<PAGE>
[ART WORK OF HALF OF LIGHT HOUSE APPEARS HERE]
[LOGO OF MAINSTAY INSTITUTIONAL FUNDS INC. APPEARS HERE]
MAINSTAY'
INSTITUTIONAL
FUNDS INC.
1997
SEMIANNUAL
REPORT
Unaudited June 30, 1997
<PAGE>
Performance Highlights--Total Returns*
<TABLE>
<CAPTION>
---------------------------------
SEC Average Annual
6 Months Ended June 30, 1997 Total Returns
as of June 30, 1997
- --------------------------------------------------------------------------------------------------------------------------------
Funds 1991 1992 1993 1994 1995 1996 1 Year 5 Year Since Inception
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Funds
- --------------------------------------------------------------------------------------------------------------------------------
EAFE Index (Instl. Class)+ 10.10% -12.22% 28.97% 6.83% 9.03% 6.45% 12.51% 11.70% 8.65%
- --------------------------------------------------------------------------------------------------------------------------------
EAFE Index (Serv. Class)++ 10.10 -12.22 28.97 6.83 8.63 6.37 12.29 11.56 8.55
- --------------------------------------------------------------------------------------------------------------------------------
Growth Equity (Instl. Class)+ 67.00 5.63 9.59 -2.23 37.88 21.62 24.07 20.43 21.73
- --------------------------------------------------------------------------------------------------------------------------------
Growth Equity (Serv. Class)++ 67.00 5.63 9.59 -2.23 37.50 21.29 23.77 20.26 21.60
- --------------------------------------------------------------------------------------------------------------------------------
Indexed Equity (Instl. Class)+ 29.80 7.19 9.41 0.90 36.88 22.57 34.32 19.25 19.03
- --------------------------------------------------------------------------------------------------------------------------------
Indexed Equity (Serv. Class)++ 29.80 7.19 9.41 0.90 36.70 22.21 33.96 19.12 18.93
- --------------------------------------------------------------------------------------------------------------------------------
International Equity (Instl. Class)(S) N/A -5.37 25.03 8.36 7.17 12.09 15.74 N/A 11.73
- --------------------------------------------------------------------------------------------------------------------------------
International Equity (Serv. Class)(S) N/A -5.37 25.03 8.36 6.86 11.59 15.49 N/A 11.56
- --------------------------------------------------------------------------------------------------------------------------------
Multi-Asset (Instl. Class)+ 17.90 7.09 8.79 -0.86 26.81 16.16 25.41 14.48 13.99
- --------------------------------------------------------------------------------------------------------------------------------
Multi-Asset (Serv. Class)++ 17.90 7.09 8.79 -0.86 26.70 15.89 25.15 14.37 13.91
- --------------------------------------------------------------------------------------------------------------------------------
Value Equity (Instl. Class)+ 36.60 20.71 14.90 1.22 29.42 22.41 26.27 18.18 20.57
- --------------------------------------------------------------------------------------------------------------------------------
Value Equity (Serv. Class)++ 36.60 20.71 14.90 1.22 29.32 22.10 25.91 18.07 20.48
- --------------------------------------------------------------------------------------------------------------------------------
Income Funds
- --------------------------------------------------------------------------------------------------------------------------------
Bond (Instl. Class)+ 14.00% 6.39% 9.74% -3.31% 17.88% 2.80% 7.69% 6.61% 7.54%
- --------------------------------------------------------------------------------------------------------------------------------
Bond (Serv. Class)++ 14.00 6.39 9.74 -3.31 17.55 2.62 7.40 6.47 7.43
- --------------------------------------------------------------------------------------------------------------------------------
Indexed Bond (Instl. Class)+ 14.70 7.09 9.64 -3.44 18.07 2.55 7.33 6.59 7.68
- --------------------------------------------------------------------------------------------------------------------------------
Indexed Bond (Serv. Class)++ 14.70 7.09 9.64 -3.44 17.97 2.34 7.11 6.51 7.62
- --------------------------------------------------------------------------------------------------------------------------------
International Bond (Instl. Class)(S) 18.73 7.68 14.56 3.11 18.46 14.32 9.64 10.53 10.11
- --------------------------------------------------------------------------------------------------------------------------------
International Bond (Serv. Class)(S) 18.73 7.68 14.56 3.11 18.26 14.08 9.39 10.41 10.03
- --------------------------------------------------------------------------------------------------------------------------------
Money Market/||/ (Instl. Class)+ 5.95 3.66 2.89 3.88 5.63 5.11 5.13 4.34 4.56
- --------------------------------------------------------------------------------------------------------------------------------
Money Market/||/ (Serv. Class)++ 5.95 3.66 2.89 3.88 5.46 4.85 4.87 4.22 4.47
- --------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond (Instl. Class)+ 11.30 5.94 5.67 0.11 10.27 4.81 6.25 5.27 6.23
- --------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond (Serv. Class)++ 11.30 5.94 5.67 0.11 10.07 4.46 6.01 5.14 6.13
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions
and dividends, and, for the Service Class shares, include the service fee
of .25%.
+ The inception date of these Institutional Class shares and the date such
shares were first offered to the public is 1/2/91.
++ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Funds' inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
(S) The inception date of the International Equity Fund and International Bond
Fund shares and the date such shares were first offered to the public is
1/1/95. The inception dates of the International Equity Fund and
International Bond Fund's predecessor separate accounts (Separate Accounts)
are 7/31/92 and 1/31/90, respectively. Performance figures include the
historical performance of the respective Separate Account for the period
prior to the Fund's commencement of operations on January 1, 1995. MacKay
Shields Financial Corporation, the Funds' investment adviser, served as
investment adviser to the Separate Accounts, and the investment objectives,
policies, restrictions, guidelines, and management style of the Separate
Accounts were substantially similar to those of the respective Funds.
Performance figures for the period prior to January 1, 1995 have been
calculated using the Separate Accounts' expense structures, which generally
was higher than the expense structure of the Funds. The Separate Accounts
were not registered under the Investment Company Act of 1940 ("1940 Act")
and therefore were not subject to certain investment restrictions imposed
under the 1940 Act. If the Separate Accounts had been registered under the
1940 Act, the Separate Accounts' performance may have been adversely
affected.
/||/ The Money Market Fund-Institutional Class had an effective 7-day yield of
5.47% with a current 7-day yield of 5.33%, both as of 6/30/97. The Money
Market Fund-Service Class had an effective 7-day yield of 5.21% with a
current 7-day yield of 5.08%, both as of 6/30/97. The Administrator has
agreed to assume a portion of the expenses for this Fund. Had certain
expenses not been assumed by the Administrator, the effective 7-day yield
and the current 7-day yield would have been 5.40% and 5.26%, respectively,
for the Institutional Class and 5.14% and 5.01%, respectively, for the
Service Class.
Investments in the Money Market Fund are neither insured nor guaranteed by
the U.S. government, and there is no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
Performance figures for each Fund reflect the waiver (through 1993 for the
Value Equity Fund and Growth Equity Fund and through 1996 for the Multi-
Asset Fund) of a portion of New York Life Insurance Company's fees (up to
the amount of such fees), received as Administrator for each Fund, to the
extent necessary to limit the total operating expenses of such Funds. After
September 30, 1996, performance figures for the Indexed Equity Fund reflect
the waiver of a portion of New York Life's and Monitor Capital Advisors,
Inc.'s fees (both up to the amount of such fees) received as Administrator
and Investment Adviser, respectively, of the Fund, to the extent necessary
to limit the total operating expenses of such Fund. As a result, total
return figures, which take into account this fee waiver, would have been
lower had New York Life and Monitor Capital not waived its administrative
fees.
The Funds currently offer two Classes of shares. Investors should consider,
when deciding whether to purchase a particular Class of shares, the
services desired and other relevant factors.
See prospectuses for more detailed information. The Funds' prospectuses
contain more information about advisory fees, other expenses and share
classes. Please read them carefully before you invest or send money.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
Foreign investing may be subject to greater risks than domestic investing.
These may include securities markets that are less efficient, less liquid
and more volatile than those in the United States, as well as foreign
currency fluctuations and different governmental regulatory concerns.
<PAGE>
Table of Contents
Chairperson's Letter 2
Portfolio Managers' Interviews & Comments
&
Financial Statements
Equity Funds
EAFE Index Fund 3
Growth Equity Fund 19
Indexed Equity Fund 29
International Equity Fund 44
Multi-Asset Fund 59
Value Equity Fund 76
Income Funds
Bond Fund 85
Indexed Bond Fund 95
International Bond Fund 105
Money Market Fund 115
Short-Term Bond Fund 124
Note 1 Organization and Business 132
Note 2 Significant Accounting Policies 133
Note 3 Fees and Related Party Policies 138
Note 4 Federal Income Tax 140
Note 5 Financial Investments 141
Note 6 Portfolio Securities Loaned 141
Note 7 Purchases and Sales of Securities 142
Note 8 Capital Share Transactions 142
<PAGE>
CHAIRPERSON'S LETTER
================================================================================
REPORT TO SHAREHOLDERS FOR THE SIX MONTHS
ENDED JUNE 30, 1997
After a remarkable six year period of expansion, the U.S. economy continued to
grow throughout the first half of 1997. For most investors, the overall impact
was positive, but there were some rough seas along the way.
As the stock market made gains early in the year, concerns about the possibility
of impending inflation brought increased price volatility. In late March, the
Federal Reserve Board moved to raise interest rates in an effort to slow
economic growth. Although this preemptive strike helped keep inflation in check,
the initial reaction from both the stock and bond markets was negative. As a
result, bond prices faltered and stocks tumbled more than 9% from their peak
before both markets began to stabilize.
[PICTURE OF ALICE T. KANE APPEARS HERE]
Alice T. Kane, Chairperson
As employment figures, earnings estimates, and other indicators began to suggest
that economic growth was slowing in the second quarter, the stock market not
only recovered lost ground, but soared to record highs. With higher valuations,
however, the market became increasingly volatile, reacting severely to any news
that could signal a shift in buying patterns or interest rates.
Positive performance, emerging concerns
Despite the volatility, domestic stock and bond markets closed the first half of
1997 with positive returns, and weakness in Malaysia and Singapore aside, most
international markets also performed well. Given these results, many investors
are once again celebrating their good fortune. The underlying volatility,
however, should serve to remind us that the level of growth we've enjoyed for
more than six years is not typical market behavior.
Certainly no one can predict what will happen next, so it's important to keep
recent performance in perspective. We believe that having realistic
expectations, as well as a long-range plan and diversified investments can help
keep you on a firm course toward achieving your goals, wherever the markets may
move.
Solid management
At MainStay(R) Institutional Funds, we believe our risk-averse approach can help
provide reassurance to many investors, particularly in uncertain times. Each
MainStay Institutional Fund is managed by experienced professionals who employ
disciplined investment strategies to seek competitive returns with careful
attention to downside risk. Our management approach offers investors a
combination of experience, insight, and market perspective that few individuals
could provide on their own. It also helps provide important checks and balances
in security selection, market evaluation, and overall accountability.
Our Fund managers believe that strong companies tend to get stronger in up
markets and perform better than average when the markets go down. Using
selection criteria appropriate to the individual Funds they manage, they may
look for specific catalysts that are likely to stimulate growth, enhance value,
or increase yield without taking on unnecessary risk.
Looking forward
As we move into the second half of 1997, we expect that an intensified focus on
inflation, interest rates, and corporate earnings, will account for much of the
momentum driving the market. But regardless of how events unfold, you can be
confident that we will hold true to our disciplined management approach.
While we've seen positive results for the first half of the year, we remain
somewhat cautious. Whatever the future brings, we'll continue to provide the
information, service, and support you can consider when making informed
decisions--and the prudent management you depend on to pursue your long-range
goals.
Sincerely,
/s/ Alice T. Kane
Alice T. Kane
Chairperson
2
<PAGE>
Portfolio Managers' Interviews & Comments
EAFE Index Fund
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. During the first six months of 1997, the Morgan Stanley Capital
International Europe, Australia and Far East ("EAFE") Index* gained 11.21%
in U.S. dollar terms
. Continued corporate restructuring and low interest rates in Europe helped
boost equity prices and a strong U.S. dollar benefited European exporters
. Japan posted positive returns for the first half of 1997, turning around
first quarter losses with a second quarter advance of 23.67% in U.S. dollar
terms
. In Hong Kong, rising property values helped real estate stocks, which make
up a large portion of that market, while property speculation and other
problems in Malaysia contributed to negative performance in that market
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6-AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 12.51% and 12.29% for Institutional Class shares
and Service Class shares, respectively, as of 6/30/97
. Switzerland and Spain were the best performing markets, and Malaysia and
Singapore were the worst performers
. Japan, which represents the largest country allocation in the MSCI EAFE
Index, had positive stock returns and the yen strengthened relative to the
U.S. dollar
. Over the first half of 1997, both share classes underperformed the average
Lipper/+/ international fund
- --------------------------------------------------------------------------------
Local terms Performance reports in local terms reflect results within a specific
country with returns denominated in its local currency. They do not consider the
impact of currency fluctuations or exchange rates when translated into other
currencies.
European Monetary Union A proposed system that would allow participating
European countries to operate with a common currency or monetary unit. To
qualify for participation, each member country must meet strict monetary and
fiscal policy guidelines.
- --------------------------------------------------------------------------------
During the first six months of 1997, the Morgan Stanley Capital International
EAFE Index gained 16.54% in local terms and 11.21% in terms of U.S. dollars.
Positive economic developments in many major markets around the world helped
fuel these strong results.
In Europe, interest rates were generally low and corporate restructuring
continued to fuel steady economic growth. At the same time, moves toward
European Monetary Union caused many local currencies to weaken against the U.S.
dollar. While this was positive for European exporters, it had a negative impact
on the returns many U.S. investors received.
In the Pacific, improvements in the Japanese economy led to a dramatic
turnaround. While first quarter returns were negative, Japanese stocks advanced
23.67% in the second quarter, to return 9.07% in U.S. dollar terms over the
first half of 1997. Since Japanese stocks account for nearly a
- --------------------------------------------------------------------------------
* The MSCI EAFE Index is an unmanaged index generally considered representative
of the international stock market.
+ Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
3
<PAGE>
================================================================================
third of the EAFE Index, they had the greatest impact of any single market on
the Fund's performance.
Switzerland and Spain recorded outstanding returns in local terms (42.58% and
36.49%, respectively), which were somewhat lower in U.S. dollar terms (31.33%
and 20.71%, respectively). Malaysia and Singapore did poorly--both in local and
U.S. dollar terms.
Given this context, how did the MainStay Institutional EAFE Index Fund perform
over the first half of 1997?
The MainStay Institutional EAFE Index Fund returned 11.00% and 10.81% for
Institutional Class shares and Service Class shares, respectively, for the six
months ended 6/30/97. Both share classes underperformed the average Lipper/++/
international fund, which returned 12.53% over the same period.
Why did the Fund underperform its peers by this amount?
Unlike many international funds, which may shift investments among markets
depending on their return potential at any given time, the MainStay
Institutional EAFE Index Fund seeks to provide investment results that
correspond to the total return performance (reflecting reinvestment of
dividends) of common stocks in the aggregate, as represented by the EAFE Index.
As a result, the Fund's investment results are primarily determined by the
performance of the Index.
How did the Fund compare with the EAFE Index?
The Fund closely tracked the Index, which gained 11.21% in U.S. dollar terms
over the first six months of 1997. The Index is a hypothetical investment that
involves no trading costs or management fees. The Fund, on the other hand, is a
real-world investment that faces these costs on an ongoing basis. As a result,
investors should anticipate that the Fund will always slightly underperform the
Index.
What risks did investors face during the first half of the year?
Investments in foreign securities may be subject to greater risks than domestic
investments. These risks include currency fluctuations, changes in U.S. or
foreign tax or currency laws, and changes in monetary policies and economic and
political conditions in foreign countries.
Where did those kinds of risks affect the Fund?
Malaysia and Singapore, which were the two worst performing markets in the EAFE
Index over the first half of the year, reflected these risks in varying degrees.
Malaysia faced a widening trade gap, current account deficit, and overzealous
lending by banks to the property sector. As a result, Malaysian stocks lost
11.79% in local terms. When that was translated into U.S. dollars, the results
were fractionally better, down 11.74%. Singapore was down 5.40% in local terms,
but due to an unfavorable currency translation, the market was down 7.45%, in
U.S. dollar terms.
Did similar factors impact other markets?
Yes they did. The dollar strengthened relative to several European currencies,
which helped exporters, but hurt returns for U.S. investors. Even the best
performing markets in the EAFE Index, Switzerland and Spain, had considerably
lower returns in U.S. dollar terms than in their local currencies. Switzerland
earned 42.58% in local terms, but only 31.33% in U.S. dollar terms. Spain was up
36.49% in local terms, but only 20.72% in U.S. dollars. Even with the currency
translation, however, these results were extraordinary for a six-month period.
Were there any cases where currency translation worked in investors' favor?
Yes there were. In Japan, the largest market in the EAFE Index, a strengthening
economy led to robust
- --------------------------------------------------------------------------------
++ Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deductions of sales charges and are
based on total returns with capital gains and dividends reinvested.
4
<PAGE>
================================================================================
equity returns in the second quarter. For the first half of 1997, Japanese
stocks returned 7.53% in local terms. While that was a definite plus,
particularly in light of Japan's earlier weakness, the strength of the yen was
favorable for U.S. investors, boosting the return to 9.07% when translated into
U.S. dollars.
Don't the effects of currency fluctuations balance out over time?
Many investors believe that they do. The Fund seeks to track the EAFE Index,
whether it goes up or down. It also invests in all of the markets in the Index,
regardless of whether the dollar is strong or weak relative to the local
currency. As a result, investors will participate in rising markets and
favorable currency translations as well as falling markets and unfavorable
currency shifts. Although past performance is no guarantee of future results,
one way to determine the impact of this indexing strategy over time is to look
at the Fund's returns over longer holding periods.
What is your outlook for the future?
We believe that Europe may continue to benefit from restructuring and that
European Monetary Union may have long-range benefits which have not yet been
realized. We are encouraged to see positive developments in the Japanese economy
and hope that they can be sustained. Whatever happens, we will seek to track the
Index as closely as possible to provide the international diversification and
capital appreciation potential that have attracted investors to the Fund.
James A. Mehling, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
5
<PAGE>
[GRAPHS APPEAR HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE EAFE INDEX FUND MSCI EAFE INDEX
---- --------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,630 10,752
10,180 10,173
10,930 11,055
91 11,010 11,249
9,665 9,923
9,866 10,142
10,027 10,304
92 9,665 9,916
10,681 11,114
11,635 12,241
12,427 13,062
93 12,464 13,183
12,858 13,652
13,542 14,359
13,521 14,382
94 13,315 14,246
13,526 14,522
13,547 14,639
14,043 15,261
95 14,518 15,891
14,989 16,362
15,247 16,633
15,235 16,625
96 15,453 16,591
97 17,153 18,451
6/30/97
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE EAFE INDEX FUND MSCI EAFE INDEX
---- --------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,630 10,752
10,180 10,173
10,930 11,055
91 11,010 11,249
9,665 9,923
9,866 10,142
10,027 10,304
92 9,665 9,916
10,681 11,114
11,635 12,241
12,427 13,062
93 12,464 13,183
12,858 13,652
13,524 14,359
13,521 14,382
94 13,315 14,246
13,537 14,522
13,547 14,639
14,011 15,261
95 14,465 15,891
14,947 16,362
15,182 16,633
15,150 16,625
96 15,385 16,591
97 17,049 18,451
6/30/97
</TABLE>
. EAFE Index Fund -- MSCI EAFE Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- ----------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EAFE Index Fund Institutional Class 11.00% 12.51% 11.70% 8.65%
EAFE Index Fund Service Class+ 10.81% 12.29% 11.56% 8.55%
Average Lipper International Fund 12.53% 16.54% 12.33% 11.73%
MSCI EAFE Index 11.21% 12.84% 12.83% 9.88%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
Institutional Class Shares
<TABLE>
<CAPTION>
Year-End Total Return %*
-------- --------------
<S> <C>
1991 10.10
1992 -12.22
1993 28.97
1994 6.83
1995 9.03
1996 6.45
1997 as of 6/30/97 11.00
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Common Stocks 97.78%
Other 1.81%++
Cash & Equivalents 0.41%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. Toyota Motor Corp. 1.73%
2. Novartis AG Registered 1.66%
3. Royal Dutch Petroleum Co. 1.57%
4. Bank of Tokyo-Mitsubishi, Ltd. 1.36%
5. Nippon Telegraph and Telephone Corp. 1.36%
6. British Petroleum Co. PLC. 1.18%
7. Glaxo Wellcome PLC. 1.07%
8. Roche Holdings AG Genusscheine 1.05%
9. Deutsche Telekom AG 0.87%
10. Nestle S.A. Registered 0.87%
<CAPTION>
- --------------------------------------------------------------------------------
Top 10 COUNTRIES
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. Japan 32.30%
2. United Kingdom 17.92%
3. Germany 7.97%
4. France 6.52%
5. Switzerland 6.48%
6. Netherlands 4.81%
7. Hong Kong 3.59%
8. Italy 2.94%
9. Australia 2.78%
10. Spain 2.54%
</TABLE>
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in their
expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
Unlike other funds which generally seek to "beat" the market, index funds
seek to track their respective indices.
++ Adjusted for liabilities.
6
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
EAFE INDEX FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS (97.8%)+
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
AUSTRALIA (2.7%)
Boral, Ltd. (building materials & components)........... 12,500 $ 39,049
Broken Hill Proprietary Co., Ltd. (energy sources)...... 17,270 252,066
Coles Myer, Ltd. (merchandising)........................ 40,137 207,171
National Australia Bank, Ltd. (banking)................. 42,900 609,665
News Corp., Ltd. (broadcasting & publishing)............ 33,000 156,984
Pacific Dunlop, Ltd. (multi-industry)................... 25,200 74,002
Pioneer International, Ltd. (building materials &
components)............................................ 42,400 162,630
Plutonic Resources, Ltd. (metals-nonferrous)............ 14,000 43,421
Rio Tinto, Ltd. (metals-nonferrous)..................... 16,448 278,229
Smith (Howard), Ltd. (multi-industry)................... 20,900 197,279
Sydney Harbour Casino Holdings, Ltd. (leisure &
tourism) (a)........................................... 40,000 62,328
Westpac Banking Corp., Ltd. (banking)................... 70,800 422,726
WMC, Ltd. (metals-nonferrous)........................... 30,600 191,415
-----------
2,696,965
-----------
AUSTRIA (0.4%)
Bank Austria AG (banking)............................... 1,750 97,056
Creditanstalt-Bankverein Stamm AG (banking)............. 700 40,877
EA-Generali AG (insurance).............................. 500 131,514
Flughafen Wien AG (transportation-airlines)............. 2,700 114,069
-----------
383,516
-----------
BELGIUM (1.4%)
Electrabel, S.A. (utilities-electrical & gas)........... 1,800 386,036
Fortis AG (insurance)................................... 3,200 661,363
PetroFina, S.A. (energy sources)........................ 820 310,779
-----------
1,358,178
-----------
DENMARK (1.1%)
Dampskibsselskabet AF 1912
Class B (transportation-shipping)...................... 7 250,727
Dampskibsselskabet Svendborg AS
Class B (transportation-shipping)...................... 4 206,916
Den Danske Bank (banking)............................... 1,800 175,366
FLS Industries AS Class B (machinery & engineering)..... 3,500 118,765
Novo Nordisk AS Class B (health & personal care)........ 2,800 305,729
-----------
1,057,503
-----------
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FINLAND (0.9%)
Kesko (food & household products)....................... 3,400 $ 47,915
Kone Corp. Class B (transportation-shipping)............ 1,900 226,789
Metra Oy Class B (machinery & engineering).............. 4,600 138,595
Nokia AB Class A (electronic components & instruments).. 5,200 388,329
Pohjola Insurance Group Class B (insurance)............. 3,000 88,944
-----------
890,572
-----------
FRANCE (6.5%)
Alcatel Alsthom, S.A. (electrical & electronics)........ 2,500 313,408
AXA-UAP, S.A. (insurance)............................... 5,000 311,279
Carrefour, S.A. (food & household products)............. 600 436,183
Compagnie de Saint Gobain, S.A. (miscellaneous-materials
& components).......................................... 1,670 243,775
Compagnie Financiere de Paribas, S.A. Class A
(banking).............................................. 3,400 235,124
Compagnie Generale de Geophysique, S.A. (energy
equipment & service) (a)............................... 300 29,229
Compagnie Generale des Eaux, S.A. (business & public
services).............................................. 2,572 329,882
Credit National, S.A. (banking)......................... 2,744 156,061
Dollfus-Mieg & Cie, S.A. (textile & apparel) (a)........ 2,450 41,814
Elf Aquitaine, S.A. (energy sources).................... 4,800 518,350
Etablissements Economiques du Casino Guichard-Perrachon,
S.A. (merchandising)................................... 6,100 302,250
Groupe Danone, S.A. (food & household products)......... 1,675 277,030
Lafarge, S.A. (building materials & components)......... 1,936 120,527
L'Air Liquide, S.A. (chemicals)......................... 2,894 459,910
L'Oreal, S.A. (health & personal care).................. 1,430 603,086
LVMH (Moet Hennessy Louis Vuitton), S.A. (beverages
& tobacco)............................................. 2,310 621,673
Michelin (CGDE), S.A. Class B (industrial components)... 3,200 192,351
PSA Peugeot, S.A. (automobiles)......................... 1,150 111,260
Sanofi, S.A. (health & personal care)................... 4,040 396,366
Schneider, S.A. (electrical & electronics).............. 3,000 159,838
Societe Generale, S.A. (banking)........................ 1,600 178,779
Total, S.A. Class B (oil/gas-exploration)............... 3,000 303,529
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
7
<PAGE>
EAFE INDEX FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FRANCE (Continued)
Union des Assurances de Paris, S.A. (insurance)......... 5,000 $ 126,130
-----------
6,467,834
-----------
GERMANY (7.7%)
AGIV AG fuer Industrie und Verkehrswesen
(multi-industry) (a)................................... 5,000 114,489
Allianz AG Registered (insurance)....................... 2,720 581,452
BASF AG (chemicals)..................................... 16,500 609,328
Bayer AG (chemicals).................................... 19,000 732,725
Bayerische Hypotheken-und Wechsel-Bank AG (banking)..... 12,450 376,886
Bayerische Vereinsbank AG (banking)..................... 6,630 271,663
Beiersdorf AG (health & personal care).................. 3,000 161,833
Daimler-Benz AG (automobiles)........................... 9,000 732,898
Deutsche Bank AG (banking).............................. 4,100 240,937
Deutsche Telekom AG (telecommunications)................ 35,000 860,671
Dresdner Bank AG (banking).............................. 600 21,038
Heidelberger Zement AG (building materials &
components)............................................ 1,100 106,684
Hochtief AG (construction & housing).................... 3,500 156,668
Mannesmann AG (machinery & engineering)................. 860 384,463
Muenchener Rueckversicherungs-Gesellschaft AG
Registered (insurance)................................. 150 425,243
RWE AG (utilities-electrical & gas)..................... 8,400 361,543
Siemens AG (electrical & electronics)................... 11,500 689,326
STRABAG AG (construction & housing) (a)................. 900 84,188
VEBA AG (utilities-electrical & gas).................... 6,900 390,036
Viag AG (multi-industry)................................ 700 319,965
-----------
7,622,036
-----------
HONG KONG (3.6%)
Cathay Pacific Airways, Ltd. (transportation-airlines).. 90,000 186,453
Cheung Kong (Holdings), Ltd. (construction & housing)... 40,000 394,976
China Light & Power Co., Ltd. (utilities-electrical
& gas)................................................. 31,200 176,795
Chinese Estates Holdings, Ltd. (multi-industry)......... 60,000 56,538
Hang Lung Development Co. (multi-industry).............. 38,000 69,650
Hang Seng Bank, Ltd. (banking).......................... 32,000 456,419
Hong Kong & China Gas Co., Ltd. (utilities-electrical
& gas)................................................. 88,334 176,730
Hong Kong Telecommunications, Ltd.
(telecommunications)................................... 185,000 441,761
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
HONG KONG (Continued)
Hopewell Holdings, Ltd. (construction & housing)........ 100,000 $ 63,250
Hutchison Whampoa, Ltd. (multi-industry)................ 69,000 596,726
Miramar Hotel & Investment, Ltd. (leisure & tourism).... 50,000 91,970
New World Development Co., Ltd. (multi-industry)........ 34,000 202,756
Shangri-La Asia, Ltd. (multi-industry).................. 60,000 72,024
Sun Hung Kai Properties, Ltd. (construction & housing).. 33,000 397,205
Swire Pacific, Ltd. Class A (multi-industry)............ 19,500 175,562
-----------
3,558,815
-----------
IRELAND (0.4%)
Allied Irish Banks PLC (banking)........................ 12,000 91,829
Independent Newspapers PLC (broadcasting & publishing).. 50,000 289,170
Irish Life PLC (insurance).............................. 15,000 76,939
-----------
457,938
-----------
ITALY (2.9%)
Alleanza Assicurazioni S.p.A. di Risp (insurance)....... 63 320
Assicurazioni Generali S.p.A. (insurance)............... 13,310 241,715
Banca Commerciale Italiana S.p.A. (banking)............. 48,500 100,337
Bulgari S.p.A. (recreation & other consumer goods)...... 20,000 113,076
Cementir S.p.A. (building materials & components)....... 62,000 38,663
Credito Italiano S.p.A. (banking)....................... 66,000 120,635
Edison S.p.A. (energy sources).......................... 18,200 90,438
Ente Nazionale Idrocarburi S.p.A. (energy sources)...... 110,000 622,248
Fiat S.p.A. (automobiles)............................... 56,000 201,421
Finanziaria Autogrill S.p.A. (food & household
products) (a).......................................... 45,000 75,244
Istituto Mobiliare Italiano S.p.A. (banking)............ 9,600 86,324
Istituto Nazionale delle Assicurazioni S.p.A.
(insurance)............................................ 65,700 100,009
Magneti Marelli S.p.A. (automobiles).................... 53,000 89,395
Mediobanca S.p.A. (financial services).................. 19,850 120,394
Montedison S.p.A. (multi-industry) (a).................. 100,800 66,467
Pirelli S.p.A. (industrial components).................. 72,000 178,149
Snia BPD S.p.A. (multi-industry)........................ 50,400 45,466
Telecom Italia S.p.A. (telecommunications).............. 90,000 269,235
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
8
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
ITALY (Continued)
Telecom Italia Mobile S.p.A. (telecommunications)....... 90,000 $ 290,916
-----------
2,850,452
-----------
JAPAN (32.3%)
Acom Co., Ltd. (financial services)..................... 3,000 144,717
Ajinomoto Co., Inc. (food & household products)......... 5,000 53,745
Arabian Oil Co., Ltd. (energy sources).................. 2,000 67,465
Asahi Bank, Ltd. (banking).............................. 38,000 323,779
Asahi Breweries, Ltd. (beverages & tobacco)............. 14,000 209,210
Asahi Chemical Industry Co., Ltd. (chemicals)........... 46,000 275,365
Asahi Glass Co., Ltd. (miscellaneous-materials &
components)............................................ 12,000 119,549
Ashikaga Bank, Ltd. (banking)........................... 19,000 69,738
Bank of Tokyo-Mitsubishi, Ltd. (banking) (d)............ 67,000 1,346,673
Bank of Yokohama, Ltd. (banking)........................ 11,000 62,003
Bridgestone Corp. (industrial components)............... 10,000 232,456
Brother Industries, Ltd. (appliances & household
durables).............................................. 22,000 94,974
Canon, Inc. (recreation & other consumer goods)......... 18,000 490,781
Chiba Bank, Ltd. (banking).............................. 25,000 149,000
Chichibu Onoda Cement Corp. (building materials &
components)............................................ 22,000 86,324
Chiyoda Corp. (machinery & engineering)................. 5,000 24,076
Chugai Pharmaceutical Co., Ltd. (health & personal
care).................................................. 10,000 90,011
Citizen Watch Co., Ltd. (recreation & other consumer
goods)................................................. 19,000 146,779
Dai Nippon Printing Co., Ltd. (business & public
services).............................................. 10,000 226,339
Daiei, Inc. (merchandising)............................. 17,000 109,193
Daikin Industries, Ltd. (machinery & engineering)....... 6,000 54,531
Dainippon Ink & Chemical, Inc. (chemicals).............. 33,000 142,461
Daiwa House Industry Co., Ltd. (construction &
housing)............................................... 8,000 97,877
Daiwa Securities Co., Ltd. (financial services)......... 12,000 94,800
Denso Corp. (industrial components) (d)................. 23,000 550,730
East Japan Railway Co. (transportation-road & rail)..... 65 334,003
Ebara Corp. (machinery & engineering)................... 6,000 90,186
Eisai Co., Ltd. (health & personal care)................ 6,000 113,782
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
JAPAN (Continued)
Fanuc, Ltd. (electronic components & instruments)....... 5,000 $ 192,257
Fuji Bank, Ltd. (banking) (d)........................... 44,000 661,364
Fuji Photo Film, Ltd. (recreation & other consumer
goods) (d)............................................. 13,000 523,726
Fujitsu, Ltd. (data processing & reproduction).......... 31,000 430,745
Furukawa Electric Co. (industrial components)........... 15,000 95,561
Gakken Co. (broadcasting & publishing).................. 13,000 68,505
Gunma Bank (banking).................................... 14,000 126,015
Hitachi Corp., Ltd. (electrical & electronics) (d)...... 57,000 637,596
Hitachi Zosen Corp. (metals-steel)...................... 20,000 79,700
Hokuriku Bank (banking)................................. 27,000 92,729
Honda Motor Co., Ltd. (automobiles) (d)................. 19,000 572,839
Industrial Bank of Japan, Ltd. (banking)................ 36,000 559,994
Ito-Yokado Co., Ltd. (merchandising).................... 7,000 406,799
Japan Airlines Co. (transportation-airlines) (a)........ 36,000 163,908
Japan Energy Corp. (energy sources)..................... 34,000 89,138
Japan Steel Works (metals-steel) (a).................... 58,000 113,030
Joyo Bank (banking)..................................... 18,000 99,572
Kajima Corp. (construction & housing)................... 20,000 117,276
Kamigumi Co., Ltd. (business & public services)......... 22,000 124,005
Kansai Electric Power Co., Inc. (utilities-electrical
& gas)................................................. 8,800 169,955
Kao Corp. (food & household products)................... 4,000 55,580
Kawasaki Heavy Industries (construction & housing)...... 22,000 102,474
Kawasaki Steel Corp. (metals-steel)..................... 66,000 215,134
Keihin Electric Express Railway (transportation-road
& rail)................................................ 16,000 75,226
Kinki Nippon Railway Co., Ltd. (transportation-road
& rail)................................................ 55,000 336,451
Kirin Brewery Co., Ltd. (beverages & tobacco)........... 14,000 145,592
Komatsu, Ltd. (machinery & engineering)................. 15,000 121,908
Kubota Corp. (machinery & engineering).................. 39,000 191,201
Kumagai Gumi Co., Ltd. (construction & housing)......... 33,000 55,080
Kurabo Industries (textile & apparel)................... 15,000 40,505
Kyocera Corp. (electronic components & instruments)..... 3,000 238,574
Kyowa Hakko Kogyo (health & personal care).............. 8,000 59,984
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
9
<PAGE>
EAFE INDEX FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
JAPAN (Continued)
Makita Corp. (electrical & electronics)................. 8,000 $ 117,452
Marubeni Corp. (wholesale & international trade)........ 16,000 72,709
Marui Co., Ltd. (merchandising)......................... 8,000 148,912
Matsushita Electric Industrial Co., Ltd. (appliances &
household durables).................................... 32,000 645,984
Mitsubishi Chemical Corp. (chemicals)................... 30,000 98,052
Mitsubishi Corp. (multi-industry)....................... 28,000 349,908
Mitsubishi Estate Co., Ltd. (construction & housing).... 19,000 275,627
Mitsubishi Heavy Industries, Ltd. (machinery &
engineering)........................................... 72,000 553,068
Mitsubishi Oil Co., Ltd. (energy sources)............... 8,000 35,655
Mitsubishi Trust & Banking Corp. (financial services)... 19,000 300,532
Mitsui & Co. (wholesale & international trade).......... 23,000 221,097
Mitsui Fudosan Co., Ltd. (construction & housing)....... 15,000 207,114
Mitsui Marine & Fire Insurance Co., Ltd. (insurance).... 9,000 65,123
Mitsui O.S.K. Lines, Ltd. (transportation-
shipping) (a).......................................... 49,000 101,058
Mitsui Trust & Banking Co., Ltd. (financial services)... 8,000 60,474
Mitsukoshi, Ltd. (merchandising)........................ 24,000 170,935
NEC Corp. (electrical & electronics).................... 27,000 377,522
NGK Insulators, Ltd. (industrial components)............ 11,000 121,122
Niigata Engineering Co., Ltd. (machinery &
engineering) (a)....................................... 11,000 20,187
Nikon Corp. (multi-industry)............................ 9,000 151,796
Nippon Express Co., Ltd. (transportation-road & rail)... 32,000 255,878
Nippon Fire & Marine Insurance (insurance).............. 15,000 81,011
Nippon Light Metal Co. (metals-nonferrous).............. 22,000 80,170
Nippon Meat Packers, Inc. (food & household products)... 12,000 155,204
Nippon Oil Co., Ltd. (energy sources)................... 17,000 93,148
Nippon Steel Corp. (metals-steel)....................... 83,000 265,475
Nippon Telegraph & Telephone Corp.
(telecommunications)................................... 140 1,345,801
Nissan Motor Co., Ltd. (automobiles).................... 42,000 326,294
Nisshinbo Industries, Inc. (textile & apparel).......... 17,000 154,504
Nissin Food Products Co., Ltd. (food & household
products).............................................. 9,000 234,379
NKK Corp. (metals-steel)................................ 66,000 141,887
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
JAPAN (Continued)
Nomura Securities Co., Ltd. (financial services)........ 30,000 $ 414,228
Obayashi Corp. (construction & housing)................. 28,000 187,678
Oji Paper Co., Ltd. (forest products & paper)........... 27,000 167,289
Olympus Optical Co., Ltd. (recreation & other consumer
goods)................................................. 20,000 180,022
Orient Corp. (financial services)....................... 30,000 122,433
Osaka Gas Co., Ltd. (utilities-electrical & gas)........ 15,000 43,127
Penta-Ocean Construction (construction & housing)....... 10,000 32,334
Pioneer Electronic Corp. (appliances & household
durables).............................................. 5,000 121,471
Sakura Bank, Ltd. (banking)............................. 48,000 368,294
Sankyo Co., Ltd. (health & personal care)............... 11,000 370,095
Sanrio Co., Ltd. (business & public services) (a)....... 5,000 41,248
Sanyo Electric Co., Ltd. (appliances & household
durables).............................................. 32,000 143,738
Sapporo Breweries (beverages & tobacco)................. 28,000 232,946
Sato Kogyo Co. (construction & housing)................. 12,000 25,169
Sharp Corp. (appliances & household durables)........... 18,000 248,537
Shimizu Corp. (construction & housing).................. 18,000 108,067
Shin-Etsu Chemical Co. (chemicals)...................... 11,000 292,231
Shionogi & Co. (health & personal care)................. 9,000 69,842
Shiseido Co., Ltd. (health & personal care)............. 13,000 214,716
Shizuoka Bank, Ltd. (banking)........................... 16,000 183,168
Sony Corp. (appliances & household durables)............ 5,400 471,432
Sumitomo Bank, Ltd. (banking) (d)....................... 46,000 755,748
Sumitomo Chemical Co. (chemicals)....................... 30,000 136,065
Sumitomo Corp. (wholesale & international trade)........ 34,000 323,867
Sumitomo Electric Industries (industrial components).... 21,000 352,355
Sumitomo Marine & Fire Insurance Co. (insurance)........ 9,000 73,931
Sumitomo Metal Industries, Ltd. (metals-steel).......... 38,000 108,258
Sumitomo Metal Mining Co. (metals-nonferrous)........... 14,000 99,100
Taisei Corp. (construction & housing)................... 15,000 69,606
Taisho Pharmaceutical Co. (health & personal care)...... 10,000 270,034
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
10
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
JAPAN (Continued)
Taiyo Yuden Co., Ltd. (electronic components &
instruments)........................................... 11,000 $ 181,683
Takashimaya Co. (merchandising)......................... 13,000 177,226
Takeda Chemical Industries, Ltd. (health & personal
care).................................................. 13,000 365,813
Teikoku Oil Co. (energy sources)........................ 20,000 89,662
Tobu Railway Co., Ltd. (transportation-road & rail)..... 16,000 73,966
Tohoku Electric Power (utilities-electrical & gas)...... 6,000 106,965
Tokai Bank (banking).................................... 29,000 299,048
Tokio Marine & Fire Insurance Co. (insurance)........... 34,000 445,686
Tokyo Dome Corp. (leisure & tourism).................... 6,000 80,748
Tokyo Electric Power Co., Inc. (utilities-electrical
& gas)................................................. 13,100 275,898
Tokyo Electron, Ltd. (electronic components &
instruments)........................................... 5,000 239,447
Tokyo Gas Co., Ltd. (utilities-electrical & gas)........ 68,000 188,972
Tokyo Steel Manufacturing Co., Ltd. (machinery &
engineering)........................................... 7,000 78,301
Tokyu Corp. (transportation-road & rail)................ 18,000 111,841
Toppan Printing Co., Ltd. (business & public services).. 22,000 346,062
Tostem Corp. (building materials & components).......... 5,000 138,513
Toto, Ltd. (building materials & components)............ 6,000 73,931
Toyo Seikan Kaisha (miscellaneous-materials &
components)............................................ 6,000 133,182
Toyoda Automatic Loom Works, Ltd. (machinery &
engineering)........................................... 4,000 90,885
Toyota Motor Corp. (automobiles) (d).................... 58,000 1,713,187
Ube Industries, Ltd. (miscellaneous-materials &
components)............................................ 44,000 128,044
Uny Co., Ltd. (food & household products)............... 7,000 137,027
Yamaha Corp. (recreation & other consumer goods)........ 11,000 201,870
Yamaichi Securities Co., Ltd. (financial services)...... 10,000 29,800
Yamanouchi Pharmaceutical Co., Ltd. (health & personal
care).................................................. 2,000 53,832
Yasuda Trust & Banking (financial services)............. 15,000 57,416
-----------
32,037,082
-----------
MALAYSIA (1.9%)
Golden Hope Plantations Berhad (food & household
products).............................................. 40,000 68,780
Hong Leong Properties Berhad (construction & housing)... 60,000 68,226
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
MALAYSIA (Continued)
Kuala Lumpur Kepong Berhad (forest products & paper).... 70,500 $ 174,572
Leader Universal Holdings Berhad (electrical &
electronics)........................................... 30,000 53,961
Malayan Banking Berhad (banking)........................ 22,000 230,982
Malaysia International Shipping Berhad Foreign
Registered (transportation-shipping)................... 37,333 96,884
Malaysian Airline System Berhad (transportation-
airlines).............................................. 50,000 124,800
Malaysian Helicopter Services Berhad (transportation-
airlines).............................................. 11,600 10,249
Malaysian Resources Corp. Berhad (construction &
housing)............................................... 19,000 52,318
Metroplex Berhad (construction & housing)............... 80,000 83,040
Multi-Purpose Holdings Berhad (multi-industry).......... 27,000 37,868
Perlis Plantations Berhad (multi-industry).............. 31,250 91,619
PPB Oil Palms Berhad (food & household products)........ 10,000 11,094
Resorts World Berhad (leisure & tourism)................ 18,000 54,200
Sime Darby Berhad (multi-industry)...................... 80,000 266,240
Technology Resources Industries Berhad (multi-
industry) (a).......................................... 29,000 49,865
Telekom Malaysia Berhad (telecommunications)............ 45,000 210,379
Tenaga Nasional Berhad (utilities-electrical & gas)..... 39,000 190,055
-----------
1,875,132
-----------
NETHERLANDS (4.8%)
ABN Amro Holding N.V. (banking)......................... 17,600 328,766
Elsevier N.V. (broadcasting & publishing)............... 29,670 496,691
Hollandsche Beton Groep N.V. (construction & housing)... 1,000 228,497
ING Groep N.V. (insurance).............................. 15,482 715,104
Koninklijke Hoogovens CVA N.V. (metals-steel)........... 1,000 55,836
Koninklijke KNP BT N.V. (forest products & paper)....... 3,200 73,005
Koninklijke Nedlloyd N.V. (transportation-shipping)..... 2,000 57,877
Koninklijke Pakhoed N.V. (transportation-shipping)...... 1,000 35,318
Philips Electronics N.V. (appliances & household
durables).............................................. 6,500 466,437
Royal Dutch Petroleum Co. (energy sources).............. 29,820 1,553,917
Stork N.V. (multi-industry)............................. 2,700 110,242
Unilever CVA N.V. (food & household products)........... 3,083 650,172
-----------
4,771,862
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
11
<PAGE>
EAFE INDEX FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
NEW ZEALAND (0.4%)
Carter Holt Harvey Ltd. (forest products & paper)....... 23,100 $ 59,646
Fletcher Challenge Building (building materials &
components)............................................ 8,775 26,345
Fletcher Challenge Energy (oil/gas-exploration)......... 8,775 26,465
Fletcher Challenge Forest (forest products & paper)..... 31,578 45,798
Fletcher Challenge Paper (forest products & paper)...... 17,550 42,462
Telecom Corp. of New Zealand Ltd. (telecommunications).. 32,000 162,656
-----------
363,372
-----------
NORWAY (0.6%)
Christiania Bank Og Kreditkasse (banking)............... 35,000 119,045
Elkem ASA Class A (metals-nonferrous)................... 5,600 110,152
Norsk Hydro ASA Class A (energy sources)................ 6,800 370,616
-----------
599,813
-----------
SINGAPORE (1.1%)
City Developments, Ltd. (real estate)................... 29,000 283,945
Development Bank of Singapore, Ltd. Foreign Registered
(banking).............................................. 8,750 110,151
First Capital Corp., Ltd. (multi-industry).............. 24,000 62,441
Goldtron, Ltd. (electronic components & instruments).... 140,000 79,310
Singapore Airlines, Ltd. Foreign Registered
(transportation-airlines).............................. 15,000 134,280
Singapore Technologies Industrial Corp.
(multi-industry)....................................... 15,000 38,605
Singapore Telecommunications, Ltd.
(telecommunications)................................... 92,000 169,860
United Overseas Bank, Ltd. Foreign Registered
(banking).............................................. 20,250 208,186
Van der Horst, Ltd. (machinery & engineering)........... 7,000 12,876
-----------
1,099,654
-----------
SPAIN (2.5%)
Banco de Bilbao Vizcaya, S.A. Registered (banking)...... 6,367 518,209
Banco de Santander, S.A. (banking)...................... 9,300 287,087
Banco Espanol de Credito, S.A. (Banesto) (banking) (a).. 1,033 10,431
Compania Sevillana de Electricidad, S.A. (utilities-
electrical & gas)...................................... 6,049 62,518
Empresa Nacional de Celulosas, S.A. (forest products
& paper)............................................... 3,000 53,036
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
SPAIN (Continued)
Empresa Nacional de Electricidad, S.A. (utilities-
electrical & gas)...................................... 4,300 $ 361,671
Gas Natural SDG, S.A. (utilities-electrical & gas)...... 1,200 262,650
Iberdrola, S.A. (utilities-electrical & gas)............ 18,500 233,970
Repsol, S.A. (energy sources)........................... 4,200 177,915
Telefonica de Espana, S.A. (telecommunications)......... 19,056 551,972
-----------
2,519,459
-----------
SWEDEN (2.2%)
ABB AB Series B (utilities-electrical & gas)............ 25,000 349,180
Astra AB Series A (health & personal care).............. 21,880 407,471
Svenska Cellulosa AB Series B (forest products &
paper)................................................. 10,000 212,742
Swedish Match AB (beverages & tobacco).................. 26,030 87,526
Telefonaktiebolaget LM Ericsson Series B
(telecommunications)................................... 19,672 774,682
Volvo AB Series B (automobiles)......................... 12,030 322,049
-----------
2,153,650
-----------
SWITZERLAND (6.5%)
Credit Suisse Group Registered
(financial services)................................... 3,750 482,303
Holderbank Financiere Glarus AG Bearer (building
materials & components)................................ 134 126,752
Holderbank Financiere Glarus AG Registered (building
materials & components)................................ 1,200 226,361
Jelmoli Holdings, Ltd. Bearer (merchandising)........... 300 187,262
Nestle S.A. Registered (food & household products)...... 650 858,730
Novartis S.A. Bearer (health & personal care)........... 357 571,063
Novartis S.A. Registered (health & personal care)....... 1,027 1,644,214
Roche Holdings AG Genusscheine (health & personal
care).................................................. 115 1,041,654
Schindler Holding AG Participating Certificate
(miscellaneous-materials & components)................. 125 156,480
Schindler Holding AG Registered (miscellaneous-materials
& components).......................................... 75 96,461
Schweizerische Bankverein Registered (banking) (a)...... 1,220 326,789
SGS Societe Generale de Surveillance Holding S.A. Bearer
(business & public services)........................... 110 235,415
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
12
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
SWITZERLAND (Continued)
SGS Societe Generale de Surveillance Holding S.A.
Registered (business & public services)................ 250 $ 98,604
Sika Finanz AG Registered (building materials &
components)............................................ 2,400 118,531
Societe Suisse pour la Microelectronique et Horlogerie
AG Registered (recreation & other consumer goods)...... 500 67,822
Sulzer AG Registered (industrial components)............ 225 192,921
-----------
6,431,362
-----------
UNITED KINGDOM (17.9%)
Abbey National PLC (banking)............................ 39,100 533,609
Associated British Foods PLC (food & household
products).............................................. 29,400 253,704
Barclays PLC (banking).................................. 25,211 500,148
Bass PLC (beverages & tobacco).......................... 19,600 239,106
B.A.T. Industries PLC (beverages & tobacco)............. 44,666 399,564
BG PLC (energy sources)................................. 82,100 301,972
Boots Co. PLC (merchandising)........................... 19,101 223,642
British Petroleum Co. PLC (energy sources).............. 94,427 1,173,161
British Sky Broadcasting Group PLC (broadcasting &
publishing)............................................ 40,000 292,916
British Steel PLC (metals-steel)........................ 54,500 135,149
British Telecommunications PLC (telecommunications)..... 99,095 735,562
BTR PLC (multi-industry)................................ 63,913 218,590
Cable & Wireless PLC (telecommunications)............... 40,976 376,787
Centrica PLC (energy sources)........................... 82,100 100,088
Chubb Security PLC (business & public services)......... 20,520 153,169
Coats Viyella PLC (textile & apparel)................... 55,900 118,620
Courtaulds PLC (chemicals).............................. 12,663 71,233
De La Rue PLC (forest products & paper)................. 15,300 93,962
Energy Group PLC (multi-industry)....................... 12,747 135,988
General Accident PLC (insurance)........................ 12,500 182,449
General Electric Co. PLC (electrical & electronics)..... 56,040 334,828
Glaxo Wellcome PLC (health & personal care)............. 51,208 1,056,795
Granada Group PLC (leisure & tourism)................... 11,410 150,020
Grand Metropolitan PLC (multi-industry)................. 48,764 471,933
Guardian Royal Exchange PLC (insurance)................. 31,700 142,447
Guinness PLC (beverages & tobacco)...................... 35,386 346,291
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
Hanson PLC (multi-industry)............................. 15,934 $ 79,157
Harrisons & Crosfield PLC (miscellaneous-materials &
components)............................................ 59,200 109,366
HSBC Holdings PLC (HK par) (financial services)......... 28,300 838,373
Imperial Chemical Industries PLC (chemicals)............ 20,553 285,794
Imperial Tobacco Group PLC (beverages & tobacco)........ 3,747 24,103
Kingfisher PLC (merchandising).......................... 16,000 181,608
Ladbroke Group PLC (leisure & tourism).................. 65,000 254,221
LASMO PLC (energy sources).............................. 29,400 126,976
Lloyds TSB Group PLC (banking).......................... 73,328 751,769
Marks & Spencer PLC (merchandising)..................... 67,789 561,849
National Grid Group PLC (utilities-electrical & gas).... 20,447 74,695
National Power PLC (utilities-electrical & gas)......... 25,000 217,190
Next PLC (merchandising)................................ 15,000 169,385
Prudential Corp. PLC (insurance)........................ 38,200 369,696
Racal Electronic PLC (multi-industry)................... 25,020 100,771
Rank Group PLC (leisure & tourism)...................... 40,500 256,474
Reuters Holdings PLC (broadcasting & publishing)........ 37,000 389,795
Rio Tinto PLC Registered (metals-nonferrous)............ 21,400 372,722
Rolls-Royce PLC (aerospace & military technology)....... 45,985 175,644
Royal & Sun Alliance Insurance Group PLC (insurance).... 26,461 195,092
Royal Bank of Scotland Group PLC (banking).............. 25,900 241,176
Sainsbury (J.) PLC (merchandising)...................... 40,082 243,153
SmithKline Beecham PLC (health & personal care)......... 43,176 794,390
Tarmac PLC (building materials & components)............ 79,168 164,701
Tesco PLC (merchandising)............................... 50,058 307,837
Thames Water PLC (utilities-electrical & gas)........... 14,000 161,587
Unilever PLC (food & household products)................ 10,089 289,059
United Biscuits (Holdings) PLC (food & household
products).............................................. 30,091 102,415
Vodafone Group PLC (multi-industry)..................... 95,135 463,127
Williams PLC (building materials & components).......... 37,000 198,901
Wilson Connolly Holdings PLC (construction & housing)... 30,300 80,937
Zeneca Group PLC (chemicals)............................ 13,553 447,967
-----------
17,771,663
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
13
<PAGE>
EAFE INDEX FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
---------------------
<S> <C> <C>
UNITED STATES (0.0%) (b)
Millennium Chemicals Inc. (chemicals)................... 535 $ 12,171
-----------
Total Common Stocks (Cost $68,206,612).................. 96,979,029 (h)
-----------
PREFERRED STOCKS (0.4%)
AUSTRALIA (0.0%) (b)
News Corp., Ltd.
A$ 0.075
(broadcasting & publishing) (e)........................ 16,500 64,524
-----------
GERMANY (0.3%)
RWE AG
DM 1.50
(utilities-electrical & gas) (e)....................... 8,000 279,363
-----------
ITALY (0.1%)
Fiat S.p.A.
IL 100
(automobiles) (e)...................................... 35,000 64,589
-----------
Total Preferred Stocks (Cost $314,219).................. 408,476
-----------
RIGHTS (0.0%) (b)
SWITZERLAND (0.0%) (b)
Sulzer Medica AG Registered
Expire 7/9/97
(health & personal care) (a)(f)........................ 225 0 (c)
-----------
Total Rights............................................ 0
-----------
WARRANTS (0.0%) (b)
FRANCE (0.0%) (b)
Compagnie Generale des Eaux, S.A.
Call Warrants
Strike price FF 900
Expire 5/2/01
(business & public services) (a)....................... 2,572 1,542
-----------
HONG KONG (0.0%) (b)
Hong Kong & China Gas Co., Ltd.
Call Warrants
Strike price HK 11.50
Expire 9/30/97
(utilities-electrical & gas) (a)....................... 6,134 6,571
-----------
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
UNITED KINGDOM (0.0%) (b)
BTR PLC
Call Warrants
Strike price (Pounds) 2.58
Expire 11/30/97
(multi-industry) (a)................................... 418 $ 19
Call Warrants
Strike price (Pounds) 4.05
Expire 11/26/98
(multi-industry) (a)................................... 1,227 51
-----------
70
-----------
Total Warrants (Cost $1,282)............................ 8,183
-----------
SHORT-TERM
INVESTMENTS (1.3%)
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
U.S. GOVERNMENT (1.3%)
United States Treasury Bills
4.82%, due 9/11/97 (d)................................. $ 100,000 98,968
4.86%, due 9/11/97 (d)................................. 100,000 98,968
4.87%, due 9/18/97 (d)................................. 600,000 593,213
4.89%, due 9/11/97 (d)................................. 100,000 98,968
4.91%, due 9/18/97 (d)................................. 400,000 395,476
-----------
Total Short-Term Investments (Cost $1,286,372).......... 1,285,593
-----------
Total Investments (Cost $69,808,485) (i)................ 99.5% 98,681,281 (j)
Cash and Other Assets, Less Liabilities................. 0.5 507,703
--------- -----------
Net Assets.............................................. 100.0% $99,188,984
========= ===========
FUTURES
CONTRACTS (0.0%) (b)
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION)
-------------------------
<S> <C> <C>
JAPAN (0.0%) (b)
Japanese Yen, TOPIX Index, September 1997.......... 5 $ 9,700 (g)
-----------
UNITED KINGDOM (0.0%) (b)
Pound Sterling, FTSE 100 Index, September 1997..... 3 (21,467)(g)
-----------
Total Futures Contracts
(Settlement Value $1,251,379)..................... $ (11,767)
===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
14
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- --------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) Security has no value.
(d) Segregated or partially segregated as collateral for futures contracts.
(e) Dividend rate shown represents the most recent annual payment.
(f) Every 10 rights entitles the holder to purchase one share of Sulzer Medica
AG Registered for CF 350.
(g) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1997.
(h) The combined market value of common stocks and settlement value of Index
futures contracts represents 99.0% of net assets.
(i) The cost for Federal income tax purposes is $70,119,547.
(j) At June 30, 1997 net unrealized appreciation for securities was
$28,561,734, based on cost for Federal income tax purposes. This consisted
of aggregate gross unrealized appreciation for all investments on which
there was an excess of market value over cost of $33,522,078 and aggregate
gross unrealized depreciation for all investments on which there was an
excess of cost over market value of $4,960,344.
