your financial intermediary.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
Despite volatile market conditions, stocks and bonds in the United States and around the world generally posted gains during the six-month period ended April 30, 2019.
After trending higher in November 2018, U.S. stocks and bonds dipped sharply in December over concerns regarding the pace of economic growth, a government shutdown and the potential impact of trade disputes between the United States and other nations, particularly China. U.S. markets recovered quickly in 2019 as trade tensions eased, the government reopened and the U.S. Federal Reserve Board (Fed) adopted a more accommodative tone regarding the future direction of interest rates. The remainder of the reporting period saw further gains across a wide spectrum of equity and fixed-income sectors, supported by encouraging economic data and generally strong corporate earnings.
The improving economic environment encouraged investors to favor areas of the market viewed as offering greater return potential along with higher risks. Among U.S. stocks, cyclical, growth-oriented sectors tended to outperform more defensive, value-oriented areas, while large-cap stocks generally outperformed their smaller-cap counterparts. Within the large-cap S&P 500® Index, the information technology sector led the market’s advance, followed by communication services, consumer discretionary and consumer staples. Industrials, utilities, financials, materials, real estate and energy produced more modest, single-digit gains. Only health care ended the reporting period in slightly negative territory, as potential regulatory changes prompted declines in health care services providers and, to a lesser extent, pharmaceutical manufacturers and biotechnology developers.
Among U.S. fixed-income instruments, corporate issues generally outperformed government bonds, with lower-credit quality, higher-yielding securities leading the sector’s advance. Long-term U.S. Treasury bond yields proved particularly weak, with 10-year yields dipping at times below 3-month yields, reflecting investors’ continued concerns about domestic economic growth.
International stocks and bonds generally mirrored U.S. market performance as European central banks eased monetary policy
and hopes rose for a resolution to trade tensions between the United States and China. Although Eurozone economic growth remained anemic, European stock markets delivered only slightly less robust returns than U.S. equities. However, U.K. stocks lagged significantly, undermined by concerns related to Brexit, the impending British exit from the European Union. Gains in Asian equities trailed mildly behind those of U.S. and European stocks, largely due to muted returns from Japanese equities and evidence of slowing Chinese economic growth. Among global bonds, high-yielding corporate issues generally produced the strongest returns, followed by emerging-market fixed-income securities, while government bonds provided more modest gains.
We’re pleased to see renewed signs of strength in broad areas of the financial market. At the same time, we remained sharply focused on providing you, as a MainStay shareholder, with the experienced and disciplined fund management that we believe underpins an effective, long-term investment strategy. Whatever tomorrow’s investment environment brings, you can rely on our portfolio managers to pursue the objectives of their individual Funds as outlined in the prospectus with the energy and dedication you have come to expect.
While volatility will always remain characteristic of financial markets, your financial professional remains an excellent resource to help you review your investment strategy and make any necessary updates or revisions. We encourage you to discuss with them any questions you may have regarding the report that follows, and to seek their advice in meeting your evolving financial goals. We also invite you to visit our website at nylinvestments.com/funds for more information on investing and the MainStay Funds.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Semiannual Report
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support at any time. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors.
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-624-6782, by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending ane-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1(Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B2 shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses. For performance information current to the most recent month-end, please call 800-624-6782 or visit nylinvestments.com/funds.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Average Annual Total Returns for the Period-Ended April 30, 2019
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||
Class A Shares4 | No Sales Charge | 1/3/1995 | 0.95 | % | 1.70 | % | 0.50 | % | 0.26 | % | 0.57 | % | ||||||||||||
Investor Class Shares4 | No Sales Charge | 2/28/2008 | 0.83 | 1.46 | 0.40 | 0.21 | 0.84 | |||||||||||||||||
Class B Shares2,4 | No Sales Charge | 5/1/1986 | 0.83 | 1.46 | 0.40 | 0.21 | 0.84 | |||||||||||||||||
Class C Shares4 | No Sales Charge | 9/1/1998 | 0.83 | 1.46 | 0.40 | 0.21 | 0.84 | |||||||||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns would have been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
4. | As of April 30, 2019, MainStay Money Market Fund had an effective7-day yield of 1.97% for Class A, 1.73% for Investor Class, 1.73% for Class B, and 1.73% for Class C shares. The7-day current yield was 1.95% for Class A, and 1.72% for Investor Class, Class B and C shares. These yields reflect certain expense limitations. Had these expense limitations not been in effect, the effective7-day yield would have been 1.97%, 1.73%, 1.73% and 1.73%, for Class A, Investor Class, Class B and C shares, respectively, and the7-day current yield would have been 1.95%, 1.72%, 1.72% and 1.71%, for Class A, Investor Class, Class B and C shares, respectively. The current yield reflects the Fund’s earnings better than the Fund’s total return. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Average Lipper Money Market Fund5 | 1.00 | % | 1.83 | % | 0.60 | % | 0.33 | % | ||||||||
Morningstar Prime Money Market Category Average6 | 1.03 | 1.87 | 0.61 | 0.34 |
5. | The Average Lipper Money Market Fund is an equally weighted performance average adjusted for capital gains distributions and income dividends of all of the money market funds in the Lipper Universe. Lipper Inc., a wholly-owned subsidiary of Thomson Reuters, is an independent monitor of mutual fund performance. Results do not reflect any deduction of sales charges. Lipper averages are not class specific. Lipper returns are unaudited. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
6. | The Morningstar Prime Money Market Category Average is representative of funds that invest in short-term money market securities in order to provide a level of current income that is consistent with the preservation of capital. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Money Market Fund |
Cost in Dollars of a $1,000 Investment in MainStay Money Market Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2018, to April 30, 2019, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from November 1, 2018, to April 30, 2019.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended April 30, 2019. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for thesix-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 11/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/19 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/19 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,009.50 | $ | 2.79 | $ | 1,022.02 | $ | 2.81 | 0.56% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,008.30 | $ | 3.98 | $ | 1,020.83 | $ | 4.01 | 0.80% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,008.30 | $ | 3.98 | $ | 1,020.83 | $ | 4.01 | 0.80% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,008.30 | $ | 3.98 | $ | 1,020.83 | $ | 4.01 | 0.80% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2019(Unaudited)
Other Commercial Paper | 57.5 | % | ||
Treasury Repurchase Agreements | 15.8 | |||
Financial Company Commercial Paper | 11.5 | |||
Treasury Debt | 7.2 | |||
U.S. Government Agency Debt | 5.2 | |||
Certificates of Deposit | 2.9 | |||
Other Assets, Less Liabilities | –0.1 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s holdings are subject to change.