(k) The following abbreviations are used in the above portfolio:
A$--Australian Dollar
DM--Deutsche Mark
FF--French Franc
HK--Hong Kong Dollar
IL--Italian Lira
(Pounds)--Pound Sterling
CF--Swiss Franc
The table below sets forth the diversification of EAFE Index Fund investments
by industry.
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT +
-----------------------
<S> <C> <C>
Aerospace & Military Technology......................... $ 175,644 0.2%
Appliances & Household Durables......................... 2,192,573 2.2
Automobiles............................................. 4,133,931 4.2
Banking................................................. 12,945,196 13.1
Beverages & Tobacco..................................... 2,306,010 2.3
Broadcasting & Publishing............................... 1,758,584 1.8
Building Materials & Components......................... 1,627,911 1.6
Business & Public Services.............................. 1,556,267 1.6
Chemicals............................................... 3,563,304 3.6
Construction & Housing.................................. 2,887,608 2.9
Data Processing & Reproduction.......................... 430,745 0.4
Electrical & Electronics................................ 2,683,932 2.7
Electronic Components & Instruments..................... 1,319,600 1.3
Energy Equipment & Service.............................. 29,229 0.0#
Energy Sources.......................................... 5,973,593 6.0
Financial Services...................................... 2,665,470 2.7
Food & Household Products............................... 3,706,260 3.7
Forest Products & Paper................................. 922,512 0.9
Health & Personal Care.................................. 8,590,710 8.7
Industrial Components................................... 1,915,645 1.9
Insurance............................................... 5,015,446 5.1
Leisure & Tourism....................................... 949,962 1.0
Machinery & Engineering................................. 1,879,044 1.9
Merchandising........................................... 3,397,222 3.5
Metals-Nonferrous....................................... 1,175,210 1.2
Metals-Steel............................................ 1,114,469 1.1
Miscellaneous-Materials & Components.................... 986,858 1.0
Multi-Industry.......................................... 4,619,143 4.7
Oil/Gas-Exploration..................................... 329,994 0.3
Real Estate............................................. 283,945 0.3
Recreation & Other Consumer Goods....................... 1,724,076 1.7
Telecommunications...................................... 6,190,282 6.2
Textile & Apparel....................................... 355,443 0.4
Transportation-Airlines................................. 733,758 0.7
Transportation-Road & Rail.............................. 1,187,366 1.2
Transportation-Shipping................................. 975,569 1.0
U.S. Government......................................... 1,285,593 1.3
Utilities-Electrical & Gas.............................. 4,475,505 4.5
Wholesale & International Trade......................... 617,672 0.6
----------- -----
98,681,281 99.5
Cash and Other Assets, Less Liabilities................. 507,703 0.5
----------- -----
Net Assets.............................................. $99,188,984 100.0%
=========== =====
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
# Less than one tenth of a percent.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
15
<PAGE>
EAFE INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (identified cost
$69,808,485)................................................... $98,681,281
Cash denominated in foreign currencies (identified cost
$16,833)....................................................... 18,309
Cash............................................................ 14,882
Receivables:
Dividends and interest.......................................... 507,839
Investment securities sold...................................... 84,277
-----------
Total assets.................................................. 99,306,588
-----------
LIABILITIES:
Payables:
Administrator................................................... 45,366
Adviser......................................................... 12,005
Custodian....................................................... 4,232
Fund shares redeemed............................................ 3,747
Transfer agent.................................................. 3,600
Accrued expenses................................................ 36,887
Variation margin payable on futures contracts................... 11,767
-----------
Total liabilities............................................. 117,604
-----------
Net assets...................................................... $99,188,984
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................ $ 6,351
Institutional Service Class.................................... 30
Additional paid-in capital...................................... 69,836,938
Accumulated undistributed net investment income................. 338,384
Accumulated undistributed net realized gain on investments...... 159,445
Accumulated net realized loss on foreign currency transactions.. (12,993)
Net unrealized appreciation on investments...................... 28,861,029
Net unrealized depreciation on translation of assets and
liabilities in foreign currencies.............................. (200)
-----------
Net assets...................................................... $99,188,984
===========
Institutional Class
Net assets applicable to outstanding shares..................... $98,723,730
===========
Shares of capital stock outstanding............................. 6,351,043
===========
Net asset value per share outstanding........................... $ 15.54
===========
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 465,254
===========
Shares of capital stock outstanding............................. 30,050
===========
Net asset value per share outstanding........................... $ 15.48
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)................................................... $1,078,696
Interest........................................................ 22,956
----------
Total income.................................................. 1,101,652
----------
Expenses:
Administration.................................................. 353,774
Advisory........................................................ 66,332
Portfolio pricing............................................... 34,667
Custodian....................................................... 23,349
Professional.................................................... 22,216
Registration.................................................... 14,240
Transfer agent.................................................. 12,674
Shareholder communication....................................... 4,412
Directors....................................................... 1,386
Service......................................................... 496
Miscellaneous................................................... 1,467
----------
Total expenses before reimbursement........................... 535,013
Expense reimbursement from Administrator........................ (118,834)
----------
Net expenses.................................................. 416,179
----------
Net investment income........................................... 685,473
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Security transactions........................................... 156,060
Futures transactions............................................ 44,287
Foreign currency transactions................................... (12,993)
----------
Net realized gain on investments and foreign currency
transactions................................................... 187,354
----------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions........................................... 8,875,497
Futures transactions............................................ 2,234
Translation of assets and liabilities in foreign currencies..... 5,556
----------
Net unrealized gain on investments and foreign currencies....... 8,883,287
----------
Net realized and unrealized gain on investments and foreign
currency transactions.......................................... 9,070,641
----------
Net increase in net assets resulting from operations............ $9,756,114
==========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $164,589.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
16
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
EAFE INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income................................. $ 685,473 $ 915,784
Net realized gain on investments...................... 200,347 566,565
Net realized loss on foreign currency transactions.... (12,993) (2,371)
Net change in unrealized appreciation on investments.. 8,877,731 3,803,611
Net change in unrealized appreciation (depreciation)
on translation of assets and liabilities in foreign
currencies........................................... 5,556 (20,453)
----------- -----------
Net increase in net assets resulting from operations.. 9,756,114 5,263,136
----------- -----------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.................................. -- (912,611)
Institutional Service Class.......................... -- (3,173)
From net realized gain on investments and foreign
currency transactions:
Institutional Class.................................. -- (1,555,065)
Institutional Service Class.......................... -- (7,001)
In excess of net investment income:
Institutional Class.................................. -- (161,899)
Institutional Service Class.......................... -- (731)
----------- -----------
Total dividends and distributions to shareholders... -- (2,640,480)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.................................. 2,967,651 20,042,853
Institutional Service Class.......................... 69,263 246,922
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
Institutional Class.................................. -- 2,628,297
Institutional Service Class.......................... -- 10,905
----------- -----------
3,036,914 22,928,977
Cost of shares redeemed:
Institutional Class.................................. (2,986,275) (16,341,457)
Institutional Service Class.......................... (43,297) (129,092)
----------- -----------
Increase in net assets derived from capital share
transactions........................................ 7,342 6,458,428
----------- -----------
Net increase in net assets........................... 9,763,456 9,081,084
NET ASSETS:
Beginning of period................................... 89,425,528 80,344,444
----------- -----------
End of period......................................... $99,188,984 $89,425,528
=========== ===========
Accumulated undistributed net investment income
(excess distribution)................................ $ 338,384 $ (347,089)
=========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
17
<PAGE>
EAFE INDEX FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- ------------- ------------- ------------- ------------- --------------------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED ----------------------------------------------------------------------------------
JUNE 30, 1997* 1996 1995 1994 1993 1992
--------------------------- ---------------------------- -------------------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period.............. $ 14.00 $ 13.97 $ 13.56 $ 13.51 $ 12.63 $ 12.63 $ 12.03 $ 9.60 $ 11.01
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income.............. 0.11 0.09 0.16 0.12 0.13 0.14 0.10 0.06 0.08
Net realized and
unrealized gain
(loss) on
investments......... 1.43 1.42 0.71 0.73 1.11 1.05 0.70 2.71 (1.41)
Net realized and
unrealized gain
(loss) on
foreign currency
transactions........ (0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.10) (0.10) 0.03 (0.01) (0.01)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations.......... 1.54 1.51 0.87 0.85 1.14 1.09 0.83 2.76 (1.34)
------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
From net investment
income.............. -- -- (0.16) (0.12) (0.04) (0.04) (0.09) (0.14) (0.07)
From net realized
gain on investments
and foreign currency
transactions........ -- -- (0.25) (0.25) (0.14) (0.14) (0.14) (0.19) --
In excess of net
investment income... -- -- (0.02) (0.02) (0.03) (0.03) -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions....... -- -- (0.43) (0.39) (0.21) (0.21) (0.23) (0.33) (0.07)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value at
end of period....... $ 15.54 $ 15.48 $ 14.00 $ 13.97 $ 13.56 $ 13.51 $ 12.63 $ 12.03 $ 9.60
======= ======= ======= ======= ======= ======= ======= ======= =======
Total investment
return (c).......... 11.00% 10.81% 6.45% 6.37% 9.03% 8.63% 6.83% 28.97% (12.22%)
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income............. 1.55%+ 1.30%+ 1.11% 0.86% 1.01% 0.76% 0.57% 0.53% 0.76%
Net expenses........ 0.94%+ 1.19%+ 0.94% 1.19% 1.03% 1.28% 1.26% 1.27% 1.32%
Expenses (before
reimbursement)..... 1.21%+ 1.46%+ 1.23% 1.48% 1.24% 1.49% 1.26% 1.27% 1.32%
Portfolio turnover
rate................ 1% 1% 4% 4% 6% 6% 7% 16% 1%
Average commission
rate paid........... $0.0062 $0.0062 $0.0097 $0.0097 (b) (b) (b) (b) (b)
Net assets at end of
period (in 000's)... $98,724 $ 465 $89,029 $ 396 $80,087 $ 257 $72,265 $53,714 $40,531
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(c) 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.
18
<PAGE>
Growth Equity Fund
================================================================================
- --------------------------------------------------------------------------------
Market highlights for the 6-months ended 6/30/97
- --------------------------------------------------------------------------------
. The biggest influences on the stock market were interest rates in the first
quarter and earnings in the second quarter of 1997
. Strong inflows into equities, particularly from foreign institutional
investors boosted performance
. Low inflation, low interest rates, and moderate economic growth provided a
solid backdrop for growth investors
. The market gave disproportional rewards to larger-capitalization issues
throughout the first half of the year
- --------------------------------------------------------------------------------
Fund highlights for the 6- and 12-month periods ended 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 24.07% and 23.77% for Institutional Class shares
and Service Class shares, respectively, as of 6/30/97
. Despite major setbacks in the first quarter, financial stocks rebounded
strongly in the second quarter and contributed significantly to the Fund's
performance
. The Fund increased its pharmaceutical and health care related holdings,
which positively impacted the portfolio
- --------------------------------------------------------------------------------
Capitalization The number of outstanding shares of a company multiplied by the
share price.
Volatility Fluctuations in the price of securities or markets, up or down, over
time.
- --------------------------------------------------------------------------------
The first six months of 1997 was like a tale of two cities, with each quarter
having a distinctive story. Following a substantial rally early in the first
quarter, concern over inflation, interest rates, and rapid economic growth led
to an equally substantial correction or downward adjustment. While the S&P 500
Index* advanced in the first quarter, the average stock fund declined.
In the second quarter, signs pointed to more moderate growth and continued low
inflation, both of which were positive for the stock market. While past
performance is no guarantee of future results, with investors focusing more on
earnings than interest rates, the stock market not only recovered lost ground,
but advanced far more in the second quarter than it typically has in an entire
year since 1926./+/
Throughout the first half of 1997, certain themes emerged. Large capitalization
issues were very strong and accounted for a major portion of the stock market's
gains. Tremendous volatility, in both directions, made news on a regular basis
and accounted for much of the opportunity investors experienced. In June, the
market reached record levels several times. And while performance varied widely
by sector and issuer, overall returns were exceedingly strong.
- --------------------------------------------------------------------------------
* "Standard & Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of Standard & Poor's. The MainStay Institutional Funds
are neither sponsored by nor affiliated with Standard & Poor's. The S&P 500
is an unmanaged index and is considered to be generally representative of the
U.S. stock market. Results assume the reinvestment of all income and capital
gain distributions.
+ Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks was
10.70%. Past performance is no guarantee of future results.
19
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Bottom-up investing Security selection based on the specific fundamental merits
of individual issues. The opposite of "top-down" investing, which starts with
general economic trends, compares market sectors, and uses relative security
values to narrow the range of issues to examine.
Weighting The proportion of a portfolio allocated to a specific security or
sector, i.e., a fund is said to be overweighted in a sector when that portion of
the portfolio is greater than the sector's general relationship to the market as
a whole.
- --------------------------------------------------------------------------------
How did the MainStay Institutional Growth Equity Fund do in this market
environment?
For the six months ended 6/30/97, the MainStay Institutional Growth Equity Fund
returned 13.28% and 13.12% for Institutional Class shares and Service Class
shares, respectively. That placed the Fund behind the average Lipper/++/ growth
fund, which returned 14.28% for the same period. During the first half of 1997,
the S&P 500 advanced 20.62%.
What would you say made the biggest contribution to the Fund's performance?
Sticking to our disciplines. Most of the Fund's underperformance in the first
quarter was due to five or six issues that did very well in the second quarter
and contributed positively to performance over the first half of the year. As
just one example, through our bottom-up approach to individual security
selection, the Fund began the year heavily overweighted in the financial sector.
When the Federal Reserve Board moved to raise interest rates in late March,
financial stocks experienced a sudden and severe setback.
At various points along the way, we were tempted to sell financials and
reposition the Fund. But when we looked at the fundamentals and considered the
likely impact--even if interest rates continued to rise--we still felt these
stocks were very cheap and offered tremendous growth potential. Our decision to
continue to hold them proved highly beneficial for the Fund when financial
stocks rallied in the second quarter. One financial stock that did particularly
well was First USA, which received a takeover bid from Banc One in the first
quarter. We sold some First USA on the merger announcement and more throughout
the second quarter--all at a handsome profit.
What else worked well?
Technology stocks took a major hit in the fourth quarter of 1996--and in the
first quarter correction this year. Our decision to continue to hold Computer
Associates International despite the market's negative view proved to be a good
decision. The stock was the Fund's best performer in the second quarter. Once
again, it was a matter of riding out the negatives. One stock that did well in
1996 but had a negative impact on the Fund's performance in the first half of
1997 was 3Com. The fundamentals were still in place and it rebounded
significantly in the second quarter, so we're glad we held onto it. The stock
suffered when Intel entered the adapter card market. But we believe investors
have overestimated the Intel threat and that 3Com is still a strong contender.
What types of securities did you buy during the first six months of 1997?
A wide variety. We don't select securities based on how the economy is doing or
what industries are hot. We look at individual issues and try to identify ones
with rapid sales growth, earnings acceleration, and a catalyst or stimulus for
further growth potential.
During the first half of 1997 we added a number of names to the Fund which
contributed positively to performance. Eli Lilly introduced a new product to
combat osteoporosis and performed very well. The Fund also purchased Monsanto,
which makes agricultural products and may be planning to spin off its less
profitable businesses. Compuware, a midsized software company, was bought in the
middle of the first quarter. And Washington Mutual was a financial security that
we bought during the first half of the year. All of these purchases were
positive contributors, though not necessarily large holdings.
================================================================================
++ Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
20
<PAGE>
================================================================================
We also added to the Fund's position in Mattel, which gained positive earnings
visibility, acquired Tyco Toys, and had a rapid turnaround from earlier
difficulties. Late in the second quarter, we bought Merck, based on its size,
rapid earnings growth, and long-range potential. While the purchase did not
impact the Fund by the end of the first half of the year, we think it may do
well in the future.
Did you buy anything that didn't do well?
Adaptec and Cardinal Health were two stocks we purchased that had slightly
negative results, but the overall impact on the Fund was minuscule.
Which stocks had the biggest impact on performance?
On the positive side, Guidant, Medtronic, Schering-Plough, Travelers, Lucent
Technologies, and Microsoft were all major holdings that had outstanding
results. Guidant makes an apparatus used in cardiovascular surgery that has had
a tremendous reception in the surgical world. Medtronic, a larger holding in a
similar business, also did well. Schering-Plough had big success with its drug,
Claritin, particularly when Seldane, a competitor's product, was taken off the
market. Travelers benefited from positive valuations resulting from acquisitions
in the financial sector, and Lucent Technologies profited from its reputation
and diversified offerings in telephone infrastructure. Microsoft continued to
set the pace in the technology sector and had a strong, positive impact on the
Fund.
Which stocks did poorly?
We've already mentioned 3Com, which was the Fund's worst performer. The Fund
also had some problems with Abacan Resources, a Canada-based Nigerian oil
drilling company. The stock dropped when new drilling was unproductive and the
company found itself short of capital. Although we feel the capital problem has
been resolved, we've sold some of the Fund's position and are keeping a close
watch on the stock.
Nine West had been a successful holding, but came under investigation by the SEC
for accounting practices relating to an acquisition in 1995. The negative press
hurt the stock and the Fund. Other acquisition-related problems plagued IKON
Office Solutions, which was formerly known as Alco Standard, and Seagate, a
major hard disk manufacturer, which saw its stock drop when tighter competition
and weakening demand led the company to preannounce lower earnings.
Did you face any major surprises during the period?
Green Tree Financial, one of the Fund's largest holdings at the end of 1996,
lost 7% over the first half of the year. This was due to rumors about
competition from Fannie Mae, as well as media attention regarding the chief
executive's compensation.
Another surprise was HFS. The stock declined 3%--we feel largely due to the
market's inability to understand a very positive merger with CUC International,
another Fund holding. HFS is a provider of real estate and travel services and
controls major franchise brands such as Howard Johnson, Ramada, Days Inn, Avis,
Century 21, and Coldwell Banker. CUC International helps people benefit from
buying clubs for shopping, travel, and auto services. While the combined company
is strong, the market has yet to grasp its potential.
The biggest surprise was that two of the Fund's largest holdings, Green Tree
Financial and HFS, lost money in a period when the market was up substantially.
Since the fundamentals of both companies remain strong, we're continuing to hold
them and have a positive outlook for the future.
How was the Fund weighted at the end of the first half of 1997?
The Fund was heavily overweighted in the health care sector, with about twice
the weighting of the S&P 500. The Fund also owned a lot of technology issues, as
most growth portfolios do, but unlike most, the Fund was also heavily weighted
in financials.
With the increased volatility in the marketplace, how are you managing risk?
We've seen two important risk factors in the first half of the year--interest
rates and corporate earnings. On both counts, we manage risk by sticking with
our fundamental investment disciplines. Regardless of where interest rates may
move, we want companies in the Fund that have significant earnings acceleration
and growth potential. Of course, there may always be earnings surprises, but by
carefully researching our stocks
21
<PAGE>
================================================================================
and assessing the relationship between price, earnings, and performance
potential, we believe we're able to make prudent decisions for investors. When
we believe that fundamentals are strong, we tend to hold. When we see
fundamentals deteriorating, we're likely to sell.
Can you give an example?
Sure. We sold AutoZone in the first quarter because they were seeing more
competition and the do-it-yourself auto repair market was slowing. Since we
wouldn't have bought the stock with those fundamentals, we decided to sell it.
Another example was Lone Star, a chain of steak house restaurants, which we sold
in the first quarter when their sales momentum slowed and the restaurant group
went out of favor. We sold both stocks at a loss, but used the proceeds to buy
stocks that we felt had better fundamentals and offered greater growth
opportunities.
What is your outlook for the future?
We're basically optimistic. As long as interest rates are calm, economic growth
is modest, and inflation remains in check, corporate earnings are likely to
remain strong. In the meantime, we'll continue to evaluate companies
individually to help our investors seek long-term growth of capital, with
dividend income as an incidental consideration.
Edmund Spelman
Rudy Carryl
Portfolio Managers
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
22
<PAGE>
[GRAPHS APPEAR HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
GROWTH EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE GROWTH EQUITY FUND S&P 500
---- ------------------ -------
<S> <C> <C>
1/2/91 10,000 10,000
12,560 11,453
12,100 11,427
14,680 12,038
91 16,700 13,047
16,369 12,717
14,175 12,958
14,738 13,366
92 17,640 14,040
17,434 14,654
17,663 14,726
19,168 15,105
93 19,333 15,456
19,064 14,870
17,735 14,933
19,453 15,663
94 18,901 15,660
20,628 17,185
22,729 18,826
25,437 20,323
95 26,062 21,546
28,040 22,703
28,939 23,723
30,783 24,456
96 31,696 26,493
6/30/97 35,905 31,955
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
GROWTH EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE GROWTH EQUITY FUND S&P 500
---- ------------------ -------
<S> <C> <C>
1/2/01 10,000 10,000
12,560 11,453
12,100 11,427
14,680 12,038
91 16,700 13,047
16,369 12,717
14,175 12,958
14,738 13,366
92 17,640 14,040
17,434 14,654
17,663 14,726
19,168 15,105
93 19,333 15,456
19,064 14,870
17,735 14,933
19,453 15,663
94 18,901 15,660
20,615 17,185
22,701 18,826
25,381 20,323
95 25,990 21,546
27,939 22,703
28,810 23,723
30,649 24,456
96 31,529 26,493
6/30/97 35,658 31,955
</TABLE>
. Growth Equity Fund -- S&P 500
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
Performance as of June 30, 1997 as of June 30, 1997
- -----------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Equity Fund Institutional Class 13.28% 24.07% 20.43% 21.73%
Growth Equity Fund Service Class + 13.12% 23.77% 20.26% 21.60%
Average Lipper Growth Fund 14.28% 23.96% 16.90% 17.74%
S&P 500 Stock Index 20.62% 34.71% 19.78% 19.57%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Institutional Class Shares
Year-end Total Return %
-------- --------------
<S> <C>
1991 67.00
1992 5.63
1993 9.59
1994 -2.23
1995 37.88
1996 21.62
1997 as of 6/30/97 13.28
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. Common Stocks 97.95%
. Cash & Equivalents 2.05%
- --------------------------------------------------------------------------------
Top 10 Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Computer Associates International, Inc. 2.82%
2. Travelers Group Inc. 2.67%
3. Intel Corp. 2.60%
4. Tyco International Ltd. 2.56%
5. HFS Inc. 2.49%
6. SunAmerica Inc. 2.40%
7. Medtronic, Inc. 2.34%
8. Lilly (Eli) and Co. 2.32%
9. American International Group, Inc. 2.16%
10. Guidant Corp. 2.09%
- --------------------------------------------------------------------------------
Top 5 Industry
Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Finance 14.88%
2. Drugs 9.92%
3. Health Care 8.58%
4. Retail 7.98%
5. Software 7.55%
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
++ Adjusted for liabilities.
23
<PAGE>
GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS (98.0)+
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
AUTO PARTS (0.7%)
Lear Seating Corp. (a).................................. 100,000 $ 4,437,500
------------
BANKS (1.9%)
NationsBank Corp. ...................................... 138,000 8,901,000
Wells Fargo & Co. ...................................... 11,000 2,964,500
------------
11,865,500
------------
BROKERAGE (0.3%)
Schwab (Charles) Corp................................... 56,500 2,298,844
------------
BUILDINGS (0.9%)
Oakwood Homes Corp...................................... 250,000 6,000,000
------------
COMPUTER SERVICES (0.1%)
Sabre Group Holdings Inc. Class A (a)................... 33,500 908,688
------------
COMPUTERS & OFFICE EQUIPMENT (6.5%)
Danka Business Systems
PLC ADR (b)............................................ 163,200 6,670,800
Hewlett-Packard Co...................................... 136,000 7,616,000
IKON Office Solutions, Inc.............................. 201,100 5,014,931
Seagate Technology (a).................................. 196,100 6,900,269
Sun Microsystems (a).................................... 316,000 11,761,141
Sterling Commerce, Inc. (a)............................. 115,593 3,800,120
------------
41,763,261
------------
CONSUMER DURABLES (1.5%)
Harley-Davidson, Inc.................................... 199,000 9,539,563
------------
CONSUMER FINANCIAL SERVICES (1.6%)
First Data Corp......................................... 234,900 10,320,919
------------
CONSUMER SERVICES (2.1%)
CUC International Inc. (a).............................. 204,000 5,265,750
Service Corp. International............................. 249,600 8,205,600
------------
13,471,350
------------
CREDIT & FINANCE (1.2%)
Equifax Inc............................................. 211,000 7,846,562
------------
DOMESTIC OIL (0.8%)
Triton Energy Ltd. (a).................................. 112,800 5,167,650
------------
DRUGS (9.9%)
Amgen Inc. (a).......................................... 192,400 11,183,250
Elan Corp. PLC ADR (a) (b).............................. 203,000 9,185,750
Lilly (Eli) and Co...................................... 135,500 14,811,844
Merck & Co., Inc........................................ 95,000 9,832,500
Schering-Plough Corp.................................... 260,000 12,447,500
Teva Pharmaceutical Industries Ltd. ADR (b)............. 92,000 5,957,000
------------
63,417,844
------------
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
ELECTRONICS (1.0%)
Waters Corp. (a)........................................ 185,000 $ 6,636,875
------------
FINANCE (14.9%)
Associates First Capital Corp. Class A.................. 96,700 5,366,850
Fannie Mae.............................................. 224,000 9,772,000
Green Tree Financial Corp............................... 371,000 13,216,875
Household International, Inc............................ 109,800 12,894,638
MGIC Investment Corp.................................... 227,200 10,891,400
SunAmerica Inc.......................................... 315,000 15,356,250
Travelers Group Inc..................................... 270,465 17,056,199
Washington Mutual Inc................................... 177,200 10,587,700
------------
95,141,912
------------
HEALTH CARE (8.6%)
Cardinal Health Inc..................................... 100,000 5,725,000
Columbia/HCA Healthcare Corp............................ 212,388 8,349,503
HEALTHSOUTH Corp. (a)................................... 414,000 10,324,125
Johnson & Johnson....................................... 175,504 11,298,070
PacifiCare Health Systems, Inc. Class B (a)............. 45,900 2,931,862
Tenet Healthcare Corp. (a).............................. 257,475 7,611,605
United Healthcare Corp.................................. 165,500 8,606,000
------------
54,846,165
------------
INDUSTRIAL (3.6%)
Illinois Tool Works Inc................................. 132,000 6,591,750
Tyco International Ltd.................................. 235,400 16,375,013
------------
22,966,763
------------
INSURANCE (2.2%)
American International Group, Inc....................... 92,550 13,824,656
------------
INTERNATIONAL OIL (1.0%)
Abacan Resource Corp. (a)............................... 475,000 1,514,063
British Petroleum Co.
PLC ADR (b)............................................ 61,758 4,624,130
------------
6,138,193
------------
MATERIALS/PROCESSING (1.2%)
Monsanto Co............................................. 177,000 7,622,062
------------
MEDICAL EQUIPMENT (4.6%)
Guidant Corp. .......................................... 157,000 13,345,000
Heartport, Inc. (a)..................................... 80,000 1,410,000
Medtronic, Inc.......................................... 184,800 14,968,800
------------
29,723,800
------------
OIL SERVICES (0.6%)
Tidewater Inc. ......................................... 87,700 3,858,800
------------
POLLUTION CONTROL (0.8%)
USA Waste Services Inc. (a)............................. 127,000 4,905,375
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
24
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
RESTAURANTS & LODGING (3.4%)
HFS Inc. (a)............................................ 274,400 $ 15,915,200
Mirage Resorts Inc. (a)................................. 222,400 5,615,600
------------
21,530,800
------------
RETAIL (8.0%)
Bed Bath & Beyond, Inc. (a)............................. 130,800 3,973,050
Home Depot, Inc. (The).................................. 121,500 8,375,906
Kohl's Corp. (a)........................................ 180,000 9,528,750
Kroger Co. (a).......................................... 278,000 8,062,000
Lowe's Cos., Inc........................................ 186,500 6,923,812
Safeway Inc. (a)........................................ 203,900 9,404,888
Staples, Inc. (a)....................................... 203,900 4,740,675
------------
51,009,081
------------
SOFTWARE (7.6%)
Computer Associates International, Inc. ................ 323,500 18,014,906
Compuware Corp. (a)..................................... 100,000 4,775,000
Microsoft Corp. (a)..................................... 100,000 12,637,500
Oracle Corp. (a)........................................ 255,750 12,883,406
------------
48,310,812
------------
TECHNOLOGY (6.7%)
Adaptec, Inc. (a)....................................... 119,700 4,159,575
Cisco Systems, Inc. (a)................................. 151,500 10,169,438
Intel Corp. ............................................ 117,400 16,648,787
3Com Corp. (a).......................................... 259,000 11,655,000
------------
42,632,800
------------
TELECOMMUNICATION EQUIPMENT (2.0%)
Lucent Technologies Inc................................. 174,000 12,538,875
------------
TELECOMMUNICATION SERVICES (1.9%)
Worldcom, Inc. (a)...................................... 379,088 12,130,816
------------
TEXTILE & APPAREL (1.9%)
Nike, Inc. Class B...................................... 108,700 6,345,362
Nine West Group Inc. (a)................................ 148,100 5,655,569
------------
12,000,931
------------
TOYS (0.5%)
Mattel, Inc............................................. 100,000 3,387,500
------------
Total Common Stocks
(Cost $361,530,919).................................... 626,243,897
------------
</TABLE>
SHORT-TERM INVESTMENT (2.1%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
COMMERCIAL PAPER (2.1%)
Associates Corp. of North America
6.08%, due 7/1/97.................................... $13,622,000 $ 13,622,000
------------
Total Short-Term Investment
(Cost $13,622,000)................................... 13,622,000
------------
Total Investment
(Cost $375,152,919) (c).............................. 100.1% 639,865,897 (d)
Liabilities in Excess of Cash and Other Assets........ (0.1) (391,848)
----------- ------------
Net Assets............................................ 100.0% $639,474,049
=========== ============
</TABLE>
- --------
(a) Non-income producing securities.
(b) ADR--American Depository Receipts.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At June 30, 1997 net unrealized appreciation was $264,712,978, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess
of market value over cost of $271,823,067 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $7,110,089.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
25
<PAGE>
GROWTH EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (identified cost
$375,152,919).................................................... $639,865,897
Cash.............................................................. 446
Receivables:
Investment securities sold....................................... 9,707,449
Fund shares sold................................................. 4,321,869
Dividends and interest........................................... 208,970
------------
Total assets.................................................... 654,104,631
------------
LIABILITIES:
Payables:
Investment securities purchased.................................. 13,622,000
Fund shares redeemed............................................. 434,714
Administrator.................................................... 309,452
Adviser.......................................................... 128,938
Transfer agent................................................... 33,868
Custodian........................................................ 8,987
Accrued expenses.................................................. 92,623
------------
Total liabilities............................................... 14,630,582
------------
Net assets........................................................ $639,474,049
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class.............................................. $ 25,314
Institutional Service Class...................................... 361
Additional paid-in capital........................................ 346,321,807
Accumulated net investment loss................................... (776,922)
Accumulated undistributed net realized gain on investments........ 29,190,511
Net unrealized appreciation on investments........................ 264,712,978
------------
Net assets........................................................ $639,474,049
============
Institutional Class
Net assets applicable to outstanding shares....................... $630,539,539
============
Shares of capital stock outstanding............................... 25,314,254
============
Net asset value per share outstanding............................. $ 24.91
============
Institutional Service Class
Net assets applicable to outstanding shares....................... $ 8,934,510
============
Shares of capital stock outstanding............................... 360,948
============
Net asset value per share outstanding............................. $ 24.75
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 1,598,485
Interest......................................................... 326,279
-----------
Total income.................................................... 1,924,764
-----------
Expenses:
Administration................................................... 1,759,754
Advisory......................................................... 733,231
Transfer agent................................................... 53,218
Professional..................................................... 43,506
Custodian........................................................ 30,481
Registration..................................................... 28,246
Shareholder communication........................................ 27,349
Service.......................................................... 9,938
Directors........................................................ 8,563
Miscellaneous.................................................... 7,400
-----------
Total expenses.................................................. 2,701,686
-----------
Net investment loss............................................... (776,922)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................. 26,000,223
Net change in unrealized appreciation on investments.............. 50,051,213
-----------
Net realized and unrealized gain on investments................... 76,051,436
-----------
Net increase in net assets resulting from operations.............. $75,274,514
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $5,833.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
26
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
GROWTH EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended
December 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss............................... $ (776,922) $ (1,305,265)
Net realized gain on investments.................. 26,000,223 25,602,618
Net change in unrealized appreciation on
investments...................................... 50,051,213 67,459,450
------------ ------------
Net increase in net assets resulting from
operations....................................... 75,274,514 91,756,803
------------ ------------
Distributions to shareholders:
From net realized gain on investments:
Institutional Class.............................. -- (21,861,690)
Institutional Service Class...................... -- (276,715)
------------ ------------
Total distributions to shareholders............. -- (22,138,405)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 75,977,806 184,940,316
Institutional Service Class...................... 2,425,019 3,762,904
Net asset value of shares issued to shareholders
in reinvestment of distributions:
Institutional Class.............................. -- 21,861,690
Institutional Service Class...................... -- 276,715
------------ ------------
78,402,825 210,841,625
Cost of shares redeemed:
Institutional Class.............................. (60,904,855) (146,673,191)
Institutional Service Class...................... (1,352,423) (590,510)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 16,145,547 63,577,924
------------ ------------
Net increase in net assets....................... 91,420,061 133,196,322
NET ASSETS:
Beginning of period............................... 548,053,988 414,857,666
------------ ------------
End of period..................................... $639,474,049 $548,053,988
============ ============
Accumulated net investment loss................... $ (776,922) $ --
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
27
<PAGE>
GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- ------------- ------------- ------------- ------------ -------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED --------------------------------------------------------------------------------------
JUNE 30, 1997* 1996 1995 1994 1993 1992
--------------------------- ---------------------------- ------------------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period...... $ 21.99 $ 21.88 $ 18.84 $ 18.80 $ 13.68 $ 13.68 $ 14.40 $ 14.71 $ 16.70
-------- ------- -------- ------- -------- ------- -------- -------- --------
Net investment
income (loss).. (0.03) (0.06) (0.06) (0.11) 0.02 (0.01) 0.01 (0.01) (0.03)
Net realized and
unrealized gain
(loss) on
investments.... 2.95 2.93 4.14 4.12 5.16 5.14 (0.33) 1.41 0.80
-------- ------- -------- ------- -------- ------- -------- -------- --------
Total from
investment
operations..... 2.92 2.87 4.08 4.01 5.18 5.13 (0.32) 1.40 0.77
-------- ------- -------- ------- -------- ------- -------- -------- --------
Less dividends
and distribu-
tions:
From net
investment
income......... -- -- -- -- (0.02) (0.01) (0.01) -- (0.02)
From net
realized
gain on
investments.... -- -- (0.93) (0.93) -- -- (0.39) (1.68) (2.74)
In excess of net
investment
income......... -- -- -- -- (0.00)(a) (0.00)(a) -- -- --
In excess of net
realized gain
on investments. -- -- -- -- (0.00)(a) (0.00)(a) (0.00)(a) (0.03) --
-------- ------- -------- ------- -------- ------- -------- -------- --------
Total dividends
and distribu-
tions.......... -- -- (0.93) (0.93) (0.02) (0.01) (0.40) (1.71) (2.76)
-------- ------- -------- ------- -------- ------- -------- -------- ---------
Net asset value
at end of
period......... $ 24.91 $ 24.75 $ 21.99 $ 21.88 $ 18.84 $ 18.80 $ 13.68 $ 14.40 $ 14.71
======== ======= ======== ======= ======== ======= ======== ======== ========
Total investment
return (c)..... 13.28% 13.12% 21.62% 21.29% 37.88% 37.50% (2.23%) 9.59% 5.63%
Ratios (to
average net
assets)/Supple-
mental Data:
Net investment
income (loss). (0.26%)+ (0.51%)+ (0.27%) (0.52%) 0.12% (0.13%) 0.04% (0.07%) (0.19%)
Net expenses... 0.92%+ 1.17%+ 0.92% 1.17% 0.93% 1.18% 0.92% 0.90% 0.90%
Expenses
(before reim-
bursement)..... 0.92%+ 1.17%+ 0.92% 1.17% 0.93% 1.18% 0.92% 0.93% 0.95%
Portfolio
turnover rate.. 15% 15% 22% 22% 33% 33% 37% 81% 121%
Average
commission
rate paid...... $ 0.0592 $0.0592 $ 0.0604 $0.0604 (b) (b) (b) (b) (b)
Net assets at
end of period
(in 000's)..... $630,540 $ 8,935 $541,212 $ 6,842 $412,129 $ 2,729 $284,388 $258,751 $212,619
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(c) 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.
28
<PAGE>
Indexed Equity Fund
================================================================================
- --------------------------------------------------------------------------------
Market highlights for the 6-months ended 6/30/97
- --------------------------------------------------------------------------------
. Low interest rates, low inflation, and economic growth that slowed in the
second quarter contributed to outstanding stock performance during the first
half of 1997
. Large capitalization issues outperformed smaller companies, causing the S&P
500 Index* to outperform most other broad stock market indexes during the
reporting period
. Gains of 25% or more were not uncommon among some of the best-known blue
chip stocks, and Microsoft gained more than 52% for the first half of the
year
. The gold, oil exploration & production, and photography/imaging sectors
recorded losses for the first six months of 1997, but each represented less
than 0.5% of the S&P 500
- --------------------------------------------------------------------------------
Fund highlights for the 6- and 12-month periods ended 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 34.32% and 33.96% for Institutional Class shares
and Service Class shares, respectively, as of 6/30/97
. Best one-year and year-to-date performance of all MainStay Institutional
Funds as of 6/30/97
. Since the Fund invests primarily in larger capitalization issues, it
benefited from the market's strong "bigger is better" mentality during the
first half of the year
. The MainStay Institutional Indexed Equity Fund closely tracked the S&P 500
Index over the first half of the year, but outperformed its average
Lipper/+/ peer fund for the six months ended 6/30/97
- --------------------------------------------------------------------------------
Total return The performance of an investment with all income and capital gains
reinvested.
Capitalization The number of outstanding shares of a company multiplied by the
share price.
- --------------------------------------------------------------------------------
For the first six months of 1997, the S&P 500 Index returned 20.62%; nearly
twice the historic average total return for an entire year since 1926./++/
Several economic and market factors combined to provide this outstanding
performance.
In the first quarter, the Federal Reserve Board moved to raise interest rates in
order to stem economic growth. While this briefly had a negative impact on
common stocks, economic growth slowed in the second quarter, easing inflation
concerns, and the stock market soared to record highs. The combination of low
interest rates, low unemployment, and strong corporate earnings has been
particularly favorable for large capitalization issues, which have greater
visibility and greater liquidity in the marketplace. Since the S&P 500 consists
of larger capitalization issues, it benefited strongly from the market's
preference for bigger blue chip stocks during the first half of the year.
- --------------------------------------------------------------------------------
* "Standard & Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of Standard & Poor's. The MainStay Institutional Funds
are neither sponsored by nor affiliated with Standard & Poor's. The S&P 500
is an unmanaged index and is considered to be generally representative of the
U.S. stock market. Results assume the reinvestment of all income and capital
gain distributions.
+ Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
++ Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks was
10.70%. Past performance is no guarantee of future results.
29
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Correction A shift in security prices to bring them more in line with
- ----------
historically appropriate levels.
Weighting The proportion of an index represented by the capitalization of an
- ---------
individual company or sector. Companies or sectors with larger relative amounts
of capital will thus have greater weightings in an index in which they are
represented.
- --------------------------------------------------------------------------------
Given this context, how did the MainStay Institutional Indexed Equity Fund do
for the first six months of 1997?
Very well. For the first six months of 1997, the Fund returned 20.48% and 20.32%
for Institutional Class shares and Service Class shares, respectively, or nearly
twice what investors might normally anticipate for an entire year since
1926(S). The Fund closely tracked the S&P 500, and outperformed the average
Lipper S&P 500 Index fund, which returned 20.27% for the first six months of
1997.
Did the stock market rise steadily throughout the reporting period?
No, there were some significant declines as well. When the Federal Reserve Board
moved to raise interest rates at the end of March, the stock market dropped
sharply through the middle of April. After this correction, however, the S&P 500
showed relatively steady growth through the end of the quarter, with a few down
days at the end of the first half of the year.
Why did the Fund do so well relative to the average stock fund?
The S&P 500 Index is composed primarily of large capitalization stocks, which
substantially outperformed smaller companies. Since the average equity fund
tends to contain stocks of companies of various sizes, the Indexed Equity Fund's
concentration among large-cap issues worked in its favor. In periods when large
capitalization issues are out of favor, however, the Fund would tend to
underperform, since its holdings are determined by the makeup of the S&P 500
Index, rather than what's currently in vogue.
Which stocks contributed the most to the Fund's strong performance?
The largest blue chip stocks with the highest weight in the Index and the best
performance had the greatest overall impact. Among these were General Electric
and Coca-Cola, with respective gains of 32.92% and 28.82%, representing 3.29%
and 2.45% of the Index, respectively. Microsoft, which represents 2.20% of the
Index, gained a spectacular 52.95% for the first half of 1997. Exxon and Merck,
with weights of 2.17% and 1.74% in the Index, gained 27.38% and 31.80%,
respectively, over the first half of the year.
Which were the best performing sectors in the first half of 1997?
Truckers, which had been the weakest performing sector in 1996, provided the
best results in both the first and second quarters of 1997, for a year-to-date
total return of 96.58%. With a weighting of only 0.02%, however, the group,
which consists of just one stock, Caliber Systems, had little impact on the
Index.
Savings & loan stocks, which account for 0.36% of the Index, gained 45.93% for
the first half of 1997 and were among the best performing stocks in the first
quarter as well. Office equipment and supplies, with a weighting of 0.55%,
gained 39.60% for the first six months of the year.
Were there other strong sectors?
In the first quarter, hardware & tools placed among the top three performing
sectors, gaining 18.92% in just three months. In the second quarter, machine
tools, which represent just 0.03% of the Index, gained 39.58%. One positive
contributor to performance was Cincinnati Milacron, the industry's largest
company, which steadily gained 38.82% in the second quarter, based largely on
favorable research reports.
- --------------------------------------------------------------------------------
(S)Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks was
10.70%. Past performance is no guarantee of future results.
30
<PAGE>
================================================================================
Communication equipment manufacturers also did well in the second quarter,
gaining 33.90% for investors and representing a healthy 2.39% of the Index. The
two largest companies in this industry, Cisco Systems and Lucent Technologies,
gained 39.48% and 36.75%, respectively, in the second quarter of 1997.
Did every sector come out ahead for the first half of the year?
No. There were a few sectors that lost money. Gold, down 17.21%, was the worst
performing industry for the first half of the year, largely as a result of
European banks selling gold reserves. Low inflation, stable interest rates, and
a strong stock market also took their toll, as did reports of fraudulent claims
of gold discoveries by small exploration companies.
Oil exploration and production companies lost 12.13% during the first half,
reflecting a mild winter and declining oil prices. Photography and imaging
companies lost 7.24% over the first six months of the year. In the second
quarter, Eastman Kodak's stock was flat, and IKON (formerly Alco Standard) lost
25.44% when the company issued profit projections well below expected levels.
Each of these declining sectors accounted for less than 0.50% of the Index as of
6/30/97.
Why did the Fund underperform the S&P 500 Index?
The returns of the S&P 500 are based on a hypothetical investment. The MainStay
Institutional Indexed Equity Fund, on the other hand, is a real-world investment
that incurs trading expenses and management fees that the Index does not. While
the Fund seeks to track the makeup and total return of the Index, it cannot
fully replicate the performance of the Index and will usually trail it by at
least a small margin. However, the Fund outperformed the average Lipper S&P 500
Index Fund. Our results for the first six months of the year were within 14
basis points of the S&P 500 Index--or just over one-tenth of one percent off the
mark.
Are we likely to see equity returns continue in this range?
The MainStay Institutional Indexed Equity Fund seeks to track the S&P 500 Index.
Investors should bear in mind that past performance is no guarantee of future
results. While the Indexed Equity Fund may do well when the stock market rises,
it is also designed to track the Index when it remains flat or declines. While
economic conditions currently appear favorable for stocks, investors should keep
in mind that recent returns have been higher than historical averages since
1926./||/
James A. Mehling, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
/||/ Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks
was 10.70%. Past performance is no guarantee of future results.
31
<PAGE>
[GRAPHS APPEAR HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE INDEXED EQUITY FUND S&P 500 INDEX
---- ------------------- -------------
<S> <C> <C>
1/2/91 10,000 10,000
11,440 11,453
11,390 11,427
11,990 12,038
91 12,980 13,047
12,646 12,717
12,872 12,958
13,264 13,366
92 13,913 14,040
14,494 14,654
14,537 14,726
14,888 15,105
93 15,222 15,456
14,618 14,870
14,662 14,933
15,365 15,663
94 15,359 15,660
16,846 17,185
18,424 18,826
19,854 20,323
95 21,024 21,546
22,145 22,703
23,112 23,723
23,796 24,456
96 25,769 26,493
31,044 31,955
6/30/97
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE INDEXED EQUITY FUND S&P 500 INDEX
---- ------------------- -------------
<S> <C> <C>
1/2/91 10,000 10,000
11,440 11,453
11,390 11,427
11,990 12,038
91 12,980 13,047
12,646 12,717
12,872 12,958
13,264 13,366
92 13,913 14,040
14,494 14,654
14,537 14,726
14,888 15,105
93 15,222 15,456
14,618 14,870
14,662 14,933
15,365 15,663
94 15,359 15,660
16,846 17,185
18,413 18,826
19,843 20,323
95 20,995 21,546
22,104 22,703
23,047 23,723
23,707 24,456
96 25,659 26,493
</TABLE> 30,874 31,955
6/30/97
. Indexed Equity Fund --S&P 500 Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indexed Equity Fund Institutional Class 20.48% 34.32% 19.25% 19.03%
Indexed Equity Fund Service Class+ 20.32% 33.96% 19.12% 18.93%
Average Lipper S&P 500 Index Fund 20.27% 34.00% 19.23% 19.02%
S&P 500 Stock Index 20.62% 34.71% 19.78% 19.57%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Institutional Class Shares
Year-end Total Return %*
-------- ---------------
<S> <C>
1991 29.80
1992 7.19
1993 9.41
1994 0.90
1995 36.88
1996 22.57
1997 as of 6/30/97 20.48
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. Common Stocks 98.94%
. Cash & Equivalents 1.06%++
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. General Electric Co. 3.12%
2. Coca-Cola Co. 2.52%
3. Exxon Corp. 2.22%
4. Microsoft Corp. 2.20%
5. Merck & Co., Inc. 1.82%
6. Royal Dutch Petroleum Co. 1.70%
7. Intel Corp. 1.68%
8. Philip Morris Cos. 1.57%
9. Procter & Gamble Co. 1.39%
10. International Business Machines Corp. 1.30%
- --------------------------------------------------------------------------------
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Oil--Integrated International 6.47%
2. Major Regional Banks 4.69%
3. Drugs 4.59%
4. Health Care--Diversified 4.46%
5. Electrical Equipment 4.15%
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions
and dividends, and, for the Service Class shares, include the service fee
of .25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
Unlike other funds which generally seek to "beat" the market, index funds
seek to track their respective indices.
++ Adjusted for liabilities.
32
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS (98.9%)+
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.9%)
Boeing Co............................................... 88,390 $ 4,690,194
General Dynamics Corp................................... 7,798 584,850
Lockheed Martin Corp. .................................. 23,565 2,440,450
McDonnell Douglas Corp.................................. 25,994 1,780,589
Northrop Grumman Corp. ................................. 7,198 632,075
Raytheon Co............................................. 28,902 1,474,002
Rockwell International Corp. ........................... 26,164 1,543,676
United Technologies Corp................................ 29,072 2,412,976
------------
15,558,812
------------
AIRLINES (0.3%)
AMR Corp. (a)........................................... 11,282 1,043,585
Delta Air Lines, Inc.................................... 8,938 732,916
Southwest Airlines Co................................... 17,731 458,790
US Airways Group, Inc. (a).............................. 9,540 333,900
------------
2,569,191
------------
ALUMINUM (0.4%)
Alcan Aluminum Ltd...................................... 27,729 961,850
Aluminum Co. of America................................. 21,474 1,618,603
Reynolds Metals Co...................................... 8,943 637,189
------------
3,217,642
------------
AUTOMOBILES (1.6%)
Chrysler Corp........................................... 84,356 2,767,931
Ford Motor Co........................................... 145,896 5,507,574
General Motors Corp..................................... 89,400 4,978,463
------------
13,253,968
------------
AUTOPARTS--AFTER MARKET (0.3%)
Cooper Tire & Rubber Co................................. 9,649 212,278
Echlin Inc.............................................. 7,629 274,644
Genuine Parts Co........................................ 22,135 749,823
Goodyear Tire & Rubber Co. (The)........................ 19,200 1,215,600
------------
2,452,345
------------
BEVERAGES--ALCOHOLIC (0.6%)
Anheuser-Busch Cos., Inc................................ 61,117 2,563,094
Brown-Forman Corp. Class B.............................. 8,514 415,590
Coors (Adolph) Co. Class B.............................. 4,524 120,451
Seagram Co. Ltd......................................... 45,476 1,830,409
------------
4,929,544
------------
BEVERAGES--SOFT DRINKS (3.4%)
Coca-Cola Co. (d)....................................... 303,947 21,200,303
PepsiCo, Inc............................................ 187,897 7,057,881
------------
28,258,184
------------
BROADCAST/MEDIA (0.4%)
Comcast Corp. Class A................................... 39,922 853,333
Tele-Communications TCI Group Series A (a).............. 81,431 1,211,286
U.S. West Media Group (a)............................... 74,384 1,506,276
------------
3,570,895
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
BUILDING MATERIALS (0.2%)
Masco Corp.............................................. 19,832 $ 827,986
Owens-Corning Corp. .................................... 6,364 274,447
Sherwin-Williams Co. ................................... 21,171 653,655
------------
1,756,088
------------
CHEMICALS (2.3%)
Air Products & Chemicals, Inc........................... 13,400 1,088,750
Dow Chemical Co......................................... 28,593 2,491,165
Du Pont (E.I.) De Nemours & Co.......................... 140,430 8,829,536
Eastman Chemical Co..................................... 9,751 619,189
Goodrich (B.F.) Co...................................... 6,571 284,606
Hercules, Inc........................................... 12,272 587,522
Monsanto Co. ........................................... 72,484 3,121,342
Praxair, Inc............................................ 19,330 1,082,480
Rohm & Haas Co.......................................... 7,901 711,584
Union Carbide Corp. .................................... 15,391 724,339
------------
19,540,513
------------
CHEMICALS--DIVERSIFIED (0.3%)
Avery Dennison Corp..................................... 12,982 520,903
Engelhard Corp. ........................................ 17,653 369,610
FMC Corp. (a)........................................... 4,685 372,164
PPG Industries, Inc..................................... 22,054 1,281,889
------------
2,544,566
------------
CHEMICALS--SPECIALTY (0.3%)
Grace (W.R.) & Co....................................... 8,876 489,289
Great Lakes Chemical Corp............................... 7,380 386,528
Morton International, Inc............................... 17,423 525,957
Nalco Chemical Co....................................... 8,304 320,742
Sigma-Aldrich Corp...................................... 12,289 430,883
------------
2,153,399
------------
COMMUNICATION--EQUIPMENT MANUFACTURERS (2.3%)
Andrew Corp. (a)........................................ 11,283 317,334
Bay Networks, Inc. (a).................................. 24,215 643,211
Cabletron Systems, Inc. (a)............................. 19,305 546,573
Cisco Systems, Inc. (a)................................. 81,320 5,458,605
DSC Communications Corp. (a)............................ 14,517 323,003
General Instrument Corp. (a)............................ 16,803 420,075
Lucent Technologies Inc................................. 78,502 5,657,051
Northern Telecom Ltd. .................................. 31,600 2,875,600
Scientific-Atlanta, Inc. ............................... 9,673 211,597
Tellabs, Inc. (a)....................................... 21,918 1,224,668
3Com Corp. (a).......................................... 40,754 1,833,930
------------
19,511,647
------------
COMPUTER--SOFTWARE & SERVICES (3.9%)
Adobe Systems, Inc...................................... 8,762 307,218
Autodesk, Inc........................................... 5,680 217,615
Automatic Data Processing, Inc.......................... 35,611 1,673,717
Ceridian Corp. (a)...................................... 9,822 414,979
Computer Associates
International, Inc..................................... 44,227 2,462,891
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
33
<PAGE>
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
COMPUTER--SOFTWARE & SERVICES (Continued)
Computer Sciences Corp. (a)............................. 9,405 $ 678,336
Equifax Inc............................................. 18,500 687,969
First Data Corp. ....................................... 54,827 2,408,961
Microsoft Corp. (a)..................................... 146,705 18,539,844
Novell Inc. (a)......................................... 42,460 294,566
Oracle Corp. (a)........................................ 80,148 4,037,456
Parametric Technology Corp. (a)......................... 15,666 666,784
Shared Medical Systems Corp............................. 2,999 161,946
------------
32,552,282
------------
COMPUTER SYSTEMS (3.5%)
Amdahl Corp. (a)........................................ 14,752 129,080
Apple Computer, Inc. (a)................................ 15,382 219,194
Compaq Computer Corp. (a)............................... 33,613 3,336,090
Data General Corp. (a).................................. 4,854 126,204
Dell Computer Corp. (a)................................. 20,547 2,412,988
Digital Equipment Corp. (a)............................. 18,705 662,858
EMC Corp. (a)........................................... 30,130 1,175,070
Hewlett-Packard Co. .................................... 124,581 6,976,536
Intergraph Corp. (a).................................... 5,925 50,363
International Business
Machines Corp.......................................... 121,759 10,981,140
Seagate Technology (a).................................. 30,358 1,068,222
Silicon Graphics Inc. (a)............................... 21,685 325,275
Sun Microsystems (a).................................... 44,977 1,673,990
Tandem Computers Inc. (a)............................... 14,228 288,117
Unisys Corp. (a)........................................ 21,374 162,977
------------
29,588,104
------------
CONGLOMERATES (0.3%)
Tenneco Inc. ........................................... 20,923 945,458
Textron Inc............................................. 20,204 1,341,040
------------
2,286,498
------------
CONTAINERS--METAL & GLASS (0.1%)
Ball Corp............................................... 3,689 110,901
Crown Cork & Seal Co., Inc.............................. 15,845 846,717
------------
957,618
------------
CONTAINERS--PAPER (0.1%)
Bemis Co., Inc. ........................................ 6,442 279,422
Stone Container Corp.................................... 12,245 175,256
Temple-Inland Inc....................................... 6,877 371,358
------------
826,036
------------
COSMETICS (1.0%)
Alberto-Culver Co. Class B.............................. 6,799 190,372
Avon Products, Inc. .................................... 16,293 1,149,675
Gillette Co. ........................................... 68,314 6,472,751
International Flavors &
Fragrances Inc. ....................................... 13,556 684,578
------------
8,497,376
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
DRUGS (4.6%)
Lilly (Eli) & Co........................................ 68,044 $ 7,438,060
Merck & Co., Inc........................................ 147,986 15,316,551
Pfizer Inc.............................................. 79,159 9,459,500
Pharmacia & Upjohn, Inc. ............................... 62,165 2,160,234
Schering-Plough Corp.................................... 89,692 4,294,004
------------
38,668,349
------------
ELECTRIC POWER COMPANIES (2.4%)
American Electric Power Co., Inc........................ 22,906 962,052
Baltimore Gas & Electric Co............................. 18,307 488,568
Carolina Power & Light Co............................... 18,565 666,019
Central & South West Corp. ............................. 25,775 547,719
Cinergy Corp. .......................................... 19,509 679,157
Consolidated Edison Co. of
New York, Inc. ........................................ 28,766 846,799
Dominion Resources, Inc................................. 22,630 828,824
DTE Energy Co. ......................................... 17,732 489,847
Duke Energy Corp........................................ 44,204 2,119,029
Edison International.................................... 50,282 1,250,765
Entergy Corp. .......................................... 29,121 797,187
FPL Group, Inc. ........................................ 22,370 1,030,418
GPU, Inc................................................ 14,901 534,573
Houston Industries Inc.................................. 28,732 615,942
Niagara Mohawk Power Corp. (a).......................... 17,671 151,308
Northern States Power Co. .............................. 8,418 435,632
Ohio Edison Co.......................................... 18,636 406,498
PacifiCorp.............................................. 36,091 794,002
PECO Energy Co.......................................... 27,226 571,746
PG&E Corp. ............................................. 50,459 1,223,631
PP&L Resources, Inc. ................................... 20,074 400,225
Public Service Enterprise
Group Inc.............................................. 28,405 710,125
Southern Co. (The)...................................... 83,599 1,828,728
Texas Utilities Co. .................................... 27,535 948,237
Unicom Corp. ........................................... 26,421 587,867
Union Electric Co. ..................................... 12,681 477,915
------------
20,392,813
------------
ELECTRICAL EQUIPMENT (4.2%)
AMP Inc. ............................................... 26,919 1,123,868
Emerson Electric Co..................................... 54,806 3,017,756
General Electric Co. (d)................................ 402,150 26,290,556
General Signal Corp. ................................... 6,205 270,693
Grainger (W.W.), Inc. .................................. 6,630 518,383
Honeywell, Inc.......................................... 15,734 1,193,817
Raychem Corp. .......................................... 5,589 415,682
Thomas & Betts Corp..................................... 6,650 349,541
Westinghouse Electric Corp. ............................ 77,902 1,801,484
------------
34,981,780
------------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc............................................... 5,691 128,047
------------
ELECTRONIC--INSTRUMENTATION (0.1%)
Perkin-Elmer Corp. ..................................... 5,460 434,411
Tektronix, Inc. ........................................ 4,189 251,340
------------
685,751
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
34
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
ELECTRONIC--SEMICONDUCTORS (3.1%)
Advanced Micro Devices, Inc. (a)........................ 17,233 $ 620,388
Applied Materials, Inc. (a)............................. 22,275 1,577,349
Intel Corp.............................................. 100,089 14,193,871
LSI Logic Corp. (a)..................................... 17,239 551,648
Micron Technology, Inc.................................. 25,617 1,023,079
Motorola, Inc. ......................................... 72,638 5,520,488
National Semiconductor Corp. (a) ....................... 17,335 530,884
Texas Instruments, Inc.................................. 23,234 1,953,108
------------
25,970,815
------------
ENGINEERING & CONSTRUCTION (0.1%)
Fluor Corp. ............................................ 10,479 578,310
Foster Wheeler Corp..................................... 5,006 202,743
------------
781,053
------------
ENTERTAINMENT (1.4%)
King World Productions,
Inc. (a)............................................... 4,603 161,105
Time Warner Inc......................................... 68,511 3,305,656
Viacom, Inc. Class B (a)................................ 43,351 1,300,530
Walt Disney Co. (The)................................... 82,757 6,641,249
------------
11,408,540
------------
FINANCIAL--MISCELLANEOUS (2.5%)
American Express Co. ................................... 58,058 4,325,321
American General Corp. ................................. 29,430 1,405,283
Fannie Mae.............................................. 130,075 5,674,522
Federal Home Loan
Mortgage Corp.......................................... 85,168 2,927,650
Green Tree Financial Corp............................... 16,608 591,660
MBIA Corp. ............................................. 5,395 608,623
MBNA Corp. ............................................. 40,928 1,498,988
Morgan Stanley, Dean Witter, Discover & Co.............. 70,232 3,024,365
Transamerica Corp. ..................................... 8,135 761,131
------------
20,817,543
------------
FOOD DISTRIBUTORS (0.2%)
Cardinal Health, Inc. .................................. 13,298 761,310
Fleming Cos., Inc....................................... 4,709 84,762
Supervalu Inc........................................... 8,313 286,798
Sysco Corp. ............................................ 21,337 778,801
------------
1,911,671
------------
FOODS (2.9%)
Archer-Daniels-Midland Co............................... 65,368 1,536,148
Campbell Soup Co........................................ 57,224 2,861,200
ConAgra, Inc. .......................................... 29,486 1,890,790
CPC International Inc................................... 17,829 1,645,840
General Mills, Inc. .................................... 19,964 1,300,155
Heinz (H.J.) Co. ....................................... 45,074 2,079,038
Hershey Foods Corp...................................... 18,755 1,037,386
Kellogg Co. ............................................ 25,813 2,210,238
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FOODS (Continued)
Quaker Oats Co.......................................... 16,850 $ 756,144
Ralston-Ralston Purina Group............................ 13,128 1,078,957
Sara Lee Corp........................................... 58,991 2,455,500
Unilever, N.V........................................... 19,562 4,187,491
Wrigley (Wm.) Jr. Co.................................... 14,382 963,594
------------
24,002,481
------------
GOLD (0.3%)
Barrick Gold Corp....................................... 45,739 1,006,258
Battle Mountain Gold Co................................. 28,154 160,126
Echo Bay Mines Ltd...................................... 17,061 95,968
Homestake Mining Co. ................................... 18,126 236,771
Newmont Mining Corp. ................................... 19,300 752,700
Placer Dome Inc......................................... 29,343 480,491
------------
2,732,314
------------
HARDWARE & TOOLS (0.1%)
Black & Decker Corp. ................................... 11,517 428,289
Snap-On, Inc............................................ 7,593 298,974
Stanley Works (The)..................................... 10,921 436,840
------------
1,164,103
------------
HEALTH CARE--DIVERSIFIED (4.5%)
Abbott Laboratories..................................... 94,704 6,321,492
Allergan, Inc........................................... 8,190 260,544
American Home Products Corp............................. 78,934 6,038,451
Bristol-Myers Squibb Co................................. 122,541 9,925,821
Johnson & Johnson....................................... 163,306 10,512,824
Mallinckrodt Group Inc. ................................ 9,194 358,566
Warner-Lambert Co. ..................................... 33,220 4,127,585
------------
37,545,283
------------
HEALTH CARE--HMOs (0.2%)
Humana Inc. (a)......................................... 19,936 461,020
United Healthcare Corp. ................................ 22,503 1,170,156
------------
1,631,176
------------
HEALTH CARE--MISCELLANEOUS (0.4%)
ALZA Corp. (a).......................................... 10,576 306,043
Amgen Inc. (a).......................................... 32,399 1,883,192
Beverly Enterprises, Inc. (a)........................... 12,137 197,226
HEALTHSOUTH Corp. (a)................................... 42,075 1,049,246
Manor Care, Inc......................................... 7,717 251,767
------------
3,687,474
------------
HEAVY TRUCKS & PARTS (0.3%)
Cummins Engine Co., Inc. ............................... 4,996 352,530
Dana Corp............................................... 12,621 479,598
Eaton Corp.............................................. 9,582 836,628
ITT Industries, Inc..................................... 14,551 374,688
Navistar International Corp. (a)........................ 9,066 156,389
PACCAR Inc.............................................. 9,556 443,757
------------
2,643,590
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
35
<PAGE>
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
HOMEBUILDING (0.0%) (b)
Centex Corp............................................. 3,443 $ 139,872
Kaufman & Broad Home Corp. ............................. 4,784 84,019
Pulte Corp.............................................. 2,578 89,102
------------
312,993
------------
HOSPITAL MANAGEMENT (0.5%)
Columbia/HCA Healthcare Corp............................ 82,189 3,231,055
Tenet Healthcare Corp. (a).............................. 36,867 1,089,881
------------
4,320,936
------------
HOTEL--MOTEL (0.3%)
Harrah's Entertainment, Inc. (a)........................ 12,557 229,165
Hilton Hotels Corp. .................................... 30,314 805,216
ITT Corp. (a)........................................... 14,209 867,637
Marriott International Inc. ............................ 15,870 974,021
------------
2,876,039
------------
HOUSEHOLD--FURNISHINGS & APPLIANCES (0.1%)
Armstrong World Industries, Inc. ....................... 5,161 378,688
Maytag Corp............................................. 12,229 319,483
Whirlpool Corp.......................................... 9,164 500,011
------------
1,198,182
------------
HOUSEHOLD PRODUCTS (2.2%)
Clorox Co. (The)........................................ 6,437 849,684
Colgate-Palmolive Co. .................................. 36,189 2,361,332
Kimberly-Clark Corp..................................... 68,584 3,412,054
Procter & Gamble Co. (The).............................. 82,821 11,698,466
------------
18,321,536
------------
HOUSEWARES (0.3%)
Fortune Brands, Inc..................................... 20,825 777,033
Newell Co............................................... 19,403 768,844
Rubbermaid Inc.......................................... 18,528 551,208
Tupperware Corp......................................... 7,663 279,699
------------
2,376,784
------------
INSURANCE BROKERS (0.3%)
Aon Corp................................................ 20,387 1,055,027
Marsh & McLennan Cos., Inc.............................. 20,092 1,434,067
------------
2,489,094
------------
INVESTMENT BANK/BROKERAGE (0.5%)
Merrill Lynch & Co., Inc................................ 40,653 2,423,935
Salomon Inc. ........................................... 13,563 754,442
Schwab (Charles) Corp................................... 21,440 872,340
------------
4,050,717
------------
LEISURE TIME (0.0%) (b)
Brunswick Corp.......................................... 12,143 379,469
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
LIFE INSURANCE (0.7%)
Aetna Inc............................................... 18,413 $ 1,885,031
Conseco Inc. ........................................... 22,478 831,686
Jefferson-Pilot Corp.................................... 8,825 616,647
Lincoln National Corp. ................................. 12,905 830,759
Torchmark Corp. ........................................ 8,863 631,489
UNUM Corp............................................... 17,102 718,284
------------
5,513,896
------------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc................................. 4,962 128,702
Giddings & Lewis, Inc. ................................. 4,147 86,568
------------
215,270
------------
MACHINERY--DIVERSIFIED (0.9%)
Briggs & Stratton Corp.................................. 3,438 171,900
Case Corp............................................... 8,962 617,258
Caterpillar Inc. ....................................... 23,431 2,515,904
Cooper Industries Inc................................... 14,507 721,723
Deere & Co. ............................................ 31,415 1,723,898
Harnischfeger Industries, Inc........................... 5,922 245,763
Ingersoll-Rand Co. ..................................... 13,559 837,268
NACCO Industries, Inc. Class A.......................... 1,069 60,332
Thermo Electron Corp. (a)............................... 18,279 621,486
Timken Co. (The)........................................ 7,476 265,865
------------
7,781,397
------------
MAJOR REGIONAL BANKS (4.7%)
Banc One Corp........................................... 61,432 2,975,613
Bank of New York Co.,
Inc. (The)............................................. 47,476 2,065,206
BankBoston Corp......................................... 18,008 1,297,701
Barnett Banks, Inc...................................... 24,397 1,280,843
Comerica Inc. .......................................... 12,991 883,388
CoreStates Financial Corp. ............................. 25,330 1,361,488
Fifth Third Bancorp..................................... 13,203 1,083,059
First Bank System, Inc. ................................ 16,433 1,402,967
First Union Corp........................................ 35,104 3,247,120
Fleet Financial Group, Inc.............................. 32,124 2,031,843
KeyCorp................................................. 27,637 1,544,217
Mellon Bank Corp........................................ 31,675 1,429,334
National City Corp. .................................... 27,204 1,428,210
NationsBank Corp........................................ 89,476 5,771,202
Norwest Corp............................................ 45,837 2,578,331
PNC Bank Corp........................................... 39,454 1,642,273
Republic New York Corp.................................. 6,927 744,653
SunTrust Banks, Inc. ................................... 27,287 1,502,490
U.S. Bancorp............................................ 18,087 1,159,829
Wachovia Corp. ......................................... 19,816 1,155,521
Wells Fargo & Co........................................ 11,012 2,967,734
------------
39,553,022
------------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises Inc. ............................. 4,445 132,517
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
36
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
MANUFACTURING--DIVERSIFIED (1.0%)
Aeroquip-Vickers Inc.................................... 3,514 $ 166,036
AlliedSignal Inc........................................ 34,628 2,908,752
Crane Co................................................ 5,778 241,593
Dover Corp.............................................. 13,762 846,363
Illinois Tool Works Inc................................. 30,499 1,523,044
Johnson Controls, Inc................................... 10,126 415,799
Millipore Corp.......................................... 5,355 235,620
Pall Corp............................................... 15,310 355,957
Parker-Hannifin Corp.................................... 9,232 560,267
Tyco International Ltd. ................................ 20,480 1,424,640
------------
8,678,071
------------
MEDICAL PRODUCTS (1.0%)
Bard (C.R.), Inc. ...................................... 7,016 254,768
Bausch & Lomb Inc....................................... 6,927 326,435
Baxter International Inc. .............................. 34,124 1,782,979
Becton, Dickinson & Co.................................. 15,044 761,603
Biomet, Inc............................................. 13,637 253,989
Boston Scientific Corp. (a)............................. 23,757 1,459,571
Guidant Corp............................................ 9,229 784,465
Medtronic, Inc. ........................................ 29,349 2,377,269
St. Jude Medical, Inc. (a).............................. 11,131 434,109
United States Surgical Corp............................. 8,956 333,611
------------
8,768,799
------------
METALS--MISCELLANEOUS (0.3%)
ASARCO Inc.............................................. 5,319 162,894
Cyprus Amax Minerals Co................................. 11,536 282,632
Freeport-McMoRan Copper & Gold Inc. Class B............. 24,587 765,270
Inco Ltd................................................ 20,573 618,476
Phelps Dodge Corp....................................... 7,550 643,166
------------
2,472,438
------------
MISCELLANEOUS (1.4%)
AirTouch Communications,
Inc. (a)............................................... 61,348 1,679,401
American Greetings Corp. Class A........................ 9,294 345,040
Corning Inc............................................. 28,191 1,568,124
Harcourt General, Inc................................... 8,828 420,433
Harris Corp............................................. 4,767 400,428
Jostens, Inc............................................ 4,903 129,317
Minnesota Mining & Manufacturing Co..................... 51,219 5,224,338
Pioneer Hi-Bred International, Inc. .................... 10,038 803,040
TRW, Inc................................................ 15,511 881,219
Whitman Corp............................................ 12,496 316,305
------------
11,767,645
------------
MONEY CENTER BANKS (2.7%)
BankAmerica Corp........................................ 86,934 5,612,676
Bankers Trust New York Corp............................. 9,564 832,068
Chase Manhattan Corp.................................... 52,858 5,130,530
Citicorp................................................ 56,764 6,843,610
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
MONEY CENTER BANKS (Continued)
First Chicago Corp...................................... 38,338 $ 2,319,449
Morgan (J.P.) & Co., Inc................................ 22,742 2,373,696
------------
23,112,029
------------
MULTI-LINE INSURANCE (1.9%)
American International
Group, Inc............................................. 57,513 8,591,004
CIGNA Corp.............................................. 9,029 1,602,648
Hartford Financial Services
Group, Inc............................................. 14,530 1,202,357
Travelers Group Inc. ................................... 78,669 4,961,064
------------
16,357,073
------------
NATURAL GAS DISTRIBUTORS & PIPELINES (0.7%)
Coastal Corp. (The)..................................... 13,063 694,788
Columbia Gas System, Inc................................ 6,836 446,049
Consolidated Natural Gas Co. ........................... 11,625 625,570
Eastern Enterprises..................................... 2,482 86,094
Enron Corp.............................................. 31,164 1,271,881
ENSERCH Corp............................................ 8,543 190,082
NICOR Inc. ............................................. 6,171 221,385
NorAm Energy Corp....................................... 16,840 256,810
ONEOK Inc............................................... 3,264 105,060
Pacific Enterprises..................................... 10,175 342,134
Peoples Energy Corp..................................... 4,196 157,088
Sonat, Inc. ............................................ 10,705 548,631
Williams Cos., Inc. (The)............................... 19,457 851,244
------------
5,796,816
------------
OFFICE EQUIPMENT & SUPPLIES (0.6%)
Moore Corp. Ltd. ....................................... 10,825 213,117
Pitney Bowes Inc........................................ 17,848 1,271,670
Xerox Corp.............................................. 39,769 3,136,780
------------
4,621,567
------------
OIL & GAS DRILLING (0.1%)
Helmerich & Payne, Inc.................................. 3,066 176,678
Rowan Cos., Inc. (a).................................... 10,536 296,984
------------
473,662
------------
OIL--EXPLORATION & PRODUCTION (0.2%)
Burlington Resources Inc................................ 15,503 684,070
Oryx Energy Co. (a)..................................... 12,835 271,139
Santa Fe Energy Resources,
Inc. (a)............................................... 12,147 178,409
Union Pacific Resources
Group, Inc............................................. 31,082 773,165
------------
1,906,783
------------
OIL--INTEGRATED DOMESTIC (1.2%)
Amerada Hess Corp....................................... 11,584 643,636
Ashland Inc............................................. 9,062 420,250
Atlantic Richfield Co................................... 40,090 2,826,345
Kerr-McGee Corp......................................... 6,017 381,327
Louisiana Land &
Exploration Co. (The).................................. 4,237 242,039
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
37
<PAGE>
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
OIL--INTEGRATED DOMESTIC (Continued)
Occidental Petroleum Corp............................... 40,286 $ 1,009,668
Pennzoil Co............................................. 5,765 442,464
Phillips Petroleum Co................................... 32,194 1,408,487
Sun Co., Inc. .......................................... 9,160 283,960
Unocal Corp............................................. 30,626 1,188,672
USX-Marathon Group...................................... 35,215 1,016,833
------------
9,863,681
------------
OIL--INTEGRATED INTERNATIONAL (6.5%)
Amoco Corp.............................................. 60,901 5,294,581
Chevron Corp............................................ 80,105 5,922,764
Exxon Corp. (d)......................................... 304,384 18,719,616
Mobil Corp.............................................. 96,446 6,739,164
Royal Dutch Petroleum Co................................ 65,682 14,285,835
Texaco Inc.............................................. 32,395 3,522,956
------------
54,484,916
------------
OIL--WELL EQUIPMENT & SERVICES (0.8%)
Baker Hughes Inc........................................ 17,741 686,355
Dresser Industries, Inc. ............................... 21,507 801,136
Halliburton Co.......................................... 15,499 1,228,296
McDermott International, Inc. .......................... 6,833 199,438
Schlumberger Ltd........................................ 30,179 3,772,375
Western Atlas Inc. (a).................................. 6,646 486,819
------------
7,174,419
------------
PAPER & FOREST PRODUCTS (0.9%)
Boise Cascade Corp...................................... 6,003 211,981
Champion International Corp............................. 11,878 656,259
Georgia-Pacific Corp.................................... 11,301 964,823
International Paper Co. ................................ 36,787 1,786,469
James River Corp. of Virginia........................... 10,542 390,054
Louisiana-Pacific Corp. ................................ 13,460 284,342
Mead Corp. ............................................. 6,490 404,003
Potlatch Corp........................................... 3,439 155,615
Union Camp Corp......................................... 8,571 428,550
Westvaco Corp........................................... 12,645 397,527
Weyerhaeuser Co......................................... 24,302 1,263,704
Willamette Industries, Inc. ............................ 6,818 477,260
------------
7,420,587
------------
PERSONAL LOANS (0.3%)
Beneficial Corp......................................... 6,593 468,515
Countrywide Credit
Industries, Inc........................................ 12,800 399,200
Household International, Inc............................ 13,034 1,530,680
Providian Financial Corp................................ 11,640 373,935
------------
2,772,330
------------
PHOTOGRAPHY/IMAGING (0.5%)
Eastman Kodak Co. ...................................... 40,342 3,096,249
IKON Office Solutions, Inc.............................. 16,508 411,668
Polaroid Corp........................................... 5,624 312,132
------------
3,820,049
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
POLLUTION CONTROL (0.3%)
Browning-Ferris Industries Inc. ........................ 26,010 $ 864,833
Waste Management Inc.................................... 55,588 1,785,764
------------
2,650,597
------------
PROPERTY--CASUALTY INSURANCE (1.3%)
Allstate Corp. (The).................................... 54,076 3,947,548
Chubb Corp. ............................................ 21,294 1,424,036
General Re Corp......................................... 9,919 1,805,258
Loews Corp.............................................. 14,051 1,406,857
MGIC Investment Corp. .................................. 14,493 694,758
SAFECO Corp............................................. 15,599 728,278
St. Paul Cos., Inc. (The)............................... 10,371 790,789
USF&G Corp.............................................. 13,529 324,696
------------
11,122,220
------------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The)............................ 12,282 722,335
Meredith Corp. ......................................... 6,582 190,878
------------
913,213
------------
PUBLISHING--NEWSPAPER (0.6%)
Dow Jones & Co., Inc.................................... 11,783 473,529
Gannett Co., Inc........................................ 17,473 1,725,459
Knight-Ridder Inc. ..................................... 11,188 548,911
New York Times Co. (The)
Class A................................................ 11,818 596,809
Times Mirror Co. (The) Class A.......................... 11,418 648,685
Tribune Co.............................................. 15,133 727,330
------------
4,720,723
------------
RAILROADS (0.8%)
Burlington Northern Santa Fe Corp....................... 18,896 1,698,278
CSX Corp. .............................................. 26,551 1,473,580
Norfolk Southern Corp................................... 15,490 1,560,618
Union Pacific Corp. .................................... 29,934 2,110,347
------------
6,842,823
------------
RESTAURANTS (0.5%)
Darden Restaurants, Inc................................. 18,747 169,895
McDonald's Corp......................................... 84,577 4,086,126
Wendy's International, Inc.............................. 15,815 410,202
------------
4,666,223
------------
RETAIL STORES--APPAREL (0.3%)
Charming Shoppes, Inc. (a).............................. 13,064 68,179
Gap, Inc. (The)......................................... 33,519 1,303,051
Limited, Inc. (The)..................................... 33,185 671,996
TJX Cos., Inc. (The).................................... 19,422 512,255
------------
2,555,481
------------
RETAIL STORES--DEPARTMENT (0.6%)
Dillard's Inc. Class A.................................. 14,058 486,758
Federated Department
Stores, Inc. (a)....................................... 25,685 892,554
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
38
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
RETAIL STORES--DEPARTMENT (Continued)
May Department Stores Co................................ 29,039 $ 1,372,093
Mercantile Stores Co., Inc.............................. 4,579 288,191
Nordstrom, Inc.......................................... 10,073 494,206
Penney (J.C.) Co., Inc.................................. 30,319 1,582,273
------------
5,116,075
------------
RETAIL STORES--DRUG (0.3%)
Longs Drug Stores Corp.................................. 4,706 123,238
Rite-Aid Corp........................................... 15,024 749,322
Walgreen Co............................................. 30,143 1,616,419
------------
2,488,979
------------
RETAIL STORES--FOOD CHAIN (0.5%)
Albertson's, Inc........................................ 30,816 1,124,784
American Stores Co...................................... 17,808 879,270
Giant Food, Inc. Class A................................ 7,284 235,819
Great Atlantic & Pacific Tea Co., Inc. (The)............ 4,735 128,733
Kroger Co. (a).......................................... 30,896 895,984
Winn-Dixie Stores, Inc.................................. 18,490 688,753
------------
3,953,343
------------
RETAIL STORES--GENERAL MERCHANDISE (1.7%)
Dayton-Hudson Corp...................................... 26,578 1,413,617
Kmart Corp. (a)......................................... 59,225 725,506
Sears, Roebuck & Co..................................... 47,925 2,575,969
Wal-Mart Stores, Inc.................................... 277,774 9,392,234
------------
14,107,326
------------
RETAIL STORES--SPECIALTY (1.2%)
Autozone, Inc. (a)...................................... 18,393 433,385
Circuit City Stores--Circuit
City Group............................................. 12,075 429,417
Costco Cos., Inc........................................ 25,703 844,986
CVS Corp................................................ 20,343 1,042,579
Home Depot, Inc. (The).................................. 59,567 4,106,400
Lowe's Cos., Inc........................................ 21,398 794,401
Pep Boys-Manny, Moe & Jack.............................. 7,435 253,255
Tandy Corp.............................................. 6,671 373,576
Toys "R" Us, Inc. (a)................................... 35,033 1,226,155
Woolworth Corp. (a)..................................... 16,513 396,312
------------
9,900,466
------------
SAVINGS & LOANS (0.2%)
Ahmanson (H.F.) & Co.................................... 12,376 532,168
Golden West Financial Corp.............................. 7,017 491,190
Great Western Financial Corp............................ 17,058 916,867
------------
1,940,225
------------
SHOES (0.3%)
Nike Inc. Class B....................................... 35,314 2,061,455
Reebok International Ltd. .............................. 6,952 325,006
Stride Rite Corp........................................ 6,232 80,237
------------
2,466,698
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
SPECIALIZED SERVICES (0.8%)
Block (H & R), Inc. .................................... 12,865 $ 414,896
Cognizant Corp. ........................................ 20,805 842,603
CUC International Inc. (a).............................. 50,065 1,292,303
Dun & Bradstreet Corp. (The)............................ 20,801 546,026
Ecolab Inc.............................................. 7,951 379,660
HFS Inc. (a)............................................ 19,205 1,113,890
Interpublic Group of Cos., Inc.......................... 9,908 607,484
Laidlaw Inc. Class B.................................... 38,459 531,215
National Service Industries, Inc........................ 5,534 269,437
Safety-Kleen Corp....................................... 7,185 121,247
Service Corp. International............................. 29,350 964,881
------------
7,083,642
------------
SPECIALTY PRINTING (0.1%)
Deluxe Corp............................................. 10,240 349,440
Donnelley (R.R.) & Sons Co.............................. 17,963 657,895
Harland (John H.) Co.................................... 3,732 85,136
------------
1,092,471
------------
STEEL (0.2%)
Allegheny Teledyne Inc.................................. 21,378 577,206
Armco Inc. (a).......................................... 13,156 50,980
Bethlehem Steel Corp. (a)............................... 13,783 143,860
Inland Steel Industries Inc............................. 6,027 157,455
Nucor Corp.............................................. 10,861 621,792
USX-U.S. Steel Group.................................... 10,351 362,932
Worthington Industries, Inc............................. 11,836 216,747
------------
2,130,972
------------
TELECOMMUNICATIONS--LONG DISTANCE (2.0%)
AT&T Corp............................................... 199,224 6,985,291
MCI Communications Corp................................. 84,190 3,222,903
Sprint Corp............................................. 52,748 2,775,864
WorldCom, Inc. (a)...................................... 109,511 3,504,352
------------
16,488,410
------------
TELEPHONE (3.9%)
ALLTEL Corp............................................. 22,891 765,418
Ameritech Corp.......................................... 67,240 4,568,117
Bell Atlantic Corp...................................... 53,648 4,070,542
BellSouth Corp.......................................... 121,648 5,641,426
Frontier Corp........................................... 20,070 400,146
GTE Corp................................................ 117,263 5,144,914
NYNEX Corp.............................................. 53,842 3,102,645
SBC Communications Inc.................................. 111,841 6,920,162
US West, Inc............................................ 58,538 2,206,151
------------
32,819,521
------------
TEXTILES--APPAREL MANUFACTURERS (0.2%)
Fruit Of The Loom, Inc. Class A (a)..................... 9,492 294,252
Liz Claiborne, Inc...................................... 8,861 413,144
Russell Corp............................................ 4,463 132,216
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
39
<PAGE>
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
TEXTILES--APPAREL MANUFACTURERS (Continued)
Springs Industries, Inc. Class A.................. 2,452 $ 129,343
VF Corp........................................... 7,931 675,127
------------
1,644,082
------------
TOBACCO (1.6%)
Philip Morris Cos................................. 297,896 13,219,135
UST Inc........................................... 22,765 631,729
------------
13,850,864
------------
TOYS (0.2%)
Hasbro Inc........................................ 15,675 444,778
Mattel, Inc....................................... 35,459 1,201,174
------------
1,645,952
------------
TRANSPORTATION--MISCELLANEOUS (0.1%)
Federal Express Corp. (a)......................... 14,055 811,676
Ryder System, Inc. ............................... 9,308 307,164
------------
1,118,840
------------
TRUCKERS (0.0%) (b)
Caliber System, Inc. ............................. 4,675 174,144
------------
Total Common Stocks
(Cost $521,874,991).............................. 833,683,498 (c)
------------
SHORT-TERM
INVESTMENTS (1.1%)
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
COMMERCIAL PAPER (0.9%)
Shinhan Bank
5.90%, due 7/1/97 (d)............................ $ 200,000 200,000
5.90%, due 7/7/97 (d)............................ 2,200,000 2,197,837
5.90%, due 8/15/97 (d)........................... 2,400,000 2,382,300
5.92%, due 8/22/97 (d)........................... 800,000 793,159
5.93%, due 8/18/97 (d)........................... 1,800,000 1,785,768
5.93%, due 8/19/97 (d)........................... 100,000 99,193
------------
Total Commercial Paper
(Cost $7,458,257)................................ 7,458,257
------------
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
U.S. GOVERNMENT (0.2%)
United States Treasury Bills
4.82%, due 9/11/97 (d)......................... $ 400,000 $ 395,872
4.86%, due 9/18/97 (d)......................... 800,000 790,951
------------
Total U.S. Government
(Cost $1,187,408).............................. 1,186,823
------------
Total Short-Term Investments
(Cost $8,645,665).............................. 8,645,080
------------
Total Investments
(Cost $530,520,656) (e)........................ 100.0% 842,328,578 (f)
------------
Cash and Other Assets,
Less Liabilities............................... 0.0 (b) 290,753
--------- ------------
Net Assets...................................... 100.0% $842,619,331
========= ============
FUTURES
CONTRACTS (0.0%) (b)
<CAPTION>
CONTRACTS UNREALIZED
LONG APPRECIATION
--------------------------
<S> <C> <C>
Standard & Poor's 500
September 1997................................. 22 $ 57,503 (g)
------------
Total Futures Contracts
(Settlement Value $9,792,750).................. $ 57,503
============
</TABLE>
- --------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) The combined market value of common stocks and settlement value of
Standard & Poor's 500 Index futures contracts represents 100.1% of net
assets.
(d) Segregated or partially segregated as collateral for futures contracts.
(e) The cost for Federal income tax purposes is $530,829,952.
(f) At June 30, 1997 net unrealized appreciation was $311,498,626, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess
of market value over cost of $316,449,741 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $4,951,115.
(g) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1997.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
40
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $530,520,656).................................. $842,328,578
Cash............................................................. 50,264
Receivables:
Investment securities sold....................................... 3,950,648
Dividends and interest........................................... 1,131,469
Fund shares sold................................................. 452,798
------------
Total assets................................................... 847,913,757
------------
LIABILITIES:
Payables:
Investment securities purchased.................................. 4,873,932
Administrator.................................................... 134,114
Fund shares redeemed............................................. 66,761
Adviser.......................................................... 35,995
Transfer agent................................................... 6,553
Custodian........................................................ 3,750
Accrued expenses................................................. 127,881
Variation margin payable on futures contracts.................... 45,440
------------
Total liabilities.............................................. 5,294,426
------------
Net assets....................................................... $842,619,331
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class.............................................. $ 32,829
Institutional Service Class...................................... 405
Additional paid-in capital....................................... 508,990,087
Accumulated undistributed net investment income.................. 6,113,117
Accumulated undistributed net realized gain on investments....... 15,617,468
Net unrealized appreciation on investments....................... 311,865,425
------------
Net assets....................................................... $842,619,331
============
Institutional Class
Net assets applicable to outstanding shares...................... $832,391,189
============
Shares of capital stock outstanding.............................. 32,828,549
============
Net asset value per share outstanding............................ $ 25.36
============
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 10,228,142
============
Shares of capital stock outstanding.............................. 404,617
============
Net asset value per share outstanding............................ $ 25.28
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 6,566,215
Interest......................................................... 646,740
------------
Total income................................................... 7,212,955
------------
Expenses:
Administration................................................... 1,453,442
Advisory......................................................... 363,361
Professional..................................................... 50,812
Custodian........................................................ 46,257
Registration..................................................... 42,360
Shareholder communication........................................ 33,929
Transfer agent................................................... 14,476
Directors........................................................ 10,302
Service.......................................................... 9,757
Miscellaneous.................................................... 10,269
------------
Total expenses before
reimbursement................................................. 2,034,965
Expense reimbursement from Administrator and Adviser............. (935,127)
------------
Net expenses................................................... 1,099,838
------------
Net investment income............................................ 6,113,117
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from:
Security transactions............................................ 4,916,229
Futures transactions............................................. 2,038,780
------------
Net realized gain on investments................................. 6,955,009
------------
Net change in unrealized appreciation on investments:
Security transactions............................................ 124,793,878
Futures transactions............................................. 57,503
------------
Net unrealized gain on investments............................... 124,851,381
------------
Net realized and unrealized gain on investments.................. 131,806,390
------------
Net increase in net assets resulting from operations............. $137,919,507
============
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $50,228.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
41
<PAGE>
INDEXED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 6,113,117 $ 9,860,784
Net realized gain on investments.................. 6,955,009 21,095,410
Net change in unrealized appreciation on invest-
ments............................................ 124,851,381 71,692,530
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 137,919,507 102,648,724
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. -- (9,781,685)
Institutional Service Class...................... -- (81,268)
From net realized gain on investments:
Institutional Class.............................. -- (13,063,037)
Institutional Service Class...................... -- (121,038)
------------ ------------
Total dividends and distributions to sharehold-
ers............................................ -- (23,047,028)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 149,592,648 252,112,038
Institutional Service Class...................... 3,418,312 4,498,994
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. -- 22,844,722
Institutional Service Class...................... -- 202,306
------------ ------------
153,010,960 279,658,060
Cost of shares redeemed:
Institutional Class.............................. (71,354,247) (90,730,104)
Institutional Service Class...................... (537,772) (337,651)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 81,118,941 188,590,305
------------ ------------
Net increase in net assets....................... 219,038,448 268,192,001
NET ASSETS:
Beginning of period............................... 623,580,883 355,388,882
------------ ------------
End of period..................................... $842,619,331 $623,580,883
============ ============
Accumulated undistributed net investment income... $ 6,113,117 $ --
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
42
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- ------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED ---------------------------
JUNE 30, 1997* 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net asset value
at beginning of
period............... $ 21.05 $ 21.01 $ 17.82 $ 17.81
-------- -------- ------------- -------------
Net investment
income............... 0.16 0.13 0.34 0.31
Net realized and
unrealized gain
(loss) on
investments.......... 4.15 4.14 3.69 3.66
-------- -------- ------------- -------------
Total from investment
operations........... 4.31 4.27 4.03 3.97
-------- -------- ------------- -------------
Less dividends and
distributions:
From net investment
income............... -- -- (0.34) (0.31)
From net realized gain
on investments....... -- -- (0.46) (0.46)
In excess of net
realized gain on
investments.......... -- -- -- --
-------- -------- ------------- -------------
Total dividends and
distributions........ -- -- (0.80) (0.77)
-------- -------- ------------- -------------
Net asset value at end
of period............ $ 25.36 $ 25.28 $ 21.05 $ 21.01
======== ======== ============= =============
Total investment
return (c) .......... 20.48% 20.32% 22.57% 22.21%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income.............. 1.69%+ 1.44%+ 1.96% 1.71%
Net expenses......... 0.30%+ 0.55%+ 0.44% 0.69%
Expenses (before
reimbursement)...... 0.56%+ 0.81%+ 0.59% 0.84%
Portfolio turnover
rate................. 2% 2% 8% 8%
Average commission
rate paid............ $ 0.0499 $ 0.0499 $ 0.0498 $ 0.0498
Net assets at end of
period (in 000's).... $832,391 $ 10,228 $617,716 $ 5,865
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- -------------------------------
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1995 1994 1993 1992
--------------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period............... $ 13.53 $ 13.53 $ 13.86 $ 13.50 $ 12.98
------------- ------------- ----------- --------- ---------
Net investment
income............... 0.35 0.33 0.33 0.30 0.30
Net realized and
unrealized gain
(loss) on
investments.......... 4.64 4.64 (0.20) 0.93 0.61
------------- ------------- ----------- --------- ---------
Total from investment
operations........... 4.99 4.97 0.13 1.23 0.91
------------- ------------- ----------- --------- ---------
Less dividends and
distributions:
From net investment
income............... (0.34) (0.33) (0.33) (0.61) (0.32)
From net realized gain
on investments....... (0.36) (0.36) (0.13) (0.25) (0.07)
In excess of net
realized gain on
investments.......... -- -- 0.00(a) (0.01) --
------------- ------------- ----------- --------- ---------
Total dividends and
distributions........ (0.70) (0.69) (0.46) (0.87) (0.39)
------------- ------------- ----------- --------- ---------
Net asset value at end
of period............ $ 17.82 $ 17.81 $ 13.53 $ 13.86 $ 13.50
============= ============= =========== ========= =========
Total investment
return (c) .......... 36.88% 36.70% 0.90% 9.41% 7.19%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income.............. 2.21% 1.96% 2.43% 2.39% 2.52%
Net expenses......... 0.50% 0.75% 0.50% 0.45% 0.45%
Expenses (before
reimbursement)...... 0.59% 0.84% 0.58% 0.60% 0.62%
Portfolio turnover
rate................. 4% 4% 5% 5% 4%
Average commission
rate paid............ (b) (b) (b) (b) (b)
Net assets at end of
period (in 000's).... $354,420 $ 969 $244,685 $219,351 $164,858
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(c) 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.
43
<PAGE>
International Equity Fund
================================================================================
- --------------------------------------------------------------------------------
Market highlights for the 6-months ended 6/30/97
- --------------------------------------------------------------------------------
. After a weak first quarter, many international markets showed outstanding
results in the second quarter of 1997, helping boost returns for the six-
month reporting period
. Restructuring and economic improvements led to excellent local returns in
many European markets, although a strong dollar moderated performance for
U.S. investors
. Economic recovery and favorable currency movements helped Japanese equities
regain some momentum, while property speculation in Malaysia presented
substantial investment risks
. Concerns over Chinese rule slowed performance in Hong Kong during the first
quarter of 1997, but returns were strong for the first half of the year
- --------------------------------------------------------------------------------
Fund highlights for the 6- and 12-month periods ended 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 15.74% and 15.49% for Institutional Class and
Service Class shares, respectively, as of 6/30/97
. The Fund reduced its positions in Germany, France, and Spain and increased
exposure in Switzerland and Belgium to strengthen core European holdings and
broaden diversification
. Malaysian holdings were sold and invested primarily in Singapore, which,
despite negative returns, the Fund's managers believe has a stable economy
and strong fundamentals
. Over the reporting period, the Fund lagged its average Lipper* peer fund but
outperformed the Morgan Stanley Capital International EAFE Index/+/
- --------------------------------------------------------------------------------
Fundamentals Key economic factors such as interest rates, gross national
product, inflation, unemployment, and currency stability, which may affect the
direction of a country's economy--or issuer-specific factors such as assets,
earnings, sales, products, and management, which may affect the performance of a
company's securities.
- --------------------------------------------------------------------------------
In the first quarter of 1997, concerns about rising U.S. interest rates caused
weakness in many international markets. During the second quarter, however,
investors returned to the fundamentals of their own markets, which produced
excellent returns in most markets and positive overall results for the first
half of the year.
Ongoing restructuring, low inflation, moderate growth, and progress toward
European Monetary Union improved overall performance in Europe. Several core
European markets provided double-digit returns, with Spain up more than 36%,
Germany up 32%, and France up 23% for the first half of 1997, in local currency
terms. As impressive as these returns may be, a strengthening dollar resulted in
more moderate returns for U.S. investors.
Asian markets were also generally strong. Japan began to climb out of its severe
recession and posted positive returns for the first half of the year. Hong Kong
suffered in the first quarter as investor concerns over unified rule by the
People's Republic of China caused a drop in equity values. Later, however, those
fears subsided and Hong Kong provided positive results for the first half of the
year. In contrast, Singapore and Malaysia both underperformed. Emerging markets
had variable results and just after the first half of 1997 ended, Thailand
devalued its currency.
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
+ The Morgan Stanley Capital International EAFE Index is an unmanaged index
generally considered representative of the international stock market.
44
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
European Monetary Union A proposed system that would allow participating
European countries to operate with a common currency or monetary unit. To
qualify for participation, each member country must meet strict monetary and
fiscal policy guidelines.
Emerging markets Countries with smaller or more recently established capital
markets, which seek to attract investors, but may lack the liquidity and
stability of larger, established markets.
Weighting The proportion of a portfolio allocated to a specific market sector or
country, i.e., a fund is said to be overweighted in a country when that portion
of the portfolio is greater than the country's total equities relative to the
international equity markets as a whole.
- --------------------------------------------------------------------------------
How did the MainStay Institutional International Equity Fund do in this
environment?
For the six months ended 6/30/97, the MainStay Institutional International
Equity Fund had total returns of 12.04% and 12.00% for Institutional Class
shares and Service Class shares, respectively. These results lagged the average
Lipper international fund, which returned 12.53% for the same period. The Fund
outperformed the Morgan Stanley Capital International EAFE Index, which returned
11.21% for the first half of 1997.
What decisions made the biggest contributions to the Fund's performance?
As international investors, we believe that country selection is the most
important decision that we can make. Given the previous weaknesses in Japan, we
felt the Fund could benefit by strengthening its positions in core European
countries. During the first half of 1997, we reduced the Fund's Japanese
exposure and reduced its positions in Germany, France, and Spain to add holdings
in Switzerland and Belgium. This strategic shift strengthened the Fund's
diversification within Europe and had a positive impact on the Fund's
performance.
What detracted from performance during the first half of 1997?
The Fund suffered due to an overweighted position in France, which was
negatively affected during, and shortly after the country's elections. In
addition, because the Fund was underweighted in Japan, it did not benefit as
much from the strengthening of the yen as did funds with heavier Japanese
weightings.
How much did you reduce the Fund's Japanese exposure?
Japan is still the largest international equity market and the Fund continues to
allocate more assets there than to any other country. At the end of 1996, Japan
represented about 29% of the Fund. At the end of the first half of 1997, it was
about 27%. The Fund is currently underweighted in Japanese securities relative
to the Morgan Stanley Capital International EAFE Index, which is the benchmark
against which we measure the Fund's performance.
The signs of recovery in Japan are positive and while its market's 7.50% return
may look meager next to the 20% to 40% returns in some European markets, Japan
was still a positive contributor to performance. In addition, the Japanese yen
strengthened relative to the dollar, so currency movements had a positive impact
for U.S. investors.
Why did you select Switzerland and Belgium?
Diversification was an important consideration. Belgium's economy is tied to
other core European economies, which are generally getting stronger and
providing moderate growth. As a result, we believed the prospects there were
very positive. Switzerland has a number of companies that are export oriented
and benefited from low interest rates and favorable exchange rates. Novartis, a
Swiss pharmaceutical company that resulted from a merger between Ciba Geigy and
Sandoz, is an excellent example.
With the high returns in Germany, France, and Spain, was it wise to reduce the
Fund's holdings in these markets?
With local returns over 20% or 30%, we felt it was a good time to take some
profits. We remain overweighted in many core European countries, including
France, Austria, and Italy. Decreasing the Fund's holdings in Spain brought the
Fund from an overweight position to a neutral position relative to the EAFE
Index. At the same
45
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Privatization The process of converting state-run or publicly-operated companies
into privately owned and operated entities. In theory, enterprises may run more
efficiently and offer better service to customers when owned by shareholders
rather than the government.
Hedging/Currency management An investment strategy that seeks to reduce the
relative effects of currency fluctuations on investor returns. There can be no
assurance that currency hedging will be beneficial to investors.
- --------------------------------------------------------------------------------
time, the Fund's investments in Switzerland and Belgium brought the Fund a more
diversified exposure to Europe.
Which companies provided the best performance during the reporting period?
There were several. For example, in Germany, the Fund had positive results from
Volkswagen. In the Netherlands, Philips Electronics did very well. And in Italy,
which has benefited from low interest rates, low exchange rates, and the
privatization of industry, the Fund had positive results from Telecom Italia
Mobile and its sister companies in telecommunications and cellular equipment.
Have deregulation and privatization had an impact on telecommunications in other
countries?
Absolutely. As the industry moved from dependence on cables to fiber optics and
cellular technology, we've also seen a general shift from government-regulated
telephone monopolies to a more competitive private market. The move in that
direction is creating opportunities for businesses in Europe and the Far East,
just as it did in the United States. On the whole, we think this is a positive
trend and we have telecommunications holdings in several countries.
Which markets didn't do well during the first half of the year?
By far the worst performer was Malaysia. We were concerned about the temporary
slowdown in technology, rising interest rates, and speculation on property
values. Although we had hoped that the situation could be contained, when
property speculation continued, we saw it as a signal to reduce the Fund's
holdings. We decided to cut the Fund's holdings in the second quarter, and since
Malaysia represented only about 3% of the Fund at the beginning of the year, the
overall impact was minor.
Where did you invest the money that you raised selling Malaysian stocks?
In Singapore and in Europe. Although the Singaporean market showed some weakness
during the first half of the year, we believe it has a stable economy, strong
fundamentals, and has been a solid performer over time. Whereas in Europe we
felt that the restructuring and economic improvements looked attractive,
especially on a relative basis.
What happened in the United Kingdom during the first half of the year?
The Fund started off the year underweighted in the U.K. and maintained that
position. Interest rates rose during the first half of the year in Britain and
we believe that to restrain their economy, further rate increases may be
necessary. The British have come out with a new budget that isn't as favorable
for corporations as it might be, so we may wait before taking any action.
What major risks did investors face during the first six months of 1997?
As you know, investments in foreign securities may be subject to greater risks
than domestic investments. These risks include currency fluctuations, changes in
U.S. or foreign tax or currency laws, and changes in monetary policies and
economic and political conditions in foreign countries. During the first six
months of 1997, many investors were concerned about news reports of small
Japanese banks facing solvency problems. Seeking to avoid difficulties of this
nature, the Fund was invested primarily in large, well-established companies.
During the first six months of 1997, managing risk was a major component in our
approach to international investing.
46
<PAGE>
================================================================================
How did shifting currencies affect the portfolio?
The U.S. dollar generally strengthened relative to European currencies. While
that substantially reduced returns in U.S. dollar terms, our currency hedging
strategy helped reduce the negative impact currency movements had on the Fund.
The Japanese yen strengthened against the U.S. dollar, and while the Fund's yen
exposure was limited, it had a positive impact on the Fund's performance.
What about markets in transition like Hong Kong?
Investors were a little cautious about Hong Kong in the first quarter, but as
the transition to rule by the People's Republic of China approached, many
investors began to realize the market's long-range potential. Hong Kong is the
fifth largest banking center and the seventh largest trading center in the
world. It's the gateway for Chinese exports and its fundamentals remain strong.
We held the Fund's investments in Hong Kong throughout the first half of the
year, and our holdings contributed positively to the Fund's performance.
What is your outlook for the Fund?
We continue to believe that restructuring and monetary union will benefit
European markets and we are strongly committed to our diversification strategy
in Europe. As new developments unfold, we may continue to shift assets among
European markets to take advantage of opportunities as they arise. We're pleased
with the economic developments in Japan as well, and if fundamentals continue to
improve, we may begin looking for selected opportunities to increase the Fund's
exposure there. In any event, we will continue to seek long-term growth of
capital commensurate with an acceptable level of risk.
Shigemi Takagi
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
47
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL EQUITY FUND VS MSCI EAFE INDEX
INSTITUTIONAL CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE INTERNATIONAL EQUITY FUND MSCI EAFE INDEX
---- ------------------------- ---------------
<S> <C> <C>
7/31/92 10,000 10,000.00
9,512 10,417.00
92 9,463 10,014.90
10,562 11,215.69
11,294 12,343.99
11,781 13,162.40
93 11,831 13,275.59
12,258 13,740.24
12,724 14,442.36
12,780 14,456.81
94 12,820 14,309.35
12,602 14,575.50
12,166 14,681.90
13,012 15,284.14
95 13,739 15,913.55
14,416 16,373.45
14,907 16,632.15
14,867 16,610.53
96 15,400 16,874.64
15,414 16,609.71
6/30/97 17,254 18,765.85
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL EQUITY FUND VS MSCI EAFE INDEX
SERVICE CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE INTERNATIONAL EQUITY FUND MSCI EAFE INDEX
---- ------------------------- ---------------
<S> <C> <C>
7/31/92 10,000 10,000.00
9,512 10,417.00
92 9,463 10,014.90
10,562 11,215.69
11,294 12,343.99
11,781 13,162.40
93 11,831 13,275.59
12,258 13,740.24
12,724 14,442.36
12,780 14,456.81
94 12,820 14,309.35
12,602 14,575.50
12,153 14,681.90
12,973 15,284.14
95 13,699 15,913.55
14,348 16,373.45
14,826 16,632.15
14,773 16,610.53
96 15,287 16,874.64
15,301 16,609.71
6/30/97 17,122 18,765.85
</TABLE>
. International Equity Fund -- MSCI EAFE Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 7/31/92.+
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity Fund Institutional Class+ 12.04% 15.74% N/A 11.73%
International Equity Fund Service Class+ 12.00% 15.49% N/A 11.56%
Average Lipper International Fund 12.53% 16.54% 12.33% 13.37%
MSCI EAFE Index 11.21% 12.84% 12.83% 13.36%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
. Common Stocks 88.69%
. Cash & Equivalents 11.24%
. Other 0.07%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. Novartis S.A. Registered 1.70%
2. Toyota Motor Corp. 1.67%
3. Siemens AG 1.39%
4. Ente Nazionale Idrocarburi S.p.A. 1.38%
5. National Australia Bank, Ltd. 1.30%
6. Roche Holdings AG Genusscheine 1.28%
7. Broken Hill Proprietary Co., Ltd. 1.22%
8. Nestle S.A. Registered 1.22%
9. Deutsche Telekom AG 1.12%
10. Allianz AG Registered 1.11%
- --------------------------------------------------------------------------------
<CAPTION>
TOP 10 COUNTRIES
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. Japan 27.09%
2. Germany 9.47%
3. France 8.60%
4. United Kingdom 8.04%
5. Switzerland 6.55%
6. Australia 6.30%
7. Italy 5.75%
8. Hong Kong 3.62%
9. Austria 2.76%
10. Spain 2.37%
</TABLE>
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares are sold with no initial or contingent deferred sales charge,
but are subject to an annual shareholder service fee of .25%.
The inception date of the International Equity Fund and the date such shares
were first offered to the public was 1/1/95.
+ The inception date of the International Equity Fund's predecessor separate
account is 7/31/92 ("Separate Account"). Performance figures, and in the
case of the graphs reflecting the investment of $10,000, the investment
results include the historical performance of the Separate Account for the
period prior to the International Equity Fund's commencement of operations
on January 1, 1995. The inception date of the International Equity's
Separate Account is 7/31/92. MacKay Shields Financial Corporation, the
International Equity Fund's investment adviser, served as investment adviser
to the Separate Account, and the investment objective, policies,
restrictions, guidelines, and management style of the Separate Account were
substantially similar to those of the International Equity Fund. Performance
figures and investment results for the period prior to January 1, 1995 have
been calculated using the Separate Account's expense structure, which
generally was higher than the expense structure of the International Equity
Fund. The Separate Account was not registered under the Investment Company
Act of 1940 ("1940 Act") and therefore was not subject to certain investment
restrictions imposed under the 1940 Act. If the Separate Account had been
registered under the 1940 Act, the Separate Account's performance and
investment results may have been adversely affected.
++ Adjusted for liabilities.
48
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS (88.7%)+
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
AUSTRALIA (6.3%)
Amcor, Ltd.
(forest products & paper).............................. 97,766 $ 644,520
Boral, Ltd. (building materials & components)........... 97,500 304,584
Brambles Industries, Ltd.
(business & public services)........................... 16,500 323,744
Broken Hill Proprietary Co., Ltd. (energy sources)...... 118,279 1,726,352
Coles Myer, Ltd.
(merchandising)........................................ 87,136 449,762
CSR, Ltd. (multi-industry).............................. 111,400 428,123
Foster's Brewing Group, Ltd. (beverages & tobacco)...... 178,427 328,822
Mount Isa Mines Holdings, Ltd. (metals-nonferrous)...... 118,143 173,472
National Australia Bank, Ltd. (banking)................. 128,905 1,831,905
News Corp., Ltd.
(broadcasting & publishing)............................ 115,672 550,260
Pacific Dunlop, Ltd.
(multi-industry)....................................... 83,030 243,830
Rio Tinto, Ltd.
(metals-nonferrous).................................... 38,842 657,039
Santos, Ltd. (energy sources)........................... 40,400 168,579
Westpac Banking Corp., Ltd. (banking)................... 91,770 547,930
WMC, Ltd. (metals-nonferrous)........................... 82,225 514,347
-----------
8,893,269
-----------
AUSTRIA (2.7%)
Austrian Airlines Oesterreichische Luftverkehrs AG
(transportation-airlines) (a).......................... 650 104,966
Bank Austria AG (banking)............................... 10,100 560,147
Creditanstalt-Bankverein Stamm AG (banking)............. 6,200 362,057
EA-Generali AG (insurance).............................. 1,500 394,542
Flughafen Wien AG
(transportation-airlines).............................. 3,950 166,878
Oesterreichische Brau-Beteiligungs AG (beverages &
tobacco)............................................... 3,000 177,391
OMV AG (energy sources)................................. 5,350 685,447
Verbundgesellschaft-Oesterreichische
Elektrizitatswirtschafts AG Class A (utilities-
electrical & gas)...................................... 5,800 408,590
Voest-Alpine Technologie AG (machinery & engineering)... 2,850 521,661
Wienerberger Baustoffindustrie AG (building materials &
components)............................................ 2,050 421,167
-----------
3,802,846
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
BELGIUM (1.2%)
Electrabel, S.A.
(utilities-electrical & gas)........................... 1,210 $ 259,498
Fortis AG (insurance)................................... 1,630 336,877
Generale de Banque, S.A. (banking)...................... 530 204,183
Kredietbank N.V. (banking).............................. 510 205,699
PetroFina, S.A. (energy sources)........................ 780 295,615
Reunies Electrobel & Tractebel, S.A. (multi-industry)... 580 241,999
Solvay, S.A. Class A (chemicals)........................ 360 212,292
-----------
1,756,163
-----------
FRANCE (8.6%)
Alcatel Alsthom, S.A.
(electrical & electronics)............................. 3,914 490,673
AXA-UAP, S.A. (insurance)............................... 10,134 630,902
Carrefour, S.A. (merchandising)......................... 1,395 1,014,127
Compagnie de Saint Gobain, S.A. (miscellaneous-materials
& commodities)......................................... 2,657 387,852
Compagnie de Suez, S.A. (banking)....................... 160,460 394,937
Compagnie Financiere de Paribas, S.A. Class A (banking). 5,804 401,372
Compagnie Generale des Eaux, S.A. (business & public
services).............................................. 5,112 655,661
Elf Aquitaine, S.A.
(energy sources)....................................... 7,095 766,188
Eridania Beghin-Say, S.A.
(food & household products)............................ 1,970 295,286
Groupe Danone, S.A.
(food & household products)............................ 2,527 417,944
Havas, S.A.
(business & public services)........................... 5,050 364,283
Lafarge, S.A. (building materials & components)......... 5,323 331,389
L'Air Liquide, S.A. (chemicals)......................... 4,240 673,816
L'Oreal, S.A.
(health & personal care)............................... 2,728 1,150,505
LVMH (Moet Hennessy Louis Vuitton), S.A.
(beverages & tobacco).................................. 2,780 748,162
Michelin (CGDE), S.A. Class B
(tire & rubber)........................................ 5,045 303,254
Pernod-Ricard, S.A.
(beverages & tobacco).................................. 2,680 138,316
Pinault-Printemps-Redoute, S.A. (building materials &
components)............................................ 1,030 495,445
PSA Peugeot, S.A. (automobiles)......................... 1,620 156,732
Rhone-Poulenc, S.A. Class A (chemicals)................. 11,262 460,384
Schneider, S.A.
(machinery & engineering).............................. 3,096 164,953
Societe Generale, S.A. (banking)........................ 4,624 516,673
Suez Lyonnaise des Eaux, S.A. (multi-industry).......... 1,281 129,171
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
49
<PAGE>
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FRANCE (Continued)
Thomson CSF, S.A. (aerospace & military technology)..... 9,085 $ 234,285
Total, S.A. Class B
(energy sources)....................................... 8,020 811,436
-----------
12,133,746
-----------
GERMANY (9.5%)
Allianz AG Registered (insurance)....................... 7,500 1,570,988
BASF AG (chemicals)..................................... 25,550 945,002
Bayer AG (chemicals).................................... 27,850 1,071,145
Daimler-Benz AG (automobiles)........................... 12,050 978,503
Deutsche Bank AG (banking).............................. 11,500 672,498
Deutsche Telekom AG (telecommunications)................ 65,500 1,578,736
Dresdner Bank AG (banking).............................. 28,700 993,157
Karstadt AG (merchandising)............................. 150 53,457
Linde AG (machinery & engineering)...................... 200 153,225
Mannesmann AG (machinery & engineering)................. 1,000 445,902
Muenchener Rueckversicherungs-Gesellschaft AG Registered
(insurance)............................................ 159 446,195
Preussag AG (multi-industry)............................ 200 58,593
RWE AG (utilities-electrical & gas)..................... 11,600 499,273
Siemens AG
(electrical & electronics)............................. 32,900 1,955,081
Thyssen AG (metals-steel)............................... 1,150 272,563
VEBA AG
(utilities-electrical & gas)........................... 12,100 680,503
Viag AG (multi-industry)................................ 1,000 455,085
Volkswagen AG (automobiles)............................. 700 537,092
-----------
13,366,998
-----------
HONG KONG (3.6%)
Cheung Kong (Holdings), Ltd.
(real estate).......................................... 89,000 878,828
China Light & Power Co., Ltd. (utilities-electrical &
gas)................................................... 79,500 450,489
Hang Seng Bank, Ltd. (banking).......................... 53,500 763,077
Hong Kong Telecommunications, Ltd. (telecommunications). 352,400 841,511
Hutchison Whampoa, Ltd.
(multi-industry)....................................... 104,000 899,415
Sun Hung Kai Properties, Ltd.
(real estate).......................................... 69,000 830,520
Swire Pacific, Ltd. Class A
(multi-industry)....................................... 50,000 450,159
-----------
5,113,999
-----------
ITALY (5.7%)
Assicurazioni Generali S.p.A. (insurance)............... 42,015 763,379
Banca Commerciale Italiana S.p.A. (banking)............. 97,000 200,767
Benetton Group S.p.A.
(textile & apparel).................................... 11,440 182,630
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
ITALY (Continued)
Credito Italiano S.p.A. (banking)....................... 119,000 $ 217,613
Edison S.p.A. (energy sources).......................... 33,000 164,061
Ente Nazionale Idrocarburi S.p.A. (energy sources)...... 343,000 1,941,208
Fiat S.p.A. (automobiles)............................... 153,000 550,580
Fiat S.p.A. di Risp (automobiles)....................... 56,000 105,205
Istituto Bancario San Paolo di Torino S.p.A. (banking).. 50,000 364,266
Istituto Nazionale delle Assicurazioni S.p.A.