8 | MainStay Money Market Fund |
Portfolio Management Discussion and Analysis(Unaudited)
Questions answered by NYL Investors LLC, the Fund’s Subadvisor.
How did MainStay Money Market Fund perform relative to its benchmark and peer group during the six months ended April 30, 2019?
As of April 30, 2019, Class A shares of MainStay Money Market Fund provided a7-day effective yield of 1.97% and a7-day current yield of 1.95%. For the six months ended April 30, 2019, Class A shares returned 0.95%, underperforming the 1.00% return of the Average Lipper Money Market Fund. Over the same period, Class A shares underperformed the 1.03% return of the Morningstar Prime Money Market Category Average.1
What factors affected the Fund’s performance during the reporting period?
A final, December 2018 rate hike by the Federal Reserve (Fed) contributed to the Fund’s performance by lifting rates across all sectors. (Contributions take weightings and total returns into account.) However, during late December 2018 and into January 2019, a strong negative shift in market expectation of future rate hikes occurred. This ultimately resulted in an inverted yield curve(2-months to 10 years, by late March 2019). This inversion chased yield-seeking, longer-term investors into the money markets. The extra demand, combined with a waning supply oftax-seasonT-bills and a light maturity calendar, detracted from the Fund’s performance by causing a significant fall in market spreads2 and yields.
What was the Fund’s duration3 strategy during the reporting period?
The Fund’s duration strategy was to remain neutral to modestly longer compared to the Average Lipper Money Market Fund.
During the reporting period, the Fund’s duration shortened by five days (20 days to 15 days) largely due to market offerings and a rapidly inverting yield curve.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
On a yield basis, the investment-grade sector provided the strongest positive contribution to the Fund’s relative performance. Over the same reporting period, U.S. Treasury bills were the Fund’s weakest relative performers.
What were some of the Fund’s largest purchases and sales during the reporting period?
The Fund’s performance benefited from its ability to roll over a maturing CD, as well as its purchase of a corporate floating-rate bond. Because of the short-term nature of its assets, the Fund did not sell any of its securities during the reporting period.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund shifted 3% of net assets from U.S. Treasury securities to the agency sector to enhance yield while maintaining adequate regulatory liquidity. The Fund also increased its allocation to the investment-grade sector by 1.5% of net assets by participating in an American Honda Motor Co. floating-rate corporate bond issuance.
1. | See page 5 for other share class returns, which may be higher or lower than Class A share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of InvestmentsApril 30, 2019 (Unaudited)
Principal Amount | Value | |||||||
Short-Term Investments 100.1%† |
| |||||||
Certificates of Deposit 2.9% |
| |||||||
Bank of Nova Scotia | $ | 5,000,000 | $ | 5,000,077 | ||||
Royal Bank of Canada | 5,000,000 | 5,000,000 | ||||||
|
| |||||||
Total Certificates of Deposit | 10,000,077 | |||||||
|
| |||||||
Financial Company Commercial Paper 11.5% |
| |||||||
Commonwealth Bank of Australia | 5,000,000 | 5,000,000 | ||||||
GlaxoSmithKline Finance PLC | 5,000,000 | 4,995,178 | ||||||
JP Morgan Securities LLC | 5,000,000 | 5,000,000 | ||||||
Nationwide Life Insurance Co. (b)(c) | ||||||||
2.435%, due 5/9/19 | 5,000,000 | 4,997,255 | ||||||
2.45%, due 5/15/19 | 5,000,000 | 4,995,178 | ||||||
Royal Bank of Canada | 5,000,000 | 5,000,000 | ||||||
Toronto-Dominion Bank (b)(c) | ||||||||
2.459%, due 5/20/19 | 5,000,000 | 4,993,403 | ||||||
2.49%, due 5/30/19 | 5,000,000 | 4,990,172 | ||||||
|
| |||||||
Total Financial Company Commercial Paper | 39,971,186 | |||||||
|
| |||||||
Other Commercial Paper 57.5% |
| |||||||
American Honda Finance Corp. | ||||||||
2.459%, due 5/28/19 (c) | 5,000,000 | 4,990,663 | ||||||
3.033% (3 Month LIBOR + 0.34%), | 5,000,000 | 5,013,393 | ||||||
Archer-Daniels-Midland Co. (b)(c) | ||||||||
2.437%, due 5/10/19 | 5,000,000 | 4,996,875 | ||||||
2.451%, due 5/16/19 | 5,000,000 | 4,994,854 | ||||||
BASF SE (b)(c) | ||||||||
2.417%, due 5/2/19 | 5,000,000 | 4,999,656 | ||||||
2.451%, due 5/17/19 | 5,000,000 | 4,994,489 | ||||||
Canadian National Railway Co. (b)(c) | ||||||||
2.42%, due 5/3/19 | 5,000,000 | 4,999,320 | ||||||
2.437%, due 5/10/19 | 5,000,000 | 4,996,938 | ||||||
2.455%, due 5/22/19 | 5,000,000 | 4,992,854 | ||||||
Cummins, Inc. | 5,000,000 | 5,000,000 | ||||||
Emerson Electric Co. | 5,000,000 | 4,992,174 |
Principal Amount | Value | |||||||
Other Commercial Paper (continued) | ||||||||
General Dynamics Corp. (b)(c) | ||||||||
2.43%, due 5/8/19 | $ | 5,000,000 | $ | 4,997,618 | ||||
2.443%, due 6/6/19 | 5,000,000 | 4,987,750 | ||||||
GlaxoSmithKline LLC (b)(c) | ||||||||
2.392%, due 5/1/19 | 5,000,000 | 5,000,000 | ||||||
2.405%, due 5/3/19 | 5,000,000 | 4,999,311 | ||||||