(insurance)............................................ 192,000 292,401
Italgas S.p.A.
(utilities-electrical & gas)........................... 43,000 139,062
Mediobanca S.p.A.
(financial services)................................... 37,900 229,983
Montedison S.p.A. (multi-industry) (a) 276,900 182,681
Olivetti Group S.p.A. (data processing & reproduction)
(a).................................................... 237,500 67,241
Parmalat Finanziaria S.p.A.
(food & household products)............................ 117,000 165,454
Pirelli S.p.A.
(industrial components)................................ 80,000 198,038
Riunione Adriatica di Sicurta S.p.A. (insurance)........ 19,600 155,009
Sirti S.p.A. (telecommunications)....................... 28,000 161,430
Telecom Italia S.p.A. (telecommunications).............. 281,000 841,011
Telecom Italia S.p.A. di Risp (telecommunications)...... 81,000 160,268
Telecom Italia Mobile S.p.A. (telecommunications)....... 282,000 911,988
Telecom Italia Mobile S.p.A. di Risp
(telecommunications)................................... 69,000 123,339
-----------
8,117,614
-----------
JAPAN (27.1%)
Ajinomoto Co., Inc.
(food & household products) (c)........................ 26,000 279,473
Asahi Bank, Ltd. (banking) (c).......................... 17,000 144,849
Asahi Chemical Industry Co., Ltd. (chemicals) (c)....... 84,000 502,842
Asahi Glass Co., Ltd. (miscellaneous-materials &
components) (c)........................................ 50,000 498,123
Bridgestone Corp.
(industrial components) (c)............................ 30,000 697,372
Canon, Inc. (recreation & other consumer goods) (c)..... 24,000 654,376
Chiba Bank, Ltd. (banking) (c).......................... 34,000 202,640
Dai Nippon Printing Co., Ltd. (business & public
services) (c).......................................... 34,000 769,556
Daiei, Inc. (merchandising) (c)......................... 37,000 237,657
Daiwa House Industry Co., Ltd. (construction & housing)
(c).................................................... 34,000 415,976
Denso Corp.
(industrial components) (c)............................ 25,000 598,621
Fanuc, Ltd. (electronic components & instruments) (c)... 9,000 346,064
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
50
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
JAPAN (Continued)
Fuji Bank, Ltd. (banking) (c)............................ 63,000 $ 946,958
Fuji Photo Film, Ltd. (recreation & other consumer goods)
(c)..................................................... 14,000 564,015
Fujitsu, Ltd. (data processing & reproduction) (c)....... 63,000 875,386
Furukawa Electric Co.
(industrial components) (c)............................. 51,000 324,907
Hankyu Corp.
(transportation-road & rail) (c)........................ 21,000 116,168
Hitachi Corp., Ltd.
(electrical & electronics) (c).......................... 84,000 939,617
Honda Motor Co., Ltd. (automobiles) (c).................. 23,000 693,440
Industrial Bank of Japan, Ltd. (banking) (c)............. 62,000 964,436
Ito-Yokado Co., Ltd. (merchandising) (c)................. 5,000 290,572
Itochu Corp. (wholesale & international trade) (c)....... 98,000 528,412
Japan Airlines Co.
(transportation-airlines) (a)(c)........................ 47,000 213,992
Japan Energy Corp.
(energy sources) (c).................................... 86,000 225,466
Joyo Bank (banking) (c).................................. 15,000 82,977
Kajima Corp.
(construction & housing) (c)............................ 26,000 152,461
Kansai Electric Power Co., Inc. (utilities-electrical &
gas) (c)................................................ 26,200 506,006
Kao Corp.
(food & household products) (c)......................... 6,000 83,370
Kawasaki Steel Corp.
(metals-steel) (c)...................................... 45,000 146,684
Kirin Brewery Co., Ltd.
(beverages & tobacco) (c)............................... 37,000 384,778
Komatsu, Ltd.
(machinery & engineering) (c)........................... 48,000 390,109
Kubota Corp.
(machinery & engineering) (c)........................... 100,000 490,258
Marubeni Corp. (wholesale & international trade) (c)..... 96,000 436,251
Marui Co., Ltd.
(merchandising) (c)..................................... 14,000 260,597
Matsushita Electric Industrial Co., Ltd. (appliances &
household durables) (c)................................. 22,000 444,116
Mitsubishi Chemical Corp. (chemicals) (c)................ 99,000 323,570
Mitsubishi Corp.
(multi-industry) (c).................................... 33,000 412,393
Mitsubishi Electric Corp.
(electrical & electronics) (c).......................... 104,000 582,577
Mitsubishi Estate Co., Ltd. (construction & housing) (c). 28,000 406,189
Mitsubishi Heavy Industries, Ltd. (machinery &
engineering) (c)........................................ 175,000 1,344,277
Mitsubishi Trust & Banking Corp. (financial services).... 44,000 695,974
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
JAPAN (Continued)
Mitsui Engineering & Shipbuilding Co., Ltd.
(machinery & engineering) (a).......................... 142,000 $ 310,234
Mitsui Fudosan Co., Ltd. (construction & housing)....... 24,000 331,383
Mitsui Marine & Fire Insurance Co., Ltd. (insurance).... 42,000 303,907
Mitsui Trust & Banking Co., Ltd. (financial services)... 28,000 211,659
Mitsukoshi, Ltd. (merchandising)........................ 26,000 185,179
NEC Corp.
(electrical & electronics)............................. 40,000 559,296
Nippon Express Co., Ltd. (transportation-road & rail)... 15,000 119,943
Nippon Oil Co., Ltd.
(energy sources)....................................... 56,000 306,844
Nippon Paper Industries Co.
(forest products & paper).............................. 26,000 150,643
Nippon Steel Corp. (metals-steel)....................... 117,000 374,221
Nippon Yusen Kabushiki Kaisha (transportation-shipping). 38,000 147,776
Nissan Motor Co., Ltd. (automobiles).................... 60,000 466,138
NKK Corp. (metals-steel)................................ 106,000 227,878
Nomura Securities Co., Ltd. (financial services)........ 31,000 428,036
Obayashi Corp.
(construction & housing)............................... 36,000 241,301
Oji Paper Co., Ltd.
(forest products & paper).............................. 23,000 142,507
Osaka Gas Co., Ltd.
(utilities-electrical & gas)........................... 46,000 132,256
Sakura Bank, Ltd. (banking)............................. 84,000 644,519
Sankyo Co., Ltd.
(health & personal care)............................... 12,000 403,742
Sanyo Electric Co., Ltd. (appliances & household
durables).............................................. 55,000 247,052
Sekisui Chemical Co., Ltd. (building materials &
components)............................................ 13,000 131,784
Sekisui House, Ltd.
(construction & housing)............................... 17,000 172,333
Sharp Corp. (appliances & household durables)........... 23,000 317,575
Shimizu Corp.
(construction & housing)............................... 53,000 318,196
Shiseido Co., Ltd.
(health & personal care)............................... 17,000 280,784
Shizuoka Bank, Ltd. (banking)........................... 6,000 68,689
Sony Corp. (appliances & household durables)............ 9,200 803,184
Sumitomo Bank, Ltd. (banking)........................... 69,000 1,133,623
Sumitomo Chemical Co. (chemicals)....................... 38,000 172,351
Sumitomo Electric Industries (industrial components).... 35,000 587,261
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
51
<PAGE>
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
JAPAN (Continued)
Sumitomo Marine & Fire Insurance Co. (insurance)........ 33,000 $ 271,084
Sumitomo Metal Industries, Ltd. (metals-steel).......... 5,000 14,245
Sumitomo Metal Mining Co. (metals-nonferrous)........... 24,000 169,886
Taisho Pharmaceutical Co.
(health & personal care)............................... 14,000 378,049
Takeda Chemical Industries, Ltd. (health & personal
care).................................................. 30,000 844,187
Teijin, Ltd. (chemicals)................................ 139,000 655,949
Tobu Railway Co., Ltd. (transportation-road & rail)..... 48,000 221,901
Tohoku Electric Power
(utilities-electrical & gas)........................... 9,000 160,448
Tokai Bank (banking).................................... 52,000 536,225
Tokio Marine & Fire Insurance Co. (insurance)........... 32,000 419,472
Tokyo Dome Corp.
(leisure & tourism).................................... 9,000 121,123
Tokyo Electric Power Co., Inc. (utilities-electrical &
gas)................................................... 26,300 553,904
Tokyo Gas Co., Ltd.
(utilities-electrical & gas)........................... 151,000 419,629
Tokyu Corp.
(transportation-road & rail)........................... 27,000 167,763
Toppan Printing Co., Ltd.
(business & public services)........................... 40,000 629,208
Tostem Corp. (building materials & components).......... 5,000 138,513
Toto, Ltd. (building materials & components)............ 6,000 73,932
Toyoda Automatic Loom Works, Ltd. (machinery &
engineering)........................................... 5,000 113,607
Toyota Motor Corp. (automobiles)........................ 80,000 2,363,026
Yamaichi Securities Co., Ltd. (financial services)...... 69,000 205,620
Yamanouchi Pharmaceutical Co., Ltd. (health & personal
care).................................................. 15,000 403,742
Yamazaki Baking Co., Ltd.
(food & household products)............................ 6,000 105,917
Yasuda Trust & Banking
(financial services)................................... 44,000 168,418
-----------
38,229,647
-----------
MALAYSIA (0.1%)
Telekom Malaysia Berhad (telecommunications)............ 22,000 102,853
-----------
NETHERLANDS (2.2%)
Elsevier N.V.
(broadcasting & publishing)............................ 10,900 182,471
ING Groep N.V. (insurance).............................. 8,905 411,317
Koninklijke PTT Nederland N.V. (forest products & paper) 7,286 286,335
Philips Electronics N.V. (appliances & household
durables).............................................. 4,400 315,742
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
NETHERLANDS (Continued)
Royal Dutch Petroleum Co.
(energy sources)....................................... 25,600 $ 1,334,014
Unilever CVA N.V.
(food & household products)............................ 2,200 463,957
Wolters Kluwer CVA N.V. (broadcasting & publishing)..... 910 111,003
-----------
3,104,839
-----------
NEW ZEALAND (1.7%)
Brierley Investments Ltd.
(multi-industry)....................................... 354,600 346,065
Carter Holt Harvey Ltd.
(forest products & paper).............................. 215,900 557,486
Fletcher Challenge Building (building materials &
components)............................................ 45,100 135,405
Fletcher Challenge Energy
(energy sources)....................................... 45,700 137,826
Fletcher Challenge Forest
(forest products & paper).............................. 7,440 10,791
Fletcher Challenge Paper
(forest products & paper).............................. 95,200 230,336
Telecom Corp. of New Zealand Ltd. (telecommunications).. 202,600 1,029,809
-----------
2,447,718
-----------
NORWAY (1.9%)
Bergesen d.y. ASA Class A (transportation-shipping)..... 6,200 146,937
Bergesen d.y. ASA Class B (transportation-shipping)..... 3,900 92,162
Dyno Industrier ASA (chemicals)......................... 3,800 98,104
Hafslund ASA Class A
(energy sources)....................................... 6,600 39,668
Hafslund ASA Class B
(energy sources)....................................... 4,900 26,639
Kvaerner ASA Class B
(machinery & engineering).............................. 3,000 168,014
Norsk Hydro ASA (energy sources)........................ 24,900 1,357,105
Norske Skogindustrier ASA Class A (forest products &
paper)................................................. 5,400 187,357
Nycomed ASA Class A
(health & personal care)............................... 6,600 97,366
Nycomed ASA Class B
(health & personal care)............................... 4,900 69,945
Orkla ASA Class A
(multi-industry)....................................... 4,700 346,683
-----------
2,629,980
-----------
SINGAPORE (1.1%)
City Developments, Ltd.
(real estate).......................................... 13,000 127,286
DBS Land, Ltd. (real estate)............................ 25,000 79,029
Development Bank of Singapore, Ltd. Foreign Registered
(banking).............................................. 10,000 125,887
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
52
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
SINGAPORE (Continued)
Fraser & Neave, Ltd.
(beverages & tobacco).................................. 12,000 $ 85,603
Keppel Corp., Ltd.
(machinery & engineering).............................. 12,500 55,253
Oversea-Chinese Banking Corp., Ltd. Foreign Registered
(banking).............................................. 19,200 198,734
Singapore Airlines, Ltd.
Foreign Registered
(transportation-airlines).............................. 17,000 152,184
Singapore Press Holdings, Ltd. Foreign Registered
(broadcasting & publishing)............................ 6,400 128,909
Singapore Telecommunications, Ltd. (telecommunications). 224,000 413,582
United Overseas Bank, Ltd. Foreign Registered (banking). 13,000 133,650
-----------
1,500,117
-----------
SPAIN (2.4%)
Acerinox, S.A. (metals-steel)........................... 924 173,454
Autopistas Concesionares Espanola, S.A. (business &
public services)....................................... 11,893 161,721
Banco de Bilbao Vizcaya, S.A. Registered (banking)...... 3,850 313,328
Banco de Central Hispanoamericano, S.A. (banking)....... 5,830 213,650
Banco de Santander, S.A. (banking)...................... 8,940 275,955
Corporacion Bancaria de Espana, S.A. (banking).......... 1,940 108,818
Corporacion Mapfre, S.A. (insurance).................... 1,890 100,745
Empresa Nacional de Electricidad, S.A. (utilities-
electrical & gas)...................................... 4,590 386,036
Fomento de Construcciones y Contratas, S.A.
(construction & housing)............................... 2,000 255,506
Gas Natural SDG, S.A.
(utilities-electrical & gas)........................... 1,830 400,513
Iberdrola, S.A.
(utilities-electrical & gas)........................... 14,580 184,381
Repsol, S.A. (energy sources)........................... 5,220 221,107
Telefonica de Espana, S.A. (telecommunications)......... 19,120 553,787
-----------
3,349,001
-----------
SWITZERLAND (6.6%)
Credit Suisse Group Registered (banking)................ 5,200 668,793
Nestle S.A. Registered (food & household products)...... 1,300 1,717,462
Novartis S.A. Registered (health & personal care)....... 1,500 2,401,483
Roche Holdings AG Genusscheine (health & personal care). 200 1,811,573
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
SWITZERLAND (Continued)
Schweizerische Bankverein Registered (banking) (a)...... 2,400 $ 642,865
Schweizerische Rueckversicherungs Gesellschaft
Registered (insurance)................................. 400 566,588
UBS-Union Bank of Switzerland (banking)................. 700 801,866
Zurich Versicherungs Gesellschaft Registered
(insurance)............................................ 1,600 637,652
-----------
9,248,282
-----------
UNITED KINGDOM (8.0%)
Abbey National PLC (banking) (c)........................ 20,208 275,784
Barclays PLC (banking) (c).............................. 17,891 354,930
Bass PLC
(beverages & tobacco) (c).............................. 13,628 166,252
B.A.T. Industries PLC
(beverages & tobacco) (c).............................. 37,057 331,498
BG PLC (energy sources) (c)............................. 52,514 193,152
BOC Group PLC (chemicals) (c)........................... 9,367 162,910
Boots Co. PLC (merchandising) (c)....................... 17,184 201,196
British Airways PLC (transportation-airlines) (c)....... 21,194 241,445
British Petroleum Co. PLC
(energy sources) (c)................................... 62,780 779,979
British Telecommunications PLC (telecommunications) (c). 64,026 475,251
BTR PLC (multi-industry) (c)............................ 46,844 160,213
Cable & Wireless PLC (telecommunications) (c)........... 41,978 385,999
Centrica PLC
(energy sources) (c)................................... 52,514 64,020
Commercial Union PLC
(insurance) (c)........................................ 15,034 158,008
EMI Group PLC (recreation & other consumer goods) (c)... 7,618 136,612
Energy Group PLC
(energy sources) (c)................................... 17,420 185,840
General Electric Co. PLC
(electrical & electronics) (c)......................... 39,522 236,138
GKN PLC
(machinery & engineering) (c).......................... 6,135 105,628
Glaxo Wellcome PLC
(health & personal care) (c)........................... 42,582 878,779
Granada Group PLC
(leisure & tourism) (c)................................ 8,096 106,446
Grand Metropolitan PLC
(multi-industry) (c)................................... 29,926 289,621
Great Universal Stores PLC (The) (merchandising) (c).... 8,956 90,625
Guinness PLC
(beverages & tobacco) (c).............................. 28,550 279,393
Hanson PLC (multi-industry) (c)......................... 21,775 108,177
HSBC Holdings PLC ((Pounds) par) (financial services)
(c).................................................... 8,602 264,637
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
53
<PAGE>
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
HSBC Holdings PLC (HK par) (financial services) (c)..... 14,700 $ 435,481
Imperial Chemical Industries PLC (chemicals) (c)........ 6,680 92,887
Imperial Tobacco Group PLC (beverages & tobacco) (c).... 17,420 112,055
Kingfisher PLC
(merchandising) (c).................................... 5,898 66,945
Lloyds TSB Group PLC
(banking) (c).......................................... 63,168 647,604
Marks & Spencer PLC (merchandising) (c)................. 41,348 342,701
MEPC PLC (real estate) (c).............................. 6,204 50,904
National Power PLC
(utilities-electrical & gas) (c)....................... 9,720 84,444
Peninsular & Oriental Steam Navigation Co. Deferred
Stock (The)
(transportation-shipping) (c).......................... 22,626 225,939
Prudential Corp. PLC
(insurance) (c)........................................ 42,229 408,688
Rank Group PLC
(leisure & tourism) (c)................................ 27,627 174,953
Redland PLC (building materials & components) (c)....... 11,809 66,921
Reed International PLC (broadcasting & publishing) (c).. 17,572 170,206
Reuters Holdings PLC (broadcasting & publishing) (c).... 31,560 332,485
Rio Tinto PLC Registered
(metals-nonferrous) (c)................................ 19,008 331,061
RMC Group PLC (building materials & components) (c)..... 4,593 74,569
Sainsbury (J.) PLC
(merchandising) (c).................................... 24,989 151,593
Scottish Power PLC
(utilities-electrical & gas) (c)....................... 47,860 311,445
Thorn PLC (appliances & household durables) (c)......... 7,618 21,807
Unilever PLC (food & household products) (c)............ 14,361 411,456
Vodafone Group PLC
(multi-industry) (c)................................... 41,072 199,942
------------
11,346,619
------------
Total Common Stocks
(Cost $112,350,759).................................... 125,143,691
------------
PREFERRED STOCK (0.1%)
AUSTRIA (0.1%)
Creditanstalt-Bankverein Vorzug AG (banking)............ 2,400 96,501
------------
Total Preferred Stock
(Cost $140,469)........................................ 96,501
------------
</TABLE>
WARRANTS (0.0%) (b)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FRANCE (0.0%) (b)
Compagnie Generale des Eaux, S.A. Call Warrants
Strike price FF 900
Expire 5/2/01
(business & public services) (a)................... 5,112 $ 3,065
------------
Total Warrants...................................... 3,065
------------
OPTIONS (0.2%)
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
UNITED STATES (0.2%)
U.S. Dollar Call/Deutsche Mark Put
Strike price DM 1.695
Expire 8/25/97..................................... $9,430,000 273,272
Strike price DM 1.745
Expire 9/15/97..................................... 2,490,000 33,946
------------
Total Options
(Cost $171,203).................................... 307,218
------------
SHORT-TERM
INVESTMENT (1.0%)
COMMERCIAL PAPER (1.0%)
UNITED STATES (1.0%)
Merrill Lynch & Co. Inc.
6.22%, due 7/1/97.................................. 1,500,000 1,500,000
------------
Total Short-Term Investment
(Cost $1,500,000).................................. 1,500,000
------------
Total Investments
(Cost $114,162,431) (d)............................ 90.0% 127,050,475 (e)
Cash and Other Assets,
Less Liabilities................................... 10.0 14,056,269
---------- ------------
Net Assets.......................................... 100.0% $141,106,744
========== ============
</TABLE>
- --------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for options and forward
foreign currency contracts.
(d) The cost for Federal income tax purposes is $114,664,192.
(e) At June 30, 1997 net unrealized appreciation for securities was
$12,386,283, based on cost for Federal income tax purposes. This consisted
of aggregate gross unrealized appreciation for all investments on which
there was an excess of market value over cost of $20,997,428 and aggregate
gross unrealized depreciation for all investments on which there was an
excess of cost over market value of $8,611,145.
(f) The following abbreviations are used in the above portfolio:
DM--Deutsche Mark
FF--French Franc
HK--Hong Kong Dollar
(Pounds)--Pound Sterling
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
54
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
The table below sets forth the diversification of International Equity Fund
investments by industry.
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT +
----------------------
<S> <C> <C>
Aerospace & Military Technology......................... $ 234,285 0.2%
Appliances & Household Durables......................... 2,286,089 1.6
Automobiles............................................. 5,850,715 4.1
Banking................................................. 17,819,563 12.6
Beverages & Tobacco..................................... 2,752,270 1.9
Broadcasting & Publishing............................... 1,475,335 1.0
Building Materials & Components......................... 2,173,708 1.5
Business & Public Services.............................. 2,907,238 2.1
Chemicals............................................... 5,371,253 3.8
Construction & Housing.................................. 2,293,345 1.6
Data Processing & Reproduction.......................... 942,627 0.7
Electrical & Electronics................................ 4,763,382 3.4
Electronic Components & Instruments..................... 346,064 0.2
Energy Sources.......................................... 11,430,546 8.1
Financial Services...................................... 4,139,808 2.9
Food & Household Products............................... 3,940,319 2.8
Forest Products & Paper................................. 2,209,973 1.6
Health & Personal Care.................................. 8,720,155 6.2
Industrial Components................................... 2,406,200 1.7
Insurance............................................... 7,867,754 5.6
Leisure & Tourism....................................... 402,521 0.3
Machinery & Engineering................................. 4,263,121 3.0
Merchandising........................................... 3,344,412 2.4
Metals-Nonferrous....................................... 1,845,805 1.3
Metals-Steel............................................ 1,209,045 0.9
Miscellaneous-Materials & Commodities................... 387,852 0.3
Miscellaneous-Materials & Components.................... 498,123 0.4
Multi-Industry.......................................... 4,952,150 3.5
Real Estate............................................. 1,966,567 1.4
Recreation & Other Consumer Goods....................... 1,218,391 0.9
Telecommunications...................................... 7,579,562 5.4
Textile & Apparel....................................... 182,631 0.1
Tire & Rubber........................................... 303,254 0.2
Transportation-Airlines................................. 879,465 0.6
Transportation-Road & Rail.............................. 625,774 0.4
Transportation-Shipping................................. 612,815 0.4
Utilities-Electrical & Gas.............................. 5,576,477 4.0
Wholesale & International Trade......................... 964,663 0.7
------------ -----
126,743,257 89.8
Cash and Other Assets,
Less Liabilities....................................... 14,363,487 10.2
------------ -----
Net Assets.............................................. $141,106,744 100.0%
============ =====
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
55
<PAGE>
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $114,162,431)................................. $127,050,475
Cash denominated in foreign currencies (identified cost
$11,588,369)................................................... 11,749,188
Cash............................................................ 117,542
Receivables:
Investment securities sold...................................... 6,938,071
Dividends and interest.......................................... 596,844
Fund shares sold................................................ 10,323
Unrealized net appreciation on forward foreign currency
contracts...................................................... 628,099
Unamortized organization expense................................ 5,674
------------
Total assets.................................................. 147,096,216
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 5,838,389
Administrator................................................... 55,667
Adviser......................................................... 39,860
Custodian....................................................... 11,600
Transfer agent.................................................. 3,745
Accrued expenses................................................ 40,211
------------
Total liabilities............................................. 5,989,472
------------
Net assets...................................................... $141,106,744
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................. $ 11,777
Institutional Service Class..................................... 67
Additional paid-in capital...................................... 119,698,205
Accumulated distribution in excess of net investment income..... (1,386,314)
Accumulated undistributed net realized gain on investments...... 791,974
Accumulated undistributed net realized gain on foreign currency
transactions................................................... 8,326,592
Net unrealized appreciation on investments...................... 12,888,044
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies and forward foreign currency
contracts...................................................... 776,399
------------
Net assets...................................................... $141,106,744
============
Institutional Class
Net assets applicable to outstanding shares..................... $140,315,544
============
Shares of capital stock outstanding............................. 11,777,246
============
Net asset value per share outstanding........................... $ 11.91
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 791,200
============
Shares of capital stock outstanding............................. 66,790
============
Net asset value per share outstanding........................... $ 11.85
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 1,465,798
Interest......................................................... 225,790
-----------
Total income................................................... 1,691,588
-----------
Expenses:
Administration................................................... 323,141
Advisory......................................................... 226,199
Custodian........................................................ 34,833
Professional..................................................... 25,142
Registration..................................................... 18,671
Transfer agent................................................... 12,522
Shareholder communication........................................ 6,557
Directors........................................................ 2,015
Amortization of organization expense............................. 1,124
Service.......................................................... 888
Miscellaneous.................................................... 12,767
-----------
Total expenses before
reimbursement................................................. 663,859
Expense reimbursement from Administrator......................... (16,690)
-----------
Net expenses................................................... 647,169
-----------
Net investment income............................................ 1,044,419
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain from:
Security transactions............................................ 2,251,765
Foreign currency transactions.................................... 8,326,592
-----------
Net realized gain on investments and foreign currency
transactions.................................................... 10,578,357
-----------
Net change in unrealized appreciation on investments:
Security transactions............................................ 8,065,315
Translation of assets and liabilities in foreign currencies and
forward foreign currency contracts.............................. (4,283,056)
-----------
Net unrealized gain on investments and foreign currencies........ 3,782,259
-----------
Net realized and unrealized gain on investments and foreign
currency transactions........................................... 14,360,616
-----------
Net increase in net assets resulting from operations............. $15,405,035
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $210,644.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
56
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 1,044,419 $ 937,888
Net realized gain on investments.................. 2,251,765 460,599
Net realized gain on foreign currency
transactions..................................... 8,326,592 4,894,535
Net change in unrealized appreciation on
investments...................................... 8,065,315 1,369,142
Net change in unrealized appreciation on
translation of assets and liabilities in foreign
currencies and forward foreign currency
contracts........................................ (4,283,056) 4,942,018
------------ ------------
Net increase in net assets resulting from
operations....................................... 15,405,035 12,604,182
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. -- (9,112,198)
Institutional Service Class...................... -- (51,313)
From net realized gain on investments and foreign
currency transactions:
Institutional Class.............................. -- (1,291,175)
Institutional Service Class...................... -- (7,470)
------------ ------------
Total dividends and distributions to
shareholders................................... -- (10,462,156)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 5,143,113 19,867,037
Institutional Service Class...................... 80,628 502,618
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. -- 10,402,553
Institutional Service Class...................... -- 58,778
------------ ------------
5,223,741 30,830,986
Cost of shares redeemed:
Institutional Class.............................. (6,428,700) (2,847,352)
Institutional Service Class...................... (98,744) (47,939)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions...................... (1,303,703) 27,935,695
------------ ------------
Net increase in net assets....................... 14,101,332 30,077,721
NET ASSETS:
Beginning of period............................... 127,005,412 96,927,691
------------ ------------
End of period..................................... $141,106,744 $127,005,412
============ ============
Accumulated distribution in excess of net
investment income................................ $ (1,386,314) $ (2,430,733)
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
57
<PAGE>
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS
------------- ------------- ------------- ------------- ------------- -------------
SIX MONTHS JANUARY 1, 1995(a)
ENDED YEAR ENDED THROUGH
JUNE 30, 1997* DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period.... $ 10.63 $ 10.58 $ 10.35 $ 10.33 $ 10.00 $ 10.00
-------- -------- -------- -------- -------- --------
Net investment income... 0.09 0.08 0.64 0.62 0.36 0.35
Net realized and
unrealized gain on
investments............ 0.85 0.85 0.09 0.09 0.17 0.16
Net realized and
unrealized gain on
foreign currency
transactions........... 0.34 0.34 0.51 0.48 0.18 0.17
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 1.28 1.27 1.24 1.19 0.71 0.68
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income................. -- -- (0.84) (0.82) (0.10) (0.09)
From net realized gain
on investments and
foreign currency
transactions........... -- -- (0.12) (0.12) (0.26) (0.26)
In excess of net
investment income...... -- -- -- -- (0.00)(b) (0.00)(b)
-------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... -- -- (0.96) (0.94) (0.36) (0.35)
-------- -------- -------- -------- -------- --------
Net asset value at end
of period.............. $ 11.91 $ 11.85 $ 10.63 $ 10.58 $ 10.35 $ 10.33
======== ======== ======== ======== ======== ========
Total investment return
(d).................... 12.04% 12.00% 12.09% 11.59% 7.17% 6.86%
Ratios (to average net
assets)/Supplemental
Data:
Net investment income.. 1.62%+ 1.37%+ 0.83% 0.58% 1.05% 0.80%
Net expenses........... 1.00%+ 1.25%+ 1.00% 1.25% 1.00% 1.25%
Expenses (before
reimbursement)........ 1.03%+ 1.28%+ 1.07% 1.32% 1.07% 1.32%
Portfolio turnover
rate................... 15% 15% 23% 23% 26% 26%
Average commission rate
paid................... $ 0.0340 $ 0.0340 $ 0.0349 $ 0.0349 (c) (c)
Net assets at end of
period (in 000's)...... $140,316 $ 791 $126,280 $ 725 $ 96,714 $ 213
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Commencement of operations.
(b) Less than one cent per share.
(c) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(d) 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.
58
<PAGE>
MULTI-ASSETS FUND
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS 6/30/97
- --------------------------------------------------------------------------------
. Low interest rates, moderating economic growth, and strong corporate earnings
provided the backdrop for extraordinary gains in the U.S. stock market during
the first half of 1997
. Corporate restructuring, low interest rates, and a strong dollar led to
positive stock performance in core European markets, and Australian stocks
performed well as its economy improved
. The S&P 500 Index* returned 20.62% over the first six months of 1997
. In a relatively quiet bond market, the Salomon Brothers Broad Investment
Grade Bond Index + returned 3.07% for the six months ended 6/30/97
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR HE 6- MONTH AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 25.41% and 25.15% for Institutional Class shares
and Service Class shares, respectively, as of 6/30/97
. Institutional Class shares received a 4-star overall rating from Morningstar,
Inc.++
. The Fund benefited from an 80% allocation to stocks throughout the first half
of the year, including some investments in foreign equities(S)
. Both share classes outperformed the average Lipper flexible portfolio fund
over the first six months of 1997
During the first six months of the year, inflation in the U.S. remained low
and corporate earnings were generally strong. Economic growth was faster than
some expected in the first quarter, but the Federal Reserve Board's preemptive
move to raise interest rates slightly in late March helped bring the growth rate
to what some feel is a more sustainable level. Against this backdrop, the U.S.
stock market started 1997 on a strong note, underwent a sharp downturn in March
and April, then soared to record highs in May and June. The S&P 500 Index rose
20.62% over the first six months of 1997, almost twice the rate investors might
normally expect for an entire year since 1926.||
Core European stock markets also had favorable returns, based on corporate
restructuring, low interest rates, and a strong dollar, which improved profit
potential for exporters. Australian stocks also did well during a period of
improving economic fundamentals.
- --------------------------------------------------------------------------------
* "Standard & Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of Standard & Poor's. The MainStay Institutional Funds
are neither sponsored by nor affiliated with Standard & Poor's. The S&P 500
is an unmanaged index and is considered to be generally representative of
the U.S. stock market. Results assume the reinvestment of all income and
capital gain distributions.
+ The Salomon Brothers Broad Investment Grade Bond Index is an unmanaged index
generally considered representative of the U.S. bond market.
++ Morningstar, Inc. is an independent fund performance monitor. Its ratings
reflect historic risk-adjusted performance, taking into account fees and
other sales charges and may change monthly. Its ratings of 1 (low) to 5
(high) stars are based on a fund's 3-, 5-, and 10-year average annual
returns with fee adjustments in excess of 90-day Treasury bill returns, and
a risk factor that reflects fund performance below 90-day Treasury bill
monthly returns. Only 10% of the funds in a rating group may receive 5
stars, 22.5% receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars,
and 10% receive 1 star. As of 6/30/97, the individual 3- and 5-year ratings
for the MainStay Institutional Multi-Asset Fund were 4 stars and 4 stars,
respectively, out of 1,997 and 1,134 domestic equity funds for the
respective period. The Fund's Service Class shares, introduced 1/1/95, will
not be rated by Morningstar until they have three years of performance
history.
(S) Investments in foreign securities may be subject to greater risks than
domestic investments. These risks include currency fluctuations, changes in
U.S. or foreign tax or currency laws, and changes in monetary policies and
economic and political conditions in foreign countries.
|| Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks was
10.70%. Past performance is no guarantee of future results.
59
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Asset allocation Apportioning investments among different categories of assets,
such as cash equivalents, common stock, income investments, and international
securities--or subcategories, such as government, corporate, and mortgage-backed
bonds.
- --------------------------------------------------------------------------------
In the bond markets, the Federal Reserve Board's preemptive rate increase had a
negative impact on bond prices, causing the Salomon Brothers Broad Investment
Grade (BIG) Index to fall 0.70% in the first quarter. Fortunately, bonds rallied
in the second quarter as economic growth slowed, unemployment reached 10-year
lows, and inflation remained modest. As a result, the Salomon Brothers BIG Index
returned 3.07% for the first half of 1997.
Given this context, how did the MainStay Institutional Multi-Asset Fund do in
the first six months of 1997?
Very well. The MainStay Institutional Multi-Asset Fund provided total returns of
16.76% and 16.60% for Institutional Class shares and Service Class shares,
respectively, for the six months ended 6/30/97. Both share classes returned more
than one and a half times the 10.25% total return of the average Lipper flexible
portfolio fund over the same period. As a result, the Fund earned a 4-star
overall rating from Morningstar, Inc.++ as of 6/30/97.
What explains the Fund's substantial outperformance of its peers?
Our asset allocation models indicated that stocks would substantially outperform
bonds and money market instruments during the reporting period. Despite the dip
in March and April, our 80% allocation to stocks over the first half of the year
proved very beneficial. This amount represents the Fund's maximum allowable
allocation to equities. While bonds had positive returns for the first half of
the year, the 3.07% return of the Salmon Brothers BIG Index was meager in
comparison with the 20.62% return of the S&P 500 Index. During the first half of
the year, the Fund also invested in foreign equity securities, which had a
positive impact on performance.
How much of the Fund's portfolio was invested in bonds and money market
securities?
In accordance with the Fund's asset class constraints, we allocated the minimum
of 10% to bonds and 10% to money market instruments throughout the first half of
1997.
Which stock sectors provided the best returns?
In domestic equities, the Fund seeks to track the makeup and total return
performance of the S&P 500 Index. The best performing sector of the Index,
truckers, consists of a single stock, Caliber System, that advanced 96.58%. But
since this stock represents only 0.02% of the Index, its impact was negligible.
The savings & loans sector gained 45.93% and represented 0.36% of the Index, and
office equipment & supply companies gained 39.60%, representing 0.55% of the
Index.
Were there individual stocks that had a major impact on performance?
Yes there were. General Electric represents 3.29% of the Index and gained 32.92%
in the first half of 1997. Coca-Cola, which was up 28.82% for the first six
months of 1997, represented 2.45% of the Index. Microsoft, representing 2.20% of
the Index, gained 52.95% in the first half of the year. Other major contributors
to performance were Exxon and Merck, with gains of 27.38% and 31.80%. These
stocks represented 2.17% and 1.74% of the Index, respectively.
Which sectors underperformed?
Gold, which represented 0.32% of the Index, was down 17.21% as European banks
sold reserves, interest rates and inflation remained low, and fraudulent claims
by some small gold exploration companies reached the headlines. Oil exploration
& production companies lost 12.13% due to mild weather and lower oil prices.
These companies represent 0.23% of the Index. Photography/imaging companies lost
7.42%, representing 0.45% of the Index. Much of the loss was due to IKON's
announcement of lower-than-anticipated profits.
- --------------------------------------------------------------------------------
++ See footnote on page 59 for more information on Morningstar, Inc.
60
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Local terms Performance reports in local terms reflect results within a
specific country with returns denominated in its local currency. They do not
consider the impact of currency fluctuations or exchange rates when translated
into other currencies.
Dollar-bloc Major markets, including Canada, Australia, New Zealand, Hong
Kong, and others, whose currencies are tied to the U.S. dollar and tend to move
in the same general direction as the U.S. dollar relative to other currencies.
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
- --------------------------------------------------------------------------------
Which foreign markets did the Fund invest in?
During the first half of 1997, 3% of the Fund's net assets were invested in
France, where the CAC-40 Index# returned 25.90% in local terms. In the first two
months of the year, 5% of net assets were invested in Germany's DAX Index,**
which rose 12.85% in local terms during that period. In May, another 5%
allocation to German stocks paid off with a 3.19% return on the DAX Index, in
local terms.
In May, 3% of net assets were allocated to Australian stocks, which yielded a
return of 5.15% as measured by the Australian All Ordinaries Index.++ Also in
May, 5% of net assets were allocated to Britain's FTSE-100 Index,++++ which
gained 4.50%.
Why did these markets do so well?
Core European markets benefited from corporate restructuring, low interest
rates, and a strong dollar, which helped firms that export products to the
United States and other dollar-bloc countries. Britain and France both responded
favorably in the wake of new elections in these countries. The Australian market
also performed well as its economic fundamentals improved.
While the allocations to bonds and money market instruments were low, how did
they perform?
Generally speaking, the bond and money markets were relatively quiet during the
first half of the year. A preemptive 25 basis point interest rate hike initiated
by the Federal Reserve Board in late March had a dampening effect on first-
quarter performance, but bonds generally rallied in the second quarter, with
strong performance among mortgage-backed securities and long-term BBB-rated
corporate bonds, which both returned 3.77% for the six months ended 6/30/97.
Although high-yield securities did especially well, the Fund only holds
investment-grade securities which may involve less risk than high yield issues.
Which bond sectors did poorly?
As bond prices rise, higher-quality securities with lower risk profiles tend to
underperform. During the first half of the year, while Treasuries and AAA/AA
corporate bonds both posted returns consistent with their historical averages
since 1926(S)(S) their performance was low relative to other sectors.
What is your outlook for the future?
While no one can predict what the markets will do next, we believe that as long
as interest rates remain low and growth rates remain modest, equities may offer
advantages over bonds and money market instruments. On the other hand, if
inflation heats up or wages increase faster than corporate productivity, both
stocks and bonds could face challenges. Whatever develops, we will continue to
seek to maximize total return with diversified investments in stocks, bonds, and
money market instruments.
James A. Mehling, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
# The CAC-40 Index is a narrow based capitalization-weighted index of 40
companies listed on the Paris Exchange.
** The German Stock Index (DAX) is a total rate of return index of 30
selected German blue chip stocks traded on the Frankfurt Stock Exchange.
++ The Australian All Ordinaries Index is a capitalization-weighted index
of common stocks listed on the Australian Stock Exchange.
++++ The British FTSE-100 Stock Index is a capitalization-weighted index of
the 100 most highly capitalized companies traded on the London Stock
Exchange.
(S)(S) Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total returns for high
grade corporate bonds overall was 5.6%, making the 6-month average
return 2.8%. Past performance is no guarantee of future results.
61
<PAGE>
[GRAPH APPEARS HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MULTI-ASSET FUND VS. LIPPER FLEXIBLE PORTFOLIO AVERAGE
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
LIPPER FLEXIBLE
DATE MULTI-ASSET FUND PORTFOLIO AVERAGE
---- ---------------- -----------------
<S> <C> <C>
1/2/91 10,000 10,000
10,560 11,123
10,650 11,150
11,130 11,723
91 11,790 12,551
11,607 12,545
11,912 12,611
12,332 13,017
92 12,626 13,560
13,098 14,162
13,244 14,388
13,548 14,940
93 13,736 15,223
13,313 14,828
13,289 14,700
13,583 15,162
94 13,618 14,981
14,460 17,096
15,379 18,132
16,362 18,804
95 17,269 19,473
18,031 19,909
18,676 19,909
18,793 19,827
96 23,422 23,002
6/30/97
</TABLE>
[GRAPH APPEARS HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MULTI-ASSET FUND VS LIPPER FLEXIBLE PORTFOLIO AVERAGE
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
LIPPER FLEXIBLE
DATE MULTI-ASSET FUND PORTFOLIO AVERAGE
---- ---------------- -----------------
<S> <C> <C>
1/2/91 10,000 10,000
10,560 11,123
10,650 11,150
11,130 11,723
91 11,790 12,551
11,607 12,545
11,912 12,611
12,332 13,017
92 12,626 13,560
13,098 14,162
13,244 14,388
13,548 14,940
93 13,736 15,223
13,313 14,828
13,289 14,700
13,583 15,162
94 13,618 14,981
14,473 17,096
15,379 18,132
16,349 18,804
95 17,254 19,473
18,000 19,909
18,629 19,909
18,732 19,827
96 23,315 23,002
6/30/97
</TABLE>
. Multi-Asset Fund--Lipper Flexible Portfolio Fund Average
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- ----------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Asset Fund
Institutional Class 16.76% 25.41% 14.48% 13.99%
Multi-Asset Fund Service
Class+ 16.60% 25.15% 14.37% 13.91%
Average Lipper Flexible
Portfolio Fund 10.25% 18.48% 12.72% 13.65%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
Institutional Class Shares
<TABLE>
<CAPTION>
Year-end Total Return %*
-------- ---------------
<S> <C>
1991 17.90
1992 7.09
1993 8.79
1994 -0.86
1995 26.81
1996 16.16
1997 as of 6/30/97 16.76
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C> <C>
1. General Electric Co. 2.34%
2. Coca-Cola Co. 1.89%
3. Exxon Corp. 1.67%
4. Microsoft Corp. 1.65%
5. Merck & Co., Inc. 1.36%
6. Intel Corp. 1.27%
7. Royal Dutch Petroleum Co. 1.26%
8. Philip Morris Cos. 1.17%
9. Proctor & Gamble Co. 1.04%
10. International Business Machines Corp. 0.98%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Oil-Integrated International 4.83%
2. Major Regional Banks 3.53%
3. Drugs 3.41%
4. Health Care-Diversified 3.33%
5. Electrical Equipment 3.11%
</TABLE>
- -------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include the
change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of .25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from the
Fund's inception (1/2/91) up to December 31, 1994. Performance figures for
these two Classes after this date will vary based on differences in their
expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee of
.25%.
62
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
LONG-TERM BONDS (8.8%)+
CORPORATE BONDS (1.5%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
BANKS (0.4%)
First Union Corp.
8.77%, due 11/15/04.................................. $ 1,000,000 $ 1,042,500
Morgan (J.P.) & Co. Inc.
8.50%, due 8/15/03................................... 500,000 538,125
------------
1,580,625
------------
BROKERAGE (0.1%)
PaineWebber Group, Inc.
7.75%, due 9/1/02.................................... 400,000 411,000
------------
CHEMICALS (0.1%)
Rhone-Poulenc S.A.
7.75%, due 1/15/02................................... 350,000 360,062
------------
CONGLOMERATES (0.2%)
Tenneco Inc.
10.20%, due 3/15/08.................................. 500,000 606,875
------------
CONSUMER FINANCIAL SERVICES (0.1%)
Bear Stearns Cos., Inc. (The)
6.625%, due 1/15/04.................................. 500,000 486,875
------------
FOOD, BEVERAGES & TOBACCO (0.1%)
Coca-Cola Enterprises
8.50%, due 2/1/22.................................... 500,000 553,125
------------
OIL--INTEGRATED DOMESTIC (0.1%)
Occidental Petroleum Corp.
10.125%, due 11/15/01................................ 500,000 559,375
------------
UTILITIES--ELECTRIC (0.3%)
Florida Power & Light Co.
6.875, due 4/1/04.................................... 500,000 495,625
Houston Lighting & Power
7.75%, due 3/15/23................................... 500,000 500,625
------------
996,250
------------
UTILITIES--TELEPHONE (0.1%)
Pacific Bell
7.125%, due 3/15/26.................................. 500,000 483,750
------------
Total Corporate Bonds
(Cost $5,948,733).................................... 6,037,937
------------
FOREIGN GOVERNMENT (0.3%)
CANADA (0.3%)
Manitoba (Province of)
9.625%, due 3/15/99 (f).............................. 500,000 526,250
Quebec (Province of)
9.375%, due 4/1/99 (f)............................... 500,000 525,625
------------
Total Foreign Government
(Cost $1,060,440).................................... 1,051,875
------------
</TABLE>
U.S. GOVERNMENT &
FEDERAL AGENCIES (7.0%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION GOLD
(MORTGAGE PASS-THROUGH SECURITIES)(0.9%)
7.00%, due 3/1/26-10/1/26......................... $ 974,358 $ 956,393
7.50%, due 7/1/11-9/1/11.......................... 934,415 948,723
7.75%, due 10/1/07................................ 701,930 711,363
8.00%, due 10/1/11-11/1/11........................ 900,262 926,145
------------
3,542,624
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES)(2.1%)
6.50%, due 11/1/03................................ 954,049 942,422
7.00%, due 10/1/03-6/1/26......................... 1,923,893 1,908,235
7.50%, due 7/1/11-10/1/11......................... 920,717 933,953
8.00%, due 7/1/09-11/1/11......................... 1,857,487 1,910,889
8.50%, due 6/1/26-10/1/26......................... 880,265 913,276
9.00%, due 6/1/26-9/1/26.......................... 1,683,580 1,775,124
------------
8,383,899
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH SECURITIES)(1.2%)
7.00%, due 7/15/11-10/15/11....................... 961,125 963,229
7.50%, due 3/15/26-6/15/26........................ 934,053 936,971
8.00%, due 8/15/26-10/15/26....................... 978,592 1,000,917
8.50%, due 11/15/26............................... 915,252 951,290
9.00%, due 4/15/26-11/15/26....................... 949,144 1,003,126
------------
4,855,533
------------
RESOLUTION FUNDING CORPORATION (0.1%)
(zero coupon), due 10/15/10....................... 500,000 202,985
------------
UNITED STATES TREASURY BONDS (0.9%)
6.25%, due 8/15/23................................ 1,000,000 925,630
8.125%, due 5/15/21............................... 1,000,000 1,144,180
10.625%, due 8/15/15.............................. 1,000,000 1,390,260
------------
3,460,070
------------
UNITED STATES TREASURY NOTES (1.8%)
5.00%, due 1/31/99................................ 1,000,000 984,810
6.375%, due 1/15/99............................... 1,000,000 1,005,530
7.50%, due 11/15/01-5/15/02....................... 2,000,000 2,088,090
7.875%, due 4/15/98-11/15/99...................... 2,000,000 2,053,260
8.25%, due 7/15/98................................ 1,000,000 1,023,790
------------
7,155,480
------------
Total U.S. Government &
Federal Agencies
(Cost $27,473,656)................................ 27,600,591 (c)
------------
Total Long-Term Bonds
(Cost $34,482,829)................................ 34,690,403
------------
</TABLE>
- ----------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
63
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (74.2%)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.4%)
Boeing Co. ............................................. 30,747 $ 1,631,513
General Dynamics Corp. ................................. 2,773 207,975
Lockheed Martin Corp. .................................. 8,136 842,585
McDonnell Douglas Corp.................................. 9,021 617,938
Northrop Grumman Corp................................... 2,454 215,492
Raytheon Co............................................. 9,996 509,796
Rockwell International Corp............................. 9,409 555,131
United Technologies Corp. .............................. 10,147 842,201
------------
5,422,631
------------
AIRLINES (0.2%)
AMR Corp. (a)........................................... 3,882 359,085
Delta Air Lines, Inc. .................................. 3,340 273,880
Southwest Airlines Co................................... 6,276 162,392
US Airways Group, Inc. (a).............................. 3,327 116,445
------------
911,802
------------
ALUMINUM (0.3%)
Alcan Aluminum Ltd...................................... 9,526 330,433
Aluminum Co. of America................................. 7,340 553,253
Reynolds Metals Co...................................... 3,105 221,231
------------
1,104,917
------------
AUTOMOBILES (1.2%)
Chrysler Corp........................................... 29,405 964,852
Ford Motor Co........................................... 50,842 1,919,285
General Motors Corp..................................... 31,147 1,734,499
------------
4,618,636
------------
AUTOPARTS--AFTER MARKET (0.2%)
Cooper Tire & Rubber Co. ............................... 3,645 80,190
Echlin Inc. ............................................ 2,645 95,220
Genuine Parts Co........................................ 7,924 268,426
Goodyear Tire & Rubber
Co. (The).............................................. 6,727 425,903
------------
869,739
------------
BEVERAGES--ALCOHOLIC (0.4%)
Anheuser-Busch Cos., Inc................................ 21,140 886,559
Brown-Forman Corp. Class B.............................. 2,970 144,973
Coors (Adolph) Co. Class B.............................. 1,627 43,319
Seagram Co. Ltd......................................... 15,763 634,461
------------
1,709,312
------------
BEVERAGES--SOFT DRINKS (2.5%)
Coca-Cola Co. (d)....................................... 105,901 7,386,595
PepsiCo, Inc. .......................................... 65,526 2,461,320
------------
9,847,915
------------
BROADCAST/MEDIA (0.3%)
Comcast Corp. Class A................................... 13,852 296,086
Tele-Communications TCI
Group Series A (a)..................................... 28,363 421,900
U.S. West Media Group (a)............................... 25,927 525,022
------------
1,243,008
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
BUILDING MATERIALS (0.2%)
Masco Corp.............................................. 6,922 $ 288,994
Owens Corning Corp...................................... 2,282 98,411
Sherwin-Williams Co..................................... 7,361 227,271
------------
614,676
------------
CHEMICALS (1.8%)
Air Products & Chemicals, Inc. ......................... 4,843 393,494
Dow Chemical Co. ....................................... 10,268 894,599
Du Pont (E.I.) De Nemours
& Co. ................................................. 50,040 3,146,265
Eastman Chemical Co..................................... 3,434 218,059
Goodrich (B.F.) Co. .................................... 2,329 100,875
Hercules, Inc........................................... 4,323 206,964
Monsanto Co............................................. 25,308 1,089,826
Praxair, Inc. .......................................... 6,670 373,520
Rohm & Haas Co.......................................... 2,816 253,616
Union Carbide Corp. .................................... 5,394 253,855
------------
6,931,073
------------
CHEMICALS--DIVERSIFIED (0.2%)
Avery Dennison Corp. ................................... 4,363 175,065
Engelhard Corp.......................................... 6,239 130,629
FMC Corp. (a)........................................... 1,612 128,053
PPG Industries, Inc. ................................... 7,769 451,573
------------
885,320
------------
CHEMICALS--SPECIALTY (0.2%)
Grace (W.R.) & Co....................................... 3,055 168,407
Great Lakes Chemical Corp............................... 2,792 146,231
Morton International, Inc............................... 6,029 182,000
Nalco Chemical Co. ..................................... 2,935 113,364
Sigma-Aldrich Corp...................................... 4,370 153,223
------------
763,225
------------
COMMUNICATION--EQUIPMENT MANUFACTURERS (1.7%)
Andrew Corp. (a)........................................ 3,859 108,534
Bay Networks, Inc. (a).................................. 8,263 219,486
Cabletron Systems, Inc. (a)............................. 6,668 188,788
Cisco Systems, Inc. (a)................................. 28,024 1,881,111
DSC Communications
Corp. (a).............................................. 4,993 111,094
General Instrument Corp. (a)............................ 5,997 149,925
Lucent Technologies Inc................................. 27,263 1,964,640
Northern Telecom Ltd.................................... 11,147 1,014,377
Scientific-Atlanta, Inc................................. 3,263 71,378
Tellabs, Inc. (a)....................................... 7,643 427,053
3Com Corp. (a).......................................... 14,169 637,605
------------
6,773,991
------------
COMPUTER--SOFTWARE & SERVICES (2.9%)
Adobe Systems, Inc. .................................... 3,029 106,204
Autodesk, Inc. ......................................... 2,049 78,502
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
64
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
COMPUTER--SOFTWARE & SERVICES (Continued)
Automatic Data
Processing, Inc. ...................................... 12,309 $ 578,523
Ceridian Corp. (a)...................................... 3,374 142,551
Computer Associates
International, Inc..................................... 15,454 860,595
Computer Sciences Corp. (a)............................. 3,244 233,974
Equifax Inc. ........................................... 6,500 241,719
First Data Corp......................................... 18,978 833,846
Microsoft Corp. (a)..................................... 51,223 6,473,307
Novell Inc. (a)......................................... 14,546 100,913
Oracle Corp. (a)........................................ 27,890 1,404,959
Parametric Technology
Corp. (a).............................................. 5,407 230,135
Shared Medical Systems Corp. ........................... 1,021 55,134
------------
11,340,362
------------
COMPUTER SYSTEMS (2.6%)
Amdahl Corp. (a)........................................ 5,047 44,161
Apple Computer, Inc. (a)................................ 5,210 74,243
Compaq Computer Corp. (a)............................... 11,601 1,151,399
Data General Corp. (a).................................. 1,634 42,484
Dell Computer Corp. (a)................................. 7,460 876,084
Digital Equipment Corp. (a)............................. 6,617 234,490
EMC Corp. (a)........................................... 10,575 412,425
Hewlett-Packard Co...................................... 43,227 2,420,712
Intergraph Corp. (a).................................... 2,041 17,349
International Business
Machines Corp.......................................... 42,406 3,824,491
Seagate Technology (a).................................. 10,590 372,636
Silicon Graphics Inc. (a)............................... 7,477 112,155
Sun Microsystems (a).................................... 15,796 587,908
Tandem Computers Inc. (a)............................... 5,026 101,776
Unisys Corp. (a)........................................ 7,384 56,303
------------
10,328,616
------------
CONGLOMERATES (0.2%)
Tenneco Inc............................................. 7,204 325,531
Textron Inc............................................. 6,955 461,638
------------
787,169
------------
CONTAINERS--METAL & GLASS (0.1%)
Ball Corp. ............................................. 1,318 39,622
Crown Cork & Seal Co., Inc. ............................ 5,596 299,036
------------
338,658
------------
CONTAINERS--PAPER (0.1%)
Bemis Co., Inc.......................................... 2,323 100,760
Stone Container Corp. .................................. 4,149 59,383
Temple-Inland Inc. ..................................... 2,371 128,034
------------
288,177
------------
COSMETICS (0.8%)
Alberto-Culver Co. Class B.............................. 2,375 66,500
Avon Products, Inc...................................... 5,769 407,075
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
COSMETICS (Continued)
Gillette Co............................................. 23,608 $ 2,236,858
International Flavors &
Fragrances Inc......................................... 4,839 244,370
------------
2,954,803
------------
DRUGS (3.4%)
Lilly (Eli) & Co. ...................................... 23,388 2,556,601
Merck & Co., Inc........................................ 51,294 5,308,929
Pfizer Inc.............................................. 27,295 3,261,753
Pharmacia & Upjohn, Inc................................. 21,463 745,839
Schering-Plough Corp.................................... 31,205 1,493,939
------------
13,367,061
------------
ELECTRIC POWER COMPANIES (1.8%)
American Electric Power
Co., Inc. ............................................. 8,080 339,360
Baltimore Gas & Electric Co. ........................... 6,395 170,667
Carolina Power & Light Co............................... 6,617 237,385
Central & South West Corp............................... 9,116 193,715
Cinergy Corp. .......................................... 6,801 236,760
Consolidated Edison Co. of New York, Inc. .............. 10,155 298,938
Dominion Resources, Inc. ............................... 7,645 279,998
DTE Energy Co........................................... 6,305 174,176
Duke Energy Corp........................................ 15,353 735,984
Edison International.................................... 17,543 436,382
Entergy Corp............................................ 9,912 271,341
FPL Group, Inc.......................................... 7,945 365,967
GPU, Inc. .............................................. 5,260 188,703
Houston Industries Inc. ................................ 9,950 213,303
Niagara Mohawk Power
Corp. (a).............................................. 6,100 52,231
Northern States Power Co................................ 2,941 152,197
Ohio Edison Co. ........................................ 6,614 144,268
PacifiCorp.............................................. 12,422 273,284
PECO Energy Co. ........................................ 9,376 196,896
PG&E Corp............................................... 17,442 422,968
PP&L Resources, Inc..................................... 6,779 135,156
Public Service Enterprise
Group Inc. ............................................ 10,066 251,650
Southern Co. (The)...................................... 29,117 636,934
Texas Utilities Co...................................... 9,521 327,879
Unicom Corp. ........................................... 9,276 206,391
Union Electric Co. ..................................... 4,414 166,353
------------
7,108,886
------------
ELECTRICAL EQUIPMENT (3.1%)
AMP Inc................................................. 9,384 391,782
Emerson Electric Co. ................................... 19,095 1,051,418
General Electric Co. (d)................................ 140,194 9,165,183
General Signal Corp..................................... 2,173 94,797
Grainger (W.W.), Inc. .................................. 2,214 173,107
Honeywell, Inc. ........................................ 5,470 415,036
Raychem Corp............................................ 1,914 142,354
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
65
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (Continued)
Thomas & Betts Corp..................................... 2,195 $ 115,375
Westinghouse Electric Corp.............................. 27,183 628,607
------------
12,177,659
------------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc. ............................................. 2,093 47,092
------------
ELECTRONIC--INSTRUMENTATION (0.1%)
Perkin-Elmer Corp....................................... 1,887 150,134
Tektronix, Inc.......................................... 1,446 86,760
------------
236,894
------------
ELECTRONIC--SEMICONDUCTORS (2.3%)
Advanced Micro Devices,
Inc. (a)............................................... 5,874 211,464
Applied Materials, Inc. (a)............................. 7,753 549,009
Intel Corp. ............................................ 35,003 4,963,863
LSI Logic Corp. (a)..................................... 6,023 192,736
Micron Technology, Inc. ................................ 9,056 361,674
Motorola, Inc. ......................................... 25,121 1,909,196
National Semiconductor
Corp. (a).............................................. 5,834 178,666
Texas Instruments, Inc. ................................ 8,199 689,228
------------
9,055,836
------------
ENGINEERING & CONSTRUCTION (0.1%)
Fluor Corp.............................................. 3,655 201,710
Foster Wheeler Corp..................................... 1,741 70,511
------------
272,221
------------
ENTERTAINMENT (1.0%)
King World Productions,
Inc. (a)............................................... 1,613 56,455
Time Warner Inc. ....................................... 24,056 1,160,702
Viacom, Inc. Class B (a)................................ 14,954 448,620
Walt Disney Co. (The)................................... 28,731 2,305,663
------------
3,971,440
------------
FINANCIAL--MISCELLANEOUS (1.9%)
American Express Co..................................... 20,014 1,491,043
American General Corp................................... 10,253 489,581
Fannie Mae.............................................. 45,333 1,977,652
Federal Home Loan
Mortgage Corp.......................................... 29,734 1,022,106
Green Tree Financial Corp............................... 5,964 212,468
MBIA Corp. ............................................. 1,838 207,349
MBNA Corp............................................... 14,451 529,268
Morgan Stanley, Dean Witter,
Discover & Co. ........................................ 24,222 1,043,060
Transamerica Corp....................................... 2,955 276,477
------------
7,249,004
------------
FOOD DISTRIBUTORS (0.2%)
Cardinal Health, Inc.................................... 4,648 266,098
Fleming Cos., Inc....................................... 1,621 29,178
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
FOOD DISTRIBUTORS (Continued)
Supervalu Inc. ......................................... 2,947 $ 101,672
Sysco Corp.............................................. 7,605 277,582
------------
674,530
------------
FOODS (2.1%)
Archer-Daniels-Midland Co. ............................. 23,018 540,923
Campbell Soup Co........................................ 19,804 990,200
ConAgra, Inc............................................ 10,183 652,985
CPC International Inc................................... 6,311 582,584
General Mills, Inc...................................... 6,810 443,501
Heinz (H.J.) Co......................................... 15,526 716,137
Hershey Foods Corp. .................................... 6,627 366,556
Kellogg Co.............................................. 8,890 761,206
Quaker Oats Co. ........................................ 5,879 263,820
Ralston-Ralston Purina Group............................ 4,547 373,707
Sara Lee Corp........................................... 20,477 852,355
Unilever, N.V. ......................................... 6,917 1,480,670
Wrigley (Wm.) Jr. Co. .................................. 5,011 335,737
------------
8,360,381
------------
GOLD (0.2%)
Barrick Gold Corp. ..................................... 15,888 349,536
Battle Mountain Gold Co. ............................... 9,718 55,271
Echo Bay Mines Ltd...................................... 5,853 32,923
Homestake Mining Co..................................... 6,391 83,482
Newmont Mining Corp..................................... 6,734 262,626
Placer Dome Inc......................................... 10,110 165,551
------------
949,389
------------
HARDWARE & TOOLS (0.1%)
Black & Decker Corp..................................... 3,823 142,168
Snap-On, Inc............................................ 2,662 104,816
Stanley Works (The)..................................... 3,833 153,320
------------
400,304
------------
HEALTH CARE--DIVERSIFIED (3.3%)
Abbott Laboratories..................................... 32,914 2,197,010
Allergan, Inc. ......................................... 2,795 88,916
American Home
Products Corp.......................................... 27,467 2,101,225
Bristol-Myers Squibb Co................................. 42,703 3,458,943
Johnson & Johnson....................................... 56,660 3,647,487
Mallinckrodt Group Inc.................................. 3,336 130,104
Warner-Lambert Co....................................... 11,455 1,423,284
------------
13,046,969
------------
HEALTH CARE--HMOs (0.2%)
Humana Inc. (a)......................................... 6,998 161,829
United Healthcare Corp.................................. 7,856 408,512
------------
570,341
------------
HEALTH CARE--MISCELLANEOUS (0.3%)
ALZA Corp. (a).......................................... 3,651 105,651
Amgen Inc. (a).......................................... 11,185 650,128
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
66
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
HEALTH CARE--MISCELLANEOUS (Continued)
Beverly Enterprises, Inc. (a)........................... 4,214 $ 68,477
HEALTHSOUTH Corp. (a)................................... 14,707 366,756
Manor Care, Inc......................................... 2,762 90,110
------------
1,281,122
------------
HEAVY TRUCKS & PARTS (0.2%)
Cummins Engine Co., Inc................................. 1,755 123,837
Dana Corp............................................... 4,388 166,744
Eaton Corp. ............................................ 3,374 294,592
ITT Industries, Inc..................................... 5,063 130,372
Navistar International
Corp. (a).............................................. 3,245 55,976
PACCAR Inc.............................................. 3,326 154,451
------------
925,972
------------
HOMEBUILDING (0.0%) (b)
Centex Corp. ........................................... 1,289 52,366
Kaufman & Broad Home Corp............................... 1,709 30,014
Pulte Corp.............................................. 858 29,655
------------
112,035
------------
HOSPITAL MANAGEMENT (0.4%)
Columbia/HCA
Healthcare Corp........................................ 28,433 1,117,772
Tenet Healthcare Corp. (a).............................. 12,848 379,819
------------
1,497,591
------------
HOTEL--MOTEL (0.3%)
Harrah's Entertainment,
Inc. (a)............................................... 4,448 81,176
Hilton Hotels Corp...................................... 10,474 278,216
ITT Corp. (a)........................................... 5,054 308,610
Marriott International Inc.............................. 5,524 339,035
------------
1,007,037
------------
HOUSEHOLD--FURNISHINGS & APPLIANCES (0.1%)
Armstrong World
Industries, Inc........................................ 1,629 119,528
Maytag Corp............................................. 4,252 111,083
Whirlpool Corp. ........................................ 3,234 176,455
------------
407,066
------------
HOUSEHOLD PRODUCTS (1.6%)
Clorox Co. (The)........................................ 2,222 293,304
Colgate-Palmolive Co. .................................. 12,659 826,000
Kimberly-Clark Corp..................................... 24,110 1,199,472
Procter & Gamble Co. (The).............................. 28,888 4,080,430
------------
6,399,206
------------
HOUSEWARES (0.2%)
Fortune Brands, Inc..................................... 7,377 275,254
Newell Co. ............................................. 6,894 273,175
Rubbermaid Inc. ........................................ 6,537 194,476
Tupperware Corp......................................... 2,657 96,980
------------
839,885
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
INSURANCE BROKERS (0.2%)
Aon Corp................................................ 7,048 $ 364,734
Marsh & McLennan Cos., Inc. ............................ 6,880 491,060
------------
855,794
------------
INVESTMENT BANK/BROKERAGE (0.4%)
Merrill Lynch & Co., Inc. .............................. 14,007 835,167
Salomon Inc. ........................................... 4,564 253,873
Schwab (Charles) Corp................................... 7,460 303,529
------------
1,392,569
------------
LEISURE TIME (0.0%) (b)
Brunswick Corp. ........................................ 4,249 132,781
------------
LIFE INSURANCE (0.5%)
Aetna Inc............................................... 6,495 664,926
Conseco Inc. ........................................... 8,060 298,220
Jefferson-Pilot Corp.................................... 3,089 215,844
Lincoln National Corp................................... 4,499 289,623
Torchmark Corp.......................................... 3,086 219,877
UNUM Corp............................................... 6,276 263,592
------------
1,952,082
------------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc. ............................... 1,723 44,690
Giddings & Lewis, Inc. ................................. 1,373 28,661
------------
73,351
------------
MACHINERY--DIVERSIFIED (0.7%)
Briggs & Stratton Corp.................................. 1,255 62,750
Case Corp. ............................................. 3,171 218,403
Caterpillar Inc......................................... 8,101 869,845
Cooper Industries Inc. ................................. 5,070 252,232
Deere & Co.............................................. 10,879 596,985
Harnischfeger Industries, Inc........................... 2,092 86,818
Ingersoll-Rand Co. ..................................... 4,696 289,978
NACCO Industries, Inc. Class A.......................... 338 19,076
Thermo Electron Corp. (a)............................... 6,377 216,818
Timken Co. (The)........................................ 2,666 94,810
------------
2,707,715
------------
MAJOR REGIONAL BANKS (3.5%)
Banc One Corp........................................... 21,338 1,033,559
Bank of New York Co.,
Inc. (The)............................................. 16,847 732,845
BankBoston Corp. ....................................... 6,260 451,111
Barnett Banks, Inc. .................................... 8,497 446,093
Comerica Inc. .......................................... 4,546 309,128
CoreStates Financial Corp. ............................. 8,797 472,839
Fifth Third Bancorp..................................... 4,454 365,367
First Bank System, Inc. ................................ 5,680 484,930
First Union Corp. ...................................... 11,953 1,105,653
Fleet Financial Group, Inc. ............................ 11,128 703,846
KeyCorp................................................. 9,522 532,042
Mellon Bank Corp. ...................................... 11,325 511,041
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
67
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
MAJOR REGIONAL BANKS (Continued)
National City Corp. .................................... 9,603 $ 504,158
NationsBank Corp. ...................................... 31,039 2,002,015
Norwest Corp. .......................................... 15,874 892,913
PNC Bank Corp. ......................................... 13,712 570,762
Republic New York Corp. ................................ 2,413 259,397
SunTrust Banks, Inc..................................... 9,461 520,946
U.S. Bancorp............................................ 6,407 410,849
Wachovia Corp........................................... 6,990 407,604
Wells Fargo & Co. ...................................... 4,115 1,108,992
------------
13,826,090
------------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises Inc............................... 1,503 44,809
------------
MANUFACTURING--DIVERSIFIED (0.8%)
Aeroquip-Vickers Inc.................................... 1,195 56,464
AlliedSignal Inc........................................ 12,218 1,026,312
Crane Co. .............................................. 1,981 82,831
Dover Corp. ............................................ 4,976 306,024
Illinois Tool Works Inc................................. 10,682 533,432
Johnson Controls, Inc. ................................. 3,542 145,443
Millipore Corp. ........................................ 1,899 83,556
Pall Corp. ............................................. 5,334 124,015
Parker-Hannifin Corp. .................................. 3,277 198,873
Tyco International Ltd.................................. 7,105 494,242
------------
3,051,192
------------
MEDICAL PRODUCTS (0.8%)
Bard (C.R.), Inc........................................ 2,467 89,583
Bausch & Lomb Inc....................................... 2,493 117,483
Baxter International Inc. .............................. 11,528 602,338
Becton, Dickinson & Co.................................. 5,273 266,946
Biomet, Inc. ........................................... 4,902 91,300
Boston Scientific Corp. (a)............................. 8,263 507,658
Guidant Corp. .......................................... 3,137 266,645
Medtronic, Inc. ........................................ 10,358 838,998
St. Jude Medical, Inc. (a).............................. 3,899 152,061
United States Surgical Corp. ........................... 2,959 110,223
------------
3,043,235
------------
METALS--MISCELLANEOUS (0.2%)
ASARCO Inc.............................................. 1,890 57,881
Cyprus Amax Minerals Co................................. 3,888 95,256
Freeport-McMoRan Copper &
Gold Inc. Class B...................................... 8,392 261,201
Inco Ltd................................................ 7,284 218,975
Phelps Dodge Corp. ..................................... 2,835 241,507
------------
874,820
------------
MISCELLANEOUS (1.1%)
AirTouch Communications,
Inc. (a)............................................... 21,225 581,034
American Greetings Corp.
Class A................................................ 3,333 123,738
Corning Inc. ........................................... 9,704 539,785
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
MISCELLANEOUS (Continued)
Harcourt General, Inc. ................................. 3,027 $ 144,161
Harris Corp............................................. 1,739 146,076
Jostens, Inc. .......................................... 1,868 49,269
Minnesota Mining &
Manufacturing Co. ..................................... 17,712 1,806,624
Pioneer Hi-Bred
International, Inc..................................... 3,571 285,680
TCI Satellite Entertainment
Class A................................................ 1 8
TRW, Inc................................................ 5,592 317,695
Whitman Corp. .......................................... 4,358 110,312
------------
4,104,382
------------
MONEY CENTER BANKS (2.1%)
BankAmerica Corp........................................ 30,332 1,958,310
Bankers Trust New York Corp. ........................... 3,402 295,974
Chase Manhattan Corp.................................... 18,590 1,804,392
Citicorp................................................ 19,930 2,402,811
First Chicago Corp...................................... 13,304 804,892
Morgan (J.P.) & Co., Inc. .............................. 8,089 844,289
------------
8,110,668
------------
MULTI-LINE INSURANCE (1.5%)
American International
Group, Inc. ........................................... 19,895 2,971,816
CIGNA Corp.............................................. 3,336 592,140
Hartford Financial Services
Group, Inc............................................. 5,057 418,467
Travelers Group Inc..................................... 27,147 1,711,958
------------
5,694,381
------------
NATURAL GAS DISTRIBUTORS & PIPELINES (0.5%)
Coastal Corp. (The)..................................... 4,556 242,322
Columbia Gas System, Inc................................ 2,341 152,750
Consolidated Natural Gas Co............................. 4,098 220,524
Eastern Enterprises..................................... 883 30,629
Enron Corp.............................................. 10,897 444,734
ENSERCH Corp............................................ 2,846 63,323
NICOR Inc............................................... 2,303 82,620
NorAm Energy Corp....................................... 5,819 88,740
ONEOK Inc............................................... 1,175 37,820
Pacific Enterprises..................................... 3,545 119,201
Peoples Energy Corp..................................... 1,485 55,595
Sonat, Inc.............................................. 3,698 189,522
Williams Cos., Inc. (The)............................... 6,793 297,194
------------
2,024,974
------------
OFFICE EQUIPMENT & SUPPLIES (0.4%)
Moore Corp. Ltd......................................... 3,743 73,690
Pitney Bowes Inc........................................ 6,493 462,626
Xerox Corp.............................................. 13,762 1,085,478
------------
1,621,794
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
68
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
OIL & GAS DRILLING (0.0%) (b)
Helmerich & Payne, Inc. ................................ 1,045 $ 60,218
Rowan Cos., Inc. (a).................................... 3,676 103,617
------------
163,835
------------
OIL--EXPLORATION & PRODUCTION (0.2%)
Burlington Resources Inc................................ 5,431 239,643
Oryx Energy Co. (a)..................................... 4,527 95,633
Santa Fe Energy Resources,
Inc. (a)............................................... 3,982 58,486
Union Pacific Resources
Group, Inc............................................. 10,523 261,760
------------
655,522
------------
OIL--INTEGRATED DOMESTIC (0.9%)
Amerada Hess Corp....................................... 3,989 221,639
Ashland Inc............................................. 3,203 148,539
Atlantic Richfield Co................................... 14,058 991,089
Kerr-McGee Corp......................................... 2,193 138,981
Louisiana Land & Exploration
Co. (The).............................................. 1,465 83,688
Occidental Petroleum Corp. ............................. 13,831 346,639
Pennzoil Co. ........................................... 2,039 156,493
Phillips Petroleum Co. ................................. 11,332 495,775
Sun Co., Inc. .......................................... 3,273 101,463
Unocal Corp. ........................................... 10,721 416,109
USX-Marathon Group...................................... 12,383 357,559
------------
3,457,974
------------
OIL--INTEGRATED INTERNATIONAL (4.8%)
Amoco Corp. ............................................ 21,082 1,832,816
Chevron Corp. .......................................... 27,636 2,043,337
Exxon Corp. (d)......................................... 106,110 6,525,765
Mobil Corp. ............................................ 33,328 2,328,794
Royal Dutch Petroleum Co. .............................. 22,726 4,942,905
Texaco Inc. ............................................ 11,440 1,244,100
------------
18,917,717
------------
OIL--WELL EQUIPMENT & SERVICES (0.6%)
Baker Hughes Inc. ...................................... 6,177 238,973
Dresser Industries, Inc. ............................... 7,480 278,630
Halliburton Co. ........................................ 5,421 429,614
McDermott International, Inc. .......................... 2,354 68,707
Schlumberger Ltd. ...................................... 10,569 1,321,125
Western Atlas Inc. (a).................................. 2,347 171,918
------------
2,508,967
------------
PAPER & FOREST PRODUCTS (0.7%)
Boise Cascade Corp. .................................... 2,080 73,450
Champion International Corp. ........................... 4,114 227,299
Georgia-Pacific Corp. .................................. 3,960 338,085
International Paper Co. ................................ 12,916 627,233
James River Corp. of Virginia........................... 3,666 135,642
Louisiana-Pacific Corp. ................................ 4,624 97,682
Mead Corp. ............................................. 2,248 139,938
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
PAPER & FOREST PRODUCTS (Continued)
Potlatch Corp. ......................................... 1,301 $ 58,870
Union Camp Corp. ....................................... 2,964 148,200
Westvaco Corp. ......................................... 4,354 136,879
Weyerhaeuser Co. ....................................... 8,585 446,420
Willamette Industries, Inc. ............................ 2,410 168,700
------------
2,598,398
------------
PERSONAL LOANS (0.2%)
Beneficial Corp. ....................................... 2,338 166,144
Countrywide Credit
Industries, Inc. ...................................... 4,500 140,344
Household International, Inc. .......................... 4,242 498,170
Providian Financial Corp. .............................. 4,106 131,905
------------
936,563
------------
PHOTOGRAPHY/IMAGING (0.3%)
Eastman Kodak Co. ...................................... 14,137 1,085,015
IKON Office Solutions, Inc. ............................ 5,896 147,032
Polaroid Corp. ......................................... 2,033 112,831
------------
1,344,878
------------
POLLUTION CONTROL (0.2%)
Browning-Ferris
Industries Inc. ....................................... 8,964 298,053
Waste Management Inc. .................................. 19,175 615,997
------------
914,050
------------
PROPERTY--CASUALTY INSURANCE (1.0%)
Allstate Corp. (The).................................... 18,855 1,376,415
Chubb Corp. ............................................ 7,320 489,525
General Re Corp. ....................................... 3,629 660,478
Loews Corp.............................................. 5,078 508,435
MGIC Investment Corp.................................... 5,177 248,172
SAFECO Corp............................................. 5,444 254,167
St. Paul Cos., Inc. (The)............................... 3,658 278,922
USF&G Corp.............................................. 4,846 116,304
------------
3,932,418
------------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The)............................ 4,384 257,834
Meredith Corp........................................... 2,459 71,311
------------
329,145
------------
PUBLISHING--NEWSPAPER (0.4%)
Dow Jones & Co., Inc.................................... 4,246 170,636
Gannett Co., Inc........................................ 6,129 605,239
Knight-Ridder Inc....................................... 4,182 205,179
New York Times Co. (The)
Class A................................................ 4,221 213,161
Times Mirror (The) Class A.............................. 4,122 234,181
Tribune Co.............................................. 5,350 257,134
------------
1,685,530
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
69
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
RAILROADS (0.6%)
Burlington Northern Santa Fe Corp..................... 6,608 $ 593,894
CSX Corp.............................................. 9,137 507,104
Norfolk Southern Corp................................. 5,487 552,815
Union Pacific Corp.................................... 10,577 745,678
------------
2,399,491
------------
RESTAURANTS (0.4%)
Darden Restaurants, Inc............................... 6,505 58,952
McDonald's Corp....................................... 29,785 1,438,988
Ryan's Family Steak Houses,
Inc. (a)............................................. 64 548
Wendy's International, Inc............................ 5,542 143,746
------------
1,642,234
------------
RETAIL STORES--APPAREL (0.2%)
Charming Shoppes, Inc. (a)............................ 4,436 23,151
Gap, Inc. (The)....................................... 11,672 453,749
Limited, Inc. (The)................................... 11,444 231,741
TJX Cos., Inc. (The).................................. 6,638 175,077
------------
883,718
------------
RETAIL STORES--DEPARTMENT (0.5%)
Dillard's Inc. Class A................................ 4,869 168,589
Federated Department Stores,
Inc. (a)............................................. 9,015 313,271
May Department Stores Co.............................. 10,138 479,021
Mercantile Stores Co., Inc............................ 1,612 101,455
Nordstrom, Inc........................................ 3,525 172,945
Penney (J.C.) Co., Inc................................ 10,311 538,105
------------
1,773,386
------------
RETAIL STORES--DRUG (0.2%)
Longs Drug Stores Corp................................ 1,751 45,854
Rite-Aid Corp......................................... 4,980 248,378
Walgreen Co........................................... 10,410 558,236
------------
852,468
------------
RETAIL STORES--FOOD CHAIN (0.4%)
Albertson's, Inc...................................... 10,896 397,704
American Stores Co.................................... 6,166 304,446
Giant Food, Inc. Class A.............................. 2,622 84,887
Great Atlantic & Pacific
Tea Co., Inc. (The).................................. 1,629 44,288
Kroger Co. (a)........................................ 10,808 313,432
Winn-Dixie Stores, Inc................................ 6,592 245,552
------------
1,390,309
------------
RETAIL STORES--GENERAL MERCHANDISE (1.3%)
Dayton-Hudson Corp.................................... 9,291 494,165
Kmart Corp. (a)....................................... 20,451 250,525
Sears, Roebuck & Co................................... 16,574 890,853
Wal-Mart Stores, Inc.................................. 96,798 3,272,982
------------
4,908,525
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
RETAIL STORES--SPECIALTY (0.9%)
Autozone, Inc. (a)...................................... 6,381 $ 150,352
Circuit City Stores-Circuit
City Group............................................. 4,248 151,070
Costco Cos., Inc........................................ 8,967 294,790
CVS Corp................................................ 7,055 361,569
Home Depot, Inc. (The).................................. 20,719 1,428,316
Lowe's Cos., Inc........................................ 7,459 276,915
Pep Boys-Manny, Moe & Jack.............................. 2,654 90,402
Tandy Corp.............................................. 2,609 146,104
Toys "R" Us, Inc. (a)................................... 12,140 424,900
Woolworth Corp. (a)..................................... 5,745 137,880
------------
3,462,298
------------
SAVINGS & LOANS (0.2%)
Ahmanson (H.F.) & Co.................................... 4,276 183,868
Golden West Financial Corp. ............................ 2,512 175,840
Great Western Financial Corp. .......................... 5,887 316,426
------------
676,134
------------
SHOES (0.2%)
Nike Inc. Class B....................................... 12,382 722,799
Reebok International Ltd................................ 2,397 112,060
Stride Rite Corp........................................ 2,188 28,170
------------
863,029
------------
SPECIALIZED SERVICES (0.6%)
Block (H&R), Inc........................................ 4,439 143,158
Cognizant Corp.......................................... 7,362 298,161
CUC International Inc. (a).............................. 17,458 450,635
Dun & Bradstreet Corp. (The)............................ 7,362 193,253
Ecolab Inc. ............................................ 2,815 134,416
HFS Inc. (a)............................................ 6,703 388,774
Interpublic Group of Cos., Inc.......................... 3,396 208,217
Laidlaw Inc. Class B.................................... 13,278 183,402
National Service
Industries, Inc........................................ 2,061 100,345
Safety-Kleen Corp....................................... 2,502 42,221
Service Corp. International............................. 10,067 330,953
------------
2,473,535
------------
SPECIALTY PRINTING (0.1%)
Deluxe Corp. ........................................... 3,543 120,905
Donnelley (R.R.) & Sons Co.............................. 6,403 234,510
Harland (John H.) Co. .................................. 1,328 30,295
------------
385,710
------------
STEEL (0.2%)
Allegheny Teledyne Inc.................................. 7,578 204,606
Armco Inc. (a).......................................... 4,571 17,713
Bethlehem Steel Corp. (a)............................... 4,728 49,348
Inland Steel Industries Inc............................. 2,157 56,352
Nucor Corp.............................................. 3,812 218,237
USX-U.S. Steel Group.................................... 3,621 126,961
Worthington Industries, Inc............................. 3,975 72,792
------------
746,009
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
70
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
TELECOMMUNICATIONS--LONG DISTANCE (1.5%)
AT&T Corp.......................................... 69,449 $ 2,435,056
MCI Communications Corp............................ 29,243 1,119,460
Sprint Corp........................................ 18,227 959,196
WorldCom, Inc. (a)................................. 38,105 1,219,360
------------
5,733,072
------------
TELEPHONE (2.9%)
ALLTEL Corp........................................ 8,163 272,950
Ameritech Corp. ................................... 23,265 1,580,566
Bell Atlantic Corp................................. 18,557 1,408,012
BellSouth Corp..................................... 42,454 1,968,804
Frontier Corp. .................................... 6,923 138,027
GTE Corp. ......................................... 41,003 1,799,007
NYNEX Corp......................................... 18,605 1,072,113
SBC Communications Inc............................. 39,122 2,420,674
US West, Inc....................................... 20,474 771,614
------------
11,431,767
------------
TEXTILES--APPAREL MANUFACTURERS (0.2%)
Fruit Of The Loom, Inc.
Class A (a)....................................... 3,304 102,424
Liz Claiborne, Inc................................. 3,133 146,076
Russell Corp. ..................................... 1,738 51,488
Springs Industries, Inc. Class A................... 866 45,682
VF Corp............................................ 2,787 237,243
------------
582,913
------------
TOBACCO (1.2%)
Philip Morris Cos.................................. 103,648 4,599,380
UST Inc. .......................................... 7,841 217,588
------------
4,816,968
------------
TOYS (0.2%)
Hasbro Inc......................................... 5,483 155,580
Mattel, Inc........................................ 12,283 416,087
------------
571,667
------------
TRANSPORTATION--MISCELLANEOUS (0.1%)
Federal Express Corp. (a).......................... 4,967 286,844
Ryder System, Inc.................................. 3,386 111,738
------------
398,582
------------
TRUCKERS (0.0%) (b)
Caliber System, Inc. .............................. 1,745 65,001
Consolidated Freightways
Corp. (a)......................................... 30 491
------------
65,492
------------
Total Common Stocks
(Cost $213,083,535)............................... 290,704,892 (d)
------------
</TABLE>
SHORT-TERM
INVESTMENTS (16.9%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL PAPER (11.9%)
Apc Funding Corp.
5.58%, due 8/12/97 (e)........................... $ 2,000,000 $ 1,986,980
Capital USA Funding Corp.
5.57%, due 7/9/97 (e)............................ 2,794,000 2,790,542
Dynamic Funding Corp.
5.82%, due 7/2/97 (e)............................ 200,000 199,968
Empire District Electric
5.75%, due 8/12/97 (e)........................... 2,000,000 1,986,583
Industrial Funding Corp.
5.65%, due 7/14/97 (e)........................... 4,313,000 4,304,200
5.65%, due 7/25/97 (e)........................... 580,000 577,815
Jet Funding Corp.
5.65%, due 7/31/97 (e)........................... 357,000 355,319
Korea Development Bank
5.63%, due 7/9/97 (e)............................ 16,000,000 15,979,982
Llama Retail Funding Corp.
5.57%, due 7/3/97 (e)............................ 2,800,000 2,799,134
Madison Funding Corp.
5.58%, due 7/10/97 (e)........................... 370,000 369,484
Merrill Lynch & Co.
5.58%, due 8/12/97 (e)........................... 175,000 173,861
Mitsubishi Motors Credit
5.65%, due 7/9/97 (e)............................ 500,000 499,372
5.62%, due 7/21/97 (e)........................... 300,000 299,063
Riverside Funding Corp.
5.63%, due 7/11/97 (e)........................... 284,000 283,556
Shinhan Bank
5.90%, due 7/1/97 (e)............................ 200,000 200,000
5.90%, due 7/7/97 (e)............................ 600,000 599,410
5.90%, due 8/15/97 (e)........................... 800,000 794,100
5.93%, due 8/19/97 (e)........................... 2,200,000 2,182,243
5.93%, due 8/22/97 (e)........................... 500,000 495,717
5.93%, due 8/26/97 (e)........................... 100,000 99,078
Tambrands Inc.
5.65%, due 7/22/97 (e)........................... 400,000 398,682
Toshiba America Inc.
5.58%, due 8/8/97 (e)............................ 9,000,000 8,946,990
Toshiba International Inc.
5.60%, due 8/4/97 (e)............................ 175,000 174,074
------------
Total Commercial Paper
(Cost $46,496,153)............................... 46,496,153
------------
U.S. GOVERNMENT (5.0%)
United States Treasury Bills
4.82%, due 9/11/97 (e)........................... 9,800,000 9,698,854
4.86%, due 9/18/97 (e)........................... 10,000,000 9,886,890
------------
Total U.S. Government
(Cost $19,599,063)............................... 19,585,744
------------
Total Short-Term Investments
(Cost $66,095,216)............................... 66,081,897
------------
Total Investments
(Cost $313,661,580) (g).......................... 99.9% 391,477,192 (h)
Cash and Other Assets,
Less Liabilities................................. 0.1 313,326
----------- ------------
Net Assets........................................ 100.0% $391,790,518
=========== ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
71
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
FUTURES CONTRACTS (0.2%)
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
LONG APPRECIATION
-------------------------
<S> <C> <C>
French CAC 40 Index
September 1997................................... 122 $ 397,739 (i)
Standard & Poor's 500
September 1997................................... 23 342,468 (i)
United States Treasury Note
September 1997 (5 Year).......................... 20 4,097 (i)
United States Treasury Note
September 1997 (10 Year)......................... 15 1,663 (i)
United States Treasury Bond
September 1997 (30 Year)......................... 9 3,941 (i)
------------
Total Futures Contracts
(Settlement Value $26,980,350)................... $ 749,908
============
</TABLE>
- --------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) The combined market value of U.S. Government and Federal Agencies
Investments and settlement value of U.S. Treasury futures contracts
represents 8.3% of net assets.
(d) The combined market value of common stocks and settlement value of Standard
& Poor's 500 Index futures contracts represents 76.8% of net assets.
(e) Segregated or partially segregated as collateral for futures contracts.
(f) Yankee bonds.
(g) The cost for Federal income tax purposes is $314,212,077.
(h) At June 30, 1997 net unrealized appreciation was $77,265,115, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $80,377,052 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $3,111,937.
(i) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1997.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
72
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MULTI-ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $313,661,580)................................. $391,477,192
Cash............................................................ 25,155
Receivables:
Investment securities sold...................................... 1,056,191
Dividends and interest.......................................... 866,857
Fund shares sold................................................ 388,248
------------
Total assets.................................................. 393,813,643
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 1,349,849
Fund shares redeemed............................................ 199,810
Administrator................................................... 159,146
Adviser......................................................... 47,744
Transfer agent.................................................. 31,620
Custodian....................................................... 17,267
Accrued expenses................................................ 70,238
Variation margin payable on futures contracts................... 147,451
------------
Total liabilities............................................. 2,023,125
------------
Net assets...................................................... $391,790,518
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................. $ 24,989
Institutional Service Class..................................... 447
Additional paid-in capital...................................... 281,432,641
Accumulated undistributed net investment income................. 4,350,517
Accumulated undistributed net realized gain on investments...... 27,449,117
Net unrealized appreciation on investments...................... 78,565,520
Net unrealized depreciation on foreign currency transactions.... (32,713)
------------
Net assets...................................................... $391,790,518
============
Institutional Class
Net assets applicable to outstanding shares..................... $384,918,998
============
Shares of capital stock outstanding............................. 24,989,426
============
Net asset value per share outstanding........................... $ 15.40
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 6,871,520
============
Shares of capital stock outstanding............................. 446,842
============
Net asset value per share outstanding........................... $ 15.38
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 2,269,830
Interest......................................................... 3,401,939
-----------
Total income................................................... 5,671,769
-----------
Expenses:
Administration................................................... 888,521
Advisory......................................................... 266,556
Transfer agent................................................... 50,046
Custodian........................................................ 35,026
Professional..................................................... 33,221
Registration..................................................... 19,507
Shareholder communication........................................ 17,758
Service.......................................................... 7,549
Directors........................................................ 5,342
Miscellaneous.................................................... 13,062
-----------
Total expenses ................................................ 1,336,588
-----------
Net investment income............................................ 4,335,181
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain (loss) from:
Security transactions............................................ 638,529
Futures transactions............................................. 7,228,759
Foreign currency transactions.................................... (30,610)
-----------
Net realized gain on investments and foreign currency
transactions.................................................... 7,836,678
-----------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions............................................ 43,584,862
Futures transactions............................................. (31,866)
Foreign currency................................................. (32,558)
-----------
Net unrealized gain on investments and foreign currency
transactions.................................................... 43,520,438
-----------
Net realized and unrealized gain on investments and foreign
currency transactions........................................... 51,357,116
-----------
Net increase in net assets resulting from operations............. $55,692,297
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $16,755.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
73
<PAGE>
MULTI-ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 4,335,181 $ 9,198,737
Net realized gain on investments.................. 7,867,288 24,496,600
Net realized loss on foreign currency
transactions..................................... (30,610) (21,867)
Net change in unrealized appreciation on
investments...................................... 43,552,996 12,530,753
Net change in unrealized depreciation on foreign
currency......................................... (32,558) (155)
------------ ------------
Net increase in net assets resulting from
operations....................................... 55,692,297 46,204,068
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. -- (9,027,765)
Institutional Service Class...................... -- (138,056)
From net realized gain on investments:
Institutional Class.............................. -- (3,132,082)
Institutional Service Class...................... -- (52,426)
------------ ------------
Total dividends and distributions to
shareholders................................... -- (12,350,329)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 27,066,751 49,757,971
Institutional Service Class...................... 1,197,977 2,319,600
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. -- 12,159,847
Institutional Service Class...................... -- 190,482
------------ ------------
28,264,728 64,427,900
Cost of shares redeemed:
Institutional Class.............................. (20,690,458) (44,770,866)
Institutional Service Class...................... (773,763) (1,100,422)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 6,800,507 18,556,612
------------ ------------
Net increase in net assets....................... 62,492,804 52,410,351
NET ASSETS:
Beginning of period............................... 329,297,714 276,887,363
------------ ------------
End of period..................................... $391,790,518 $329,297,714
============ ============
Accumulated undistributed net investment income... $ 4,350,517 $ 15,336
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
74
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MULTI-ASSET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- --------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED -----------------------------
JUNE 30, 1997* 1996
--------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of
period.................. $ 13.19 $ 13.19 $ 11.79 $ 11.79
-------- -------- -------- --------
Net investment
income.................. 0.17 0.15 0.38 0.34
Net realized and
unrealized gain
(loss) on
investments............. 2.04 2.04 1.53 1.53
Net realized and
unrealized loss on
foreign currency
transactions............ -- -- (0.00)a) (0.00)(a)
-------- -------- -------- --------
Total from investment
operations.............. 2.21 2.19 1.91 1.87
-------- -------- -------- --------
Less dividends and
distributions:
From net investment
income.................. -- -- (0.38) (0.34)
From net realized gain
on investments.......... -- -- (0.13) (0.13)
In excess of net
realized gain on
investments............. -- -- -- --
-------- -------- -------- --------
Total dividends and
distributions........... -- -- (0.51) (0.47)
-------- -------- -------- --------
Net asset value at end
of period............... $ 15.40 $ 15.38 $ 13.19 $ 13.19
======== ======== ======== ========
Total investment
return (c) ............. 16.76% 16.60% 16.16% 15.89%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income................. 2.44%+ 2.44%+ 2.99% 2.74%
Net expenses............ 0.75%+ 1.00%+ 0.70% 0.95%
Expenses (before
reimbursement)......... 0.75%+ 1.00%+ 0.75% 1.00%
Portfolio turnover
rate.................... 1% 1% 103% 103%
Average
commission rate
paid.................... $ 0.0497 $ 0.0497 $ 0.0498 $ 0.0498
Net assets at end
of period (in 000's).... $384,919 $ 6,872 $323,790 $ 5,508
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- -----------------------------
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1995 1994 1993 1992
------------------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period.................. $ 10.67 $ 10.67 $ 11.67 $ 12.02 $ 11.79
-------- -------- -------- -------- --------
Net investment
income.................. 0.48 0.47 0.45 0.39 0.50
Net realized and
unrealized gain
(loss) on
investments............. 2.39 2.39 (0.55) 0.59 0.29
Net realized and
unrealized loss on
foreign currency
transactions............ (0.01) (0.01) -- -- --
-------- -------- -------- -------- --------
Total from investment
operations.............. 2.86 2.85 (0.10) 0.98 0.79
-------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income.................. (0.48) (0.47) (0.45) (0.88) (0.51)
From net realized gain
on investments.......... (1.18) (1.18) (0.42) (0.44) (0.05)
In excess of net
realized gain on
investments............. (0.08) (0.08) (0.03) (0.01) --
-------- -------- -------- -------- --------
Total dividends and
distributions........... (1.74) (1.73) (0.90) (1.33) (0.56)
-------- -------- -------- -------- --------
Net asset value at end
of period............... $ 11.79 $ 11.79 $ 10.67 $ 11.67 $ 12.02
======== ======== ======== ======== ========
Total investment
return (c) ............. 26.81% 26.70% (0.86%) 8.79% 7.09%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income................. 4.03% 3.78% 3.63% 3.55% 4.65%
Net expenses............ 0.70% 0.95% 0.70% 0.60% 0.60%
Expenses (before
reimbursement)......... 0.77% 1.02% 0.75% 0.75% 0.79%
Portfolio turnover
rate.................... 261% 261% 128% 101% 89%
Average commission rate
paid.................... (b) (b) (b) (b) (b)
Net assets at end of
period (in 000's)....... $273,351 $ 3,536 $229,079 $258,345 $190,899
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(b) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(c) 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.
75
<PAGE>
VALUE EQUITY FUND
================================================================================
- --------------------------------------------------------------------------------
MARRKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. The stock market started the year on a strong note, then, dropped during a
five week period in March and early April, to finally recover to record highs
. The greatest gains were among a small number of large capitalization issues,
which experienced large inflows from foreign institutional investors
. Interest rate sensitive issues reacted severely to rising interest rates but
outperformed the market in the second quarter
- --------------------------------------------------------------------------------
FUND HGIHLIGHTS FOR THE 6- AND 12-MONTHS PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 26.27% and 25.91% for Institutional Class and
Service Class shares, respectively, as of 6/30/97
. Both share classes underperformed the average Lipper* growth and income fund
for the six months ended 6/30/97
. Interest rate sensitive stocks, particularly insurance companies, were among
the Fund's strongest performers
- --------------------------------------------------------------------------------
Capitalization The number of outstanding shares of a company multiplied by the
share price.
Investment cycle The time it takes for a market to expand and contract, or
move from current levels to new highs and new lows.
Price-to-Earnings The price of a stock divided by its earnings per share.
Price to Cash Flow The relationship between the price of a stock and the
amount of free cash flow the company is able to generate.
- --------------------------------------------------------------------------------
The first half of 1997 was a dynamic and volatile period in the stock market.
Carrying momentum from the fourth quarter of 1996, equities rose early in the
year. Then in March and early April, in anticipation of and reaction to the
Federal Reserve Board's move to increase interest rates, the market declined
9.8%. As economic growth slowed, the ensuing recovery brought unexpected stock
price gains, led by a small number of large capitalization issues. Foreign
institutional investors contributed to the rally by pouring money into large,
liquid issues.
Although most investors anticipated a correction, the speed and magnitude of the
recovery appeared to dramatically shorten traditional investment cycles.
During the first six months of 1997, the equity markets were highly volatile,
with daily gains or losses of 100 points or more becoming common, making this
one of the most volatile periods in recent history. Even so, there were some
strong value sectors--most notably interest rate sensitive issues--that
performed well on an absolute and relative basis over the first half of 1997.
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc., is an independent monitor of mutual funds
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
76
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Bottom-up investing Security selection based on the specific fundamental
merits of individual issues. The opposite of "top-down" investing, which starts
with general economic trends, compares market sectors, and uses relative
security values to narrow the range of issues to examine.
Recovery A market recovery refers to a rise in security prices that were
formerly depressed. An economic recovery refers to a general improvement in
formerly weak fundamentals underlying a country's gross domestic product, which
may include factory output, sales, productivity, employment, and relative
currency values.
- --------------------------------------------------------------------------------
Given this context, how did the MainStay Institutional Value Equity Fund do over
the first half of 1997?
For the six months ended 6/30/97 the MainStay Institutional Value Equity Fund
returned 11.09% and 10.91% for Institutional Class and Service Class shares,
respectively. While these returns are close to the historical averages for an
entire year since 1926 +, both share classes lagged the average Lipper/++/
growth and income fund, which returned 15.52% for the same period.
What were the primary reasons for the Fund's underperformance?
During the first half of the year, much of the return in the S&P 500 came from a
small number of large capitalization stocks that did not fit the Fund's
investment profile; which is geared towards companies with low price-to-earnings
(P/E) and low price to cash flow ratios. More specifically, the value stocks we
emphasized ranged from $7.5 billion to $15 billion in market capitalization, in
sharp contrast to the market's preference for companies with market
capitalizations in excess of $20 billion. As a result, the Fund did not
participate in a large part of what made the market rise.
How did your disciplines help investors?
Using the Fund's strict, bottom-up stock selection process, we had identified
interest-rate sensitive issues, particularly insurance companies, as an area
that offered potentially outstanding value. While this sector was hit hard
during the correction, its recovery in the second quarter provided good returns
for investors and the Fund.
Which insurance and financial issues did well?
There were several. For the period the securities were held in the Fund's
portfolio, Travelers was up 40%, American International Group advanced 38%, the
Equitable gained 22%, and NationsBank earned 34%. Allstate and Chubb each
provided returns over 25%, and Transamerica gained 19%. The Fund purchased
Transamerica throughout much of the first and second quarters of the year. The
company was actively restructuring, auctioning off subsidiaries that didn't fit
their core business, and providing direct incentives for managers to improve
stock performance. We look for these kinds of catalysts to identify value and
make our investments worthwhile.
What major decisions did you make during the first half of the year?
We selectively increased the Fund's positions in the basic materials companies.
We believe auto related and paper stocks were two of the most undervalued
sectors in which we increased the Fund's position during the first half of 1997.
In general, the economically sensitive sectors underperformed the broad market
averages during the first half of 1997.
What happened in the economically sensitive sector?
The Fund's holdings in basic materials stock such as paper and chemicals
suffered from continued poor pricing coming off of 1996 with high inventories.
Also, the Fund's holdings in fertilizer stocks (i.e. Agrium and IMC Global) were
hurt from poor planting conditions related to poor weather.
Late last year you began buying utilities. What happened in that area?
We continued to purchase utilities as the Fund's proprietary valuation criteria
showed they had high potential. The Fund was slightly overweight at the end of
1997 and we may continue to strengthen the Fund's utility positions in the
future. We believe there may be many opportunities among aggressive utilities
that can restructure and take advantage of deregulation.
- --------------------------------------------------------------------------------
+ Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for stocks was
10.70%. Past performance is no guarantee of future results.
++ Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
77
<PAGE>
================================================================================
While the utility sector underperformed during the first half of 1997, there may
be strong future potential in names like PECO Energy and LILCO. PECO, for
example, is actively repurchasing shares. Another underperformer was Niagara
Mohawk, which was down 16%. On the other hand, Brooklyn Union Gas saw the same
potential we did in LILCO and offered to merge with the company, which
contributed positively to the Fund's performance.
What other significant purchases did you make?
Columbia HCA, a health care company, was the Fund's largest purchase during the
first six months of 1997. We began investing in Columbia HCA after its stock
corrected sharply. The company owns hospitals and has had consistent growth with
high free cash flow, and has other characteristics that we believe are
attractive within our investment framework. After we purchased the stock for the
Fund, the company announced a billion dollar share repurchase.
The Fund also bought Banc One when, after acquiring First USA, it became the
lowest P/E, lowest price to cash flow stock in the entire financial services
sector.
Were there other significant purchases?
Toys "R" Us was an excellent value story. We bought the stock based on their low
P/E and substantial free cash flow. The company had dynamic product flow due to
the biggest lineup of blockbuster movies in recent years. The stock was up about
17% through 6/30/97.
What about sales during the first half of the year?
Conrail was sold when it was acquired by CSX and Norfolk Southern at a
substantial premium to the Fund's cost.
Xerox appreciated 51% in the first six months of 1997 and according to the
Fund's management disciplines, we started cutting back on the Fund's position.
Philip Morris was another position in which we cut back on. Given the rising
multiples of the stock and the uncertainties faced by the company, we trimmed
the Fund's holdings just before the March correction.
Which of the Fund's sales didn't do well?
We moved the Fund's investment holdings out of Stone Container and into Georgia-
Pacific where we saw a better risk reward tradeoff. Humana, a health care
company, was the Fund's largest sale. We had expected a turnaround, but saw
deteriorating earnings and management decisions.
Were there other stocks that underperformed in the Fund?
Areas of weakness were the energy-related stocks due to lower oil and natural
gas prices (Unocal, Occidental, MAPCO, and Seagull Energy). However, this sector
appeared significantly undervalued, based upon discount to transaction value and
we expect a consolidation theme may unfold over the next 6-12 months. Also,
agriculture-related stocks experienced a continued setback due to weather
related conditions (IMC Global, Agrium).
How did the portfolio perform when the market corrected?
Very well. By purchasing stocks that are already undervalued, we seek to
outperform the market when prices go down. That's a major attraction of our
value approach for risk-averse investors.
How was the Fund positioned?
At the end of June, the Fund was overweighted in consumer cyclicals, materials
processing, and transportation, and underweight in health care and consumer
staples.
What risks do you see on the horizon?
The biggest risk lies in valuation overall--with stock prices now selling at or
near historical valuation highs, many investors are anticipating a continuation
of the current investment environment. Any disappointment on the inflation front
and/or corporate earnings could lead to downside price volatility.
Denis Laplaige
Jeffrey Simon
Portfolio Managers
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
78
<PAGE>
[GRAPHS APPEAR HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
VALUE EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE VALUE EQUITY FUND S&P 500 INDEX
---- ----------------- -------------
<S> <C> <C>
1/2/91 10,000 10,000
11,550 11,453
11,830 11,427
12,870 12,038
91 13,660 13,047
14,695 12,717
14,637 12,958
14,847 13,366
92 16,489 14,040
17,465 14,654
17,670 14,726
18,680 15,105
93 18,945 15,456
18,976 14,870
19,068 14,933
20,015 15,663
94 19,177 15,660
20,866 17,185
22,191 18,826
23,632 20,323
95 24,819 21,546
26,401 22,703
26,728 23,723
27,605 24,456
96 33,749 31,955
6/30/97 33,749 31,955
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
VALUE EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE VALUE EQUITY FUND S&P 500 INDEX
---- ----------------- -------------
<S> <C> <C>
1/2/91 10,000 10,000
11,550 11,453
11,830 11,427
12,870 12,038
91 13,660 13,047
14,695 12,717
14,637 12,958
14,847 13,366
92 16,489 14,040
17,465 14,654
17,670 14,726
18,680 15,105
93 18,945 15,456
18,976 14,870
19,068 14,933
20,015 15,663
94 19,177 15,660
20,833 17,185
22,208 18,826
23,632 20,323
95 24,799 21,546
26,363 22,703
26,672 23,723
27,532 24,456
96 33,584 31,955
6/30/97 33,584 31,955
</TABLE>
. Value Equity Fund --S&P 500 Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
Performance as of June 30, 1997 as of June 30, 1997
- ------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Equity Fund Institutional Class 11.09% 26.27% 18.18% 20.57%
Value Equity Fund Service Class + 10.91% 25.91% 18.07% 20.48%
Average Lipper Growth & Income Fund 15.52% 28.07% 17.25% 17.59%
S&P 500 Stock Index 20.62% 34.71% 19.78% 19.57%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Institutional Class Shares
Year-End Total Return %*
-------- --------------
<S> <C>
1991 36.60
1992 20.71
1993 14.90
1994 1.22
1995 29.42
1996 22.41
1997 as of 6/30/97 11.09
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. Common Stocks 95.70%
. Cash & Equivalents 4.30%++
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Tenneco Inc. 2.58%
2. Columbia HCA Healthcare Corp. 2.38%
3. Banc One Corp. 2.18%
4. Toys "R" Us, Inc. 2.04%
5. International Business Machines Corp. 2.04%
6. Time Warner Inc. 2.03%
7. PG&E Corp. 1.99%
8. Allstate Corp. (The) 1.87%
9. IMC Global Inc. 1.85%
10. Xerox Corp. 1.84%
- --------------------------------------------------------------------------------
TOP 5 INDUSTRY
HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Banks 7.56%
2. Retail 6.91%
3. Utilities-Electric 6.64%
4. Chemicals 6.22%
5. Health Care 5.82%
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
++ Adjusted for liabilities.
79
<PAGE>
VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
COMMON STOCKS (95.7%)+
<TABLE>
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
AEROSPACE/DEFENSE ELECTRONICS (0.7%)
Litton Industries, Inc. (a)............................. 124,900 $ 6,034,231
------------
AIRLINES (1.5%)
AMR Corp. (a)........................................... 149,100 13,791,750
------------
AUTO MANUFACTURING (2.9%)
Ford Motor Co........................................... 404,200 15,258,550
General Motors Corp..................................... 189,000 10,524,937
------------
25,783,487
------------
AUTO PARTS (3.0%)
Echlin Inc.............................................. 424,300 15,274,800
Mark IV Industries, Inc................................. 494,025 11,856,600
------------
27,131,400
------------
BANKS (7.6%)
Banc One Corp........................................... 407,000 19,714,062
Bankers Trust New York Corp. ........................... 126,400 10,996,800
Chase Manhattan Corp.................................... 88,200 8,560,913
NationsBank Corp........................................ 160,020 10,321,290
PNC Bank Corp. ......................................... 239,000 9,948,375
Wells Fargo & Co. ...................................... 32,600 8,785,700
------------
68,327,140
------------
CAPITAL GOODS (2.7%)
Case Corp. ............................................. 117,300 8,079,037
Xerox Corp. ............................................ 211,300 16,666,288
------------
24,745,325
------------
CHEMICALS (6.2%)
Agrium Inc.............................................. 814,300 9,364,450
Dow Chemical Co. ....................................... 104,000 9,061,000
Georgia Gulf Corp....................................... 331,700 9,640,031
IMC Global Inc.......................................... 477,660 16,718,100
Imperial Chemical Industries, PLC ADR (b)............... 45,500 2,587,813
PPG Industries, Inc. ................................... 152,600 8,869,875
------------
56,241,269
------------
COMPUTERS & OFFICE EQUIPMENT (2.0%)
Lexmark International Group, Inc. Class A (a)........... 292,600 8,887,725
Storage Technology Corp. (a)............................ 207,800 9,247,100
------------
18,134,825
------------
CONGLOMERATES (3.5%)
American Standard Cos.
Inc. (a)............................................... 183,900 8,229,525
Tenneco Inc............................................. 515,600 23,298,675
------------
31,528,200
------------
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
CONTAINERS (1.6%)
Owens-Illinois Inc. (a)................................. 460,600 $ 14,278,600
------------
DOMESTIC OIL (4.9%)
Amerada Hess Corp....................................... 159,800 8,878,887
Louisiana Land & Exploration Co. (The).................. 162,500 9,282,812
Noble Affiliates, Inc................................... 135,700 5,249,894
Parker & Parsley
Petroleum Co. ......................................... 204,200 7,223,575
Unocal Corp. ........................................... 349,900 13,580,494
------------
44,215,662
------------
ENERGY (3.6%)
Coastal Corp. (The)..................................... 213,100 11,334,256
MAPCO Inc............................................... 375,100 11,815,650
Seagull Energy Corp. (a)................................ 547,000 9,572,500
------------
32,722,406
------------
FINANCE (3.3%)
Transamerica Corp....................................... 158,500 14,829,656
Travelers Group Inc..................................... 231,568 14,603,257
------------
29,432,913
------------
FOOD (1.0%)
IBP, Inc................................................ 375,100 8,721,075
------------
FOOD, BEVERAGES & TOBACCO (4.1%)
Philip Morris Cos....................................... 282,000 12,513,750
RJR Nabisco Holdings Corp............................... 419,200 13,833,600
UST Inc. ............................................... 389,300 10,803,075
------------
37,150,425
------------
HEALTH CARE (5.8%)
Aetna Inc............................................... 162,000 16,584,750
Columbia/HCA
Healthcare Corp........................................ 548,200 21,551,113
Foundation Health Systems,
Inc. (a)............................................... 477,700 14,480,281
------------
52,616,144
------------
HOUSEHOLD PRODUCTS (2.1%)
Premark International, Inc. ............................ 393,900 10,536,825
Tupperware Corp......................................... 243,500 8,887,750
------------
19,424,575
------------
INSURANCE (5.7%)
Allstate Corp. (The).................................... 231,971 16,933,883
American International
Group, Inc............................................. 100,675 15,038,328
Chubb Corp.............................................. 169,500 11,335,313
Equitable Cos., Inc. (The).............................. 237,700 7,903,525
------------
51,211,049
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
80
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
INTERNATIONAL OIL (2.6%)
British Petroleum Co., PLC
ADR (b).......................................... 132,000 $ 9,883,500
Occidental Petroleum Corp......................... 534,900 13,405,931
------------
23,289,431
------------
PAPER & FOREST PRODUCTS (5.1%)
Bowater Inc....................................... 283,000 13,088,750
Chesapeake Corp................................... 216,900 7,320,375
Georgia-Pacific Corp. ............................ 162,800 13,899,050
Rayonier Inc...................................... 156,050 6,563,853
Temple-Inland Inc. ............................... 95,000 5,130,000
------------
46,002,028
------------
RAILROADS (4.5%)
CSX Corp.......................................... 238,900 13,258,950
Illinois Central Corp. ........................... 363,700 12,706,769
Union Pacific Corp................................ 209,600 14,776,800
------------
40,742,519
------------
RECREATION & ENTERTAINMENT (2.0%)
Time Warner Inc................................... 380,000 18,335,000
------------
RETAIL (6.9%)
Dillard's Inc..................................... 193,800 6,710,325
Federated Department Stores, Inc. (a)............. 441,600 15,345,600
Great Atlantic & Pacific Tea Co., Inc. (The)...... 146,800 3,991,125
Kroger Co. (a).................................... 354,800 10,289,200
Penney (J.C.) Co., Inc............................ 146,700 7,655,906
Toys "R" Us, Inc. (a)............................. 527,600 18,466,000
------------
62,458,156
------------
TECHNOLOGY (2.0%)
International Business
Machines Corp.................................... 204,200 18,416,288
------------
TEXTILE & APPAREL (2.1%)
Burlington Industries, Inc. (a)................... 414,900 4,978,800
Fruit of the Loom, Inc.
Class A (a)...................................... 76,200 2,362,200
Reebok International Ltd.......................... 241,700 11,299,475
------------
18,640,475
------------
TIRE & RUBBER (1.4%)
Goodyear Tire & Rubber
Co. (The)........................................ 202,200 12,801,788
------------
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
TRANSPORTATION (0.3%)
Arkansas Best Corp. (a)........................... 305,500 $ 2,787,688
------------
UTILITIES--ELECTRIC (6.6%)
GPU, Inc.......................................... 170,800 6,127,450
Long Island Lighting Co........................... 551,500 12,684,500
Niagara Mohawk Power
Corp. (a)........................................ 700,500 5,998,031
PECO Energy Co. .................................. 497,400 10,445,400
PG&E Corp......................................... 741,900 17,991,075
Pinnacle West Capital Corp........................ 229,200 6,890,325
------------
60,136,781
------------
Total Common Stocks
(Cost $707,728,802).............................. 865,100,630
------------
SHORT-TERM
INVESTMENT (3.5%)
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
COMMERCIAL PAPER (3.5%)
American General Finance Corp.
6.08%, due 7/1/97................................ $31,404,000 31,404,000
------------
Total Short-Term Investment (Cost $31,404,000).... 31,404,000
------------
Total Investments
(Cost $739,132,802) (c).......................... 99.2% 896,504,630 (d)
Cash and Other Assets,
Less Liabilities................................. 0.8 7,504,069
----------- ------------
Net Assets........................................ 100.0% $904,008,699
=========== ============
</TABLE>
- --------
(a) Non-income producing securities.
(b) ADR--American Depository Receipt.
(c) The cost for Federal income tax purpose is $739,198,754.