Henkel of America, Inc. (b)(c) | ||||||||
2.445%, due 5/13/19 | 5,000,000 | 4,995,833 | ||||||
2.451%, due 5/17/19 | 5,000,000 | 4,994,533 | ||||||
Hershey Co. (b)(c) | ||||||||
2.427%, due 5/6/19 | 5,000,000 | 4,998,299 | ||||||
2.445%, due 5/13/19 | 5,000,000 | 4,995,900 | ||||||
IBM Credit LLC (b)(c) | ||||||||
2.455%, due 5/22/19 | 5,000,000 | 4,992,679 | ||||||
2.455%, due 5/23/19 | 5,000,000 | 4,992,392 | ||||||
International Business Machines Corp. | 5,000,000 | 4,997,933 | ||||||
John Deere Canada ULC (b)(c) | ||||||||
2.434%, due 5/21/19 | 5,000,000 | 4,993,222 | ||||||
2.439%, due 6/7/19 | 5,000,000 | 4,987,410 | ||||||
Novartis Finance Corp. (b)(c) | ||||||||
2.412%, due 5/8/19 | 5,000,000 | 4,997,569 | ||||||
2.46%, due 5/30/19 | 5,000,000 | 4,990,092 | ||||||
NSTAR Electric Co. | 5,000,000 | 4,995,513 | ||||||
ONE Gas, Inc. | 5,000,000 | 4,995,522 | ||||||
Ontario Teachers’ Finance Trust (b)(c) | ||||||||
2.407%, due 5/6/19 | 5,000,000 | 4,998,264 | ||||||
2.439%, due 5/28/19 | 5,000,000 | 4,990,756 | ||||||
PACCAR Financial Corp. (c) | ||||||||
2.468%, due 6/5/19 | 5,000,000 | 4,988,090 | ||||||
2.471%, due 6/7/19 | 5,000,000 | 4,987,307 | ||||||
Province of Ontario Canada | 5,000,000 | 4,994,875 | ||||||
Province of Quebec Canada (b)(c) | ||||||||
2.415%, due 5/9/19 | 5,000,000 | 4,997,261 | ||||||
2.447%, due 6/6/19 | 5,000,000 | 4,987,750 | ||||||
Roche Holdings, Inc. | 5,000,000 | 4,999,658 | ||||||
Schlumberger Investment SA (b)(c) | ||||||||
2.41%, due 5/7/19 | 5,000,000 | 4,997,958 | ||||||
2.434%, due 5/21/19 | 5,000,000 | 4,993,139 | ||||||
Siemens Capital Co. LLC (b)(c) | ||||||||
2.407%, due 5/6/19 | 5,000,000 | 4,998,299 | ||||||
2.494%, due 6/27/19 | 5,000,000 | 4,980,446 | ||||||
|
| |||||||
Total Other Commercial Paper | 199,796,595 | |||||||
|
|
10 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Short-Term Investments (continued) |
| |||||||
Treasury Debt 7.2% |
| |||||||
United States Treasury Bills (c) | ||||||||
2.408%, due 5/2/19 | $ | 9,175,000 | $ | 9,174,396 | ||||
2.419%, due 5/14/19 | 9,148,000 | 9,140,058 | ||||||
2.43%, due 5/21/19 | 3,710,000 | 3,705,125 | ||||||
United States Treasury Notes | ||||||||
1.125%, due 5/31/19 | 3,000,000 | 2,997,116 | ||||||
|
| |||||||
Total Treasury Debt | 25,016,695 | |||||||
|
| |||||||
Treasury Repurchase Agreements 15.8% |
| |||||||
Bank of America N.A. | 15,000,000 | 15,000,000 | ||||||
RBC Capital Markets LLC | 25,003,000 | 25,003,000 |
Principal Amount | Value | |||||||
Treasury Repurchase Agreements (continued) |
| |||||||
TD Securities (U.S.A.) LLC | $ | 15,000,000 | $ | 15,000,000 | ||||
|
| |||||||
Total Treasury Repurchase Agreements | 55,003,000 | |||||||
|
| |||||||
U.S. Government Agency Debt 5.2% |
| |||||||
Federal Home Loan Banks (c) | ||||||||
2.443%, due 5/3/19 | 10,000,000 | 9,998,667 | ||||||
2.448%, due 5/29/19 | 5,000,000 | 4,990,550 | ||||||
2.448%, due 5/31/19 | 3,220,000 | 3,213,479 | ||||||
|
| |||||||
Total U.S. Government Agency Debt | 18,202,696 | |||||||
|
| |||||||
TotalShort-Term Investments (Amortized Cost $347,990,249) | 100.1 | % | 347,990,249 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (478,693 | ) | ||||
Net Assets | 100.0 | % | $ | 347,511,556 |
† | Percentages indicated are based on Fund net assets. |
(a) | Floating rate—Rate shown was the rate in effect as of April 30, 2019. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Interest rate shown represents yield to maturity. |
The following abbreviation is used in the preceding pages:
LIBOR—London Interbank Offered Rate
The following is a summary of the fair valuations according to the inputs used as of April 30, 2019, for valuing the Fund’s assets:
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Asset Valuation Inputs | ||||||||||||||||
Investments in Securities (a) | ||||||||||||||||
Short-Term Investments | ||||||||||||||||
Certificates of Deposit | $ | — | $ | 10,000,077 | $ | — | $ | 10,000,077 | ||||||||
Financial Company Commercial Paper | — | 39,971,186 | — | 39,971,186 | ||||||||||||
Other Commercial Paper | — | 199,796,595 | — | 199,796,595 | ||||||||||||
Treasury Debt | — | 25,016,695 | — | 25,016,695 | ||||||||||||
Treasury Repurchase Agreements | — | 55,003,000 | — | 55,003,000 | ||||||||||||
U.S. Government Agency Debt | — | 18,202,696 | — | 18,202,696 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 347,990,249 | $ | — | $ | 347,990,249 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Statement of Assets and Liabilitiesas of April 30, 2019 (Unaudited)
Assets |
| |||
Investment in securities, at value | $ | 292,987,249 | ||
Repurchase agreements, at value | 55,003,000 | |||
Cash | 638 | |||
Receivables: | ||||
Fund shares sold | 1,896,637 | |||
Interest | 97,597 | |||
Other assets | 68,462 | |||
|
| |||
Total assets | 350,053,583 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 2,254,834 | |||
Manager (See Note 3) | 115,544 | |||
Transfer agent (See Note 3) | 87,051 | |||
Professional fees | 31,606 | |||
Shareholder communication | 31,426 | |||
Custodian | 16,273 | |||
Trustees | 541 | |||
Accrued expenses | 2,016 | |||
Dividend payable | 2,736 | |||
|
| |||
Total liabilities | 2,542,027 | |||
|
| |||
Net assets | $ | 347,511,556 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 3,475,625 | ||
Additional paid-in capital | 344,036,006 | |||
|
| |||
347,511,631 | ||||
Total distributable earnings (loss) | (75 | ) | ||
|
| |||
Net assets | $ | 347,511,556 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 261,650,237 | ||
|
| |||
Shares of beneficial interest outstanding | 261,680,803 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 28,100,433 | ||
|
| |||
Shares of beneficial interest outstanding | 28,112,398 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 35,173,267 | ||
|
| |||
Shares of beneficial interest outstanding | 35,179,097 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 22,587,619 | ||
|
| |||
Shares of beneficial interest outstanding | 22,590,236 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
|
12 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operationsfor the six months ended April 30, 2019 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 4,270,599 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 690,939 | |||
Transfer agent (See Note 3) | 262,099 | |||
Registration | 52,600 | |||
Professional fees | 37,196 | |||
Custodian | 19,776 | |||
Shareholder communication | 18,564 | |||
Trustees | 4,261 | |||
Miscellaneous | 6,049 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,091,484 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (21,461 | ) | ||
|
| |||
Net expenses | 1,070,023 | |||
|
| |||
Net investment income (loss) | 3,200,576 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | 140 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 3,200,716 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statements of Changes in Net Assets
for the six months ended April 30, 2019 (Unaudited) and the year ended October 31, 2018
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,200,576 | $ | 3,650,342 | ||||
Net realized gain (loss) on investments | 140 | (8 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 3,200,716 | 3,650,334 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | (2,478,092 | ) | (2,760,996 | ) | ||||
Investor Class | (220,494 | ) | (256,309 | ) | ||||
Class B | (301,577 | ) | (385,826 | ) | ||||
Class C | (200,413 | ) | (247,211 | ) | ||||
|
| |||||||
Total distributions to shareholders | (3,200,576 | ) | (3,650,342 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 223,443,917 | 333,214,701 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 3,111,996 | 3,557,971 | ||||||
Cost of shares redeemed | (201,714,274 | ) | (342,943,592 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 24,841,639 | (6,170,920 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 24,841,779 | (6,170,928 | ) | |||||
Net Assets | ||||||||
Beginning of period | 322,669,777 | 328,840,705 | ||||||
|
| |||||||
End of period | $ | 347,511,556 | $ | 322,669,777 | ||||
|
|
14 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlightsselected per share data and ratios
Class A | Six months ended April 30, | Year ended October 31, | ||||||||||||||||||||||||||
2019* | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.95 | % | 1.21 | % | 0.35 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.91 | %†† | 1.20 | % | 0.32 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.56 | %†† | 0.57 | % | 0.59 | % | 0.43 | % | 0.13 | % | 0.11 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.56 | %†† | 0.57 | % | 0.60 | % | 0.64 | % | 0.64 | % | 0.64 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 261,650 | $ | 235,855 | $ | 227,572 | $ | 226,181 | $ | 243,517 | $ | 230,330 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.83 | % | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.67 | %†† | 0.97 | % | 0.18 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.80 | % | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.85 | %†† | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 28,101 | $ | 26,548 | $ | 27,087 | $ | 58,658 | $ | 56,512 | $ | 56,177 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlightsselected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.83 | % | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.67 | %†† | 0.96 | % | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.80 | % | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.85 | %†† | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 35,173 | $ | 37,284 | $ | 43,351 | $ | 53,341 | $ | 58,152 | $ | 63,581 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2019* | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.83 | % | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.67 | %†† | 0.94 | % | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.80 | % | 0.73 | % | 0.43 | % | 0.13 | % | 0.11 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.85 | %†† | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 22,588 | $ | 22,983 | $ | 30,831 | $ | 41,311 | $ | 41,050 | $ | 36,939 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
16 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements(Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Money Market Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has four classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008.