(d) At June 30, 1997 net unrealized appreciation was $157,305,876, based on
cost for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess
of market value over cost of $167,477,954 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $10,172,078.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
81
<PAGE>
VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $739,132,802).................................. $896,504,630
Cash............................................................. 806
Receivables:
Investment securities sold....................................... 44,362,049
Dividends and interest........................................... 2,008,700
Fund shares sold................................................. 118,055
------------
Total assets................................................... 942,994,240
------------
LIABILITIES:
Payables:
Investment securities purchased.................................. 38,037,592
Administrator.................................................... 443,611
Adviser.......................................................... 184,838
Fund shares redeemed............................................. 142,186
Transfer agent................................................... 36,199
Custodian........................................................ 13,373
Accrued expenses................................................. 127,742
------------
Total liabilities.............................................. 38,985,541
------------
Net assets....................................................... $904,008,699
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class.............................................. $ 50,297
Institutional Service Class...................................... 988
Additional paid-in capital....................................... 639,741,126
Accumulated undistributed net investment income.................. 5,658,300
Accumulated undistributed net realized gain on investments....... 101,186,160
Net unrealized appreciation on investments....................... 157,371,828
------------
Net assets....................................................... $904,008,699
============
Institutional Class
Net assets applicable to outstanding shares...................... $886,636,484
============
Shares of capital stock outstanding.............................. 50,297,414
============
Net asset value per share outstanding............................ $ 17.63
============
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 17,372,215
============
Shares of capital stock outstanding.............................. 988,089
============
Net asset value per share outstanding............................ $ 17.58
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 8,694,692
Interest......................................................... 785,130
-----------
Total income................................................... 9,479,822
-----------
Expenses:
Administration................................................... 2,555,672
Advisory......................................................... 1,064,863
Professional..................................................... 61,013
Transfer agent................................................... 57,061
Shareholder communication........................................ 43,014
Custodian........................................................ 41,626
Registration..................................................... 22,696
Service.......................................................... 19,599
Directors........................................................ 13,053
Miscellaneous.................................................... 10,984
-----------
Total expenses................................................. 3,889,581
-----------
Net investment income............................................ 5,590,241
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................. 83,987,217
Net change in unrealized appreciation on investments............. 817,641
-----------
Net realized and unrealized gain on investments.................. 84,804,858
-----------
Net increase in net assets resulting from operations............. $90,395,099
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $26,697.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
82
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................ $ 5,590,241 $ 11,990,048
Net realized gain on investments................. 83,987,217 84,508,224
Net change in unrealized appreciation on
investments..................................... 817,641 50,724,771
------------ ------------
Net increase in net assets resulting from
operations...................................... 90,395,099 147,223,043
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class............................. -- (11,732,570)
Institutional Service Class..................... -- (189,419)
From net realized gain on investments:
Institutional Class............................. -- (72,015,324)
Institutional Service Class..................... -- (1,288,651)
------------ ------------
Total dividends and distributions to
shareholders.................................. -- (85,225,964)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................. 84,308,647 174,875,420
Institutional Service Class..................... 2,587,161 10,412,344
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class............................. -- 83,668,524
Institutional Service Class..................... -- 1,478,062
------------ ------------
86,895,808 270,434,350
Cost of shares redeemed:
Institutional Class............................. (108,117,910) (101,781,417)
Institutional Service Class..................... (1,640,950) (1,135,271)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions..................... (22,863,052) 167,517,662
------------ ------------
Net increase in net assets...................... 67,532,047 229,514,741
NET ASSETS:
Beginning of period.............................. 836,476,652 606,961,911
------------ ------------
End of period.................................... $904,008,699 $836,476,652
============ ============
Accumulated undistributed net investment income.. $ 5,658,300 $ 68,059
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
83
<PAGE>
VALUE EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS SERVICE CLASS
------------- ------------- ------------- ------------- ------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED -------------------------------------------------------
JUNE 30, 1997* 1996 1995
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 15.87 $ 15.85 $ 14.43 $ 14.43 $ 11.58 $ 11.58
-------- -------- -------- -------- -------- --------
Net investment
income.......... 0.11 0.09 0.25 0.23 0.21 0.20
Net realized and
unrealized gain
(loss) on
investments..... 1.65 1.64 2.98 2.96 3.20 3.20
-------- -------- -------- -------- -------- --------
Total from
investment
operations...... 1.76 1.73 3.23 3.19 3.41 3.40
-------- -------- -------- -------- -------- --------
Less dividends
and
distributions:
From net
investment
income.......... -- -- (0.25) (0.23) (0.21) (0.20)
From net realized
gain on
investments..... -- -- (1.54) (1.54) (0.35) (0.35)
-------- -------- -------- -------- -------- --------
Total dividends
and
distributions... -- -- (1.79) (1.77) (0.56) (0.55)
-------- -------- -------- -------- -------- --------
Net asset value
at end of
period.......... $ 17.63 $ 17.58 $ 15.87 $ 15.85 $ 14.43 $ 14.43
======== ======== ======== ======== ======== ========
Total investment
return (b)...... 11.09% 10.91% 22.41% 22.10% 29.42% 29.32%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 1.32%+ 1.07%+ 1.70% 1.45% 1.64% 1.39%
Net expenses.... 0.91%+ 1.16%+ 0.92% 1.17% 0.93% 1.18%
Expenses (before
reimbursement).. 0.91%+ 1.16%+ 0.92% 1.17% 0.93% 1.18%
Portfolio
turnover rate... 39% 39% 50% 50% 51% 51%
Average
commission rate
paid............ $ 0.0593 $ 0.0593 $ 0.0594 $ 0.0594 (a) (a)
Net assets at end
of period (in
000's).......... $886,636 $ 17,372 $821,725 $ 14,752 $603,749 $ 3,213
<CAPTION>
INSTITUTIONAL CLASS
-----------------------------
YEAR ENDED DECEMBER 31
-----------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 12.40 $ 14.16 $ 13.66
-------- -------- --------
Net investment
income.......... 0.17 0.16 0.21
Net realized and
unrealized gain
(loss) on
investments..... (0.02) 1.63 2.22
-------- -------- --------
Total from
investment
operations...... 0.15 1.79 2.43
-------- -------- --------
Less dividends
and
distributions:
From net
investment
income.......... (0.17) (0.37) (0.28)
From net realized
gain on
investments..... (0.80) (3.18) (1.65)
-------- -------- --------
Total dividends
and
distributions... (0.97) (3.55) (1.93)
-------- -------- --------
Net asset value
at end of
period.......... $ 11.58 $ 12.40 $ 14.16
======== ======== ========
Total investment
return (b)...... 1.22% 14.90% 20.71%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 1.50% 1.38% 1.67%
Net expenses.... 0.92% 0.90% 0.90%
Expenses (before
reimbursement).. 0.92% 0.93% 0.95%
Portfolio
turnover rate... 43% 83% 133%
Average
commission rate
paid............ (a) (a) (a)
Net assets at end
of period (in
000's).......... $396,537 $305,060 $230,836
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
(b) 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.
84
<PAGE>
BOND FUND
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. Although the Federal Reserve Board moved to raise interest rates slightly in
late March, the bond markets were relatively quiet over the first half of
1997
. Rapid economic growth in the first quarter of 1997 gave way to more moderate
growth in the second quarter, while inflation and unemployment remained low
. With low bond market volatility and relatively stable interest rates, many
income investors moved their attention from Treasuries to other yield-
enhancing securities
. Mortgages and corporate bonds outperformed most other sectors during the
first half of the year
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 7.69% and 7.40% for Institutional Class shares and
Service Class shares, respectively, as of 6/30/97
. The Fund overweighted corporate bonds, mortgage-backed, asset-backed, and
other securities offering attractive yield spreads to Treasuries
. Financial company investments and BBB-rated Yankee bonds also contributed
positively to performance
. Both share classes outperformed the average Lipper* intermediate U.S. bond
fund for the six months ended 6/30/97
During the first six months of 1997, the bond markets were relatively quiet,
with interest rates and bond prices moving within a relatively narrow range.
Rapid economic growth in the first quarter prompted a preemptive move by the
Federal Reserve Board to increase interest rates by 25 basis points at the end
of March. While this had a temporary negative impact on bond prices, slower
growth in the second quarter led to a gradual recovery and most bond markets
closed the first half of the year slightly ahead of where they had started the
year.
High real returns--or returns after adjustments for inflation--attracted foreign
capital to the U.S. bond markets, while a rapidly rising stock market tended to
draw money away from bonds. With few opportunities for yield enhancement in the
Treasury market, many investors focused their attention on securities that
offered yield advantages. As yield spreads tightened, corporate bonds, mortgage-
backed securities, asset-backed securities, and Yankee bonds outperformed
Treasuries during the first half of the year. Selected industries, such as
financials and telecommunications, were strong performers, benefiting from
relatively stable interest rates and moderate economic growth.
Given this context, how did the MainStay Institutional Bond Fund do during the
first half of 1997?
The MainStay Institutional Bond Fund provided total returns of 2.84% and 2.63%
for Institutional Class shares and Service Class shares, respectively, for the
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
Yield spreads The difference in yield between securities in different market
sectors, such as corporate bonds and Treasury issues--or between different
securities in a single sector, such as short-term and intermediate-term Treasury
issues.
Yankee bonds Dollar-denominated bonds issued in the United States by foreign
banks and corporations, usually when conditions in the U.S. are more favorable
than in other markets, including the issuer's domestic market overseas.
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
85
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Weighting The proportion of a portfolio allocated to a specific security or
sector, i.e., a fund is said to be overweighted in a sector when that portion of
the portfolio is greater than the sector's general relationship to the market as
a whole.
Duration A measure of price sensitivity, which adjusts for the time value of the
payments investors will receive and which takes into account interest payments
as well as principal payments. Duration is a better gauge of interest-rate
sensitivity than average maturity alone.
Yield curve When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
- --------------------------------------------------------------------------------
six months ended 6/30/97. Both share classes outperformed the average Lipper+
intermediate U.S. government fund, which returned 2.50% over the same period.
What contributed to the Fund's outperformance during the first six months of
1997?
Our decision to overweight non-Treasury securities was definitely a positive
factor. During the reporting period, yield spreads between non-Treasury
securities and Treasury securities tightened, allowing the Fund to see capital
appreciation in many of the Fund's holdings. We also increased the Fund's
concentration in investment-grade mortgage-backed and asset-backed securities,
which also had a positive impact on performance. The Fund also held some low-
balance mortgage loans and lower-rated investment-grade Yankee bonds. We believe
our disciplined research helped us identify opportunities in these areas and
they did well for our investors.
What types of mortgage-related securities did the Fund own?
During the first half of the year, mortgage-backed securities made up 15% of the
Fund. Within that segment, the Fund held a variety of securities. In addition to
seasoned mortgage pools that performed in line with the market, the Fund also
owned unleveraged collateralized mortgage obligations (CMOs), adjustable-rate
mortgages (ARMs), and low-balance mortgage loans, all of which outperformed
Treasuries. Low-balance mortgage loans paid about 50 basis points over standard
mortgages and gained the highest quality rating, as rated by Standard & Poor's
and Moody's. Our research showed that they offered an excellent opportunity to
enhance yield.
Has the Fund continued to hold all of these securities?
We trimmed back the Fund's mortgage holdings, including CMOs, in June. We felt
that the relative advantages of these securities might begin to decline and we
wanted to take profits.
Where did you find opportunities in Yankee bonds?
We were particularly interested in Yankee securities. These bonds are issued in
the U.S. by foreign banks and corporations, but carry no currency risk since
they're denominated in U.S. dollars. We've been investing in these securities
for some time, and because of our research, we feel are better equipped than
some of our competitors to evaluate Yankee securities. During the first half of
the year, we increased the Fund's exposure in Yankee bonds, and the move was
positive for the portfolio.
How important is research in your overall investment process?
Very important--especially in a period like the first half of 1997. With
interest rates relatively stable, there were few opportunities to increase
yields by making duration bets or yield curve plays. As a result, we needed to
find attractive relative values by looking at each sector, analyzing risk and
reward potential, and evaluating individual issues to see where the real
opportunities were. We think our in-depth research, which includes specialists
in different markets and a team of PhD's, has been a tremendous asset.
- --------------------------------------------------------------------------------
+ Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
86
<PAGE>
================================================================================
What is the quality rating of the portfolio?
The Fund consists of high-quality, very liquid issues. As of June 30, 1997, the
Fund's average weighted quality was AA.
Were there any portions of the portfolio you might have managed differently?
During the first six months of 1997 we were underweighted in utilities because
we felt that with deregulation, there was a likelihood of utility bonds being
downgraded. While we may have missed an opportunity in the utility sector, we
feel that overall, we allocated our assets in a beneficial way.
What's your outlook for the future?
We remain cautiously optimistic. With spreads at tighter levels, the opportunity
profile is shifting among non-Treasury securities. The Federal Reserve Board has
been vigilant on inflation, and we expect that to continue. As long as
productivity increases faster than wages, we don't see any problems on the
horizon. Whatever the future brings, we'll continue to seek to maximize total
return, consistent with liquidity, low risk to principal, and investment in debt
securities.
Ravi Akhoury
Edward Munshower
Portfolio Managers
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
87
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
BOND FUND VS LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
INSTITUTIONAL CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE BOND FUND INSTITUTIONAL LEHMAN BROTHERS
---- ----------------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,240 10,270
10,350 10,425
10,960 11,025
91 11,400 11,613
11,264 11,439
11,647 11,902
12,063 12,484
92 12,128 12,494
12,627 13,075
12,961 13,468
13,342 13,913
93 13,310 13,873
12,949 13,439
12,776 13,272
12,829 13,338
94 12,870 13,388
13,460 14,055
14,267 14,966
14,527 15,253
95 15,170 15,963
14,800 15,590
14,893 15,663
15,124 15,939
96 15,595 16,426
6/30/97 16,038 16,878
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
BOND FUND VS LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
SERVICE CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE BOND FUND INSTITUTIONAL LEHMAN BROTHERS
---- ----------------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,240 10,270
10,350 10,425
10,960 11,025
91 11,400 11,613
11,264 11,439
11,647 11,902
12,063 12,484
92 12,128 12,494
12,627 13,075
12,961 13,468
13,342 13,913
93 13,310 13,873
12,949 13,439
12,776 13,272
12,829 13,338
94 12,870 13,388
13,446 14,055
14,253 14,966
14,512 15,253
95 15,128 15,963
14,759 15,590
14,836 15,663
15,052 15,939
96 15,525 16,426
6/30/97 15,934 16,878
</TABLE>
. Bond Fund -- Lehman Brothers Gov't/Corp Bond Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- ---------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bond Fund Institutional Class 2.84% 7.69% 6.61% 7.54%
Bond Fund Service Class+ 2.63% 7.40% 6.47% 7.43%
Average Lipper Intermediate U.S.
Government Fund 2.50% 6.88% 5.66% 6.97%
Lehman Brothers Gov't/Corporate Bond Index 2.74% 7.75% 7.23% 8.38%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Institutional Class Shares
<TABLE>
<CAPTION>
Year-end
1991 1992 1993 1994 1995 1996 1997
as of 6/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return %* 14.00 6.39 9.74 -3.31 17.88 2.80 2.84
</TABLE>
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Government/Agency 41.63%
AAA 24.30%
AA 2.98%
A 10.80%
BBB 19.44%
BB 0.85%
-------
100.00%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
. U.S. Government & Federal Agencies 39.35%
. Domestic Bonds 30.88%
. Cash & Equivalents 5.48%(S)
. Other Asset-Backed/Mortgage-Backed Securities 24.29%
</TABLE>
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Treasury Bond, 2/15/27, 6.625% 11.02%
2. US Treasury Bond, 8/15/17, 8.875% 4.91%
3. Green Tree Rec. Equip., 7/15/28, 6.55% 2.99%
4. US Treasury Bond, 8/15/13, 12.00% 2.94%
5. US Treasury Note, 11/30/00, 5.625% 2.90%
6. US Treasury Note, 2/28/02, 6.25% 2.89%
7. US Treasury Note, 11/15/98, 5.50% 2.85%
8. US Treasury Note, 11/30/99, 7.75% 2.56%
9. Hydro Quebec, 7/07/24, 8.05% 2.50%
10. GNMA, 5/20/25, 7.125% 2.31%
</TABLE>
- --------------------------------------------------------------------------------
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Government & Federal Agency 39.35%
2. First Mortgage Loans 8.24%
3. Banks 8.11%
4. Finance 4.26%
5. Transportation 4.08%
Average Maturity 9.2 years
(as of 6/30/97)
</TABLE>
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
++ Actual percentages will vary over time. Bond quality ratings provided by
Standard & Poor's. See the prospectus for details.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
(S) Adjusted for liabilities.
88
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
LONG-TERM INVESTMENTS (94.5%)+
ASSET-BACKED
SECURITIES (12.5%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
AIRCRAFT LEASES (3.1%)
Aircraft Lease Portfolio Securitization Limited
Series 1996-1 Class C 7.0375%, due 6/15/06 (a)....... $ 2,089,244 $ 2,089,244
Airplanes Pass Through Trust Series 1-Class C
8.15%, due 3/15/19................................... 3,374,000 3,512,401
------------
5,601,645
------------
AUTO LEASES (0.7%)
Advanta Automobile Receivables Trust
Series 1997-1 Class A2 6.75%, due 12/15/03........... 1,205,000 1,210,651
------------
CONSUMER LOANS (3.0%)
Green Tree Recreational Equipment & Consumer Trust
Series 1997-B Class A1 6.55%, due 7/15/28............ 5,375,000 5,362,369
------------
CREDIT CARD RECEIVABLES (2.4%)
Banc One Credit Card Master Trust
Series 1995-A Class A 6.15%, due 7/15/02............. 1,875,000 1,859,100
Standard Credit Card Master Trust
Series 1995-4 Class A 5.9125%, due 2/15/00 (a)....... 2,375,000 2,375,380
------------
4,234,480
------------
EQUIPMENT LOANS (2.4%)
Case Equipment Loan Trust Series 1997-A Class A3
6.45%, due 3/15/04................................... 2,040,000 2,044,060
Newcourt Receivables Asset Trust
Series 1996-2 Class A 6.87%, due 6/20/04............. 1,230,855 1,237,970
Series 1996-3 Class A 6.24%, due 12/20/04............ 1,066,592 1,063,339
------------
4,345,369
------------
MANUFACTURED HOUSING LOANS (0.9%)
Green Tree Financial Corp. Series 1997-4 Class A7
7.36%, due 2/15/29................................... 1,650,000 1,633,500
------------
Total Asset-Backed Securities (Cost $22,337,912)...... 22,388,014
------------
CORPORATE BONDS (20.6%)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
BANKS (5.1%)
Capital One Bank 7.15%, due 9/15/06.................... $ 2,475,000 $ 2,502,101
First National Bank Commerce 6.50%, due 1/14/00........ 2,000,000 1,998,340
Sakura Capital Funding (Cayman), Ltd.
6.7625%, due 8/29/49 (a)(c)........................... 825,000 825,000
SouthTrust Bank of Alabama (Birmingham)
7.69%, due 5/15/25.................................... 1,875,000 1,980,600
Wachovia Corp.
7.00%, due 12/15/99................................... 1,810,000 1,832,553
------------
9,138,594
------------
BROKERAGE (2.3%)
Lehman Brothers Holdings, Inc.
7.375%, due 5/15/07................................... 2,000,000 2,050,120
Salomon, Inc.
6.70%, due 7/5/00..................................... 2,110,000 2,105,463
------------
4,155,583
------------
FINANCE (1.7%)
Integra Financial Corp.
6.50%, due 4/15/00.................................... 1,800,000 1,798,866
TTB Finance Cayman Ltd.
6.7625%, due 3/18/07 (a).............................. 1,250,000 1,250,000
------------
3,048,866
------------
HEALTH CARE (1.1%)
Aetna Services, Inc.
6.97%, due 8/15/36.................................... 1,887,000 1,899,398
------------
INDUSTRIAL (2.9%)
Dayton Hudson Co.
5.895%, due 6/15/37................................... 1,585,000 1,582,781
Merck & Co.
Series MTNB
5.76%, due 5/3/37..................................... 900,000 908,631
RJR Nabisco, Inc.
8.25%, due 7/1/04..................................... 1,275,000 1,270,321
Sears Roebuck Acceptance Corp.
6.95%, due 5/15/02.................................... 1,470,000 1,480,658
------------
5,242,391
------------
MEDIA (1.0%)
Tele-Communications, Inc.
9.25%, due 4/15/02.................................... 1,750,000 1,882,457
------------
TRANSPORTATION (4.1%)
American Airlines
Series 91A2
10.18%, due 1/2/13.................................... 1,910,000 2,324,107
Series 94A4
9.78%, due 11/26/11................................... 2,180,000 2,485,592
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
89
<PAGE>
BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
CORPORATE BONDS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
TRANSPORTATION (Continued)
Federal Express Corp.
Series 97-C
7.65%, due 1/15/14................................... $ 2,460,000 $ 2,512,595
------------
7,322,294
------------
UTILITIES--TELEPHONE (2.4%)
BellSouth Capital Funding Corp.
6.04%, due 11/15/26.................................. 2,345,000 2,320,073
US West Capital Funding, Inc.
7.95%, due 2/1/97.................................... 1,940,000 1,957,732
------------
4,277,805
------------
Total Corporate Bonds (Cost $36,727,225).............. 36,967,388
------------
MORTGAGE-BACKED SECURITIES (11.8%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (3.6%)
Asset Securitization Corp.
Series 1996-MD6 Class A1B
6.88%, due 11/13/26.................................. 1,935,000 1,936,974
Series 1997-MD7 Class A1B
7.41%, due 1/13/30................................... 1,615,000 1,658,411
Series 1997-D4 Class A1D
7.49%, due 4/14/29................................... 2,750,000 2,837,449
------------
6,432,834
------------
FIRST MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (8.2%)
Bear Stearns Mortgage Securities, Inc.
Series 1996-5 Class A2
10.00%, due 9/25/27.................................. 1,386,945 1,440,800
Series 1996-4 Class AI2
10.50%, due 9/25/27.................................. 1,245,662 1,304,782
Residential Accredit Loans, Inc.
Series 1997-QS4 Class A4
10.00%, due 5/25/27.................................. 1,162,414 1,230,973
Series 1997-QS5 Class A3
10.00%, due 7/25/27.................................. 1,910,000 2,017,132
Series 1996-QS4 Class AI2
11.00%, due 8/25/26.................................. 1,362,270 1,423,994
Series 1997-QS1 Class A6
11.00%, due 2/25/27.................................. 1,883,985 2,055,089
Residential Asset Securitization Trust
Series 1997-A3 Class A4
10.00%, due 5/25/27.................................. 2,284,937 2,407,661
Series 1997-A5 Class A7
10.00%, due 7/25/27.................................. 1,139,664 1,199,496
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
FIRST MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (Continued)
Structured Asset Securities Corp.
Series 1996-2 Class A1
7.00%, due 8/25/26................................... $ 1,700,000 $ 1,709,826
------------
14,789,753
------------
Total Mortgage-Backed Securities (Cost $21,062,000)... 21,222,587
------------
U.S. GOVERNMENT &
FEDERAL AGENCIES (39.3%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (COLLATERALIZED
MORTGAGE OBLIGATIONS) (1.4%)
6.515%, due 12/1/03.................................. 1,294,085 1,275,838
6.525%, due 12/1/03.................................. 1,244,324 1,231,109
------------
2,506,947
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(MORTGAGE PASS-THROUGH SECURITIES) (6.5%)
6.875%, due 10/20/22 ARM (b)......................... 3,247,204 3,342,607
7.125%, due 6/20/23-8/20/25 ARM (b).................. 8,168,870 8,393,694
------------
11,736,301
------------
UNITED STATES TREASURY BONDS (18.9%)
6.625%, due 2/15/27 (d).............................. 20,225,000 19,788,949
8.875%, due 8/15/17 (d).............................. 7,243,000 8,821,757
12.00%, due 8/15/13 (d).............................. 3,745,000 5,271,686
------------
33,882,392
------------
UNITED STATES TREASURY NOTES (12.5%)
5.50%, due 11/15/98 (d).............................. 5,150,000 5,119,409
5.625%, due 11/30/00 (d)............................. 5,265,000 5,209,875
6.25%, due 2/28/02 (d)............................... 5,215,000 5,185,640
7.75%, due 11/30/99 (d).............................. 4,440,000 4,594,690
7.875%, due 11/15/99 (d)............................. 2,232,000 2,408,819
------------
22,518,433
------------
Total U.S. Government & Federal Agencies
(Cost $70,132,035)................................... 70,644,073
------------
YANKEE BONDS (10.3%)
BANKS (3.0%)
Dao Heng Bank Ltd.
7.75%, due 1/24/07 (c)............................... 2,200,000 2,205,698
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
90
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
YANKEE BONDS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
BANKS (Continued)
Export-Import Bank Korea
6.50%, due 11/15/06............................. $ 590,000 $ 571,173
7.10%, due 3/15/07.............................. 2,620,000 2,644,523
------------
5,421,394
------------
FINANCE (2.6%)
Guangdong International Trust & Investments
8.75%, due 10/24/16............................. 2,450,000 2,550,597
Hero Asia BVI Co. Ltd.
9.11%, due 10/15/01 (c)......................... 781,005 811,690
Wharf Capital International Ltd.
8.875%, due 11/1/04............................. 1,150,000 1,236,365
------------
4,598,652
------------
FOREIGN GOVERNMENTS (3.9%)
Hydro-Quebec (Province of) Canada
8.05%, due 7/7/24............................... 4,125,000 4,488,413
Republic of Columbia
8.375%, due 2/15/27............................. 1,140,000 1,104,523
Republic of South Africa
8.50%, due 6/23/97.............................. 1,445,000 1,442,601
------------
7,035,537
------------
UTILITIES--TELEPHONE (0.8%)
SK Telecom Co., Ltd.
7.75%, due 4/29/04.............................. 1,375,000 1,399,461
------------
Total Yankee Bonds (Cost $18,132,674)............ 18,455,044
------------
Total Long-Term Investments (Cost $168,391,846).. 169,677,106
------------
</TABLE>
SHORT-TERM INVESTMENT (3.9%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
COMMERCIAL PAPER (3.9%)
Ford Motor Credit Corp.
6.111%, due 7/1/97.............................. $ 7,010,000 $ 7,010,000
------------
Total Short-Term Investment (Cost $7,010,000).... 7,010,000
------------
Total Investments (Cost $175,401,846) (e)........ 98.4% 176,687,106 (f)
Cash and Other Assets,
Less Liabilities................................ 1.6 2,832,339
----------- ------------
Net Assets....................................... 100.0% $179,519,445
=========== ============
</TABLE>
- --------
(a) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(b) ARM--Adjustable Rate Mortgage. Resets annually.
(c) May be sold to institutional investors only.
(d) Represents securities out on loan or a portion of which is out on loan.
(e) The cost for Federal income tax purposes is $175,518,652.
(f) At June 30, 1997 net unrealized depreciation was $1,168,454, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $1,428,940 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $260,486.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
91
<PAGE>
BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $175,401,846)................................. $176,687,106
Cash............................................................ 224
Receivables:
Investment securities sold...................................... 13,421,985
Interest........................................................ 2,458,518
------------
Total assets.................................................. 192,567,833
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 12,894,567
Administrator................................................... 66,884
Adviser......................................................... 29,374
Fund shares redeemed............................................ 6,445
Custodian....................................................... 4,173
Transfer agent.................................................. 3,217
Accrued expenses................................................ 43,728
------------
Total liabilities............................................. 13,048,388
------------
Net assets...................................................... $179,519,445
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................. $ 18,212
Institutional Service Class..................................... 150
Additional paid-in capital...................................... 188,223,781
Accumulated undistributed net investment income................. 5,516,831
Accumulated net realized loss on investments.................... (15,524,789)
Net unrealized appreciation on investments...................... 1,285,260
------------
Net assets...................................................... $179,519,445
============
Institutional Class
Net assets applicable to outstanding shares..................... $178,063,033
============
Shares of capital stock outstanding............................. 18,212,251
============
Net asset value per share outstanding........................... $ 9.78
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 1,456,412
============
Shares of capital stock outstanding............................. 149,565
============
Net asset value per share outstanding........................... $ 9.74
============
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................ $ 6,171,812
------------
Expenses:
Administration.................................................. 478,908
Advisory........................................................ 174,148
Professional.................................................... 23,375
Registration.................................................... 13,456
Custodian....................................................... 13,398
Transfer agent.................................................. 12,680
Shareholder communication....................................... 9,077
Directors....................................................... 2,815
Service......................................................... 1,926
Miscellaneous................................................... 8,464
------------
Total expenses before
reimbursement................................................ 738,247
Expense reimbursement from Administrator........................ (83,266)
------------
Net expenses.................................................. 654,981
------------
Net investment income........................................... 5,516,831
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments................................ (1,066,656)
Net change in unrealized appreciation on investments............ 335,376
------------
Net realized and unrealized loss on investments................. (731,280)
------------
Net increase in net assets resulting from operations............ $ 4,785,551
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
92
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................. $ 5,516,831 $ 10,823,324
Net realized loss on investments.................. (1,066,656) (1,408,215)
Net change in unrealized appreciation on
investments...................................... 335,376 (4,694,584)
------------ ------------
Net increase in net assets resulting from
operations....................................... 4,785,551 4,720,525
------------ ------------
Dividends to shareholders:
From net investment income:
Institutional Class.............................. -- (10,771,014)
Institutional Service Class...................... -- (96,049)
------------ ------------
Total dividends to shareholders................. -- (10,867,063)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 4,401,028 13,700,996
Institutional Service Class...................... 463,392 1,264,903
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Institutional Class.............................. -- 10,770,836
Institutional Service Class...................... -- 96,049
------------ ------------
4,864,420 25,832,784
Cost of shares redeemed:
Institutional Class.............................. (8,093,685) (34,891,092)
Institutional Service Class...................... (642,634) (456,729)
------------ ------------
Decrease in net assets derived from capital
share transactions.............................. (3,871,899) (9,515,037)
------------ ------------
Net increase (decrease) in net assets............ 913,652 (15,661,575)
NET ASSETS:
Beginning of period............................... 178,605,793 194,267,368
------------ ------------
End of period..................................... $179,519,445 $178,605,793
============ ============
Accumulated undistributed net investment income... $ 5,516,831 $ --
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
93
<PAGE>
BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- ------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED ---------------------------
JUNE 30, 1997* 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 9.51 $ 9.49 $ 9.85 $ 9.83
-------- ------ ------------- -------------
Net investment
income.......... 0.30 0.28 0.62 0.60
Net realized and
unrealized gain
(loss) on
investments..... (0.03) (0.03) (0.34) (0.34)
-------- ------ ------------- -------------
Total from
investment
operations...... 0.27 0.25 0.28 0.26
-------- ------ ------------- -------------
Less dividends
and
distributions:
From net
investment
income.......... -- -- (0.62) (0.60)
From net realized
gain
on investments.. -- -- -- --
In excess of net
realized gain on
investments..... -- -- -- --
-------- ------ ------------- -------------
Total dividends
and
distributions... -- -- (0.62) (0.60)
-------- ------ ------------- -------------
Net asset value
at end of
period.......... $ 9.78 $ 9.74 $ 9.51 $ 9.49
======== ====== ============= =============
Total investment
return (a)...... 2.84% 2.63% 2.80% 2.62%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 6.34%+ 6.09%+ 6.10% 5.85%
Net expenses.... 0.75%+ 1.00%+ 0.75% 1.00%
Expenses (before
reimbursement).. 0.85%+ 1.10%+ 0.86% 1.11%
Portfolio
turnover rate... 146% 146% 398% 398%
Net assets at end
of period
(in 000's)...... $178,063 $1,456 $177,009 $1,597
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- ------------------------------
YEAR ENDED DECEMBER 31
----------------------------------------------------------
1995 1994 1993 1992
--------------------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 8.93 $ 8.93 $ 9.98 $ 11.08 $ 11.40
------------- ------------- ---------- --------- ---------
Net investment
income.......... 0.68 0.67 0.72 0.74 0.61
Net realized and
unrealized gain
(loss) on
investments..... 0.92 0.90 (1.05) 0.26 0.05
------------- ------------- ---------- --------- ---------
Total from
investment
operations...... 1.60 1.57 (0.33) 1.00 0.66
------------- ------------- ---------- --------- ---------
Less dividends
and
distributions:
From net
investment
income.......... (0.68) (0.67) (0.72) (1.35) (0.70)
From net realized
gain
on investments.. -- -- -- (0.65) (0.28)
In excess of net
realized gain on
investments..... -- -- -- (0.10) --
------------- ------------- ---------- --------- ---------
Total dividends
and
distributions... (0.68) (0.67) (0.72) (2.10) (0.98)
------------- ------------- ---------- --------- ---------
Net asset value
at end of
period.......... $ 9.85 $ 9.83 $ 8.93 $ 9.98 $ 11.08
============= ============= ========== ========= =========
Total investment
return (a)...... 17.88% 17.55% (3.31%) 9.74% 6.39%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 6.62% 6.37% 7.13% 6.86% 6.02%
Net expenses.... 0.75% 1.00% 0.75% 0.70% 0.70%
Expenses (before
reimbursement).. 0.86% 1.11% 0.82% 0.84% 0.85%
Portfolio
turnover rate... 470% 470% 478% 567% 609%
Net assets at end
of period
(in 000's)...... $193,518 $ 749 $202,970 $219,834 $203,531
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) 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.
94
<PAGE>
Indexed Bond Fund
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTH ENDED 6/30/97
- --------------------------------------------------------------------------------
. Rapid economic growth in the first quarter of 1997 led the Federal Reserve
Board to raise interest rates slightly at the end of March
. Bond prices fell following the rate increase, but rallied in the second
quarter of 1997 as economic growth slowed to a more sustainable level
. The Salomon Brothers Broad Investment Grade (BIG) Index* returned 3.07% over
the first half of 1997
. During the first half of 1997, interest rates and bond prices remained within
a relatively narrow range, with most major sectors providing positive overall
returns
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 7.33% and 7.11% for Institutional Class shares and
Service Class shares, respectively, as of 6/30/97
. Mortgage-backed securities and BBB-rated corporate bonds were the best
performing sectors in the Fund, each returning 3.77% over the first six
months of 1997
. Treasury securities and high-quality corporate bonds underperformed, but
still provided positive returns
. Both share classes outperformed the average Lipper/+/ general U.S. government
fund for the six months ended 6/30/97
The bond markets were relatively quiet in the first half of 1997, with interest
rates and bond prices remaining in a relatively narrow range. The biggest shift
came in late March, when the bond market braced for, and then reacted to, a
preemptive move by the Federal Reserve Board to curtail inflation and slow the
rapidly expanding economy. As interest rates rose 25 basis points, bond prices
fell, causing the Salomon Brothers Broad Investment Grade (BIG) Index to close
the first quarter of 1997 down 0.70%.
Fortunately, many analysts felt that the Federal Reserve Board's move had the
desired effect to slow economic growth to more sustainable levels and to help
the general concern over inflation subside. These developments helped bond
prices rally, with the Salomon Brothers BIG Index gaining 3.80% in the second
quarter of 1997, to bring the total return for the Index to 3.07% for the first
half of the year.
As may be typical during a market rally, the highest quality securities
underperformed, while those with wider yield spreads to Treasuries generally did
better. High-yield bonds did especially well, but are not included in the Fund's
investments.
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
Yield spread The difference in yield between securities in different market
sectors, such as corporate bonds and Treasury issues--or between different
securities in a single sector, such as short-term and intermediate-term Treasury
issues.
High-yield bonds Debt securities rated below investment grade by major rating
agencies. Such bonds typically pay higher yields to compensate investors for
accepting a higher level of risk.
- --------------------------------------------------------------------------------
================================================================================
* The Salomon Brothers Broad Investment Grade Bond Index is an unmanaged index
generally considered representative of the U.S. bond market.
+ Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
95
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Mortgage-backed securities Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of the
underlying fixed or adjustable-rate mortgages are, in effect, "passed through"
to investors (net of fees paid to the issuer or guarantor of the securities).
- --------------------------------------------------------------------------------
Given this context, how did the MainStay Institutional Indexed Bond Fund do in
the first half of 1997?
Very well. For the six months ended 6/30/97, the Fund returned 2.76% and 2.66%
for Institutional Class shares and Service Class shares, respectively. Both
share classes outperformed the average Lipper general U.S. government fund,
which returned 2.47% over the same period.
What helped the Fund outperform its peers over the first half of the year?
Unlike funds that attempt to move assets from sector to sector as opportunities
may arise, the MainStay Institutional Indexed Bond Fund seeks to provide
investment results that correspond to the total return performance of fixed
income securities in the aggregate, as represented by the Salomon Brothers BIG
Index. During the first half of 1997, the makeup of the Index provided favorable
opportunities for income investors and helped the Fund outperform its peers.
Which sectors had the strongest performance?
Mortgage-backed securities represented 29.65% of the Index on 6/30/97 and
provided a total return of 3.77% for the six months ended on that date. Long-
term BBB-rated corporate bonds also returned 3.77% over the same period. As may
generally be the case, sectors that offered the widest yield spreads to
Treasuries tended to provide the best performance as the market rallied. While
high-yield securities provided higher returns, they are not part of the Index
and were not included in the Fund.
Which sectors underperformed?
In the relatively quiet bond market during the first half of the year, most bond
sectors provided positive overall returns. Treasury securities, which
represented 43.65% of the Index as of 6/30/97, gained 2.72% during the reporting
period. AAA-rated and AA-rated corporate bonds did slightly better, gaining
2.86% over the first six months of the year. While these sectors underperformed
other yield-enhancing securities, their positive returns were in line with
historical averages from 1926 through 1996./++/
Why didn't the Fund outperform the Index?
First, the Fund's objective is to track the Index, not outperform it. Second,
the Salomon Brothers BIG Index is a hypothetical investment that does not incur
trading costs or management fees. The Fund, on the other hand, is a real-world
investment, which is subject to these expenses. As a result, the Fund will
generally underperform the Index by a small amount and investors should take
this fact into account in evaluating the performance of any indexed fund.
Will the Fund ever do well when bonds in general don't?
As evidenced by the Fund's negative return for the first quarter of 1997, it's
highly unlikely. Of course, past performance is no guarantee of future results
and no one can say for sure where the markets will head or which sectors may
face setbacks. But the Fund seeks to remain fully invested across the sectors
represented in the Salomon Brothers BIG Index. Just as it benefited during the
recent broad bond market rally, the Fund will also participate in any general
market decline. Although past performance is no guarantee of future results, one
way to see how the ups and downs of the bond markets have affected the Fund is
to look at its results over the long-term.
- --------------------------------------------------------------------------------
++ Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved. From 1926 to 1996, the average annual total return for long-term
corporate bonds was 5.6%, making the six-month average return 2.8%. Past
performance is no guarantee of future results.
96
<PAGE>
================================================================================
What's your outlook for the future?
We think bond investments will continue to represent a way to pursue current
income and away for equity investors to seek to diversify their holdings. As
long as inflation remains modest and the economy continues to grow at a
reasonable pace, the bond market should benefit. Rapid economic growth, rising
wages, or higher inflation could pose challenges for bond investors. In any
case, we will seek to track the Salomon Brothers BIG Index as closely as we can,
in both good and bad markets and regardless of whether interest rates go up or
down.
James A. Mehling, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
97
<PAGE>
[GRAPH APPEARS HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED BOND FUND VS SALOMON BROTHERS BIG INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE INDEXED BOND FUND INSTITUTIONAL SALOMON BROTHER
---- ------------------------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,220 10,263
10,380 10,448
10,930 11,042
91 11,470 11,597
11,334 11,461
11,756 11,927
12,262 12,442
92 12,283 12,477
12,788 12,996
13,128 13,355
13,491 13,708
93 13,467 13,711
13,066 13,326
12,908 13,197
12,956 13,269
94 13,003 13,320
13,637 13,995
14,451 14,853
14,723 15,135
95 15,354 15,792
15,032 15,516
15,074 15,592
15,312 15,884
96 15,745 16,363
6/30/97 16,179 18,696
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED BOND FUND VS SALOMON BROTHERS BIG INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE INDEXED BOND FUND SERVICE SALOMON BROTHER
---- -------------------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
10,220 10,263
10,380 10,448
10,930 10,042
91 11,470 11,597
11,334 11,461
11,756 11,927
12,262 12,442
92 12,283 12,477
12,788 12,996
13,128 13,355
13,491 13,708
93 13,467 13,711
13,066 13,326
12,908 13,197
12,956 13,269
94 13,003 13,320
13,663 13,995
14,477 14,853
95 14,723 15,135
15,341 15,792
15,020 15,516
15,047 15,592
15,285 15,884
96 15,699 16,363
6/30/97 16,117 18,696
</TABLE>
. Indexed Bond Fund -- Salomon Brothers BIG Index
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Total Return*
Performance as of June 30, 1997 as of June 30,1997
- ---------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indexed Bond Fund Institutional Class 2.76% 7.33% 6.59% 7.68%
Indexed Bond Fund Service Class+ 2.66% 7.11% 6.51% 7.62%
Average Lipper General U.S. Government Fund 2.47% 7.01% 5.98% 7.08%
Salomon Brothers BIG Bond Index 3.07% 8.16% 7.17% 8.37%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Institutional Class Shares
Year-end Total Return %*
-------- ---------------
<S> <C>
1991 14.70
1992 7.09
1993 9.64
1994 -3.44
1995 18.07
1996 2.55
1997 as of 6/30/97 2.76
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quality Breakdown++
(% of bonds as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
Government/Agency 78.95%
AAA 3.95%
AA 3.50%
A 10.55%
BBB 3.05%
-------
100.00%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. U.S. Government & Federal Agencies 77.84%
. Domestic Bonds -- Non-Convertible 18.56%
. Cash & Equivalents 2.18%(S)
. Foreign & Other Non-Convertible Bonds 1.42%
- --------------------------------------------------------------------------------
Top 10 Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. Donaldson, Lufkin & Jenrette 11/01/05, 6.875% 2.46%
2. FHLMC 9/17/01, 7.256% 2.38%
3. Bayerische Landesbank NY 2/09/06, 6.20% 2.31%
4. US Treasury Note 11/05/01, 7.50% 2.11%
5. Northern Telecom 6/12/01, 8.75% 1.80%
6. US Treasury Note 5/15/99, 6.375% 1.69%
7. US Treasury Note 7/15/98, 8.25% 1.55%
8. US Treasury Note 10/31/99, 7.50% 1.39%
9. US Treasury Note 3/31/00, 6.875% 1.37%
10. Federal Farm Mountain 9/10/99, 6.17% 1.34%
- --------------------------------------------------------------------------------
Top 5 Industry
Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. US Government & Federal Agencies 77.84%
2. Banks 4.99%
3. Finance 2.89%
4. Utilities-Telephone 2.75%
5. Utilities-Electric 1.51%
- --------------------------------------------------------------------------------
Average Maturity 6.8 years
(as of 6/30/97)
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in
their expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
Unlike other funds which generally seek to "beat" the market, index funds
seek to track their respective indices.
++ Actual percentages will vary over time. Bond quality ratings provided by
Standard & Poor's. See the prospectus for details.
(S) Adjusted for liabilities.
98
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
LONG-TERM INVESTMENTS (97.8%)+
CORPORATE BONDS (18.6%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------
<S> <C> <C>
AUTOMOTIVE (0.3%)
General Motors Corp.
8.125%, due 4/15/16.................................... $ 300,000 $ 310,875
------------
AUTOMOTIVE RENTALS (0.6%)
Hertz Corp.
7.00%, due 7/15/03..................................... 700,000 694,750
------------
BANKS (4.5%)
ABN Amro Bank, N.V.
Chicago Branch
7.55%, due 6/28/06..................................... 800,000 824,000
ANZ Banking Group, Ltd.
7.55%, due 9/15/06..................................... 700,000 720,125
Bayerische Landesbank-NY
6.20%, due 2/6/06...................................... 2,900,000 2,744,125
First Union Corp.
8.77%, due 11/15/04.................................... 1,000,000 1,042,500
------------
5,330,750
------------
CHEMICALS (0.7%)
DuPont (E.I.) de Nemours & Co.
8.125%, due 3/15/04.................................... 800,000 855,000
------------
CONSUMER FINANCIAL SERVICES (1.4%)
General Motors Acceptance Corp.
8.40%, due 10/15/99.................................... 500,000 521,250
Japan Financial Corp.
8.70%, due 7/30/01..................................... 600,000 642,000
KFW International Finance, Inc.
9.125%, due 5/15/01.................................... 500,000 541,875
------------
1,705,125
------------
ENTERTAINMENT (0.5%)
Walt Disney Co. (The)
6.75%, due 3/30/06..................................... 600,000 591,750
------------
FINANCE (2.9%)
Commercial Credit Co.
8.70%, due 6/15/10..................................... 450,000 514,688
Donaldson, Lufkin & Jenrette
Securities Corp.
6.875%, due 11/1/05.................................... 3,000,000 2,921,250
------------
3,435,938
------------
FOOD, BEVERAGES & TOBACCO (0.5%)
Coca-Cola Enterprises
8.50%, due 2/1/22...................................... 500,000 553,125
------------
MACHINERY (0.5%)
Caterpillar, Inc.
9.00%, due 4/15/06..................................... 500,000 564,375
------------
</TABLE>
- --------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------
<S> <C> <C>
OIL & GAS (0.4%)
Texaco Capital, Inc.
9.75%, due 3/15/20..................................... $ 350,000 $ 434,437
------------
PAPER & FOREST PRODUCTS (0.5%)
Scott Paper Co.
7.00%, due 8/15/23..................................... 650,000 604,500
------------
RETAIL--GENERAL MERCHANDISE (0.7%)
Limited, Inc.
7.50%, due 3/15/23..................................... 900,000 790,875
------------
STEEL (0.9%)
USX Corp.
7.20%, due 2/15/04..................................... 1,100,000 1,104,125
------------
UTILITIES--ELECTRIC (1.5%)
Pennsylvania Power & Light Co.
7.30%, due 3/1/24...................................... 1,000,000 945,000
Texas Utility Electric Co.
8.25%, due 4/1/04...................................... 800,000 850,000
------------
1,795,000
------------
UTILITIES--TELEPHONE (2.7%)
Northern Telecom
8.75%, due 6/12/01..................................... 2,000,000 2,142,500
United Telecommunication, Inc.
9.50%, due 4/1/03...................................... 1,000,000 1,118,750
------------
3,261,250
------------
Total Corporate Bonds
(Cost $21,666,838)..................................... 22,031,875
------------
FOREIGN GOVERNMENT (0.9%)
CANADA (0.9%)
Ontario Hydro
7.45%, due 3/31/13 (b)................................. 500,000 506,250
Quebec (Province of)
7.50%, due 7/15/23 (b)................................. 600,000 585,000
------------
Total Foreign Government
(Cost $1,028,092)...................................... 1,091,250
------------
INTERNATIONAL
CORPORATE BOND (0.5%)
BANKS (0.5%)
Korea Development Bank
(Eurobonds)
7.25%, due 5/15/06..................................... 600,000 596,250
------------
Total International Corporate Bond
(Cost $587,689)........................................ 596,250
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
99
<PAGE>
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
U.S. GOVERNMENT & FEDERAL AGENCIES (77.8%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
FEDERAL FARM MOUNTAIN (1.3%)
6.17%, due 9/10/99................................ $1,600,000 $ 1,593,040
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (2.9%)
(zero coupon), due 11/29/19....................... 3,100,000 628,339
7.526%, due 9/17/01............................... 2,800,000 2,826,880
------------
3,455,219
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION GOLD
(MORTGAGE PASS-THROUGH SECURITIES) (8.9%)
6.50%, due 10/1/01-5/1/26......................... 3,915,338 3,811,127
7.00%, due 8/1/03-7/1/26.......................... 2,870,415 2,855,651
7.50%, due 9/1/11-11/1/26......................... 2,938,168 2,960,181
8.00%, due 7/1/26................................. 927,184 948,916
------------
10,575,875
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.6%)
(zero coupon), due 7/5/14......................... 2,500,000 741,250
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MORTGAGE PASS-THROUGH SECURITIES) (11.0%)
6.50%, due 7/1/03-5/1/26.......................... 4,258,414 4,148,656
7.00%, due 5/1/11-11/1/26......................... 3,309,329 3,277,023
7.50%, due 11/1/26................................ 491,649 492,725
8.00%, due 7/1/07-11/1/26......................... 5,036,904 5,160,870
------------
13,079,274
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH SECURITIES) (7.8%)
7.00%, due 3/15/07-5/15/26........................ 1,933,689 1,918,529
7.50%, due 8/15/08-11/15/26....................... 2,866,998 2,890,787
8.00%, due 6/15/26-11/15/26....................... 2,450,973 2,506,887
8.50%, due 7/15/26-11/15/26....................... 1,895,608 1,970,248
------------
9,286,451
------------
UNITED STATES TREASURY BONDS (13.9%)
6.00%, due 2/15/26................................ 500,000 447,200
6.25%, due 8/15/23................................ 700,000 647,941
6.875%, due 8/15/25............................... 500,000 501,810
7.125%, due 2/15/23............................... 600,000 617,886
7.25%, due 5/15/16................................ 500,000 521,175
7.50%, due 11/15/16-11/15/24...................... 1,200,000 1,286,360
7.625%, due 11/15/22-2/15/25...................... 800,000 873,644
8.00%, due 11/15/21 (a)........................... 1,000,000 1,130,710
8.125%, due 8/15/19-5/15/21....................... 1,300,000 1,485,472
8.75%, due 5/15/17-8/15/20........................ 1,500,000 1,815,435
8.875%, due 2/15/19............................... 600,000 733,992
9.375%, due 2/15/06............................... 530,000 628,150
9.875%, due 11/15/15.............................. 600,000 789,102
10.375%, due 11/15/12............................. 500,000 634,055
11.25%, due 2/15/15............................... 400,000 580,848
11.75%, due 2/15/01............................... 400,000 469,752
11.875%, due 11/15/03............................. 500,000 638,805
12.00%, due 8/15/13............................... 500,000 703,050
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
UNITED STATES TREASURY BONDS (Continued)
12.75%, due 11/15/10.............................. $ 400,000 $ 554,952
13.125%, due 5/15/01.............................. 300,000 369,246
13.375%, due 8/15/01.............................. 500,000 625,920
14.25%, due 2/15/02............................... 300,000 393,453
------------
16,448,958
------------
UNITED STATES TREASURY NOTES (31.4%)
5.125%, due 2/28/98-12/31/98 (a).................. 2,550,000 2,532,304
5.25%, due 7/31/98 (a)............................ 1,000,000 993,970
5.375%, due 5/31/98 (a)........................... 1,000,000 996,660
5.75%, due 10/31/00-8/15/03....................... 2,200,000 2,134,890
5.875%, due 8/15/98-3/31/99....................... 2,200,000 2,196,940
6.00%, due 10/15/99............................... 1,000,000 998,200
6.125%, due 9/30/00............................... 700,000 696,773
6.25%, due 4/30/01-2/15/03........................ 1,900,000 1,889,004
6.375%, due 5/15/99-8/15/02 (a)................... 4,600,000 4,615,803
6.50%, due 10/15/06............................... 1,200,000 1,194,132
6.75%, due 4/30/00................................ 700,000 708,848
6.875%, due 3/31/00............................... 1,600,000 1,625,456
7.00%, due 4/15/99................................ 1,200,000 1,218,840
7.125%, due 10/15/98-9/30/99...................... 2,500,000 2,544,970
7.50%, due 10/31/99-2/15/01....................... 5,850,000 6,086,880
7.875%, due 11/15/99.............................. 1,000,000 1,037,120
8.25%, due 7/15/98 (a)............................ 1,800,000 1,842,822
8.50%, due 2/15/20................................ 1,600,000 1,738,188
8.875%, due 11/15/97.............................. 900,000 910,503
9.125%, due 5/15/99............................... 1,200,000 1,263,192
------------
37,225,495
------------
Total U.S. Government &
Federal Agencies
(Cost $91,797,483)................................ 92,405,562 (c)
------------
Total Long-Term Investments (Cost $115,080,102).... 116,124,937
------------
SHORT-TERM
INVESTMENTS (0.8%)
U.S. GOVERNMENT (0.8%)
United States Treasury Bills
5.035%, due 9/18/97 (a)........................... 600,000 593,213
5.06%, due 9/11/97 (a)............................ 400,000 395,872
------------
Total Short-Term Investments (Cost $989,518)....... 989,085
------------
Total Investments
(Cost $116,069,620) (d)........................... 98.6% 117,114,022 (e)
Cash and Other Assets, Less Liabilities............ 1.4 1,604,670
--------- ------------
Net Assets......................................... 100.0% $118,718,692
========= ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
100
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
FUTURES CONTRACTS (0.0%) (f)
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
LONG DEPRECIATION
---------------------------
<S> <C> <C>
United States Treasury Note September 1997 (5 Year).... 4 $ (1,181)(g)
United States Treasury Note September 1997 (10 Year)... 3 (1,561)(g)
United States Treasury Bond September 1997 (30 Year)... 2 (1,332)(g)
------------
Total Futures Contracts (Settlement Value $969,313).... $ (4,074)
============
</TABLE>
- --------
(a) Segregated or partially segregated as collateral for futures contracts.
(b) Yankee bonds.
(c) The combined market value of U.S. Government and Federal Agencies
Investments and the settlement value of securities purchased under U.S.
Treasury futures contracts represents 79.49% of net assets.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(e) At June 30, 1997 net unrealized appreciation was $1,044,402, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess
of market value over cost of $1,637,809 and aggregate unrealized
depreciation for all investments on which there was an excess of cost over
market value of $593,407.
(f) Less than one tenth of a percent.
(g) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1997.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
101
<PAGE>
INDEXED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $116,069,620)................................. $117,114,022
Cash............................................................ 54,654
Receivables:
Interest........................................................ 1,736,025
Fund shares sold................................................ 3,369
------------
Total assets.................................................. 118,908,070
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 98,876
Administrator................................................... 24,087
Adviser......................................................... 9,730
Fund shares redeemed............................................ 6,078
Custodian....................................................... 6,022
Transfer agent.................................................. 3,878
Accrued expenses................................................ 39,260
Variation margin payable on futures contracts................... 1,447
------------
Total liabilities............................................. 189,378
------------
Net assets...................................................... $118,718,692
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................. $ 10,708
Institutional Service Class..................................... 269
Additional paid-in capital...................................... 115,355,886
Accumulated undistributed net investment income................. 3,885,182
Accumulated net realized loss on investments.................... (1,573,681)
Net unrealized appreciation on investments...................... 1,040,328
------------
Net assets...................................................... $118,718,692
============
Institutional Class
Net assets applicable to outstanding shares..................... $115,808,556
============
Shares of capital stock outstanding............................. 10,708,460
============
Net asset value per share outstanding........................... $ 10.81
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 2,910,136
============
Shares of capital stock outstanding............................. 269,451
============
Net asset value per share outstanding........................... $ 10.80
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................ $ 4,173,081
------------
Expenses:
Administration.................................................. 230,604
Advisory........................................................ 57,651
Professional.................................................... 19,859
Custodian....................................................... 16,205
Registration.................................................... 15,033
Transfer agent.................................................. 12,742
Shareholder communication....................................... 6,149
Service......................................................... 3,620
Directors....................................................... 1,798
Miscellaneous................................................... 18,247
------------
Total expenses before
reimbursement................................................ 381,908
Expense reimbursement from Administrator........................ (90,033)
------------
Net expenses.................................................. 291,875
------------
Net investment income........................................... 3,881,206
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from:
Security transactions........................................... (54,324)
Futures transactions............................................ (49,459)
------------
Net realized loss on investments................................ (103,783)
------------
Net change in unrealized appreciation on investments:
Security transactions........................................... (646,224)
Futures transactions............................................ 23,865
------------
Net unrealized loss on investments.............................. (622,359)
------------
Net realized and unrealized loss on investments................. (726,142)
------------
Net increase in net assets resulting from operations............ $ 3,155,064
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
102
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................. $ 3,881,206 $ 7,685,433
Net realized loss on investments.................. (103,783) (210,720)
Net change in unrealized appreciation on invest-
ments............................................ (622,359) (5,463,442)
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 3,155,064 2,011,271
------------ ------------
Dividends to shareholders:
From net investment income:
Institutional Class.............................. -- (7,431,001)
Institutional Service Class...................... -- (179,250)
------------ ------------
Total dividends to shareholders................. -- (7,610,251)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 9,173,991 26,939,671
Institutional Service Class...................... 706,680 2,494,926
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Institutional Class.............................. -- 7,370,778
Institutional Service Class...................... -- 179,250
------------ ------------
9,880,671 36,984,625
Cost of shares redeemed:
Institutional Class.............................. (5,927,224) (82,553,928)
Institutional Service Class...................... (636,321) (275,156)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions...................... 3,317,126 (45,844,459)
------------ ------------
Net increase (decrease) in net assets............ 6,472,190 (51,443,439)
NET ASSETS:
Beginning of period............................... 112,246,502 163,689,941
------------ ------------
End of period..................................... $118,718,692 $112,246,502
============ ============
Accumulated undistributed net investment income... $ 3,885,182 $ 3,976
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
103
<PAGE>
INDEXED BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- ------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED ---------------------------
JUNE 30, 1997* 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 10.52 $10.52 $ 10.99 $10.99
-------- ------ ------------- -------------
Net investment
income.......... 0.35 0.34 0.76 0.74
Net realized and
unrealized gain
(loss) on
investments..... (0.06) (0.06) (0.48) (0.48)
-------- ------ ------------- -------------
Total from
investment
operations...... 0.29 0.28 0.28 0.26
-------- ------ ------------- -------------
Less dividends
and
distributions:
From net
investment
income.......... -- -- (0.75) (0.73)
From net realized
gain on
investments..... -- -- -- --
In excess of net
realized gain on
investments..... -- -- -- --
-------- ------ ------------- -------------
Total dividends
and
distributions... -- -- (0.75) (0.73)
-------- ------ ------------- -------------
Net asset value
at end of
period.......... $ 10.81 $10.80 $ 10.52 $10.52
======== ====== ============= =============
Total investment
return (a)...... 2.76% 2.66% 2.55% 2.34%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 6.23%+ 5.98%+ 6.21% 5.96%
Net expenses.... 0.50%+ 0.75%+ 0.50% 0.75%
Expenses (before
reimbursement).. 0.66%+ 0.91%+ 0.65% 0.90%
Portfolio
turnover rate... 12% 12% 312% 312%
Net assets at end
of period (in
000's).......... $115,809 $2,910 $109,482 $2,764
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- -------------------------------------------
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1995 1994 1993 1992
------------------------------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 10.06 $10.06 $ 11.08 $ 11.65 $ 11.47
------------- ----------------------- --------- ---------
Net investment
income.......... 0.82 0.81 0.65 0.67 0.79
Net realized and
unrealized gain
(loss) on
investments..... 1.00 1.00 (1.03) 0.38 (0.02)
------------- ----------------------- --------- ---------
Total from
investment
operations...... 1.82 1.81 (0.38) 1.05 0.77
------------- ----------------------- --------- ---------
Less dividends
and
distributions:
From net
investment
income.......... (0.82) (0.81) (0.64) (1.46) (0.56)
From net realized
gain on
investments..... (0.07) (0.07) -- (0.15) (0.03)
In excess of net
realized gain on
investments..... -- -- -- (0.01) --
------------- ----------------------- --------- ---------
Total dividends
and
distributions... (0.89) (0.88) (0.64) (1.62) (0.59)
------------- ----------------------- --------- ---------
Net asset value
at end of
period.......... $ 10.99 $10.99 $ 10.06 $ 11.08 $ 11.65
============= ======================= ========= =========
Total investment
return (a)...... 18.07% 17.97% (3.44%) 9.64% 7.09%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 6.38% 6.13% 6.13% 6.19% 7.30%
Net expenses.... 0.50% 0.75% 0.50% 0.45% 0.45%
Expenses (before
reimbursement).. 0.63% 0.88% 0.61% 0.61% 0.61%
Portfolio
turnover rate... 284% 284% 274% 213% 78%
Net assets at end
of period (in
000's).......... $169,404 $159,792 $125,003
</TABLE>
- -------- $163,219 $ 471
* Unaudited.