Class A, Class I and Investor Class shares are offered at net asset value (“NAV”) without an initial sales charge. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Investor Class shares may convert automatically to Class A shares and Class A shares may convert automatically to Investor Class shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions.
The Fund’s investment objective is to seek a high level of current income while preserving capital and maintaining liquidity.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard CodificationTopic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Valuation of Shares. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share by using the amortized cost method of valuation, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(B) Securities Valuation. Securities are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate per the requirements of Rule 2a-7 under the 1940 Act. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security.
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for theday-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an
17 |
Notes to Financial Statements(Unaudited) (continued)
independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
Securities valued at amortized cost are not obtained from a quoted price in an active market and are generally categorized as Level 2 in the hierarchy. The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2019, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models and option adjusted spread pricing. During the six-month period ended April 30, 2019, there were no material changes to the fair value methodologies.
Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of April 30, 2019, there were no securities held by the Fund that were fair valued in such a manner.
(C) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends from net investment income, if any, daily and intends to pay them at least monthly and declares and pays distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued daily and discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the straight-line method. The straight-line method approximates the effective interest rate for short-term investments. Income frompayment-in-kind securities, to the extent the Fund held any such securities during the six-month period ended April 30, 2019, is recorded daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by
18 | MainStay Money Market Fund |
the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2019, repurchase agreements are shown in the Portfolio of Investments.
(I) Debt Securities. The Fund’s investments may include securities such as variable rate notes, floaters and mortgage-related and asset-backed securities. If expectations about changes in interest rates, or assessments of an issuer’s credit worthiness or market conditions are incorrect, these types of investments could lose money.
The Fund may also invest in U.S. dollar-denominated securities of foreign issuers, which carry certain risks in addition to the usual risks inherent in domestic instruments. These risks include those resulting from future adverse political or economic developments and possible imposition of foreign governmental laws or restrictions. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view
that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect,wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. NYL Investors LLC (“NYL Investors” or the “Subadvisor”), a registered investment adviser and a direct,wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for theday-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and NYL Investors, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.40% up to $500 million; 0.35% from $500 million to $1 billion; and 0.30% in excess of $1 billion. During the six-month period ended April 30, 2019, the effective management fee rate was 0.40% of the Fund’s average daily net assets, exclusive of any applicable waivers/reimbursements.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) do not exceed the following percentages of the Fund’s average daily net assets: Class A, 0.70%; Investor Class, 0.80%; Class B, 0.80%; and Class C, 0.80%. This agreement will remain in effect until February 28, 2020, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments may voluntarily waive or reimburse expenses of the Fund to the extent it deems appropriate to enhance the yield of the Fund’s during periods when expenses have a significant impact on the yield of the Fund, as applicable, because of low interest rates. This expense limitation policy is voluntary and in addition to any contractual arrangements that may be in place with respect to the Fund and described in the Fund’s prospectus.
During the six-month period ended April 30, 2019, New York Life Investments earned fees from the Fund in the amount of $690,939. Additionally, New York Life Investments reimbursed expenses in the amount of $21,461, without which the Fund’s total returns would have been lower.
19 |
Notes to Financial Statements(Unaudited) (continued)
State Street Bank and Trust Company (“State Street”) providessub-administration andsub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAV of the Fund, maintaining the general ledger andsub-ledger accounts for the calculation of the Fund’s NAV, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Sales Charges. Although the Fund does not assess a CDSC upon redemption of Class B or Class C shares of the Fund, the applicable CDSC will be assessed when shares are redeemed from the Fund if the shareholder previously exchanged his or her investment into the Fund from another fund within the MainStay Group of Funds. During the six-month period ended April 30, 2019, the Fund was advised that NYLIFE Distributors LLC (the “Distributor”), an indirect wholly owned subsidiary of New York Life, received from shareholders the proceeds from CDSCs of Class A, Investor Class, Class B and Class C of $30,997, $996, $12,898 and $3,607, respectively.
(C) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During thesix-month period ended April 30, 2019, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 102,376 | ||
Investor Class | 48,762 | |||
Class B | 66,733 | |||
Class C | 44,228 |
(D) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
Note 4–Federal Income Tax
The amortized cost also represents the aggregate cost for federal income tax purposes.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $141 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No
capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $—(a) | $— |
(a) | Less than 1,000. |
During the year ended October 31, 2018, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 3,650,342 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2019, there were no interfund loans made or outstanding with respect to the Fund.
Note 7–Capital Share Transactions
Class A (at $1 per share) | Shares | |||
Six-month period ended April 30, 2019: | ||||
Shares sold | 195,143,185 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,403,725 | |||
Shares redeemed | (175,755,411 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 21,791,499 | |||
Shares converted into Class A (See Note 1) | 5,912,583 | |||
Shares converted from Class A (See Note 1) | (1,908,451 | ) | ||
|
| |||
Net increase (decrease) | 25,795,631 | |||
|
| |||
Year ended October 31, 2018: | ||||
Shares sold | 284,906,430 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,687,453 | |||
Shares redeemed | (286,642,779 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 951,104 | |||
Shares converted into Class A (See Note 1) | 10,972,124 | |||
Shares converted from Class A (See Note 1) | (3,641,126 | ) | ||
|
| |||
Net increase (decrease) | 8,282,102 | |||
|
|
20 | MainStay Money Market Fund |
Investor Class (at $1 per share) | Shares | |||
Six-month period ended April 30, 2019: | ||||
Shares sold | 15,490,385 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 213,160 | |||
Shares redeemed | (10,646,958 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 5,056,587 | |||
Shares converted into Investor Class (See Note 1) | 2,113,231 | |||
Shares converted from Investor Class (See Note 1) | (5,617,695 | ) | ||
|
| |||
Net increase (decrease) | 1,552,123 | |||
|
| |||
Year ended October 31, 2018: | ||||
Shares sold | 27,361,559 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 247,655 | |||
Shares redeemed | (20,939,279 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 6,669,935 | |||
Shares converted into Investor Class (See Note 1) | 3,717,379 | |||
Shares converted from Investor Class (See Note 1) | (10,925,800 | ) | ||
|
| |||
Net increase (decrease) | (538,486 | ) | ||
|
| |||
Class B (at $1 per share) | Shares | |||
Six-month period ended April 30, 2019: | ||||
Shares sold | 1,724,399 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 297,923 | |||
Shares redeemed | (4,083,877 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (2,061,555 | ) | ||
Shares converted from Class B (See Note 1) | (49,131 | ) | ||
|
| |||
Net increase (decrease) | (2,110,686 | ) | ||
|
| |||
Year ended October 31, 2018: | ||||
Shares sold | 3,017,330 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 380,517 | |||
Shares redeemed | (9,387,697 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (5,989,850 | ) | ||
Shares converted into Class B (See Note 1) | 34 | |||
Shares converted from Class B (See Note 1) | (77,057 | ) | ||
|
| |||
Net increase (decrease) | (6,066,873 | ) | ||
|
| |||
Class C (at $1 per share) | Shares | |||
Six-month period ended April 30, 2019: | ||||
Shares sold | 11,085,948 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 197,188 | |||
Shares redeemed | (11,228,028 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 55,108 | |||
Shares converted from Class C (See Note 1) | (450,537 | ) | ||
|
| |||
Net increase (decrease) | (395,429 | ) | ||
|
| |||
Year ended October 31, 2018: | ||||
Shares sold | 17,929,357 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 242,346 | |||
Shares redeemed | (25,973,838 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (7,802,135 | ) | ||
Shares converted from Class C (See Note 1) | (45,554 | ) | ||
|
| |||
Net increase (decrease) | (7,847,689 | ) | ||
|
|
Note 8–Recent Accounting Pronouncement
To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU)2018-13, Fair Value Measurement Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating toASU 2018-13 is not required. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact in the financial statement disclosures has not yet been determined.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2019, events and transactions subsequent to April 30, 2019, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
21 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited)
The continuation of the Management Agreement with respect to the MainStay Money Market Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and NYL Investors LLC (“NYL Investors”) with respect to the Fund (together, “Advisory Agreements”), following an initial term of up to two years, is subject to annual review and approval by the Board of Trustees of The MainStay Funds (the “Board” of the “Trust”) in accordance with Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”). At its December10-12, 2018in-person meeting, the Board, including the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for aone-year period the continuation of the Advisory Agreements.