+ Annualized.
(a) 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.
104
<PAGE>
INTERNATIONAL BOND FUND
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. With the exception of Japan, most international bond markets outperformed
the United States in local currency terms
. A strengthening dollar translated into negative returns for U.S. investors
in several European markets, while Japan and the U.K. provided positive
returns after currency translations
. Emerging market debt performed well during the first half of the year, as
did dollar-bloc bonds in Australia and New Zealand
. The bond market rewarded the U.K. for establishing an independent central
bank with a bond rally, even as rates increased
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 9.64% and 9.39% for Institutional Class shares and
Service Class shares, respectively, as of 6/30/97
. Adding emerging market debt, dollar-bloc, and U.K. debt and increasing the
duration of the portfolio were major contributors to the Fund's
outperformance
. While selected currency hedging helped the portfolio, our exposure to core
European currencies negatively impacted performance
. Both share classes outperformed the average Lipper* international income
fund for the six months ended 6/30/97
- --------------------------------------------------------------------------------
Local currency/U.S. dollar returns Bonds may be denominated in different
currencies, such as francs, deutsche marks, or Canadian dollars. Returns
expressed in local currency terms show what an investor using that currency
would have earned, without any adjustment for differences in currency values.
Returns expressed in U.S. dollar terms reflect any differences in the relative
value of the local currency and the U.S. dollar. Returns expressed in U.S.
dollars may be more or less than local returns.
- --------------------------------------------------------------------------------
During the first six months of 1997, most international bond markets
outperformed the United States in local currency terms. Unfortunately, a
strengthening dollar turned positive results into negative ones for U.S.
investors in most international markets.
Japan and the U.K. were notable exceptions. Japanese bonds underperformed U.S.
bonds in local terms, but a strengthening yen led to outperformance in U.S.
dollar terms. In the United Kingdom, the new Labor government gave the Bank of
England independent central bank status. Although the Bank moved to raise rates,
the bond markets rallied on confidence that inflation could finally be
controlled without forcing a recession.
Emerging markets had outstanding performance in the first half of the year, with
emerging market dollar bonds returning over 10%. Dollar-bloc countries, such as
Australia and New Zealand, also had strong markets as their economies slowed and
interest rates fell. Core European markets generally did well in local terms,
although France was still adjusting to new socialist leadership. European
Monetary Union remains a major theme, although the long-term impact has yet to
be seen.
On the currency front, the strengthening U.S. dollar relative to core European
currencies represented a key risk factor. At the same time, the Japanese yen
offered opportunities as it strengthened relative to the dollar. At the end of
the second quarter, Canadian dollars were extremely inexpensive and may offer
attractive opportunities going forward.
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
105
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Emerging markets Countries with smaller or more recently established capital
markets, which seek to attract investors, but may lack the liquidity and
stability of larger, established markets.
Dollar-bloc Major markets, including Canada, Australia, New Zealand, Hong Kong,
and others, whose currencies are tied to the U.S. dollar and tend to move in the
same general direction as the U.S. dollar relative to other currencies.
European Monetary Union A proposed system that would allow participating
European countries to operate with a common currency or monetary unit. To
qualify for participation, each member country must meet strict monetary and
fiscal policy guidelines.
Duration Equals the weighted average time until bond investors recover their
investment. It is a measurement of interest rate risk.
Yield spread The difference in yield between securities in different market
sectors, such as Treasuries and corporate bonds--or between different securities
in a single sector, such as corporate bonds with different credit ratings.
Hedging/Currency management An investment strategy that seeks to reduce the
relative effects of currency fluctuations on investor returns. There can be no
assurance that currency hedging will be beneficial to investors.
- --------------------------------------------------------------------------------
Given this context, how did the MainStay Institutional International Bond Fund
do over the first half of 1997?
The MainStay Institutional International Bond Fund returned 0.72% and 0.54% for
Institutional Class shares and Service Class shares, respectively, for the six
months ended 6/30/97. The Fund substantially outperformed its benchmark, the
Salomon Brothers Non-U.S. Dollar World Government Bond Index,/+/ which returned
- -3.12% for the first half of the year. It also outperformed the average
Lipper/++/ international income fund, which returned -1.19% over the same
period.
What did you do to outperform your competitors?
We took a number of significant steps during the first half of 1997. The first,
and perhaps most important, was to increase the Fund's exposure to emerging
markets from zero to about 15% of the portfolio. We invested in Brazil,
Venezuela, Mexico, Argentina, Russia, and just recently, in South Africa. The
results were very positive.
Why did these markets do so well?
Mexico and Argentina have come out of recession and are now quite strong. In
fact, we believe Argentina could possibly see its debt move to investment grade.
Venezuela is benefiting from an oil boom, and South Africa may reduce their
interest rates in the near future, which we believe could have a positive impact
on the Fund in the second half of the year.
What other steps did you take?
We bought dollar-bloc bonds in Australia and New Zealand, starting from zero in
New Zealand. These were two of the top performing international markets, up
about 6% and 5%, respectively, in local terms, during the first half of the
year. We also strengthened the Fund's holdings in the U.K., which rallied about
6% in local terms, even though interest rates went up. While the U.S. dollar
return was lower, it was still ahead of U.S. bonds and highly positive for the
Fund. In addition, our purchases lengthened the duration of the Fund, which also
had a positive impact on performance.
What securities did you sell during the first half of the year?
We reduced the Fund's holdings in Canadian bonds. The Canadian bond market had
rallied, their economy had been in recession, but gross domestic product was in
the 3% to 4% range at the end of the first half of 1997. With interest rates at
low levels, we thought it would be prudent to sell Canadian bonds and invest the
money elsewhere, which benefited investors.
We also trimmed our European bonds in Austria, France, Italy, and Spain.
Austria's yield spreads to German bonds flattened to the point that we felt the
Fund would be better off invested in more liquid German securities. France,
which was going through political upheaval with a conservative president and a
socialist parliament offered no value in our opinion. And in Italy and Spain,
spreads had also narrowed relative to German bonds, so we felt we could achieve
better returns by investing our money elsewhere, and we did.
What happened on the currency front?
There were really two sides to the currency story in the first half of the year.
First, there was the rising U.S. dollar, which took away some of our profits in
European
- --------------------------------------------------------------------------------
+ The Salomon Brothers Non-U.S. World Government Bond Index is an unmanaged
index generally considered representative of the world bond market.
++ Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
106
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
International diversification Purchasing securities in several international
markets, which may react differently to economic, monetary, and market trends.
Diversification may help reduce investment risk.
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
- --------------------------------------------------------------------------------
markets where we were insufficiently hedged. For example, Germany was up about
3% in local terms, but down 8% in unhedged U.S. dollar terms. Although we
carried partial hedges on many of our positions, we would have done better
hedging more of the Fund's European currency exposure throughout the first half
of the year.
The other side of the currency story was finding opportunities. While we have
carefully avoided Japanese bonds, we spotted an opportunity to increase the
Fund's exposure to the Japanese yen by implementing hedges on our emerging
market debt and by buying some yen denominated money market instruments. This
was a tactical way to participate in the yen's increasing strength relative to
the dollar. We've since closed-out those positions and, as of the end of the
second quarter of 1997, have no yen exposure. But the net effect was positive.
Although we sold Canadian bonds, we bought Canadian dollars, increasing the
Fund's exposure throughout the second quarter. We believe the currency is
fundamentally cheap and that rising Canadian interest rates should support the
currency going forward. We believe this decision should be positive for the Fund
in the second half of the year.
It sounds like you're being more aggressive in seeking currency opportunities.
That's right. We've been seeking ways to improve our currency management and
make the most of market opportunities. The yen and Canadian dollar moves are
just two examples of how stronger currency management has added value to the
Fund.
What other risks did investors face during the first half of the year?
As you know, investments in foreign securities may be subject to greater risks
than domestic investments. These risks include currency fluctuations, changes in
U.S. or foreign tax or currency laws, and changes in monetary policies and
economic and political conditions in foreign countries.
To help manage against these risks, we seek broad geographic diversification to
limit our exposure to any single market. Since emerging markets may carry
additional risk, we primarily purchased dollar bonds or deutsche mark bonds in
several of these countries. Anticipating potential difficulties after the
Mexican elections, we pared back our exposure by selling Brady bonds.
Unfortunately, these bonds have done well, so our prudence had a slightly
negative impact. With rates rising in the U.K., we're becoming less bullish and
may cut back there. We don't believe we can effectively manage the portfolio
without carefully managing risk.
What's your outlook going forward?
In South Africa, we expect the central bank to lower rates by 200 basis points
by year end. While that will have a tremendous effect on the local market, our
South African holdings represent only about 2% of the Fund and some of that is
in dollar bonds. So the impact on the portfolio may be modest. We're looking
forward to the European Monetary Union, but can't predict how the bond markets
will react, if and when it occurs.
Otherwise, we have a positive view of the bond markets, as long as there's
moderate growth and low inflation. Whatever the future may bring, we'll seek to
provide competitive overall return commensurate with an acceptable level of risk
by investing in a wide variety of non-U.S. debt securities, primarily those
issued by foreign governments.
Joseph Portera
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
107
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL BOND FUND VS SALOMON BROTHERS
NON-US DOLLAR WORLD GOV'T BOND INDEX
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
DATE INTERNATIONAL BOND FUND SALOMON BROTHERS
---- ----------------------- ----------------
<S> <C> <C>
1/31/90 10,000 10,000
8,492
10,098.54
10,710.51
90 11,670.17
10,318 10,255.31
9,969 10,179.42
10,831 11,265.57
91 11,868 12,445.20
11,420 11,843.80
12,478 12,955.94
13,113 13,913.38
92 12,779 13,039.62
13,608 13,815.48
14,045 14,217.51
14,381 14,983.83
93 14,640 15,012.30
14,701 15,303.54
14,785 15,563.70
15,048 15,820.50
94 15,094 16,910.68
16,287 18,208.18
16,800 19,098.56
17,011 18,634.47
95 17,881 19,022.08
18,185 18,700.59
18,778 18,775.39
19,611 19,387.47
96 20,441 19,798.48
19,889 18,654.13
6/30/97 20,589 19,182.04
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL BOND FUND VS. SALOMON BROTHERS
NON-US DOLLAR WORLD GOV'T BOND INDEX
SERVICE CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE INTERNATIONAL BOND FUND SALOMON BROTHERS
---- ----------------------- ----------------
<S> <C> <C>
1/31/90 10,000 10,000
8,492
10,098.54
10,710.51
90 11,670.17
10,318 10,255.31
9,969 10,179.42
10,831 11,265.57
91 11,868 12,445.20
11,420 11,843.80
12,478 12,955.94
13,133 13,913.38
92 12,779 13,039.62
13,608 13,815.48
14,045 14,217.51
14,381 14,983.83
93 14,640 15,012.30
14,701 15,303.54
14,785 15,563.70
15,048 15,820.50
94 15,094 16,910.68
16,287 18,208.18
16,800 19,098.56
16,996 18,634.47
95 17,850 19,022.08
18,155 18,700.59
18,716 18,775.39
19,549 19,387.47
96 20,363 19,798.48
19,793 18,654.13
6/30/97 20,473 19,182.04
</TABLE>
. International Bond Fund --Salomon Brothers Non-U.S. Dollar World Gov't Bond
Index
Source: Lipper Analytical Services, Inc.
The graphs assume a $10,000 investment made on 1/31/90.+
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- --------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Bond Fund
Institutional Class+ 0.72% 9.64% 10.53% 10.11%
International Bond Fund
Service Class+ 0.54% 9.39% 10.41% 10.03%
Average Lipper
International Income Fund -1.19% 6.39% 7.56% 7.39%
Salomon Brothers Non-U.S.
Dollar World Gov't Bond
Index -3.12% 2.16% 8.16% 10.15%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. Foreign & Other
Non-Convertible Bonds 78.70%
. Cash & Equivalents 12.79%(S)
. Other 5.79%
. Foreign Government
Bond-US dollar 2.72%
Average Maturity 7-8 years
(as of 6/30/97)
- --------------------------------------------------------------------------------
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Government/Agency 3.03%
AAA 60.06%
AA 21.61%
A 3.00%
BBB 2.80%
BB 7.22%
B 2.28%
-------
100.00%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. Kingdom of Denmark, 12/15/04, 7.00% 3.07%
2. New Zealand Govt, 2/15/00, 6.50% 3.01%
3. Nykredit, 10/1/26, 6.00% 2.76%
4. Bonos del Tesoro, 5/9/02, 8.75% 2.72%
5. United Kingdom Treasury, 2/26/01, 10.00% 2.71%
6. Province of Ontario, 9/27/05, 7.25% 2.68%
7. Bayerische Landesbank, 12/7/06, 7.875% 2.62%
8. Republic of Deutschland, 11/11/04, 7.50% 2.45%
9. Buoni Poliennali del Tesoro, 7/15/00, 10.50% 2.20%
10. Buoni Poliennali del Tesoro, 5/1/02, 12.00% 2.10%
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
TOP 10 COUNTRIES
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<S> <C>
1. United States 12.45%
2. Germany 11.50%
3. United Kingdom 11.37%
4. Italy 10.09%
5. Canada 6.84%
6. Australia 6.09%
7. Denmark 5.83%
8. Sweden 5.62%
9. France 4.48%
10. Spain 4.14%
</TABLE>
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
The inception date of the International Bond Fund and the date such shares
were first offered to the public was 1/1/95.
+ The inception date of the International Bond Fund's predecessor separate
account is 1/31/90 ("Separate Account"). Performance figures, and in the
case of the graphs reflecting the investment of $10,000, the investment
results include the historical performance of the Separate Account for the
period prior to the International Bond Fund's commencement of operations on
January 1, 1995. MacKay Shields Financial Corporation, the International
Bond Fund's investment adviser, served as investment adviser to the Separate
Account, and the investment objective, policies, restrictions, guidelines,
and management style of the Separate Account were substantially similar to
those of the International Bond Fund. Performance figures and investment
results for the period prior to January 1, 1995 have been calculated using
the Separate Account's expense structure, which generally was higher than
the expense structure of the International Bond Fund. The Separate Account
was not registered under the Investment Company Act of 1940 ("1940 Act") and
therefore was not subject to certain investment restrictions imposed under
the 1940 Act. If the Separate Account had been registered under the 1940
Act, the Separate Account's performance and investment results may have been
adversely affected.
++ Actual percentages will vary over time. Bond quality ratings provided by
Standard & Poor's. See the prospectus for details.
(S) Adjusted for liabilities
108
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
LONG-TERM BONDS (87.2%)+
BRADY BONDS (2.6%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
UNITED STATES (2.6%)
Republic of Brazil
6.00%, due 9/15/13............................... $ 750,000 $ 576,562
Republic of Venezuela
Series DL
6.75%, due 12/18/07
(call date 8/25/97) (a).......................... 250,000 231,562
Series W-A
6.75%, due 3/31/20
(call date 10/18/97) (b)......................... 500,000 393,438
United Mexican States
Series B
6.25%, due 12/31/19
(call date 8/14/97) (d).......................... 250,000 192,969
-----------
Total Brady Bonds
(Cost $1,347,969)................................ 1,394,531
-----------
CORPORATE BONDS (16.1%)
DENMARK (2.7%)
Nykredit
Series ANN
6.00%, due 10/1/26............................... DK 10,618,000 1,454,811
-----------
GERMANY (4.9%)
Bayerische VBK New York
4.50%, due 6/24/02............................... DM 1,835,000 1,042,683
Depfa Bank
Series 436
5.75%, due 3/4/09................................ 815,000 459,068
International Bank of Reconstruction &
Development
7.125%, due 4/12/05 (c).......................... 900,000 569,946
Ministry Finance Russia
9.00%, due 3/25/04............................... 880,000 517,132
-----------
2,588,829
-----------
SWEDEN (3.6%)
Banque Nationale de Paris Medium-Term Notes Series
E
11.00%, due 11/4/99.............................. SK 6,050,000 868,489
Stadshypotek AB
Series 1553
10.00%, due 12/20/00............................. 7,000,000 1,022,706
-----------
1,891,195
-----------
UNITED KINGDOM (4.9%)
Abbey National Treasury
8.00%, due 4/2/03................................ (Pounds)354,000 601,656
Bayerische Landesbank
7.875%, due 12/7/06.............................. 807,000 1,384,451
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
European Investment Bank
8.75%, due 8/25/17................................ (Pounds)315,000 $ 593,800
-----------
2,579,907
-----------
Total Corporate Bonds
(Cost $8,745,980)................................. 8,514,742
-----------
GOVERNMENTS & FEDERAL
AGENCIES (65.3%)
ARGENTINA (1.0%)
Argentina Bocon Previs
Series Pre-1
3.242%, due 4/1/01
(call date 8/1/97) (a)............................ AP 551,873 520,805
-----------
AUSTRALIA (6.1%)
Australian Government
Series 904
9.00%, due 9/15/04................................ A$ 1,309,000 1,098,836
Series 1002
10.00%, due 10/15/02.............................. 808,000 698,793
Fannie Mae Medium-Term Notes
Series E
6.50%, due 7/10/02................................ 1,115,000 822,757
Queensland Treasury Corp.
8.00%, due 5/14/03................................ 520,000 413,503
8.00%, due 9/14/07................................ 225,000 178,089
-----------
3,211,978
-----------
CANADA (6.8%)
Alberta Government
Series UB
9.60%, due 7/7/98................................. C$ 850,000 648,327
Canadian Government
Series A76
9.00%, due 6/1/25................................. 55,000 50,183
Series H74
10.00%, due 6/1/08................................ 210,000 194,123
Series J24
10.25%, due 2/1/04................................ 300,000 267,049
Series A33
11.50%, due 9/1/00................................ 350,000 298,519
Province of Ontario
7.25%, due 9/27/05................................ 1,860,000 1,414,415
9.75%, due 10/29/01............................... 212,000 176,209
Province of Quebec
7.75%, due 3/30/06................................ 715,000 558,708
-----------
3,607,533
-----------
DENMARK (3.1%)
Kingdom of Denmark
7.00%, due 12/15/04............................... DK 10,025,000 1,620,001
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
109
<PAGE>
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
GOVERNMENTS & FEDERAL AGENCIES (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------------
<S> <C> <C>
EUROPEAN MONETARY UNION (1.5%)
France Obligations Assimilables du Tresor
7.50%, due 4/25/05............................... ECU 630,000 $ 789,311
-----------
FRANCE (4.5%)
France Obligations Assimilables du Tresor
7.50%, due 4/25/05............................... FF 1,224,000 237,485
8.25%, due 2/27/04............................... 2,480,000 497,105
8.50%, due 3/28/00............................... 3,000,000 571,086
8.50%, due 11/25/02.............................. 4,200,000 842,515
8.50%, due 10/25/08.............................. 850,000 177,936
8.50%, due 12/26/12.............................. 170,000 36,300
-----------
2,362,427
-----------
GERMANY (6.6%)
Province of Ontario
6.25%, due 1/13/04............................... DM 835,000 503,626
Republic of Deutschland
Series 94
6.25%, due 1/4/24 (c)............................ 530,000 295,912
7.375%, due 1/3/05 (c)........................... 255,000 164,441
7.50%, due 11/11/04 (c).......................... 1,990,000 1,292,761
Treuhandanstalt
6.50%, due 4/23/03............................... 1,060,000 656,001
7.50%, due 9/9/04 (c)............................ 875,000 567,823
-----------
3,480,564
-----------
IRELAND (2.9%)
Irish Government
6.25%, due 4/1/99 (c)............................ IP 279,000 422,586
8.00%, due 8/18/06............................... 198,000 327,530
8.25%, due 8/18/15 (c)........................... 111,000 191,653
8.75%, due 7/27/97 (c)........................... 179,000 270,555
8.75%, due 9/30/12 (c)........................... 179,000 322,295
-----------
1,534,619
-----------
ITALY (10.1%)
Buoni Poliennali del Tesoro
7.25%, due 11/1/26............................... IL 395,000,000 229,866
7.50%, due 10/1/99............................... 1,020,000,000 617,630
8.50%, due 8/1/97................................ 475,000,000 278,241
8.50%, due 1/1/04................................ 1,690,000,000 1,088,326
9.50%, due 2/1/01................................ 555,000,000 359,756
10.50%, due 7/15/00.............................. 1,770,000,000 1,163,563
10.50%, due 4/1/05............................... 670,000,000 478,072
12.00%, due 5/1/02............................... 1,540,000,000 1,107,445
-----------
5,322,899
-----------
JAPAN (2.1%)
Autobahn Schnell
6.00%, due 3/11/00............................... (Yen)110,000,000 1,078,164
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
NEW ZEALAND (3.5%)
Fannie Mae Medium-Term Notes Series E
7.25%, due 6/20/02................................ N$ 390,000 $ 260,356
New Zealand Government
6.50%, due 2/15/00................................ 2,350,000 1,587,428
-----------
1,847,784
-----------
SOUTH AFRICA (1.8%)
Republic of South Africa
Series 150
12.00%, due 2/28/05............................... ZAR 4,875,000 958,335
-----------
SPAIN (4.1%)
Spanish Government
7.35%, due 3/31/07................................ SP 31,900,000 232,396
7.90%, due 2/28/02................................ 70,000,000 521,333
10.50%, due 10/30/03.............................. 120,060,000 1,012,769
11.30%, due 1/15/02............................... 50,270,000 419,473
-----------
2,185,971
-----------
SWEDEN (2.0%)
Swedish Government
Series 1034
9.00%, due 4/20/09................................ SK 4,900,000 748,016
Series 1030
13.00%, due 6/15/01............................... 2,000,000 326,158
-----------
1,074,174
-----------
UNITED KINGDOM (6.5%)
Fannie Mae Medium-Term Notes Series E
6.875%, due 6/7/02................................ (Pounds)315,000 517,583
United Kingdom
Treasury Bonds
8.00%, due 12/7/15................................ 310,000 561,884
9.50%, due 4/18/05 (c)............................ 480,000 911,205
10.00%, due 2/26/01 (c)........................... 791,000 1,431,652
-----------
3,422,324
-----------
UNITED STATES (2.7%)
Bonos del Tesoro
8.75%, due 5/9/02................................. $ 1,435,000 1,436,148
-----------
Total Governments & Federal Agencies
(Cost $34,577,796)................................ 34,453,037
-----------
YANKEE BONDS (3.2%)
UNITED STATES (3.2%)
Grupo Televisa S.A.
11.875%, due 5/15/06.............................. $ 800,000 902,000
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
110
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
YANKEE BONDS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------------
<S> <C> <C>
UNITED STATES (Continued)
Republic of South Africa
8.50%, due 6/23/17............................. $ 770,000 $ 760,837
-----------
Total Yankee Bonds
(Cost $1,655,048).............................. 1,662,837
-----------
Total Long-Term Bonds
(Cost $46,326,793)............................. 46,025,147
-----------
OPTIONS (0.3%)
UNITED STATES (0.3%)
U.S. Dollar Call/Deutsche Mark Put
Strike price DM 1.695
Expire 8/25/97................................. $ 3,800,000 110,120
Strike price DM 1.745
Expire 9/15/97................................. 4,865,000 66,324
-----------
Total Options
(Cost $125,369)................................ 176,444
-----------
SHORT-TERM INVESTMENT (3.6%)
COMMERCIAL PAPER (3.6%)
UNITED STATES (3.6%)
Merrill Lynch & Co. Inc.
6.22%, due 7/1/97.............................. $ 1,900,000 1,900,000
-----------
Total Short-Term Investment
(Cost $1,900,000).............................. 1,900,000
-----------
Total Investments
(Cost $48,352,162) (e)......................... 91.1% 48,101,591 (f)
Cash and Other Assets,
Less Liabilities............................... 8.9 4,673,579
-------------- -----------
Net Assets...................................... 100.0% $52,775,170
============== ===========
</TABLE>
- --------
(a) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(b) Issued with oil-linked certificates. Each certificate represents 1,250
oil-linked payment obligations.
(c) Segregated as collateral for options and forward foreign currency
contracts.
(d) Issued with Value Recovery Rights. For every $1.00 in face value of par
bonds, the holder receives $1.00 in notional Value Recovery Rights.
(e) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(f) At June 30, 1997 net unrealized depreciation for securities was $250,571,
based on cost for Federal income tax purposes. This consisted of aggregate
gross unrealized appreciation for all investments on which there was an
excess of market value over cost of $1,010,450 and aggregate gross
unrealized depreciation for all investments on which there was an excess
of cost over market value of $1,261,021.
(g) The following abbreviations are used in the above portfolio:
AP--Argentinian Peso
A$--Australian Dollar
C$--Canadian Dollar
DK--Danish Krone
DM--Deutsche Mark
ECU--European Currency Unit
FF--French Franc
IP--Irish Punt
IL--Italian Lira
(Yen)--Japanese Yen
N$--New Zealand Dollar
(Pounds)--Pound Sterling
ZAR--South African Rand
SP--Spanish Peseta
SK--Swedish Krona
$--U.S. Dollar
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
111
<PAGE>
INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $48,352,162)................................... $48,101,591
Cash denominated in foreign currencies (identified cost
$2,143,043)..................................................... 2,121,677
Receivables:
Investment securities sold....................................... 3,434,903
Interest......................................................... 1,314,838
Fund shares sold................................................. 10,000
Unrealized net appreciation on forward foreign currency
contracts....................................................... 1,418,402
Unamortized organization expense ................................ 1,901
-----------
Total assets................................................... 56,403,312
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 3,546,825
Custodian........................................................ 19,276
Administrator.................................................... 16,509
Adviser.......................................................... 12,945
Transfer agent................................................... 4,193
Accrued expenses................................................. 28,394
-----------
Total liabilities.............................................. 3,628,142
-----------
Net assets....................................................... $52,775,170
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized Institutional Class.................................. $ 4,697
Institutional Service Class...................................... 23
Additional paid-in capital....................................... 48,504,634
Accumulated undistributed net investment income.................. 1,486,418
Accumulated undistributed net realized gain on investments....... 1,123,778
Accumulated undistributed net realized gain on foreign currency
transactions.................................................... 553,040
Net unrealized depreciation on investments....................... (250,571)
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies and forward foreign currency
contracts....................................................... 1,353,151
-----------
Net assets....................................................... $52,775,170
===========
Institutional Class
Net assets applicable to outstanding shares...................... $52,515,012
===========
Shares of capital stock outstanding.............................. 4,697,098
===========
Net asset value per share outstanding............................ $ 11.18
===========
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 260,158
===========
Shares of capital stock outstanding.............................. 23,369
===========
Net asset value per share outstanding............................ $ 11.13
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest......................................................... $1,723,394
----------
Expenses:
Administration................................................... 127,780
Advisory......................................................... 76,668
Professional..................................................... 20,807
Registration..................................................... 12,920
Transfer agent................................................... 11,995
Custodian........................................................ 11,127
Shareholder communication........................................ 2,650
Directors........................................................ 795
Amortization of organization expense............................. 377
Service.......................................................... 291
Miscellaneous.................................................... 4,833
----------
Total expenses before
reimbursement................................................. 270,243
Expense reimbursement from Administrator......................... (27,170)
----------
Net expenses................................................... 243,073
----------
Net investment income............................................ 1,480,321
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain from:
Security transactions............................................ 1,109,864
Foreign currency transactions.................................... 553,040
----------
Net realized gain on investments and foreign currency
transactions.................................................... 1,662,904
----------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions............................................ (3,715,468)
Translation of assets and liabilities in
foreign currencies and forward foreign currency contracts....... 950,139
----------
Net unrealized loss on investments and
foreign currencies.............................................. (2,765,329)
----------
Net realized and unrealized loss on investments and foreign
currency transactions........................................... (1,102,425)
----------
Net increase in net assets resulting from operations............. $ 377,896
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
112
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................... $ 1,480,321 $ 2,835,164
Net realized gain on investments.................... 1,109,864 868,042
Net realized gain on foreign currency transac-
tions.............................................. 553,040 2,078,040
Net change in unrealized appreciation (deprecia-
tion) on investments............................... (3,715,468) 179,771
Net change in unrealized appreciation on transla-
tion of assets and liabilities in foreign curren-
cies and forward foreign currency contracts........ 950,139 421,727
----------- -----------
Net increase in net assets resulting from opera-
tions.............................................. 377,896 6,382,744
----------- -----------
Dividends and distributions to shareholders:
From net investment income and net realized gain on
foreign currency transactions:
Institutional Class................................ -- (5,580,459)
Institutional Service Class........................ -- (22,729)
From net realized gain on investments:
Institutional Class................................ -- (1,136,473)
Institutional Service Class........................ -- (4,703)
----------- -----------
Total dividends and distributions to sharehold-
ers.............................................. -- (6,744,364)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class................................ 884,867 2,326,123
Institutional Service Class........................ 51,101 205,185
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
Institutional Class................................ -- 6,716,923
Institutional Service Class........................ -- 27,424
----------- -----------
935,968 9,275,655
Cost of shares redeemed:
Institutional Class................................ (725,887) (1,096,721)
Institutional Service Class........................ (17,186) (7,271)
----------- -----------
Increase in net assets derived from capital share
transactions...................................... 192,895 8,171,663
----------- -----------
Net increase in net assets......................... 570,791 7,810,043
NET ASSETS:
Beginning of period................................. 52,204,379 44,394,336
----------- -----------
End of period....................................... $52,775,170 $52,204,379
=========== ===========
Accumulated undistributed net investment income..... $ 1,486,418 $ 6,097
=========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
113
<PAGE>
INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS
------------- ------------- ------------- ------------- ------------- -------------
SIX MONTHS JANUARY 1, 1995(A)
ENDED YEAR ENDED THROUGH
JUNE 30, 1997* DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 11.10 $ 11.07 $ 11.16 $ 11.14 $ 10.00 $ 10.00
------- ------- ------- ------- ------- -------
Net investment income... 0.31 0.30 1.21 1.19 0.70 0.70
Net realized and unrealized gain (loss)
on investments......... (0.54) (0.57) 0.11 0.11 1.12 1.10
Net realized and unrealized gain on
foreign currency transactions............ 0.31 0.33 0.27 0.26 0.02 0.02
------- ------- ------- ------- ------- -------
Total from investment operations.......... 0.08 0.06 1.59 1.56 1.84 1.82
------- ------- ------- ------- ------- -------
Less dividends and distributions:
From net investment income and net
realized gain on foreign currency
transactions............................ -- -- (1.37) (1.35) (0.55) (0.55)
From net realized gain on investments..... -- -- (0.28) (0.28) (0.13) (0.13)
------- ------- ------- ------- ------- -------
Total dividends and distributions......... -- -- (1.65) (1.63) (0.68) (0.68)
------- ------- ------- ------- ------- -------
Net asset value at end of period.......... $ 11.18 $ 11.13 $ 11.10 $ 11.07 $ 11.16 $ 11.14
======= ======= ======= ======= ======= =======
Total investment return (b)............... 0.72% 0.54% 14.32% 14.08% 18.46% 18.26%
Ratios (to average net
assets)/Supplemental Data:
Net investment income.................... 5.79%+ 5.54%+ 6.02% 5.77% 6.61% 6.36%
Net expenses............................. 0.95%+ 1.20%+ 0.95% 1.20% 0.95% 1.20%
Expenses (before reimbursement).......... 1.06%+ 1.31%+ 1.08% 1.33% 1.03% 1.28%
Portfolio turnover rate................... 98% 98% 57% 57% 92% 92%
Net assets at end of period (in 000's).... $52,515 $ 260 $51,980 $ 225 $44,388 $ 6
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Commencement of operations.
(b) 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.
114
<PAGE>
MONEY MARKET FUND
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. The Federal Reserve Board made a preemptive strike against inflation by
raising the targeted funds rate by 25 basis points in March to 5.50%
. Many investors anticipated an additional Federal Reserve rate increase in
May, which did not materialize
. The spread between Treasuries and Eurodollar issues widened during the first
six months of the year, creating buying opportunities among securities
priced off of the London Interbank Offered Rate (LIBOR)
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. The MainStay Institutional Money Market Fund returned 5.13% and 4.87% for
Institutional Class shares and Service Class shares, respectively, for the
12 months ended 6/30/97
. A shorter duration helped performance as short-term rates increased in the
first quarter of 1997, but had a negative impact when the market rallied in
May
. Selected floaters, asset-backed securities, and short corporate issues
helped the Fund increase yield without aggressively extending duration
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
Bullish/bearish A bull market occurs when security prices are rising, a bear
market occurs when security prices decline. A bullish attitude therefore
suggests a positive outlook, while a bearish attitude represents a negative view
of the market or the opportunities it may present.
- --------------------------------------------------------------------------------
During the first half of 1997, the money markets were primarily affected by the
perceptions and realities of interest rates. Early in the year, Federal Reserve
Board (Fed) Chairman Alan Greenspan was highly vocal about the need for higher
interest rates to preempt inflation. On March 25th, the Fed raised the targeted
funds rate 25 basis points to 5.50%.
Despite widespread anticipation of an additional rate increase, economic
indicators suggested that the economy was not likely to overheat, and the Fed
took no additional action at its Federal Open-Market Committee meeting in May.
This led to a market rally and underscored the difficulty of predicting how
interest rates may change.
Given this context, how did the MainStay Institutional Money Market Fund do?
For the six months ended June 30, 1997, the MainStay Institutional Money Market
Fund returned 2.54% and 2.41% for Institutional Class shares and Service Class
shares, respectively. These results compared favorably with the 2.56% return for
the average Lipper* institutional money market fund.
During most of the first half of 1997, investor psychology remained relatively
bearish, since most participants expected the initial Fed move and anticipated
further tightening later in the first half of the year. When that failed to
materialize, the markets rallied. While we were able to buy some securities
before prices reached their highs, our portfolio was positioned for rising
rates, and was hurt when the Fed failed to act in May.
- --------------------------------------------------------------------------------
* Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
115
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Duration A measure of average maturity, which adjusts for the time value of the
payments investors will receive, and which takes into account interest payments
as well as principal payments. Duration is a better gauge of interest-rate
sensitivity than average maturity alone.
Yield spread The difference in yield between securities in different market
sectors, such as Treasury securities and Eurodollar issues--or between different
securities in a single sector, such as Treasury bonds with different maturities.
LIBOR The London Interbank Offered Rate (LIBOR) is the rate that the most
creditworthy international banks dealing in Eurodollars charge each other for
large loans. Other large Eurodollar loans to less creditworthy borrowers are
often based on the LIBOR rate.
Weighting The proportion of a portfolio allocated to a specific security or
sector, i.e., a fund is said to be overweighted in a sector when that portion of
the portfolio is greater than the sector's general relationship to the market as
a whole.
- --------------------------------------------------------------------------------
What was your duration strategy during the first six months of 1997?
With strong indications that the Fed would tighten interest rates, we shortened
the Fund's duration early in the year, which helped performance in the first
quarter. Unfortunately, continued shortening hurt our performance when
anticipated rate increases failed to materialize in May. As the prospects for
further short-term rate increases dimmed--at least for the near term--we
extended the Fund's portfolio duration to a more neutral position.
Were there other factors that influenced the management of the Fund?
Yes, there were. As the yield spread between Treasuries and Eurodollar issues
widened, we found opportunities among floaters, asset-backed securities, and
short corporate issues. By purchasing securities that were priced off of LIBOR
instead of Treasuries, we were able to take advantage of attractive prices and
relative values. This strategy was particularly effective earlier in the year,
since the market was slow to adjust to the widening spreads.
How did these purchases affect overall Fund performance?
Basically, they allowed us to buy cheap, increase yield, and avoid aggressively
extending the Fund's duration. Although a longer duration would have helped
performance in the second quarter, basically these factors contributed
positively to the Fund's performance for the first half of the year.
What were some of your most significant purchases during the reporting period?
We bought IBM and PNC prime-rate based floaters in February and May. They were
solid purchases that allowed the Fund to pick up yield without extending
duration. In June, we decided to purchase more complex structures, including
asset-backed securities. Since these securities are less liquid than other money
market instruments, they also helped us increase yield.
Are you currently concentrated in any particular type of security?
We're currently overweighted in floating-rate securities. Because these bonds
have longer final maturities, they tend to trade cheap relative to commercial
paper. Yet they still allow the Fund to remain responsive to market moves. We're
underweighted in Treasuries because we believe yield opportunities among other
products currently outweigh any incremental risks.
Speaking of risks, what should investors know about them?
No one can say for sure what the Fed will do next. We carefully manage risk by
monitoring economic factors and shifting duration based on our best assessment
of where rates will move. Our decision to shorten duration was successful in the
first quarter, but there always remains the possibility that the economy will
suddenly weaken, causing a sharp decline in short-term interest rates.
- --------------------------------------------------------------------------------
116
<PAGE>
================================================================================
Do you think that will happen?
Not in the near term. We expect the economy to remain relatively stable,
possibly picking up somewhat later in the year. Until we see signs of a
strengthening economy, we expect the Federal Reserve Board to maintain its
current position. Regardless of where the economy and the Fed may move, we'll
continue to seek to provide a high level of current income, while preserving
capital and maintaining liquidity.
David Clement, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
117
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE
INSTITUTIONAL CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE MONEY MARKET FUND LIPPER INSTITUTIONAL MONEY MARKET AVERAGE
- ---- ----------------- -----------------------------------------
<S> <C> <C>
1/2/91 10,000 10,000
10,162 10,168
10,313 10,318
10,461 10,465
91 10,595 10,599
10,709 10,711
10,808 10,800
10,899 10,889
92 10,983 10,972
11,063 11,053
11,140 11,132
11,220 11,212
93 11,300 11,294
11,383 11,377
11,479 11,479
11,600 11,601
94 11,738 11,745
11,903 11,909
12,071 12,080
12,234 12,250
95 12,399 12,419
12,556 12,577
12,708 12,732
12,889 12,894
96 13,032 13,058
6/30/97 13,392 13,363
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE
SERVICE CLASS SHARES
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DATE MONEY MARKET FUND LIPPER INSTITUTIONAL MONEY MARKET AVERAGE
- ---- ----------------- -----------------------------------------
<S> <C> <C>
1/2/91 10,000 10,000
10,162 10,168
10,313 10,318
10,461 10,465
91 10,595 10,599
10,709 10,711
10,808 10,800
10,899 10,889
92 10,983 10,972
11,063 11,053
11,140 11,132
11,220 11,212
93 11,300 11,294
11,383 11,377
11,479 11,479
11,600 11,601
94 11,738 11,745
11,903 11,909
12,066 12,080
12,222 12,250
95 12,379 12,419
12,528 12,577
12,672 12,732
12,826 12,894
96 12,972 13,055
6/30/97 13,392 13,292
</TABLE>
. Money Market Fund --Lipper Institutional Money Market Average
Source: Lipper Analytical Services, Inc.
These graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
PERFORMANCE as of June 30, 1997 as of June 30, 1997
- --------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund
Institutional Class+ 2.54% 5.13% 4.34% 4.56%
Money Market Fund Service
Class+ 2.41% 4.87% 4.22% 4.47%
Average Lipper Institutional
Money Market Fund 2.56% 5.19% 4.41% 4.63%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
Institutional Class Shares
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Year-End Total Return %*
-------- ---------------
<S> <C>
1991 5.95
1992 3.66
1993 2.89
1994 3.88
1995 5.63
1996 5.11
1997 2.54
As of 6/30/97
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Commercial Paper 69.95%
Other 16.02%
Medium-Term Notes 10.91
Negotiable CDs - Domestic 2.17
MM Bankers' Acceptances 1.01%
Cash & Equivalents -0.06++
</TABLE>
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Dun & Bradstreet Corp. (The) 4.37%
2. Chrysler Financial Corp. 4.32%
3. Gotham Funding Corp. 4.30%
4. Sears Roebuck Acceptance Corp. 4.30%
5. Household Finance Corp. 4.28%
6. Norwest Financial Inc. 4.27%
7. NEBHELP Capital Services Inc. 2.49%
8. PACCAR Financial Corp. 2.49%
9. BankAmerica Corp. 2.17%
10. Mellon Bank N.A. 2.17%
</TABLE>
- --------------------------------------------------------------------------------
TOP 5 INDUSTRY
HOLDINGS
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Finance 20.90%
2. Banks 20.62%
3. Auto Manufacturing 11.59%
4. Consumer Financial Services 6.41%
5. Retail 5.76%
Average Maturity 56 Days
(as of 6/30/97)
</TABLE>
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in their
expense structures.
The Money Market Fund--Institutional Class had a 7-day effective yield of
5.47% and a 7-day average yield of 5.33%, both as of 6/30/97. The Money
Market Fund--Service Class had a 7-day effective yield of 5.21% with a 7-day
current yield of 5.08%, both as of 6/30/97. The Administrator has agreed to
assume a portion of the expenses for these Funds. Had certain expenses not
been assumed by the Administrator, the 7-day effective yield and the 7-day
current yield would have been 5.40% and 5.26%, respectively, for the
Institutional Class and 5.14% and 5.01%, respectively, for the Service Class.
Investments in the Money Market Fund are neither insured nor guaranteed by
the U.S. Government, and there is no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
++ Adjusted for liabilities.
118
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
SHORT-TERM INVESTMENTS (100.1%)+
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (4.3%)
Asset-Backed Securities Investment Trust
Series 1997-C Class N
5.69%, due 6/15/98 (a)(b)(c)......................... $ 5,000,000 $ 5,000,000
PNC Student Loan Trust I
Series 1997-2 Class A-1
5.63%, due 7/20/98 (b)(c)............................ 5,000,000 5,000,000
------------
10,000,000
------------
BANK NOTES (6.5%)
Bank of America-Illinois
5.85%, due 9/30/97 (c)............................... 3,000,000 2,999,273
First Union National Bank of North Carolina
5.70%, due 8/5/97 (c)................................ 5,000,000 5,000,000
Huntington National Bank-Ohio
5.77%, due 9/2/97 (c)................................ 3,000,000 3,000,000
PNC Bank N.A.-Pittsburgh, Pennsylvania
5.63%, due 5/12/98 (b)(c)............................ 3,000,000 2,998,731
5.69%, due 6/5/98 (b)(c)............................. 1,000,000 1,000,090
------------
14,998,094
------------
BANKERS' ACCEPTANCES (1.0%)
Mellon Bank N.A.-Pittsburgh, Pennsylvania
5.42%, due 7/3/97.................................... 1,000,000 999,699
5.68%, due 11/18/97.................................. 1,353,933 1,324,026
------------
2,323,725
------------
CERTIFICATE OF DEPOSIT (2.2%)
Mellon Bank N.A.-Pittsburgh, Pennsylvania
5.75%, due 12/9/97 (c)............................... 5,000,000 5,000,000
------------
COMMERCIAL PAPER (70.0%)
American Home Products Corp.
5.64%, due 7/25/97 (a)............................... 5,000,000 4,981,200
Ameritech Corp.
5.59%, due 8/6/97.................................... 5,000,000 4,972,050
ARCO Chemical Co.
5.65%, due 7/2/97 (a)................................ 5,000,000 4,999,215
BTM Capital Corp.
5.68%, due 8/26/97 (a)............................... 3,600,000 3,568,192
Centric Funding Corp.
5.63%, due 10/7/97................................... 5,000,000 4,923,369
Chrysler Financial Corp.
5.56%, due 7/22/97................................... 10,000,000 9,967,567
Columbus Southern Power
5.73%, due 7/3/97.................................... 2,000,000 1,999,363
5.75%, due 7/16/97................................... 5,000,000 4,988,021
Cooperative Association of Tractor Dealers Inc.
Series A
5.68%, due 8/4/97.................................... 2,000,000 1,989,271
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
------------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Dun & Bradstreet Corp. (The)
5.62%, due 9/9/97.................................... $10,200,000 $ 10,088,537
Enterprise Funding Corp.
5.65%, due 7/14/97 (a)............................... 1,000,000 997,960
Ford Motor Credit Co.
5.56%, due 7/30/97................................... 5,000,000 4,977,606
Fountain Square Commercial Funding Corp.
5.70%, due 10/14/97 (a).............................. 2,059,000 2,024,839
General Electric Capital Corp.
5.38%, due 7/7/97.................................... 5,000,000 4,995,517
5.52%, due 7/14/97 (c)............................... 601,000 601,000
5.70%, due 11/24/97 (c).............................. 1,067,000 1,067,000
General Motors Acceptance Corp.
5.53%, due 7/18/97................................... 3,000,000 2,992,166
5.64%, due 7/7/97.................................... 5,000,000 4,995,300
Gotham Funding Corp.
5.65%, due 8/13/97 (a)............................... 10,000,000 9,932,514
Household Finance Corp.
5.60%, due 9/22/97................................... 10,000,000 9,870,889
Jefferson Smurfit Finance Corp.
Series B
5.54%, due 7/3/97.................................... 3,000,000 2,999,077
5.70%, due 8/19/97................................... 2,850,000 2,827,889
May Department Stores Co.
5.55%, due 7/11/97................................... 2,358,000 2,354,365
Mayne Nickless Ltd.
5.59%, due 7/28/97................................... 5,000,000 4,979,038
Morgan Stanley Group Inc.
5.62%, due 7/18/97................................... 3,000,000 2,992,038
NEBHELP Capital Services Inc.
5.57%, due 7/17/97................................... 5,772,000 5,757,711
Norwest Financial Inc.
5.60%, due 10/7/97................................... 10,000,000 9,847,556
Oak Funding Corp.
5.68%, due 9/19/97................................... 2,000,000 1,974,756
Oakland-Alameda County Coliseum Authority Lease
Revenue Bonds (Oakland Coliseum Project)
Series 1995 B-1
5.63%, due 7/7/97.................................... 5,000,000 4,999,983
PACCAR Financial Corp.
5.57%, due 9/5/97.................................... 5,814,000 5,754,629
Riverwoods Funding Corp.
5.55%, due 8/27/97................................... 5,000,000 4,956,062
Sears Roebuck Acceptance Corp.
5.60%, due 8/21/97................................... 10,000,000 9,920,667
Seiko Corp. of America
5.68%, due 8/22/97................................... 3,000,000 2,975,387
UST Inc.
5.55%, due 7/8/97.................................... 4,185,000 4,180,484
------------
161,451,218
------------
</TABLE>
- -----------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
119
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1997 (Unaudited)
SHORT-TERM INVESTMENTS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
<S> <C> <C>
CORPORATE BONDS (2.4%)
Fleet Mortgage Group Inc.
6.13%, due 8/15/97 (c).............................. $ 4,500,000 $ 4,501,760
Otter Tail Power Co.
8.75%, due 12/15/97 (c)............................. 951,000 964,164
------------
5,465,924
------------
CORPORATE NOTES (2.8%)
Dillard Department Stores Inc.
9.63%, due 9/15/97 (c).............................. 1,000,000 1,007,206
General Motors Acceptance Corp.
7.00%, due 8/15/97 (c).............................. 1,800,000 1,802,125
Mississippi Power Co.
5.38%, due 3/1/98 (c)............................... 2,500,000 2,487,916
WMX Technologies Inc.
6.38%, due 7/1/97 (c)............................... 1,200,000 1,200,000
------------
6,497,247
------------
MEDIUM-TERM NOTES (10.9%)
BankAmerica Corp.
Series G
6.88%, due 11/20/97 (c)............................. 5,000,000 5,017,383
Caterpillar Financial Services Corp.
Series E
6.56%, due 11/3/97 (c).............................. 900,000 901,276
Chrysler Financial Corp. Series K
6.83%, due 6/8/98 (c)............................... 1,000,000 1,004,868
CIT Group Holdings Inc.
7.00%, due 9/30/97 (c).............................. 3,900,000 3,910,070
8.75%, due 4/15/98 (c).............................. 1,000,000 1,018,529
General Motors Acceptance Corp.
5.65%, due 12/15/97 (c)............................. 1,000,000 998,271
IBM Credit Corp.
5.60%, due 3/2/98 (b)(c)............................ 3,000,000 2,998,649
Morgan Stanley Group Inc.
Series C
5.76%, due 5/18/98 (b)(c)........................... 2,500,000 2,499,889
Pacific Gas & Electric Co. Series B
9.09%, due 12/15/97 (c)............................. 1,800,000 1,823,329
Southern California Gas Co.
5.98%, due 8/28/97 (c).............................. 3,000,000 3,002,099
U.S. Bancorp
Series E
7.11%, due 12/10/97 (c)............................. 2,000,000 2,012,454
------------
25,186,817
------------
Total Short-Term Investments
(Amortized Cost
$230,923,025) (d)................................... 100.1% 230,923,025
Liabilities In Excess of
Cash and Other Assets............................... (0.1) (128,528)
----------- ------------
Net Assets........................................... 100.0% $230,794,497
=========== ============
</TABLE>
- --------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(c) Coupon interest bearing security.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
The table below sets forth the diversification of Money Market Fund
investments by industry.
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
AMORTIZED
COST PERCENT +
------------------------
<S> <C> <C>
Auto Manufacturing...................................... $ 26,737,903 11.6%
Banks................................................... 47,586,497 20.6
Brokerage............................................... 5,491,928 2.4
Capital Goods........................................... 2,890,547 1.2
Chemicals............................................... 4,999,215 2.2
Computers & Office Equipment............................ 2,998,649 1.3
Conglomerates........................................... 6,663,517 2.9
Consumer Financial Services............................. 14,799,488 6.4
Drugs................................................... 4,981,200 2.2
Finance................................................. 48,225,248 20.9
Paper & Forest Products................................. 5,826,965 2.5
Pollution & Related..................................... 1,200,000 0.5
Publishing.............................................. 10,088,537 4.4
Retail.................................................. 13,282,237 5.8
Tobacco................................................. 4,180,484 1.8
Transportation.......................................... 4,979,038 2.2
Trucking................................................ 5,754,629 2.5
Utilities............................................... 8,810,714 3.8
Utilities-Electric...................................... 3,452,080 1.5
Utilities-Gas........................................... 3,002,099 1.3
Utilities-Telephone..................................... 4,972,050 2.1
------------ -----
230,923,025 100.1
Liabilities in Excess of Cash and Other Assets.......... (128,528) (0.1)
------------ -----
Net Assets.............................................. $230,794,497 100.0%
============ =====
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
120
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(amortized cost $230,923,025).................................. $230,923,025
Cash............................................................. 134
Receivables:
Investment securities sold....................................... 10,628,323
Interest......................................................... 961,248
Fund shares sold................................................. 26,843
------------
Total assets................................................... 242,539,573
------------
LIABILITIES:
Payables:
Fund shares redeemed............................................. 10,604,999
Administrator.................................................... 65,747
Adviser.......................................................... 19,810
Custodian........................................................ 11,034
Transfer agent................................................... 5,917
Accrued expenses................................................. 54,181
Dividend payable................................................. 983,388
------------
Total liabilities.............................................. 11,745,076
------------
Net assets....................................................... $230,794,497
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
12 billion shares authorized
Institutional Class.............................................. $ 178,144
Institutional Service Class...................................... 52,648
Additional paid-in capital....................................... 230,561,486
Accumulated undistributed net realized gain on investments....... 2,219
------------
Net assets....................................................... $230,794,497
============
Institutional Class
Net assets applicable to outstanding shares...................... $178,146,228
============
Shares of capital stock outstanding.............................. 178,144,009
============
Net asset value per share outstanding............................ $ 1.00
============
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 52,648,269
============
Shares of capital stock outstanding.............................. 52,648,269
============
Net asset value per share outstanding............................ $ 1.00
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest......................................................... $ 4,745,676
------------
Expenses:
Administration .................................................. 339,137
Advisory......................................................... 84,784
Service.......................................................... 54,323
Registration..................................................... 23,622
Custodian........................................................ 22,704
Professional..................................................... 20,458
Transfer agent................................................... 15,629
Shareholder communication........................................ 11,270
Directors........................................................ 2,405
Miscellaneous.................................................... 1,785
------------
Total expenses before
reimbursement................................................. 576,117
Expense reimbursement from Administrator......................... (97,873)
------------
Net expenses................................................... 478,244
------------
Net investment income............................................ 4,267,432
------------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................. 3,107
------------
Net increase in net assets resulting from operations............. $ 4,270,539
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
121
<PAGE>
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income........................... $ 4,267,432 $ 4,967,474
Net realized gain (loss) on investments......... 3,107 (888)
------------- -------------
Net increase in net assets resulting from
operations..................................... 4,270,539 4,966,586
------------- -------------
Dividends to shareholders:
From net investment income:
Institutional Class............................ (3,214,415) (4,202,178)
Institutional Service Class.................... (1,053,017) (765,425)
------------- -------------
Total dividends to shareholders............... (4,267,432) (4,967,603)
------------- -------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................ 196,367,497 346,674,956
Institutional Service Class.................... 45,204,840 58,869,480
Net asset value of shares issued to
shareholders in reinvestment of dividends:
Institutional Class............................ 2,828,733 4,007,693
Institutional Service Class.................... 963,718 650,486
------------- -------------
245,364,788 410,202,615
Cost of shares redeemed:
Institutional Class............................ (131,813,317) (307,790,041)
Institutional Service Class.................... (28,184,762) (27,639,595)
------------- -------------
Increase in net assets derived from capital
share transactions............................ 85,366,709 74,772,979
------------- -------------
Net increase in net assets..................... 85,369,816 74,771,962
NET ASSETS:
Beginning of period............................. 145,424,681 70,652,719
------------- -------------
End of period................................... $ 230,794,497 $ 145,424,681
============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
122
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- ------------- -------------
SIX MONTHS
ENDED ----------------------------
JUNE 30, 1997* 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------------- -------------
Net investment
income.......... 0.03 0.02 0.05 0.05
-------- -------- ------------- -------------
Less dividends
from net
investment
income.......... (0.03) (0.02) (0.05) (0.05)
-------- -------- ------------- -------------
Net asset value
at end of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ============= =============
Total investment
return (a)...... 2.54% 2.41% 5.11% 4.85%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 5.10%+ 4.85%+ 5.00% 4.75%
Net expenses.... 0.50%+ 0.75%+ 0.50% 0.75%
Expenses (before
reimbursement).. 0.62%+ 0.87%+ 0.67% 0.92%
Net assets at end
of period (in
000's).......... $178,146 $ 52,648 $110,760 $ 34,664
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- -----------------------------
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1995 1994 1993 1992
--------------------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- --------- --------- ---------
Net investment
income.......... 0.05 0.05 0.04 0.03 0.03
------------- ------------- --------- --------- ---------
Less dividends
from net
investment
income.......... (0.05) (0.05) (0.04) (0.03) (0.03)
------------- ------------- --------- --------- ---------
Net asset value
at end of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ========= ========= =========
Total investment
return (a)...... 5.63% 5.46% 3.88% 2.89% 3.66%
Ratios (to
average net
assets)/Supplemental
Data:
Net investment
income......... 5.48% 5.23% 3.89% 2.85% 3.64%
Net expenses.... 0.50% 0.75% 0.50% 0.45% 0.45%
Expenses (before
reimbursement).. 0.73% 0.98% 0.68% 0.67% 0.65%
Net assets at end
of period (in
000's).......... $ 67,869 $ 2,784 $ 65,106 $ 75,832 $ 71,573
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) 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.
123
<PAGE>
SHORT-TERM BOND FUND
================================================================================
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS FOR THE 6-MONTHS ENDED 6/30/97
- --------------------------------------------------------------------------------
. Although the Federal Reserve Board moved to raise short-term interest rates
slightly at the end of March, the short-term bond market was relatively
quiet during the first six months of 1997
. With relatively stable interest rates and little price movement, many
investors sought opportunities in securities that offered yield spreads to
Treasuries
. With bond market volatility low, many investors engaged in a "battle for
basis points," as they sought ways to improve yields and total returns
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/97
- --------------------------------------------------------------------------------
. One-year total returns of 6.25% and 6.01% for Institutional Class shares and
Service Class shares, respectively, for the period ended 6/30/97
. Institutional Class shares received a 4-star overall rating from
Morningstar, Inc.* as of 6/30/97
. The Fund took profits in some of its yield-enhancing securities and bought
Treasuries with the proceeds, which increased the quality of the portfolio
from AAA to Agency-rated+
. For the six months ended 6/30/97, Institutional Class shares outperformed
the average Lipper++ short-term investment-grade fund, which returned 2.73%,
while Service Class shares underperformed the average peer fund
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
Yield The income per share (or current value of a security) paid to investors
over a specified period of time as a percentage of the cost of the security.
- --------------------------------------------------------------------------------
The short-term bond markets were relatively quiet during the first six months of
1997. Although the Federal Reserve Board made a preemptive move by raising
short-term interest rates 25 basis points in late March, the move was widely
anticipated and had little impact over the six month period.
With interest rates relatively stable and prices moving within a narrow range,
investors sought opportunities among securities that offered the potential for
yield enhancement. Within the narrow maturity spectrum of the short-term market,
this led to a "battle for basis points," which highlighted the value of research
and individual security selection.
- --------------------------------------------------------------------------------
* Morningstar, Inc. is an independent fund performance monitor. Its ratings
reflect historic risk-adjusted performance, taking into account fees and
other sales charges, and may change monthly. Its ratings of 1 (low) to 5
(high) stars are based on a fund's 3-, 5-, and 10-year average annual returns
with fee adjustments in excess of 90-day Treasury bill returns, and a risk
factor that reflects fund performance below 90-day Treasury bill monthly
returns. Only 10% of the funds in a rating group may receive 5 stars, 22.5%
receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars, and 10% receive
1 star. As of 6/30/97, the individual 3- and 5-year ratings for the MainStay
Institutional Short-Term Bond Fund were 4 stars and 4 stars, respectively,
out of 1,248 and 677 taxable bond funds for the respective periods. The
Fund's Service Class shares, introduced January 1, 1995, will not be rated by
Morningstar until they have three years of performance history.
+ Agency rating is above AAA. Currently debt rated AAA has the highest rating
assigned by Standard & Poor's. These ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to represent
the stability or safety of the Fund.
++ Lipper Analytical Services, Inc., is an independent monitor of mutual fund
performance. Results do not reflect any deduction of sales charges and are
based on total returns with capital gains and dividends reinvested.
124
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Mortgage-backed securities Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of the
underlying fixed or adjustable-rate mortgages are, in effect, "passed through"
to investors (net of fees paid to the issuer or guarantor of the securities).
Asset-backed securities Bonds or notes backed by loans or accounts receivable
(such as automobile loans, computer leases, or credit card debt), and often
"enhanced" by a letter of credit or insurance.
Prepayment risk The risk that mortgage or loan holders will repay their
obligations before they mature, shortening the stream of interest payments
investors receive.
- --------------------------------------------------------------------------------
Given this context, how did the MainStay Institutional Short-Term Bond Fund do
in the first half of 1997?
The Fund performed closely in line with the market, with total returns of 2.74%
and 2.64% for Institutional Class shares and Service Class shares, respectively,
for the six months ended 6/30/97. Institutional Class shares outperformed--and
Service Class shares underperformed--the average Lipper short-term investment-
grade fund, which returned 2.73% over the first half of 1997.
How was the Fund managed during the first six months of 1997?
With interest rates and bond prices moving in a very narrow range, the Fund
maintained an average maturity of approximately 1.9 years. Our biggest strategy
was to sell yield-enhancing securities as we saw opportunities to do so at
attractive prices and move into Treasuries.
Can you give us some specific examples?
The Fund held a relatively substantial position in agency securities and
unleveraged collateralized mortgage obligations (or CMOs) that was reduced by
about half by the end of the first half of the year. The Fund sold some
government mortgage-backed securities, which did well for the portfolio. As
spreads to Treasuries narrowed, we sold corporate bonds, reducing the Fund's
position to about 4% of the portfolio. The Fund's holdings in asset-backed
securities were also reduced.
What was the overall impact of these sales?
All of this contributed positively to the Fund's performance. We were able to
lock in gains in many securities--and by purchasing Treasuries with the proceeds
of the sales, we improved the quality of the portfolio from AAA to Agency-
rated,(S) which is even better.
Could yields have been enhanced by reducing the quality of the Fund's portfolio?
That is a strategy we could have considered, and some of our competitors may
have done so. But we believe that quality is part of what attracts investors to
the Institutional Short-Term Bond Fund. When a fund can improve its quality and
still earn as much as other short-term bond funds in this category that are
investing in lower quality, emerging markets or higher-risk bonds, we think
investors are getting a double reward.
How did you manage to improve the Fund's quality?
I think much of the credit goes to our research process. We have specialists in
various sectors of the bond market, who help us identify opportunities and
evaluate risk potential. An example might be low-balance mortgage loans. The
smaller quality mortgages in which the Fund invested during the first half of
1997, carried the highest quality ratings as rated by Standard & Poor's and
Moody's. Our research indicates that they may offer lower prepayment risk than
the market believes. Since these securities may offer higher yields and lower
risk than standard mortgages, we added them to the Fund. They have performed
very well.
- --------------------------------------------------------------------------------
(S) Agency rating is above AAA. Currently debt rated AAA has the highest
rating assigned by Standard & Poor's. These ratings are based solely on
the creditworthiness of the bonds in the portfolio and are not meant to
represent the stability or safety of the Fund.
125
<PAGE>
================================================================================
What is your outlook going forward?
We believe that the Federal Reserve Board has helped keep the economy growing
and inflation in line. As long as that continues, it will be good for bonds.
However, if inflation heats up, and interest rates rise, it would have a
negative impact on bond prices. As long as productivity can stay ahead of wage
increases, we think the outlook on inflation will remain positive. Whatever
happens in the economy and the markets, we'll continue to seek to maximize total
return, consistent with liquidity, preservation of capital, and investment in
short-term debt securities.
Ravi Akhoury
Edward Munshower
Portfolio Managers
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
126
<PAGE>
[GRAPHS APPEAR HERE]
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
SHORT-TERM BOND FUND VS
SALOMON 1-3 YEAR TREASURY INDEX
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
DATE SHORT TERM BOND FUND INSTITUTIONAL SALOMON 1-3 YEAR
---- ---------------------------------- ----------------
<S> <C> <C>
1/2/91 10,000 10,000
10,220 10,220
10,420 10,418
10,760 10,768
91 11,130 11,164
11,140 11,178
11,455 11,498
11,749 11,841
92 11,791 11,867
12,079 12,122
12,214 12,258
12,383 12,431
93 12,459 12,507
12,374 12,445
12,374 12,451
12,495 12,570
94 12,473 12,574
12,885 12,987
13,258 13,394
13,444 13,588
95 13,754 13,923
13,796 13,982
13,939 14,128
14,152 14,362
96 14,415 14,632
6/30/97 14,810 16,210
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
SHORT-TERM BOND FUND VS
SALOMON 1-3 YEAR TREASURY INDEX
SERVICE CLASS SHARES
<TABLE>
<CAPTION>
DATE SHORT TERM BOND FUND SERVICE SALOMON 1-3 YEAR
---- ---------------------------- ----------------
<S> <C> <C>
1/2/91 10,000 10,000
10,220 10,220
10,420 10,418
10,760 10,768
91 11,130 11,164
11,140 11,178
11,455 11,498
11,749 11,841
92 11,791 11,867
12,079 12,122
12,214 12,258
12,383 12,431
93 12,459 12,507
12,374 12,445
12,374 12,451
12,495 12,570
94 12,473 12,574
12,885 12,987
13,245 13,394
13,418 13,588
95 13,728 13,923
13,756 13,982
13,884 14,128
14,083 14,362
96 14,340 14,632
6/30/97 14,719 16,210
</TABLE>
. Short-Term Bond Fund--Salomon 1-3 Year Treasury Index
Source: Lipper Analytical Services, Inc.
The graphs assume a $10,000 investment made on 1/2/91.
<TABLE>
<CAPTION>
Total Return* SEC Average Annual Total Return*
Performance as of June 30, 1997 as of June 30, 1997
- ----------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Bond Fund Institutional Class 2.74% 6.25% 5.27% 6.23%
Short-Term Bond Fund Service Class+ 2.64% 6.01% 5.14% 6.13%
Average Lipper Short-Term Investment Grade Fund 2.73% 6.28% 5.34% 6.39%
Salomon 1-3 Year Treasury Index 2.86% 6.53% 5.53% 6.49%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
Institutional Class Shares
<TABLE>
Year-end Total Return %
-------- --------------
<S> <C>
1991 11.30
1992 5.94
1993 5.67
1994 0.11
1995 10.27
1996 4.81
1997 as of 6/30/97 2.74
</TABLE>
- --------------------------------------------------------------------------------
Quality Breakdown++
(% of bonds as of June 30, 1997)
- --------------------------------------------------------------------------------
Government/Agency 81.84%
AAA 14.17%
AA 0.15%
A 3.34%
BBB 0.50%
-------
100.00%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
. U.S. Government &
Agency Bonds 3.75%
. Other Asset-Backed/
Mortgage-Backed
Securities 14.01%
. Domestic Bonds -
Non-Convertible 80.05%
. Cash & Equivalents 2.19%*
- --------------------------------------------------------------------------------
Top 10 Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. US Treasury Note 5/15/99, 6.375% 17.53%
2. US Treasury Note 2/15/00, 5.875% 10.87%
3. US Treasury Note 11/30/99, 7.75% 9.47%
4. US Treasury Note 10/31/98, 4.75% 9.01%
5. US Treasury Note 2/15/99, 5.00% 8.72%
6. US Treasury Note 11/15/98, 5.50% 7.20%
7. US Treasury Note 11/15/99, 7.875% 7.02%
8. US Treasury Note 4/30/00, 6.75% 3.76%
9. Bear Stearns Mtge. Sec., 9/25/27, 10.00% 3.47%
10.Travelers Properties
Casualty Corp., 9/01/99, 6.75% 3.26%
- --------------------------------------------------------------------------------
Top 5 Industry
Holdings
(% of net assets as of June 30, 1997)
- --------------------------------------------------------------------------------
1. US Government & Federal Agency 80.05%
2. First Mortgage Loans 9.09%
3. Financial 3.26%
4. Recreational Vehicles 2.14%
5. Equipment Loans 2.05%
Average Maturity 1.9 years
(as of 6/30/97)
- --------------------------------------------------------------------------------
* The total return reflects the annual return on an investment including
appreciation and dividends or interest. Total returns shown herein include
the change in share price and reinvestment of capital gain distributions and
dividends, and, for the Service Class shares, include the service fee of
.25%.
+ Performance figures for the Service Class, first offered to the public on
1/1/95, include the historical performance of the Institutional Class from
the Fund's inception (1/2/91) up to December 31, 1994. Performance figures
for these two Classes after this date will vary based on differences in their
expense structures.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that upon redemption, shares may be worth
more or less than their original cost.
The Institutional Class shares are sold with no sales charge. The Service
Class shares, first offered 1/1/95, are sold with no initial or contingent
deferred sales charge, but are subject to an annual shareholder service fee
of .25%.
++ Actual percentages will vary over time. Bond quality ratings provided by
Standard & Poor's. See the prospectus for details.
# Adjusted for liabilities.
127
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
LONG-TERM INVESTMENTS (97.8%)+
ASSET-BACKED
SECURITIES (4.8%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------------------
<S> <C> <C>
BOAT LOANS (0.6%)
Chrysler Financial Corp.
Grantor Trust
Series 11-A Class A
8.90%, due 8/15/97 (a)................................. $ 304,695 $ 304,695
-----------
EQUIPMENT LOANS (2.1%)
Newcourt Receivables Asset Trust
Series 1996-2 Class A
6.87%, due 6/20/04..................................... 1,070,309 1,076,495
-----------
RECREATIONAL VEHICLES (2.1%)
Fleetwood Credit Corp.
Grantor Trust
Series 1996-A Class A
6.75%, due 10/17/11.................................... 1,120,157 1,122,263
-----------
Total Asset-Backed Securities
(Cost $2,497,172)...................................... 2,503,453
-----------
CORPORATE BONDS (3.8%)
BANKS (0.5%)
Sakura Capital Funding (Cayman) Ltd.
6.7625%, due 8/29/49 (d)(e)............................ 260,000 260,000
-----------
FINANCE (3.3%)
Travelers Property Casualty Corp.
6.75%, due 9/1/99...................................... 1,700,000 1,712,308
-----------
Total Corporate Bonds
(Cost $1,955,535)...................................... 1,972,308
-----------
MORTGAGE-BACKED SECURITIES (9.2%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (0.1%)
Resolution Trust Corp.
Series 1992-C4 Class A1
8.15%, due 6/25/24..................................... 78,364 78,462
-----------
FIRST MORTGAGE LOANS (COLLATERALIZED
MORTGAGE OBLIGATIONS) (9.1%)
Bear Stearns Mortgage
Securities, Inc.
Series 1996-5 Class A2
10.00%, due 9/25/27.................................... 1,753,161 1,821,236
Series 1996-4 Class AI2
10.50%, due 9/25/27.................................... 1,595,214 1,670,923
Residential Accredit Loans, Inc.
Series 1996-QS4 Class AI2
11.00%, due 8/25/26.................................... 1,221,601 1,276,951
-----------
4,769,110
-----------
Total Mortgage-Backed Securities
(Cost $4,835,630)...................................... 4,847,572
-----------
</TABLE>
U.S. GOVERNMENT &
FEDERAL AGENCY (80.0%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(MORTGAGE PASS-THROUGH SECURITIES) (6.4%)
7.125%, due 5/20/23-8/20/25 ARM (b).............. $ 3,303,612 $ 3,395,074
-----------
UNITED STATES TREASURY NOTES (73.6%)
4.75%, due 10/31/98 (c).......................... 4,800,000 4,726,512
5.00%, due 2/15/99............................... 4,650,000 4,576,623
5.50%, due 11/15/98 (c).......................... 3,800,000 3,777,428
5.875%, due 2/15/00 (c).......................... 5,750,000 5,704,172
6.375%, due 5/15/99 (c).......................... 9,155,000 9,200,775
6.75%, due 4/30/00............................... 1,950,000 1,975,584
7.75%, due 11/30/99 (c).......................... 4,800,000 4,967,232
7.875%, due 11/15/99............................. 3,550,000 3,682,025
-----------
38,610,351
-----------
Total U.S. Government &
Federal Agency
(Cost $42,045,146)............................... 42,005,425
-----------
Total Long-Term Investments
(Cost $51,333,483)............................... 51,328,758
-----------
SHORT-TERM
INVESTMENT (1.1%)
COMMERCIAL PAPER (1.1%)
Ford Motor Credit Corp.
6.111%, due 7/1/97............................... 575,000 575,000
-----------
Total Short-Term Investment
(Cost $575,000).................................. 575,000
-----------
Total Investments
(Cost $51,908,483) (f)........................... 98.9% 51,903,758 (g)
Cash and Other Assets, Less Liabilities........... 1.1 572,958
----------- -----------
Net Assets........................................ 100.0% $52,476,716
=========== ===========
</TABLE>
- --------
(a) Long-term security maturing within the twelve month period.
(b) ARM--Adjustable Rate Mortgage. Resets annually.
(c) Represents securities out on loan or a portion which is out on loan.
(d) May be sold to institutional investors only.
(e) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(f) The cost for Federal income tax purposes is $51,910,145.
(g) At June 30, 1997 net unrealized depreciation was $6,387, based on cost for
Federal income tax purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an excess of market
value over cost of $94,030 and aggregate gross unrealized depreciation for
all investments on which there was an excess of cost over market value of
$100,417.
- --------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
128
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $51,908,483)................................... $51,903,758
Cash............................................................. 598
Receivables:
Investment securities sold...................................... 2,699,836
Interest........................................................ 555,793
-----------
Total assets................................................... 55,159,985
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 2,576,221
Fund shares redeemed............................................ 55,717
Administrator................................................... 10,170
Adviser......................................................... 6,386
Transfer agent.................................................. 3,755
Custodian....................................................... 2,998
Accrued expenses................................................. 28,022
-----------
Total liabilities.............................................. 2,683,269
-----------
Net assets....................................................... $52,476,716
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................. $ 5,249
Institutional Service Class..................................... 139
Additional paid-in capital....................................... 57,866,199
Accumulated undistributed net investment income.................. 1,685,345
Accumulated net realized loss on investments..................... (7,075,491)
Net unrealized depreciation on investments....................... (4,725)
-----------
Net assets....................................................... $52,476,716
===========
Institutional Class
Net assets applicable to outstanding shares...................... $51,127,593
===========
Shares of capital stock outstanding.............................. 5,248,625
===========
Net asset value per share outstanding............................ $ 9.74
===========
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 1,349,123
===========
Shares of capital stock outstanding.............................. 138,903
===========
Net asset value per share outstanding............................ $ 9.71
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest.......................................................... $1,814,376
----------
Expenses:
Administration.................................................... 119,405
Advisory.......................................................... 39,801
Professional...................................................... 16,023
Registration...................................................... 12,837
Transfer agent.................................................... 11,317
Custodian......................................................... 8,419
Shareholder communication......................................... 3,053
Service........................................................... 1,750
Directors......................................................... 883
Miscellaneous..................................................... 1,698
----------
Total expenses before
reimbursement................................................... 215,186
Expense reimbursement from Administrator........................... (54,230)
----------
Net expenses..................................................... 160,956
----------
Net investment income.............................................. 1,653,420
----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments................................... (171,862)
Net change in unrealized appreciation on investments............... (31,046)
----------
Net realized and unrealized loss on investments.................... (202,908)
----------
Net increase in net assets resulting from operations............... $1,450,512
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
129
<PAGE>
SHORT-TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited) and the year ended December
31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.............................. $ 1,653,420 $ 3,831,143
Net realized loss on investments................... (171,862) (490,723)
Net change in unrealized appreciation on
investments....................................... (31,046) (637,312)
----------- -----------
Net increase in net assets resulting from
operations........................................ 1,450,512 2,703,108
----------- -----------
Dividends to shareholders:
From net investment income:
Institutional Class............................... -- (3,734,256)
Institutional Service Class....................... -- (90,257)
----------- -----------
Total dividends to shareholders.................. -- (3,824,513)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................... 12,439,809 61,352,652
Institutional Service Class....................... 206,514 806,649
Net asset value of shares issued to shareholders in
reinvestment of dividends:
Institutional Class............................... -- 3,734,256
Institutional Service Class....................... -- 90,257
----------- -----------
12,646,323 65,983,814
Cost of shares redeemed:
Institutional Class............................... (20,531,295) (57,100,440)
Institutional Service Class....................... (209,381) (671,716)
----------- -----------
Increase (decrease) in net assets derived from
capital share transactions....................... (8,094,353) 8,211,658
----------- -----------
Net increase (decrease) in net assets............. (6,643,841) 7,090,253
NET ASSETS:
Beginning of period................................. 59,120,557 52,030,304
----------- -----------
End of period....................................... $52,476,716 $59,120,557
=========== ===========
Accumulated undistributed net investment income..... $ 1,685,345 $ 31,925
=========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
130
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS
------------- ------------- ------------- -------------
SIX MONTHS YEAR ENDED DECEMBER 31
ENDED ---------------------------
JUNE 30, 1997* 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of
period............... $ 9.48 $ 9.46 $ 9.68 $ 9.67
------- ------ ------------- -------------
Net investment
income............... 0.31 0.30 0.66 0.64
Net realized and
unrealized gain (loss)
on investments....... (0.05) (0.05) (0.20) (0.21)
------- ------ ------------- -------------
Total from investment
operations........... 0.26 0.25 0.46 0.43
------- ------ ------------- -------------
Less dividends and
distributions:
From net investment
income............... -- -- (0.66) (0.64)
From net realized gain
on investments....... -- -- -- --
In excess of net
investment income.... -- -- -- --
In excess of net
realized gain on
investments.......... -- -- -- --
------- ------ ------------- -------------
Total dividends and
distributions........ -- -- (0.66) (0.64)
------- ------ ------------- -------------
Net asset value at end
of period............ $ 9.74 $ 9.71 $ 9.48 $ 9.46
======= ====== ============= =============
Total investment
return (a)........... 2.74% 2.64% 4.81% 4.46%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income.............. 6.24%+ 5.99%+ 5.85% 5.60%
Net expenses......... 0.60%+ 0.85%+ 0.60% 0.85%
Expenses (before
reimbursement)...... 0.80%+ 1.05%+ 0.79% 1.04%
Portfolio turnover
rate................. 77% 77% 195% 195%
Net assets at end of
period (in 000's).... $51,128 $1,349 $57,805 $1,316
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS INSTITUTIONAL CLASS
------------- ------------- ----------------------------
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1995 1994 1993 1992
--------------------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period............... $ 9.37 $ 9.37 $ 10.33 $ 11.23 $ 11.13
------------- ------------- -------- --------- ---------
Net investment
income............... 0.65 0.64 0.97 0.72 0.66
Net realized and
unrealized gain (loss
on investments....... 0.31 0.30 (0.96) (0.12) (0.03)
------------- ------------- -------- --------- ---------
Total from
investment
operations........... 0.96 0.94 0.01 0.60 0.63
------------- ------------- -------- --------- ---------
Less dividends and
distributions:
From net investment
income............... (0.65) (0.64) (0.97) (1.36) (0.48)
From net realized gain
on investments....... -- -- -- (0.04) (0.05)
In excess of net
investment income.... -- -- -- (0.02) --
In excess of net
realized gain on
investments.......... -- -- -- (0.08) --
------------- ------------- -------- --------- ---------
Total dividends and
distributions........ (0.65) (0.64) (0.97) (1.50) (0.53)
------------- ------------- -------- --------- ---------
Net asset value at end
of period............ $ 9.68 $ 9.67 $ 9.37 $ 10.33 $ 11.23
============= ============= ======== ========= =========
Total investment
return (a)........... 10.27% 10.07% 0.11% 5.67% 5.94%
Ratios (to average net
assets)/Supplemental
Data:
Net investment
income.............. 6.38% 6.13% 5.90% 6.32% 6.64%
Net expenses......... 0.60% 0.85% 0.60% 0.55% 0.55%
Expenses (before
reimbursement)...... 0.82% 1.07% 0.72% 0.68% 0.72%
Portfolio turnover
rate................. 171% 171% 269% 232% 270%
Net assets at end of
period (in 000's).... $50,902 $1,128 $62,340 $148,846 $161,499
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) 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.
131
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- -------------------------------------------------------------------------------
NOTE 1--Organization and Business:
- -------------------------------------------------------------------------------
MainStay Institutional Funds Inc. (the "Company") was incorporated in the state
of Maryland on September 21, 1990 and commenced operations on January 2, 1991.
The Company is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended, ("Investment Company Act"). As
of June 30, 1997 the Company has eleven separate investment portfolios: EAFE
Index Fund, Growth Equity Fund, Indexed Equity Fund, International Equity
Fund, Multi-Asset Fund, Value Equity Fund, Bond Fund, Indexed Bond Fund,
International Bond Fund, Money Market Fund and Short-Term Bond Fund
(individually or collectively referred to as a "Fund" or the "Funds").
The International Bond Fund and the International Equity Fund commenced
operations on January 1, 1995.
Each Fund currently offers two classes of shares as follows: Institutional
Class shares and Institutional Service Class shares. The Company has adopted a
Shareholder Services Plan with respect to the Institutional Service Class of
each Fund. The Institutional Class shares and Institutional Service Class
shares are substantially the same, except that the Institutional Service Class
shares bear the fees payable under the Shareholder Services Plan at an annual
rate of 0.25% of the average daily net assets of the outstanding Institutional
Service Class shares ("Shareholder Service Fee"). The distribution of
Institutional Service Class shares commenced on January 1, 1995.
The investment objectives for each of the Funds of the Company are as
follows:
The EAFE Index Fund seeks to provide investment results that correspond to
the total return performance (reflecting reinvestment of dividends) of common
stocks in the aggregate, as represented by the Morgan Stanley Capital
International Europe, Australia and Far East ("EAFE") Index.
The Growth Equity Fund seeks long-term growth of capital. Dividend income,
if any, is a consideration incidental to the Fund's objective of growth of
capital.
The Indexed Equity Fund seeks to provide investment results that correspond
to the total return performance (reflecting reinvestment of dividends) of
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index.
The International Equity Fund seeks long-term growth of capital by investing
in a portfolio consisting primarily of non-U.S. equity securities. Current
income is a secondary objective.
The Multi-Asset Fund seeks to maximize total return, consistent with certain
percentage constraints on amounts allocated to each asset class, from a
combination of common stocks, fixed income securities, and money market
investments.
The Value Equity Fund seeks maximum long-term total return from a
combination of capital growth and income. The Fund is not designed or managed
primarily to produce current income.
The Bond Fund seeks to maximize total return, consistent with liquidity, low
risk to principal and investment in debt securities.
The Indexed Bond Fund seeks to provide investment results that correspond to
the total return performance of fixed income securities in the aggregate, as
represented by the Salomon Brothers Broad Investment Grade Bond Index.
The International Bond Fund seeks to provide total return by investing
primarily in a portfolio of non-U.S. (primarily government) debt securities.
The Money Market Fund seeks to provide a high level of current income while
preserving capital and maintaining liquidity.
The Short-Term Bond Fund seeks to maximize total return, consistent with
liquidity, preservation of capital and investment in short-term debt
securities.
132
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- -------------------------------------------------------------------------------
NOTE 2--Significant Accounting Policies:
- -------------------------------------------------------------------------------
The following is a summary of significant accounting policies followed by the
Company:
(A)
VALUATION OF FUND SHARES. The net asset value per share of each Class of
shares of each Fund is calculated on each day the New York Stock Exchange (the
"Exchange") is open for trading as of the close of regular trading on the
Exchange. The net asset value per share of each Class of shares is determined
by taking the assets attributable to that Class, subtracting the liabilities
attributable to that Class, and dividing the result by the outstanding shares
of that Class.
The Money Market Fund seeks to maintain a net asset value of $1.00 per share,
although there is no assurance that it will be able to do so.
(B)
SECURITIES VALUATION. Portfolio securities of the Money Market Fund are valued
at their amortized cost, which approximates market value. 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.
Portfolio securities of each of the other Funds are stated at value
determined (a) by appraising common and preferred stocks which are traded on
the New York Stock Exchange at the last sale price on that day or, if no sale
occurs, the mean between the closing bid price and asked price; (b) by
appraising common and preferred stocks traded on other United States national
securities exchanges or foreign securities exchanges as nearly as possible in
the manner described in (a) by reference to their principal exchange,
including the National Association of Securities Dealers National Market
System; (c) by appraising over-the-counter securities quoted on the National
Association of Securities Dealers ("NASDAQ") system (but not listed on the
National Market System) at the bid price supplied through such system; (d) by
appraising over-the-counter securities not quoted on the NASDAQ system and
securities listed or traded on certain foreign exchanges whose operations are
similar to the U.S. over-the-counter market at prices supplied by a pricing
agent selected by a Fund's investment adviser if such prices are deemed to be
representative of market values at the regular close of business of the New
York Stock Exchange; (e) by appraising debt securities at prices supplied by a
pricing agent selected by a Fund's investment adviser, whose prices reflect
broker/dealer supplied valuations and electronic data processing techniques if
those prices are deemed by a Fund's investment adviser to be representative of
market values at the regular close of business of the New York Stock Exchange;
(f) by appraising options and futures contracts at the last sale price on the
market where any such option or futures are principally traded; and (g) by
appraising all other securities and other assets, including over-the-counter
common and preferred stocks not quoted on the NASDAQ system, securities not
listed or traded on foreign exchanges whose operations are similar to the U.S.
over-the-counter market and debt securities for which prices are supplied by a
pricing agent but are not deemed by a Fund's investment adviser to be
representative of market values, but excluding money market instruments with a
remaining maturity of sixty days or less and including restricted securities
and securities for which no market quotations are available, at fair value in
accordance with procedures approved by the Board of Directors. Money Market
instruments held by the Funds with a remaining maturity of sixty days or less
are valued by the amortized cost method which 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.
Events affecting the values of portfolio securities that occur between the
time their prices are determined and the close of the New York Stock Exchange
will not be reflected in the Funds' calculation of net asset values' unless a
Fund's investment adviser deems that the particular event would materially
affect such Fund's net asset value, in which case an adjustment will be made.
(C)
FEDERAL INCOME TAXES. Each of the Funds is treated as a separate entity for
Federal income tax purposes. The Company's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Fund within the allowable time limits. Therefore, no Federal income or
excise tax provision is required.
Investment income received by a Fund from foreign sources may be subject to
foreign income taxes withheld at the source.
133
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
(D)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are recorded on the ex-
dividend date. For the Money Market Fund, dividends are declared daily and
paid monthly. Each of the other Funds intends to declare and pay substantially
all of their net investment income and net realized gains no less frequently
than once a year. Income distributions and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles.
(E)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Company records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage related and other asset-
backed securities. Dividend income is recognized on the ex-dividend date and
interest income is accrued daily. Discounts on securities, other than short-
term securities, purchased for all Funds are amortized on the constant yield
method over the life of the respective securities or, in the case of a
callable security, over the period to the first date of call. Premiums on
securities purchased are not amortized for any Fund except the Money Market
Fund which amortizes the premium on the constant yield method over the life of
the respective securities.
(F)
ORGANIZATION COSTS. Organization costs incurred for the International Bond
Fund and the International Equity Fund are being amortized over a maximum
period of 60 months beginning January 1, 1995, the date such Funds commenced
operations. In the event that any of the initial shares purchased by
affiliates of the Administrator are redeemed, proceeds of such redemption will
be reduced by the proportionate amount of the unamortized deferred
organizational expenses which the number of shares redeemed bears to the total
number of initial shares purchased.
(G)
EXPENSES. Expenses with respect to any two or more Funds are allocated in
proportion to the net assets of the respective Funds when the expenses are
incurred except where allocations of direct expenses can otherwise fairly be
made.
The investment income and expenses (other than expenses incurred under the
Shareholder Services Plan), and realized and unrealized gains and losses on
investments of a Fund are allocated to separate classes of shares based upon
their relative net assets on the date the income is earned or expenses and
realized and unrealized gains and losses are incurred.
(H)
USE OF ESTIMATES. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
(I)
FOREIGN CURRENCY TRANSACTIONS. The books and records of the Company are kept
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at
the mean between the buying and selling rates last quoted by any major U.S.
bank at the following dates:
(i) market value of investment securities, other assets and liabilities--
at the valuation date
(ii) income and expenses--at the date of such transactions.
The assets and liabilities are presented at the exchange rates and market
values at the close of the period. The changes in net assets arising from
changes in exchange rates and the changes in net assets resulting from changes
in market prices are not separately presented. However, gains and losses from
certain foreign currency transactions are treated as ordinary income for
Federal income tax purposes.
Net realized gain (loss) on foreign currency transactions represents net
gains and losses on forward currency transactions, net currency gains and
losses realized as a result of differences between the amounts of security
sale
134
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
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 at period-end exchange rates are
reflected in unrealized foreign exchange gains or losses.
There are certain risks involved in investing in foreign securities that are
in addition to the usual risks inherent in domestic instruments. These risks
include those resulting from future adverse political and economic
developments and possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions.
EAFE INDEX FUND
Foreign cash held at June 30, 1997:
<TABLE>
<CAPTION>
CURRENCY COST VALUE
----------------------------------------- ----------- -----------
<S> <C> <C> <C>
Pound Sterling (Pounds) 11,000 $ 16,833 $ 18,309
=========== ===========
INTERNATIONAL EQUITY FUND
Foreign cash held at June 30, 1997:
<CAPTION>
CURRENCY COST VALUE
----------------------------------------- ----------- -----------
<S> <C> <C> <C>
Australian Dollar A$ 158,928 $ 122,843 $ 118,198
Austrian Schilling AS 571,468 47,456 46,608
Belgian Franc BF 47,295 1,509 1,316
Danish Krone DK 9,265 1,570 1,397
Deutsche Mark DM 2,254,698 1,306,150 1,289,898
French Franc FF 1,083,681 186,743 184,582
Hong Kong Dollar HK 742,664 95,931 95,861
Italian Lira IL 200,015,634 119,196 117,609
Japanese Yen (Yen) 3,197,607 27,001 27,944
Malaysian Ringgit MK 76,780 30,646 32,619
Netherland Guilder NG 80,456 42,204 41,064
New Zealand Dollar N$ 67,919 47,025 46,036
Norwegian Krone NK 285,430 40,384 38,989
Pound Sterling (Pounds) 2,527,753 3,961,308 4,206,962
Singapore Dollar S$ 555,263 385,217 388,350
Spanish Peseta SP 747,162,329 5,140,981 5,079,957
Swiss Franc CF 46,358 32,205 31,798
----------- -----------
$11,588,369 $11,749,188
=========== ===========
INTERNATIONAL BOND FUND
Foreign cash held at June 30, 1997:
<CAPTION>
CURRENCY COST VALUE
----------------------------------------- ----------- -----------
<S> <C> <C> <C>
Argentinian Peso AP 13,855 $ 13,856 $ 13,856
Australian Dollar A$ 13,779 10,352 10,323
Canadian Dollar C$ 40,344 29,002 29,243
Danish Krone DK 219,390 33,989 33,087
Deutsche Mark DM 3,061,016 1,774,861 1,755,597
French Franc FF 555,038 97,421 94,539
Italian Lira IL 18,928,302 11,111 11,130
New Zealand Dollar N$ 55,989 38,370 37,950
Pound Sterling (Pounds) 61,483 100,607 102,327
Swedish Krona SK 260,000 33,474 33,625
----------- -----------
$ 2,143,043 $ 2,121,677
=========== ===========
</TABLE>
135
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
(J)
FORWARD CURRENCY CONTRACTS. A forward currency contract is an agreement to buy
or sell currencies of different countries on a specified future date at a
specified rate. During the period the forward contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by "marking
to market" such contract on a daily basis to reflect the market value of the
contract at the end of each day's trading. When the forward contract is
closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the Fund's
basis in the contract. Forward currency contracts are used for hedging
purposes. (see Note 5).
INTERNATIONAL EQUITY FUND
Forward foreign currency contracts open at June 30, 1997:
<TABLE>
<CAPTION>
VALUE ON UNREALIZED
CONTRACT TRADE CURRENT APPRECIATION/
AMOUNT DATE VALUE (DEPRECIATION)
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
Australian Dollar, expiring 7/7/97-9/3/97....... A$ 5,815,000 $ 4,438,602 $ 4,359,143 $ 79,459
Deutsche Mark, expiring 7/7/97-10/20/97......... DM 67,162,166 40,065,931 38,672,485 1,393,446
French Franc, expiring 8/18/97.................. FF 41,790,000 7,191,621 7,141,911 49,710
Italian Lira, expiring 8/1/97................... IL 10,800,000,000 6,276,096 6,339,600 (63,504)
Japanese Yen, expiring 7/7/97-10/28/97.......... (Yen) 2,920,960,890 24,917,372 25,700,503 (783,131)
New Zealand Dollar, expiring 7/23/97............ N$ 3,450,000 2,371,530 2,336,782 34,748
Norwegian Krone, expiring 7/21/97............... NK 12,115,000 1,710,031 1,656,169 53,862
Spanish Peseta, expiring 8/1/97................. SP 595,000,000 4,057,566 4,047,190 10,376
Swiss Franc, expiring 9/29/97-10/10/97.......... CF 16,749,000 11,741,167 11,626,620 114,547
----------
889,513
----------
FOREIGN CURRENCY BUY CONTRACTS
- ------------------------------
Canadian Dollar, expiring 7/16/97............... C$ 9,415,995 6,822,284 6,832,990 10,706
Deutsche Mark, expiring 7/7/97-9/29/97.......... DM 52,210,850 30,588,488 30,043,357 (545,131)
French Franc, expiring 8/18/97.................. FF 36,385,000 6,387,367 6,218,196 (169,171)
Italian Lira, expiring 8/1/97................... IL 4,710,000,000 2,751,104 2,764,770 13,666
Japanese Yen, expiring 7/7/97................... (Yen) 1,858,172,635 15,705,000 16,257,152 552,152
Pound Sterling, expiring 7/7/97................. (Pounds) 3,360,000 5,479,042 5,590,869 111,827
Swiss Franc, expiring 7/10/97-9/29/97........... CF 16,860,000 11,830,398 11,594,935 (235,463)
----------
(261,414)
----------
Net Appreciation................................ $ 628,099
==========
</TABLE>
136
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL BOND FUND
Forward foreign currency contracts open at June 30, 1997:
<TABLE>
<CAPTION>
VALUE ON UNREALIZED
CONTRACT TRADE CURRENT APPRECIATION/
AMOUNT DATE VALUE (DEPRECIATION)
------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
Australian Dollar, expiring 9/3/97.............. A$ 4,865,000 $ 3,704,795 $ 3,647,529 $ 57,266
Danish Krone, expiring 7/22/97.................. DK 7,185,000 1,094,094 1,085,057 9,037
Deutsche Mark, expiring 7/3/97-10/20/97......... DM 50,201,220 30,698,909 28,876,322 1,822,587
French Franc, expiring 8/18/97.................. FF 7,495,000 1,288,079 1,280,895 7,184
Irish Punt, expiring 7/3/97-10/10/97............ IP 1,373,000 2,103,030 2,069,419 33,611
Italian Lira, expiring 8/1/97................... IL 1,192,000,000 692,576 699,704 (7,128)
Japanese Yen, expiring 7/7/97................... (Yen) 553,025,000 4,833,097 4,838,416 (5,319)
New Zealand Dollar, expiring 7/23/97............ N$ 2,770,000 1,904,098 1,876,199 27,899
Pound Sterling, expiring 7/7/97................. (Pounds) 2,015,000 3,274,575 3,352,857 (78,282)
Spanish Peseta, expiring 8/1/97................. SP 115,000,000 784,235 782,230 2,005
Swedish Krona, expiring 8/1/97.................. SK 26,145,000 3,409,497 3,385,673 23,824
Swiss Franc, expiring 7/10/97-9/29/97........... CF 5,439,432 3,803,101 3,752,253 50,848
----------
1,943,532
----------
FOREIGN CURRENCY BUY CONTRACTS
- ------------------------------
Australian Dollar, expiring 7/7/97.............. A$ 1,620,000 1,261,980 1,213,774 (48,206)
Canadian Dollar, expiring 7/16/97............... C$ 3,545,838 2,569,074 2,573,140 4,066
Deutsche Mark, expiring 7/3/97-10/10/97......... DM 46,904,706 27,582,860 26,957,600 (625,260)
French Franc, expiring 8/18/97-8/20/97.......... FF 33,520,000 5,842,991 5,728,723 (114,268)
Irish Punt, expiring 7/3/97..................... IP 324,000 490,760 488,791 (1,969)
Italian Lira, expiring 8/1/97................... IL 340,000,000 199,437 199,580 143
Japanese Yen, expiring 7/7/97................... (Yen) 438,416,000 3,538,042 3,835,702 297,660
Pound Sterling, expiring 7/7/97-9/17/97......... (Pounds) 1,212,280 1,982,969 2,014,706 31,737
Spanish Peseta, expiring 7/16/97................ SP 81,000,000 559,392 550,881 (8,511)
Swedish Krona, expiring 8/1/97.................. SK 12,000,000 1,563,314 1,553,952 (9,362)
Swiss Franc, expiring 7/10/97-9/29/97........... CF 5,453,309 3,802,347 3,751,187 (51,160)
----------
(525,130)
----------
Net Appreciation................................ $1,418,402
==========
</TABLE>
(K)
REPURCHASE AGREEMENTS. At the time the Funds enter into a repurchase
agreement, the value of the underlying security, including accrued interest,
will equal or exceed the value of the repurchase agreement and, in the case of
repurchase agreements exceeding one day, the value of the underlying security,
including accrued interest, is required during the term of the agreement to be
equal to or exceed the value of the repurchase agreement. The underlying
securities for all repurchase agreements are held in a segregated account of
the Funds' custodian. In the case of repurchase agreements exceeding one day,
the market value of the underlying securities is monitored by pricing the
underlying securities daily.
In the event of the bankruptcy of a counterparty, realization of the
collateral may be delayed or limited.
(L)
FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date, or
to make or receive a cash payment based on the value of a securities index.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market"
such contract on a daily basis to reflect the market value of the contract at
the end of each day's trading. The Fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in the value of the
contract. Such receipts or payments are known as "variation margin". When the
futures contract is closed, the Fund records a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract. Futures contracts are used for hedging
purposes. (see Note 5).
137
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
(M)
MORTGAGE DOLLAR ROLLS. A mortgage dollar roll ("MDR") is a transaction in
which a Fund sells mortgage-backed securities ("MBS") from its portfolio to a
counterparty from whom it simultaneously agrees to buy a similar security on a
delayed delivery basis. The MDR transactions of a Fund are classified as
purchase and sale transactions. The securities sold in connection with the
MDRs are removed from the portfolio and a realized gain or loss is recognized.
The securities the Funds have agreed to acquire are included at market value
in the portfolio of investments and liability for such purchase commitments is
included as payables for investments purchased. The Fund maintains a
segregated account with its custodian containing securities from its portfolio
having a value not less than the repurchase price, including accrued interest.
MDR transactions involve certain risks, including the risk that the MBS
returned to the Fund at the end of the roll, while substantially similar,
could be inferior to what was initially sold to the counterparty.
(N)
SECURITIES LENDING. The Fund may lend its securities to broker-dealers and
financial institutions. The loans are secured by collateral 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 fail financially. The Fund receives
compensation for lending its securities in the form of fees or it retains a
portion of interest on the investment of any cash received as collateral. The
Fund also continues to receive interest and dividends on the securities loaned
and any gain or loss in the market price of the securities loaned that may
occur during the term of the loan will be for the account of the Fund.
- -------------------------------------------------------------------------------
NOTE 3--Fees and Related Party Policies:
- -------------------------------------------------------------------------------
(A)
INVESTMENT ADVISORY AND ADMINISTRATION FEES. MacKay-Shields Financial
Corporation ("MacKay-Shields") serves as the investment adviser to the Growth
Equity Fund, International Equity Fund, Value Equity Fund, Bond Fund,
International Bond Fund and Short-Term Bond Fund under an Investment Advisory
Agreement. MacKay-Shields is a registered investment adviser and an indirect
wholly-owned subsidiary of New York Life Insurance Company ("New York Life").
New York Life serves as the investment adviser to the Money Market Fund under
an Investment Advisory Agreement. Monitor Capital Advisors Inc. ("Monitor
Capital"), is a registered investment adviser and a wholly-owned subsidiary of
NYLIFE Inc., an indirect wholly-owned subsidiary of New York Life and serves
as investment adviser to the EAFE Index Fund, Indexed Equity Fund, Multi-Asset
Fund and Indexed Bond Fund under an Investment Advisory Agreement.
New York Life is the Administrator for the Funds.
The Company, on behalf of each Fund, pays the Advisers and Administrator a
monthly fee for the services performed and the facilities furnished at an
annual rate of the average daily net assets of that Fund as follows:
<TABLE>
<CAPTION>
ADVISER ADMINISTRATOR
------- -------------
<S> <C> <C>
EAFE Index Fund........................................ .15% .80%
Growth Equity Fund..................................... .25% .60%
Indexed Equity Fund.................................... .10% .40%
International Equity Fund.............................. .35% .50%
Multi-Asset Fund....................................... .15% .50%
Value Equity Fund...................................... .25% .60%
Bond Fund.............................................. .20% .55%
Indexed Bond Fund...................................... .10% .40%
International Bond Fund................................ .30% .50%
Money Market Fund...................................... .10% .40%
Short-Term Bond Fund................................... .15% .45%
</TABLE>
138
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
The Administrator (in the case of the Indexed Equity Fund together with
Monitor Capital, the Fund's investment adviser) has voluntarily agreed to
assume the portion of the Funds' operating expenses for the six months ended
June 30, 1997, for the following Funds to the extent the expenses (excluding
service fees) on an annualized basis exceeded the indicated percentages:
<TABLE>
<S> <C>
EAFE Index Fund.................... .94%
Indexed Equity Fund................ .30%
International Equity Fund.......... 1.00%
Bond Fund.......................... .75%
Indexed Bond Fund.................. .50%
International Bond Fund............ .95%
Money Market Fund.................. .50%
Short-Term Bond Fund............... .60%
</TABLE>
In connection with the voluntary expense limitations, the Administrator
assumed the following expenses for the six months ended June 30, 1997:
<TABLE>
<S> <C>
EAFE Index Fund................ $118,834
Indexed Equity Fund............ 935,127*
International Equity Fund...... 16,690
Bond Fund...................... 83,266
Indexed Bond Fund.............. $90,033
International Bond Fund........ 27,170
Money Market Fund.............. 97,873
Short-Term Bond Fund........... 54,230
</TABLE>
- --------
* For the Indexed Equity Fund the Administrator assumed $755,295, Monitor
Capital the Adviser assumed $179,832.
The Growth Equity Fund, Multi-Asset Fund and the Value Equity Fund do not
have a voluntary expense limitation.
These voluntary expense limitations will continue through December 31, 1997
(December 31, 1998 for the Indexed Equity Fund), after which the voluntary
expense limitations may be terminated or revised at anytime at the discretion
of the Administrator (and the Adviser in the case of the Indexed Equity Fund).
(B)
SERVICE FEES. In accordance with the Shareholder Services Plan, New York Life
has agreed to provide, through its affiliates or independent third parties,
various shareholder and administrative support services to Institutional
Service Class shareholders. For its services, New York Life is entitled to a
Shareholder Service Fee accrued daily and paid monthly at an annual rate of
0.25% of the average daily net assets attributable to the Institutional
Service Class of each Fund.
(C)
DISTRIBUTOR. NYLIFE Distributors Inc. ("NYLIFE Distributors"), an indirect
wholly-owned subsidiary of New York Life serves as the Company's distributor
and principal underwriter (the "Distributor") pursuant to a Distribution
Agreement. The Distributor is not obligated to sell any specific amount of the
Company's shares, and receives no compensation from the Company pursuant to
the Distribution Agreement.
(D)
DIRECTORS FEES. Directors, other than those affiliated with New York Life,
MacKay-Shields, Monitor Capital or NYLIFE Distributors, are paid an annual fee
of $24,000 and $1,000 for each Board of Directors and Committee meeting
attended plus reimbursement for travel and out-of-pocket expenses.
(E)
CAPITAL. The Funds have been advised that at June 30, 1997 affiliates of New
York Life owned a significant number of shares of the Funds with the following
market values:
<TABLE>
<S> <C>
EAFE Index Fund............. $ 78,914,962
Growth Equity Fund.......... 548,414,980
Indexed Equity Fund......... 685,459,230
International Equity Fund... 111,122,919
Multi-Asset Fund............ 241,325,969
Value Equity Fund........... 726,768,570
Bond Fund................... $129,895,073
Indexed Bond Fund........... 89,379,381
International Bond Fund..... 50,025,906
Money Market Fund........... 74,122,224
Short-Term Bond Fund........ 14,535,637
</TABLE>
139
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
From time to time, the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities
of these shareholders could have a material impact on the Fund.
(F)
OTHER. Fees for the cost of legal services provided to the Company by the
Office of General Counsel of New York Life are charged to the Funds. For the
six months ended June 30, 1997 these fees were as follows:
<TABLE>
<S> <C>
EAFE Index Fund................. $ 3,341
Growth Equity Fund.............. 20,765
Indexed Equity Fund............. 25,259
International Equity Fund....... 4,848
Multi-Asset Fund................ 12,917
Value Equity Fund............... 31,436
Bond Fund....................... $6,651
Indexed Bond Fund............... 4,338
International Bond Fund......... 1,949
Money Market Fund............... 5,696
Short-Term Bond Fund............ 2,097
</TABLE>
- -------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- -------------------------------------------------------------------------------
At December 31, 1996, for Federal income tax purposes, capital loss
carryforwards, as shown in the table below, were available to the extent
provided by regulations to offset future realized gains of each respective
Fund through the years indicated. To the extent that these loss carryforwards
are used to offset future capital gains, it is probable that the capital gains
so offset will not be distributed to shareholders. Additionally, as shown in
the table below, certain Funds intend to elect, to the extent provided by
regulations, to treat certain qualifying capital losses that arose during the
year ended December 31, 1996 as if they arose on January 1, 1997.
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S) DEFERRED (000'S)
----------------- -------------- ----------------
<S> <C> <C> <C>
EAFE Index Fund........... $ 0 $ 55
======= ======
International Equity
Fund..................... $ 0 $1,040
======= ======
Bond Fund................. 2002 $12,622
2004 1,624
-------
$14,246 $ 0
======= ======
Indexed Bond Fund......... 2004 $ 1,439 $ 59
======= ======
Short-Term Bond Fund...... 2001 $ 164
2002 4,478
2003 1,770
2004 485
-------
$ 6,897 $ 5
======= ======
</TABLE>
The Multi-Asset Fund intends to elect to treat for Federal income tax purposes
approximately $4,674 of qualifying foreign exchange losses that arose during
the year ended December 31, 1996 as if they arose January 1, 1997. The Growth
Equity Fund utilized $96,809 of capital loss carryforwards during the prior
year.
140
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- -------------------------------------------------------------------------------
NOTE 5--Financial Investments:
- -------------------------------------------------------------------------------
The EAFE Index Fund's, International Equity Fund's, Multi-Asset Fund's and
International Bond Fund's use of forward contracts, involves, to varying
degrees, elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. The contract amount reflects the extent
of each Fund's involvement in these financial instruments. Risks arise from
the possible movements in the foreign exchange rates underlying these
instruments. The unrealized appreciation (depreciation) on forward contracts
reflects each Fund's exposure at period end to credit loss in the event of a
counterparty's failure to perform its obligations.
The EAFE Index Fund's and Multi-Asset Fund's use of forward foreign currency
exchange contracts are intended to minimize the risk of loss to the Fund from
adverse changes in the relationship between U.S. dollar and foreign
currencies. The International Equity Fund and International Bond Fund enter
into forward currency exchange contracts in order to protect against
uncertainty in the level of future foreign currency exchange rates.
The EAFE Index Fund's, Indexed Equity Fund's, Multi-Asset Fund's and
Indexed Bond Fund's use of futures contracts involves, to varying degrees,
elements of market risk in excess of the amount recognized in the statement of
assets and liabilities. The contract or notional amounts and variation margin
reflect the extent of each Fund's involvement in open futures positions. Risks
arise from possible imperfect correlation in movements in the price of futures
contracts, interest rates and the underlying hedged assets, and the possible
inability of counterparties to meet the terms of their contracts. However,
each Fund's activities in futures contracts are conducted through regulated
exchanges which minimize counterparty credit risks.
The EAFE Index Fund and Indexed Equity Fund invests in stock index futures
contracts to maintain cash reserves while remaining fully invested, to
facilitate trading, or to reduce transaction costs. The Multi-Asset Fund has
entered into contracts for the future delivery of debt securities and invests
in stock index futures contracts to rebalance the Fund's portfolio composition
and risk profile to meet asset class constraints. The Indexed Bond Fund
invests in contracts for the future delivery of debt securities in order to
attempt to maintain cash reserves while remaining fully invested, to
facilitate trading, or to reduce transaction costs.
- -------------------------------------------------------------------------------
NOTE 6--Portfolio Securities Loaned:
- -------------------------------------------------------------------------------
At June 30, 1997, the Bond Fund and Short-Term Bond Fund had portfolio
securities with a fair market value of $37,522,352 and $12,312,360,
respectively, on loan to broker-dealers and government securities dealers.
With respect to these securities loaned, the funds received collateral with a
fair market value of $38,784,016 and $12,687,763 respectively.
141
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 7--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the six months ended June 30, 1997, purchases and sales of securities,
other than securities subject to repurchase transactions and short-term
securities, were as follows:
<TABLE>
<CAPTION>
EAFE Index Growth Equity Indexed Equity International Equity
Fund Fund Fund Fund
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government securities $ -- $-- $ -- $ -- $ -- $ -- $ -- $ --
All others 1,347 772 108,215 88,053 98,405 11,189 17,940 19,098
----------------------------------------------------------------------------
Total $1,347 $772 $108,215 $88,053 $98,405 $11,189 $ 17,940 $ 19,098
============================================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 8--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
EAFE Index Growth Equity
Fund Fund
Institutional Institutional Institutional Institutional Institutional Institutional Institutional Institutional
Class Service Class Class Service Class Class Service Class Class Service Class
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Six months ended Year ended Six months ended Year ended
June 30, 1997 1996 June 30, 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 207 5 1,451 17 3,333 107 8,895 183
Shares issued in
reinvestment of
dividends and
distributions -- -- 190 1 -- -- 983 13
---------------------------------------------------------------------------------------------------------------
207 5 1,641 18 3,333 107 9,878 196
Shares redeemed (213) (3) (1,192) (9) (2,627) (59) (7,148) (28)
---------------------------------------------------------------------------------------------------------------
Net increase
(decrease) (6) 2 449 9 706 48 2,730 168
===============================================================================================================
<CAPTION>
Multi-Asset Value Equity
Fund Fund
Institutional Institutional Institutional Institutional Institutional Institutional Institutional Institutional
Class Service Class Class Service Class Class Service Class Class Service Class
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Six months ended Year ended Six months ended Year ended
June 30, 1997 1996 June 30, 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,921 85 3,939 188 5,170 157 11,047 686
Shares issued in
reinvestment of
dividends and
distributions -- -- 917 14 -- -- 5,285 93
---------------------------------------------------------------------------------------------------------------
1,921 85 4,856 202 5,170 157 16,332 779
Shares redeemed (1,477) (56) (3,494) (84) (6,642) (100) (6,392) (71)
---------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 444 29 1,362 118 (1,472) 57 9,940 708
===============================================================================================================
<CAPTION>
International Bond Money Market
Fund Fund
Institutional Institutional Institutional Institutional Institutional Institutional Institutional Institutional
Class Service Class Class Service Class Class Service Class Class Service Class
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Six months ended Year ended Six months ended Year ended
June 30, 1997 1996 June 30, 1997 1996
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 81 5 187 18 196,367 45,205 346,675 58,869
Shares issued in
reinvestment of
dividends and
distributions -- -- 609 3 2,829 964 4,008 651
---------------------------------------------------------------------------------------------------------------
81 5 796 21 199,196 46,169 350,683 59,520
Shares redeemed (66) (2) (93) (1) (131,813) (28,185) (307,790) (27,640)
---------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 15 3 703 20 67,383 17,984 42,893 31,880
===============================================================================================================
</TABLE>
*Less than one thousand shares.
142
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Multi-Asset Value Equity Bond Indexed Bond International Bond Short-Term Bond
Fund Fund Fund Fund Fund Fund
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $161 $159 $18,702 $12,910 $ -- $ -- $40,550 $38,701
26,764 3,452 323,329 335,556 91 103 4,915 986 50,373 41,862 259 5,991
- -------------------------------------------------------------------------------------------------------------
$26,764 $3,452 $323,329 $335,556 $252 $262 $23,617 $13,896 $ 50,373 $ 41,862 $40,809 $44,692
=============================================================================================================
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Indexed Equity International Equity
Fund Fund
Institutional Institutional Institutional Institutional Institutional Institutional Institutional Institutional
Class Service Class Class Service Class Class Service Class Class Service Class
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Six months ended Year ended Six months ended Year ended
June 30, 1997 1996 June 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6,611 149 12,964 232 476 7 1,803 47
-- -- 1,075 10 -- -- 994 5
- ----------------------------------------------------------------------------------------------------------------
6,611 149 14,039 242 476 7 2,797 52
(3,132) (24) (4,575) (17) (576) (9) (260) (4)
- ----------------------------------------------------------------------------------------------------------------
3,479 125 9,464 225 (100) (2) 2,537 48
================================================================================================================
<CAPTION>
Bond Indexed Bond
Fund Fund
Institutional Institutional Institutional Institutional Institutional Institutional Institutional Institutional
Class Service Class Class Service Class Class Service Class Class Service Class
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Six months ended Year ended Six months ended Year ended
June 30, 1997 1996 June 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
461 49 1,404 129 870 67 2,467 228
-- -- 1,130 10 -- -- 699 17
- ----------------------------------------------------------------------------------------------------------------
461 49 2,534 139 870 67 3,166 245
(854) (68) (3,576) (47) (564) (60) (7,620) (25)
- ----------------------------------------------------------------------------------------------------------------
(393) (19) (1,042) 92 306 7 (4,454) 220
================================================================================================================
<CAPTION>
Short-Term Bond
Fund
Institutional Institutional Institutional Institutional
Class Service Class Class Service Class
- ------------- ------------- ------------- -------------
Six months ended Year ended
June 30, 1997 1996
- --------------------------------------------------------
<S> <C> <C> <C>
1,300 22 6,225 82
-- -- 394 10
- --------------------------------------------------------
1,300 22 6,619 92
(2,151) (22) (5,775) (70)
- --------------------------------------------------------
(851) -- * 844 22
========================================================
</TABLE>
143
<PAGE>
OFFICERS AND DIRECTORS
Alice T. Kane
Chairperson and Director
Patrick G. Boyle
Director
Lawrence Glacken
Director
Robert P. Mulhearn
Director
Susan B. Kerley
Director
Linda M. Livornese
President
Jefferson C. Boyce
Senior Vice President
Robert Fenster
Vice President
Michael J. Harrington
Vice President
Richard Zuccaro
Tax Vice President
Anthony W. Polis
Treasurer
Sara L. Badler
Secretary
INVESTMENT ADVISERS
New York Life Insurance Company
MacKay Shields Financial Corporation
Monitor Capital Advisors, Inc.
ADMINISTRATOR
New York Life Insurance Company
DISTRIBUTOR
NYLIFE Distributors Inc.
TRANSFER AGENT
Boston Financial Data Services
CUSTODIAN
The Bank of New York
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
LEGAL COUNSEL
Dechert Price & Rhoads
The financial information included herein is taken from the records of the Fund
without examination by the Fund's independent accountants who do not express an
opinion thereon.
<PAGE>
[LOGO OF MAINSTAY INSTITUTIONAL FUNDS INC. APPEARS HERE]
MAINSTAY(R)
INSTITUTIONAL
FUNDS INC.
This is a copy of a report by MainStay Institutional Funds Inc. to the
shareholders. Distribution of this report to persons other than these
shareholders is authorized only when accompanied or preceded by a current
prospectus. This report does not offer for sale or solicit orders to buy any
securities.
Advisers:
New York Life Insurance Company
MacKay Shields Financial Corporation
Monitor Capital Advisors, Inc.
D o n ' t M i s s T h e B o a t(R)
Distributed by NYLIFE Distributors Inc., member NASD,
300 Interpace Parkway, Building A, 2nd Floor, Parsippany, NJ 07054
http://www.mainstayfunds.com
NYLIFE Distributors Inc. is an indirect wholly owned
subsidiary of New York Life Insurance Company.
[LOGO OF NEW YORK LIFE APPEARS HERE]
[ART WORK OF HALF OF LIGHT HOUSE APPEARS HERE]