In reaching the decision to approve the Advisory Agreements, the Board considered information furnished by New York Life Investments and NYL Investors in connection with an annual contract review process undertaken by the Board that took place at various meetings of the Board and its Contracts Committee between October 2018 and December 2018, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to other investment advisory clients of New York Life Investments and/or NYL Investors (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board considered information furnished by New York Life Investments and NYL Investors in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Independent Trustees, which encompassed a variety of topics, including those summarized below. The Board took into account information provided in advance of and during its meetings throughout the year, including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Advisory Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group of New York Life Investments as well as presentations from New York Life Investments and NYL Investors personnel, such as portfolio managers. The Board also took into account other information received from New York Life Investments throughout the year, including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, andnon-advisory services provided to the Fund by New York Life Investments. The overall annual contract review process, including the structure and format for materials provided to the Board, was developed in consultation with the Board. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
In addition to information provided to the Board throughout the year, the Board received information provided specifically in response to requests prepared on behalf of, and in consultation with, the Board by independent legal counsel regarding the Fund’s distribution arrangements in connection with its June 2018 meeting. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule12b-1 distribution and service fees by applicable share classes of the Fund. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale or distribution of Fund shares or that provide servicing to Fund shareholders.
In considering the continuation of the Advisory Agreements, the Trustees reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments and NYL Investors; (ii) the qualifications of the portfolio managers of the Fund and the historical investment performance of the Fund, New York Life Investments and NYL Investors; (iii) the costs of the services provided, and profits realized, by New York Life Investments and NYL Investors from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and/or NYL Investors. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise given different terms of agreements, variations in fund strategies and other factors, the Board considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of the Advisory Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Trustees noted that, throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and NYL Investors. The Board’s conclusions with respect to the Advisory Agreements may have also been based, in part, on the Board’s knowledge of New York Life Investments and NYL Investors resulting from, among other things, the Board’s consideration of the Advisory Agreements in prior years, the advisory agreements for other funds in the MainStay Group of Funds in prior years, the Board’s regular review throughout the
22 | MainStay Money Market Fund |
year of the performance and operations of other funds in the MainStay Group of Funds and the Board’s business judgment and industry experience. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the continuation of the Advisory Agreements during its December10-12, 2018in-person meeting are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and NYL Investors
The Board examined the nature, extent and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund and managing Fund operations in amanager-of-managers structure, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers , including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative and othernon-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory andnon-advisory services to the Fund, including New York Life Investments’ supervision and due diligence reviews of NYL Investors and ongoing analysis of, and interactions with, NYL Investors with respect to, among other things, Fund investment performance and risk as well as NYL Investors’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides to the Fund under the terms of the Management Agreement, including: (i) fund accounting and ongoing supervisory services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment supervisory and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Trust’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including supervision and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading monitoring and analysis by compliance and investment personnel. The Board noted that certainnon-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Trust’s officers, except for a portion of the salary of the Trust’s Chief Compliance Officer. The Board recognized that New York Life Investments has provided an increasingly broad array ofnon-advisory services to the MainStay Group
of Funds as a result of regulatory and other developments, including in connection with the designation of New York Life Investments as the administrator of the MainStay Group of Funds’ liquidity risk management program adopted under the 1940 Act. The Board considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, extent and quality of the investment advisory services that NYL Investors provides to the Fund. The Board evaluated NYL Investors’ experience in serving as subadvisor to the Fund and managing other portfolios and NYL Investors’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at NYL Investors, and NYL Investors’ overall legal and compliance environment, resources and history. In addition to information provided in connection with its quarterly meetings with the Trust’s Chief Compliance Officer, the Board considered that New York Life Investments and NYL Investors believe the compliance policies, procedures and systems are reasonably designed to prevent violation of the federal securities laws, and acknowledged their continued commitment to further developing and strengthening compliance programs relating to the Fund. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by NYL Investors. The Board reviewed NYL Investors’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating the portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund would likely continue to benefit from the nature, extent and quality of these services as a result of New York Life Investments’ and NYL Investors’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance compared to relevant investment categories and the Fund’s benchmark, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as portfolio attribution information and commentary on the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
23 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
In considering the Fund’s investment performance, the Board generally placed greater emphasis on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or NYL Investors had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions. In considering the investment performance of the Fund, the Board noted that the Fund underperformed its peer funds over various periods. The Board considered its discussions with representatives from New York Life Investments and NYL Investors regarding the Fund’s investment performance relative to that of its benchmark index and peer funds.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and NYL Investors to seek to enhance investment returns, supported a determination to approve the continuation of the Advisory Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and NYL Investors
The Board considered the costs of the services provided by New York Life Investments and NYL Investors under the Advisory Agreements and the profits realized by New York Life Investments and its affiliates, including NYL Investors, due to their relationships with the Fund. Because NYL Investors is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, not the Fund, the Board considered cost and profitability information for New York Life Investments and NYL Investors in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital.
In evaluating the costs of the services provided by New York Life Investments and NYL Investors and profits realized by New York Life Investments and its affiliates, including NYL Investors, the Board considered, among other factors, each party’s continuing investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board considered the financial resources of New York Life Investments and NYL Investors and acknowledged that New York Life Investments and NYL Investors must be in a position to attract and retain experienced professional personnel and to maintain a strong
financial position for New York Life Investments and NYL Investors to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other expected benefits resulting from its relationship with New York Life Investments.
In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board considers information provided by New York Life Investments regarding its methodology for calculating profitability and allocating costs. In 2014, the Board engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the funds in the MainStay Group of Funds and among individual funds in the MainStay Group of Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments business units and affiliated subadvisors that provide services to the funds in the MainStay Group of Funds; (ii) how costs are allocated to the funds in the MainStay Group of Funds and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certainfall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund, including reputational and other indirect benefits. The Board observed that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which was furnished to the Board as part of the annual contract review process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Advisory Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on apre-tax basis and without regard to distribution expenses incurred by New York Life Investments from its own resources.
After evaluating the information deemed relevant by the Trustees, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that any profits realized by New York Life Investments and its affiliates, including NYL Investors, due to their relationships with the Fund were not excessive.
24 | MainStay Money Market Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Advisory Agreements and the Fund’s total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the subadvisory fees paid to NYL Investors are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and NYL Investors on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund, if any. The Board considered the similarities and differences in the contractual management fee schedules of the Fund and these similarly-managed funds, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board considered its discussions with representatives from New York Life Investments regarding the management fee paid by the Fund.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a“per-account” fee) as compared with certain other fees (e.g., management fees) that are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments regarding the reasonableness of the Fund’s transfer agent fee schedule, including industry data demonstrating that theper-account fees that NYLIM Service Company LLC, an affiliate of New York Life Investments and the Fund’s transfer agent, charges the Fund are within the range ofper-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also took into account information received from NYLIM Service Company LLC regarding thesub-transfer agency payments it made to intermediaries in connection with the provision ofsub-transfer agency services to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on aper-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e.,
small accounts). The Board considered the extent to which transfer agent fees comprised total expenses of the Fund. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) customers, who often maintain smaller account balances than other shareholders of funds, and the impact of small accounts on the expense ratios of Fund share classes. The Board also recognized measures that it and New York Life Investments have taken to mitigate the effect of small accounts on the expense ratios of Fund share classes. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that theper-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board considered New York Life Investments’ rationale with respect to these groupings and received a report from an independent consultant engaged to conduct comparative analysis of these groupings. The Board also considered that NYLIM Service Company LLC had waived its contractual cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Advisory Agreements, support a conclusion that these fees and expenses are reasonable.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund shareholders. The Board also considered a report from New York Life Investments, previously prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. Although the Board recognized the difficulty of determining future economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints, initially setting management fee rates at scale or making additional investments to enhance shareholder services. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Advisory Agreements, that the Fund’s expense structure appropriately reflects economies of scale for
25 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement(Unaudited) (continued)
the benefit of Fund shareholders at current asset levels. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees voting separately, unanimously voted to approve the continuation of the Advisory Agreements.
26 | MainStay Money Market Fund |
Federal Income Tax Information
(Unaudited)
In February 2019, shareholders will receive an IRS Form1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end April 30, 2019.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website atnylinvestments.com/fundsor on the Securities and Exchange Commission’s (“SEC”) website atwww.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-624-6782; visiting the MainStay Funds’ website atnylinvestments.com/funds; or on the SEC’s website atwww.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file a Form N-MFP every month disclosing its portfolio holdings. The Fund’s Form N-MFP is available without charge, on the SEC’s website atwww.sec.gov or by calling New York Life Investments at800-624-6782.
27 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay Small Cap Core Fund1
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund2
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Infrastructure Bond Fund3
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund4
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund5
MainStay MacKay Short Term Municipal Fund6
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date7
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.8
Brussels, Belgium
Candriam Luxembourg S.C.A.8
Strassen, Luxembourg
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC8
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC8
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Formerly known as MainStay Epoch U.S. Small Cap Fund. |
2. | Effective June 21, 2019, MainStay MacKay Emerging Markets Debt Fund was renamed MainStay Candriam Emerging Markets Debt Fund. |
3. | Formerly known as MainStay MacKay Government Fund. |
4. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
5. | This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT. |
6. | Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund. |
7. | Effective June 14, 2019, each MainStay Retirement Fund merged into a respective acquiring MainStay Asset Allocation Fund. |
8. | An affiliate of New York Life Investment Management LLC. |
Not part of the Semiannual Report
For more information
800-624-6782
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2019 NYLIFE Distributors LLC. All rights reserved.
1737111 MS065-19 | MSMM10-06/19 (NYLIM) NL214 |
Item 2. | Code of Ethics. |
Not applicable.
Item 3. | Audit Committee Financial Expert. |
Not applicable.
Item 4. | Principal Accountant Fees and Services. |
Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
The Schedule of Investments is included as part of Item 1 of this report.
Item 7. | Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers ofClosed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Since the Registrant’s last response to this Item, there have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s Disclosure Controls and Procedures (as defined in Rule30a-3(c) under the Investment Company Act of 1940) (the “Disclosure Controls”), as of a date within 90 days prior to the filing date (the “Filing Date”) of this FormN-CSR (the “Report”), the Registrant’s principal executive officer and principal financial officer have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule30a-3(d)) under the Investment Company Act of 1940 that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2 under the Investment Company Act of 1940. |
(b) | Certifications of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE MAINSTAY FUNDS | ||
By: | /s/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: | July 2, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: | July 2, 2019 |
By: | /s/ Jack R. Benintende | |
Jack R. Benintende | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | July 2, 2019 |
EXHIBIT INDEX
(a) | Certifications of principal executive officer and principal financial officer as required by Rule30a-2 under the Investment Company Act of 1940. | |
(b) | Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |